CHIU MING KIANG v. WILLIAM LEE SHUNG

Property law - application for new tenancy under Part IV notice of application disclosed that unrepresented applicant tenant was already a sub-tenant of part of suit premises before 10 June 1983 - applicant at hearing claims suit premises subject to Part II and not Part IV on the facts disclosed in notice of application - whether applicant estopped from disputing classification of premises - whether premises subject to Part IV

Held : 1. On the facts and in the light of the strict time limitations for applying for new tenancies and the provisions in Section 10 Lands Tribunal Ordinance and paragraphs (8) and (9) of Lands Tribunal Direction No. 1 the applicant was not estopped from disputing the classification of the suit premises nor had he waived that right; 2. Section 50 (6)(o) extends to retain in Part II new tenancies granted on or after 10 June 1983 where the tenant was already in possession ever if merely as a sub-tenant of part only of the suit premises; 3. Application for new Part IV tenancy dismissed.

IN THE LANDS TRIBUNAL OF HONG KONG

Lands Tribunal Application No. L.T. 4806 of 1989

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JUDGMENT

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1. The applicant is the tenant from the respondent of domestic premises situate at No. 50 Yen Chow Street, 8th Floor, Kowloon and now applies pursuant to Section 117 of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, for a new tenancy. The parties had earlier on 12th December 1985 entered into a tenancy agreement of the suit premises for a duration of 2 years from 1st January 1986 at a monthly rent of $1018. At the expiration of that original duration, the applicant exercised the option contained in Clause 9 of the tenancy agreement and renewed the tenancy for a further 2 years at an increased rent of $1323 per month.

2. The applicant applies for the new tenancy consequent to the service of Form CR 101 upon him by the respondent, pursuant to Section 119, which terminated the existing tenancy as at the 31st day of December 1989. The present application was filed on 31st October 1989 and therefore complies with the time limitations imposed by Section 119D. The respondent's notice of opposition declares that he does not oppose the grant of a new tenancy subject to the Tribunal determining the new rent.

3. In the course of the applicant's evidence he asserted that the suit premises were Part II premises and not subject to Part IV. Applications for new tenancies under Section 117 can, of course, only be brought if the premises are subject to Part IV. The applicant confirmed the statement in his notice of application that he first occupied part of the suit premises in March 1980 as a sub-tenant of the then principal tenant. During 1985 the principal tenant failed to pay the rent to the respondent and disappeared. At that stage the applicant, after negotiations with the respondent, took over the tenancy of the whole of the suit premises direct from the respondent. Those negotiations culminated in the parties executing on 12th December 1985 the current tenancy agreement.

4. The applicant was unrepresented but the statement in his notice of application, confirmed in his oral evidence, that he first occupied part of the suit premise during March 1980, raises a question of jurisdiction, namely whether the suit premises are subject to Part IV. The suit premises are post-war premises and are prima facie either Part II or Part IV premises. The negatively drafted provisions of Section 116(2)(a) being the application section of Part IV, make it necessary to turn to Part II or Section 50(6) in order to determine their appropriate classification. Whether the premises are Part II or Part IV is, for different reasons, of crucial importance to each of the parties.

5. When the present provisions were enacted in 1981 their major immediate impact on post-war doemstic premises, was to transfer higher valued properties with rateable values exceeding $80,000 to Part IV. The latter sum has now been reduced to $30,000 but is based on 1983 and not higher current rateable values. Tenants of Part II premises enjoy both restricted rents and security of tenure. Part N tenants are given some security of tenure but must on the grant of any new statutory tenancy pay the prevailing market rent The provisions of Part IV, although affecting only domestic tenancies, are modelled on the very complex provisions which apply to English business tenancies under Part II of the Landlord and Tenant Act 1954.

6. Apart from the higher unrestricted rents paid by Part IV tenants, they suffer a number of other disadvantages compared to their Part II counterparts. They must comply with the much more complicated Part IV procedure including the stringent time limits in relation to both pre-application notices and in subsequent applications to the Lands Tribunal. They must periodically take the initiative when their tenancy is terminated and apply to the Lands Tribunal for a new tenancy. On the other hand, Part II tenants never have to take the initiative. Under the Part II concept of statutory continuance, a tenancy continues after its contractual expiration, unless and until the landlord, on limited statutory grounds, takes proceedings for vacant possession

7. So long as the majority of Part IV premises were higher rateable value properties, the complex machinery of Part IV may have worked satisfactorily. However, quite apart from the successive lowering of the rateable value ceiling, two other statutory provisions, namely paragraphs (1) and (o) of Section 50(6) have radically extended the range of Part IV tenancies.

8. The applicant's evidence in this case raises the question whether the suit premises are excluded from Part II under Section 50(6)(o) which provides that Part II does not apply to:

"(o)     a tenancy or sub-tenancy created on or after 10 June 1983 of premises of which, or part of which, the tenant or sub-tenant under that tenancy or sub-tenancy is not already in possession under another tenancy or sub-tenancy "

This is one of the two provisions which has resulted in thousands of domestic premises, with rateable values lower than the original $80,000 or the subsequent reductions to $30,000 becoming subject to Part IV. The other provision is Section 50(6)(1).

9. The provisions of Section 50(6)(0) have in practice led to considerable confusion not only in the case of unrepresented applications but also quite often when parties have been represented. The position from time to time arises, in the case of purported Part IV applications, that while a current tenancy commenced on or after 10 June 1983, the tenant had earlier and continuously been in possession as tenant of the same premises When this position is evident from the pleadings or has emerged in evidence, the Lands Tribunal has usually taken the initiative in pointing out the jurisdictional position to the parties and invariably the proceedings have been discontinued.

10. However, this is the first occasion before the present Tribunal, where an applicant who became a tenant of the whole of the suit premises after 10th June 1983 was nevertheless a sub-tenant of part of the same premises before that date. After hearing evidence, the Tribunal indicated that because of the novelty of the factual situation in relation to a statutory provision on which it had not heard submissions on this specific issue, it was reluctantly minded to adjourn the proceedings for further consideration. Mr. Edmund Cheung who with his considerable expertise and experience had appeared for the respondent, accepted the invitation to tender written submissions on the classification issue and I am grateful for the submissions which have since been received.

11. I confirm that the applicant has expressly brought the present application pursuant to Section 117_. of Part IV of the Landlord and Tenant (Consolidation) Ordinance. If that procedural step were to estop the applicant from disputing that the suit premises are subject to Part IV, I would not need to enter upon any further consideration of the classification issue. I record that although it was the applicant who on 31st October 1989 commenced the present proceedings before this Tribunal, it was the respondent who initiated the operation of the Part IV statutory machinery, by serving on the applicant more than 6 months earlier the statutory prescribed Form CR 101 under Section 119 of Part IV.

12. Hong Kong courts have yet to consider whether estoppel arises in these circumstances. In England there is a substantial number of cases dealing with similar questions under the equivalent Part II of their Landlord and Tenant Act 1954 Under English law a party may be estopped from denying the validity of a pre-application notice - Bristol Cars Ltd. v. RKH (Hotels) Ltd. (1979) 38 P & CR 411; British Railways Board v. A J A Smith (No. 2) (1981) 259 EG 766. In the related area of waiver the House of Lords held in Kammins Ballrooms Co. Ltd. v. Zenith investments (Torquay) Ltd. (1971) AC 850 that the English time limits equivalent to our Section 119D, imposed on tenants for applying for new tenancies, may be waived by a landlord. A cuooint summary of the position which arose in the House of Lords may be found in the subsequent judgment of Russell L.J. in Zenith Investment (Torquay) Ltd. v. Kammins Ballrooms Co. Ltd. (No. 2) (1971) 1WLR 1751.

13. In England it has also been held that the courts general power to enlarge time, under the Rules of the Supreme Court Order 97 Rule 6 and under the County Courts Rules Order 7 Rule 20(2) may, as a matter of law, be exercised to grant relief to parties who have failed to comply with the time limitations under the Landlord and Tenant Act 1954 - Joan Barrie v. G.U.S. Property Management Ltd. (1981) 259 EG 628; Ali v. Knight (1984) 272 EG 1165.

14. I accept that under English law, estoppel or waiver might prevent an applicant for a new tenancy, from later contesting that his premises were subject to Part II of the Landlord and Tenant Act 1954. However, I am well satisfied that the position in Hong Kong is different for at least two reasons. First, unlike the House of Lords judgment in Kamins Ballrooms Co Ltd. v, Zenith Investments (Torquay) Ltd. which held that the time limitations were merely procedural and not jurisdictional, the Court of Appeal in Hong Kong has twice held that various time and other limitations in our Section 119D are jurisdictional and not procedural - Sin Hua Trust Savings and Commercial Bank Ltd. v. Ng Yee May CA No. 137/85; Ram Isardas Mahtani v. Wong Kwok Tai CA 156/89.

15. The fatal consequence to a Hong Kong domestic tenant, who does not apply for a new tenancy within the prescribed time limits, is that no extension of time may be granted. His tenancy is terminated. There is no statutory continuance. If he refuses to vacate he may be evicted. This is so even where in Form CR 101 the landlord gives written notice that he will not oppose the grant of a new tenancy. Every week tenants in these circumstances are evicted from their homes.

16. Because of the more unercus time limitation position which exists under Hong Kong law, clearly the prudent practice for a domestic tenant to follow, after receiving from the landlord a Form CH 101 purporting to terminate his tenancy, is to apply to the Lands Tribunal before time has expired for a new tenancy. Any classification issue could then be disputed at the hearing before the Tribunal. Ideally the tenant should expressly raise the issue of classification in his notice of application. In the present notice of application the tenant makes no express assertion or admission that the premises are Part IV premises. Further, by pleading that he has been in possession of part of the premises since March 1980, on the facts, he raises the possibility, subject to other considerations such as rateable value, that the suit premises are not Part IV premises.

17. The second reason I consider estoppel or waiver do not so readily arise in Hong Kong under the Landlord and Tenant (Consolidation) Ordinance, follows from the fact that, unlike the position in England, applications in Hong Kong are heard by a tribunal and not by a court. In England applications for new tenancies are heard by the County Court where the rateable value does not exceed £5000 and by the High Court where the rateable value exceeds that figure. In Hong Kong neither the District Court nor the High Court have jurisdiction under the Ordinance, for exclusive jurisdiction is vested in the Lands Tribunal.

18. Apart from the relaxation under Section 10(6), Lands Tribunal Ordinance, Cap. 17 in relation to admissibility of evidence, Section 10(5)(a) directs that proceedings are to be conducted with as much informality as is consistent with attaining justice. In addition, the President is authorised to give directions as to the manner and form in which proceedings shall be conducted. Under the latter provision six directions were issued on 1st July 1986. Direction No. 1 includes the following important instructions :

"(8)     Where parties are in person, a Presiding Officer should intervene as actively as he thinks proper, to ensure that they, and their witnesses, do themselves justice and tell their stories in full.

(9)     A Presiding officer should be prepared to discuss, and seek to identify, the issues with the parties, particularly if they are unrepresented...

19. The Lands Tribunal therefore, at least to a limited extent, may exercise a quasi-investigatory role, quite foreign to a court of law. The obligation upon the Tribunal to discuss and identify the issues with the parties reduces the importance, particularly where a party is unrepresented, of the procedural and pleading consequences of the actual contents of notices of application or opposition. Those documents very descriptions emphasise that they are not statements of claim or defence.

20. Although I recognise the prescribed forms are being increasingly varied and extended to resemble statements of claim and defence, often with paragraphs drafted in archaic form, some of which are, at times, quite irrelevant. This unfortunate tenancy has been criticised by a number of commentators including Merry Hong Kong Tenancy Law (2nd Edn) at page 404. Similar misconeeptions as to the nature of the Tribunal result in an excessive use of interlocutory applications, despite the strong statement of the President, Sir Denys Roberts, in Kwan Chow Po Wan v. Fok Ming L.T. No. 255/84 that the Rules of the Supreme Court should in the Lands Tribunal be used sparingly and only where a gap exists in the Lands Tribunal's procedure.

21. The present position which exists, as a matter of law, is that the failure of Hong Kong domestic tenants to comply with the statutory time limits, by filing notices of application within those limits, will usually be fatal to their wish to remain in possession under a new tenancy. This is the position even whre, as frequently occurs, the landlord has given notice that he does not oppose a new tenancy. Yet an English business tenant, under the similar English legislation, may succeed in having the time limits extended or be able to rely on estoppel or waiver.

22. On the other hand, except as to time limitations, the very different practice and procedure of the Lands Tribunal, compared with the procedural requirements of the English High Court and County Courts, obliges this Tribunal to adopt a less strict approach to the contents of notices of application and opposition, particularly where a party is unrepresented. The cumulative affect of these differences leds me to hold that the applicant's action in filing a notice of application within the time limits, does not at this stage estop him from disputing the classification of the suit premises nor has he waived that right.

23. I turn now to determine the remaining dispute, whether the suit premises are subject to Part IV or fall into Part II of the Landlord and Tenant (Consolidation) Ordinance. This dispute resolves itself into a narrow issue of statutory interpretation. The Tribunal's findings of fact material to this issue are :

1.     The current tenancy was created after 10th June 1983, namely on 12th December 1985;

2.     On 10th June 1983 the applicant was already in possession of part of those premises under another tenancy or sub-tenancy, which later became subject to the current tenancy. In fact the prior right of occupation of part of the premises was under a sub-tenancy created during March 1980.

3.     The applicant as tenant or sub-tenant has continuously been in possession of at least part of the suit premises from March 1980 down to the present time. Section 50(6)(o) does not expressly require continuity of the applicant's status as either a tenant or sub-tenant from before 10th June 1983 until now but that is the necessary factual consequence.

24. Quite clearly where a tenant enters into a new tenancy on or after 10th June 1983, of domestic premises not otherwise subject to Part IV, if on that date he was already in possession of the same premises under a prior tenancy, then the new tenancy is not subject to Part IV. Section 50(6)(o) only makes former non-Part IV premises subject to Part IV, where the tenant under the new tenancy is also a new tenant. The crucial question in this application is whether premises continue to be non-Part IV premises, if the tenant under the new tenancy agreement, was formerly merely a sub-tenant and of part only of the premises, later subject to the new tenancy agreement.

25. Mr. Cheung argues that the references to tenancies and sub-tenancies in Section 50(6)(o) are mutually exclusive. In his twofold written submissions he invites the Tribunal to construe the Section as referring in the alternative to:

1.     A tenancy created on or after 10 June 1983 of which the tenant under that tenancy is not already in possession under another tenancy;

2.     A sub-tenancy created on or after 10 June 1983 of premises of which, or part of which, the sub-tenant under that sub-tenancy is not already in possession under. another sub-tenancy.:

I appreciate that alternative exclusive construction may be arguable. However, there is no statutory support for the omission in the first limb of "part" of the premises but its inclusion in the second limb.

26. In my view the proper approach is to consider the plain and ordinary meaning of the Section in the context of the whole Ordinance. I would also record that the practice of a sub-tenant of the whole or part of domestic premises becoming, during his period of occupation, the direct tenant of the landlord is relatively common in Hong Kong. In addition to this position frequently being achieved between the parties by agreement, the Ordinance itself contains a number of provisions where that position may non-contractually arise by order of the Lands Tribunal or otherwise. These statutory pr ovisions include Sections 21, 34, 53(6A) and 119P(3). The overall scheme of the Ordinance, including these latter Sections, is helpful in interpreting Section 50(6)(o),

27. In my view the plain and ordinary meaning of Section 50(6)(o) is that it also excludes from Part IV, tenancies where the tenant was already, on or before 10th June 1983, a sub-tenant of only part of the premises included in the new tenancy. Under the Section it matters not that the tenant previously only occupied part of the existing premises. It equally matters not that the former status of the tenant was merely that of a sub-tenant. If the legislature had more restrictively intended to exclude from Part IV only those tenancies where the tenant was also previously tenant of the whole of the premises, it could very easily have enacted such a provision in unambiguous terms.

I hold that as the applicant was on 10th June 1983 already a sub-tenant of part of the premises now subject to the new tenancy agreement, those premises remain excluded from Part IV pursuant to Section 50(6)(o). In passing I observe that the conclusion I have arrived at, as a matter of statutory interpretation, corresponds with the opinion expressed in Merry (supra) at page 186:

"An exclusion added in 1983 was that of tenancies to new tenants. The tenancy must have been created on or after 10th June 1983 and the tenant must not have been already in occupation of any part of the premises under another tenancy. Sitting tenants were therefore not affected but tenants who first rented premises after 10 June 1983 have no protection from paying market rents once their existing tenancies have ended."

28. Accordingly, the suit premises are not subject to Part IV but remain under Part II. It follows that there is no jurisdiction to entertain the present application for a new tenancy brought under Section 117 of Part IV. The application for a new tenancy is dismissed on this classification and jurisdictional ground. The applicant continues entitled to remain in possession at the existing rent subject to any exercise in the future of the respondent's Part II statutory rights as to rent and possession.