TOHO LIMITED v. NG SIK YU

CACV 36/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 36 OF 2004

(ON APPEAL FROM DCCJ 3463 OF 2002)

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JUDGMENT

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Hon Cheung JA (giving judgment of the court) :

The appeal

1.  The plaintiff claimed against the defendant for vacant possession of a premises situated in North Point.  It also claimed an injunction and other monetary relief against the defendant.  The action was tried by Deputy Judge C.P. Pang in the District Court.  He dismissed the plaintiff’s case.  The plaintiff now appeals.

The facts

2.  The facts of the case are not difficult.  The plaintiff is the owner of the property known as Shops Nos. 5 and 6 on the Ground Floor of Princess Mansion (‘the property’).  The property is located at the junction of King’s Road and Fuk Yuen Street.  The address of the property includes the names of both streets, namely 165A, 167, 167A, 169, 169A, 171, 171A, 173 and 175 King’s Road and 8-14 Fuk Yuen Street.

3.     On the Fuk Yuen Street side of the property is a wall with columns (‘the wall’).  The plaintiff had let part of the wall to the defendant.  The judge found (and of which finding there is no appeal) that the area let consisted of ‘the external wall of the columns and the space in between for the length of about 12 feet’ (‘the wall space’).  It is not in dispute that the width of the space that was located between the columns was about 1.5 feet to 1.6 feet. 

4.  The defendant rented the wall space from the previous owners of the property since 1968.  The plaintiff became the owner of the property and the landlord of the defendant since 31 May 1995.  Written tenancy agreements were entered into by the parties.

5.  It is also not in dispute that the defendant had since 1968 erected a structure of about 3 feet by 12 feet (‘the original stall’) against the external side of the wall for operating the business of selling ivory and mahjong tiles.  The original stall was erected on the pavement of Fuk Yuen Street which was land belonging to the Government.  From 1977 onwards the defendant had obtained from the Urban Council a ‘Wall Stall Licence’ to operate as a wall stall hawker at the stall.  This licence was subsequently renamed as the ‘Fixed Pitch Hawker Licence (Wall Stall)’.

6.  The plaintiff’s claim was based on forfeiture of the tenancy agreement and nuisance.  The plaintiff claimed that on 15 March 2002, the defendant demolished the original stall and erected a new stall (‘the new stall’) of a smaller size i.e. about 4 feet 5 inches by 2 feet 7 inches (81.3 cm by 135 cm) at a location of about 2.5 inches (about 50 mm) away from the wall.  The defendant continued with his trade in the new stall. 

7.  The plaintiff claimed that the demolition carried out by the defendant was in breach of the terms of the tenancy agreement.  The plaintiff further claimed that the defendant had failed to pay the monthly rent of $5,800 since 20 January 2002.  These two breaches formed the basis of the forfeiture claim.  The plaintiff further claimed that the new stall precluded the plaintiff from letting out the wall space to other tenants and the trading activities of the defendant in the new stall had caused nuisance and annoyance to the plaintiff.

The finding

8.  The judge found that the plaintiff and the defendant had in fact reached an agreement on 20 February 2002 that the defendant would terminate the tenancy of the wall space on 19 March 2002 and it was agreed by the parties that the two months rental deposit held by the plaintiff would be used to set off the rent from 20 January 2002 to 19 March 2002.  The judge, however, did not accept the defendant’s evidence that he had informed the plaintiff that he would demolish the original stall.  There is no appeal against the findings.

9.  On such findings, the judge held that the existence of the new stall does not interfere with the rights of the plaintiff.  He held that the new stall is an independent structure standing away from the wall and the defendant no longer occupies the wall space let to him by the plaintiff.  He held that vacant possession had been delivered by the defendant.

10.  He further held that the original stall was not part of the premises let to the defendant.  As such the demolition was not a demolition of the ‘partition, fittings and decoration’ of the wall space let to the defendant.  The defendant was therefore not in breach of the terms of the tenancy agreement.

Was vacant possession delivered?

11.  We disagree with the judge that vacant possession of the wall space had been delivered by the defendant.  The right to vacant possession means actual unimpeded physical enjoyment of the wall.  The impediment does not mean any impediment but one which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property.  This principle is clearly stated in Cumberland Consolidated Holdings, Limited v. Ireland [1946] 1 KB 264 where the English Court of Appeal was dealing with the question of giving vacant possession in a contract of sale of land.  At completion there was rubbish (in the form of many sacks of cement which had hardened) in the property which the vendor refused to remove.  The court found that vacant possession was not given by the vendor. 

12.  The right of an owner of a property has as much right to the use and enjoyment of the internal part of his property as the external walls of his property.  Again this principle is firmly established in Cobb v. Saxby [1914] 3 KB 822 where Rowlatt J at page 826 held that,

13.  In this case, the wall space let to the defendant is on the external wall of the property.  If the defendant is to deliver vacant possession of the wall space let to him then he has to do so in a way which will enable the plaintiff to have unimpeded use of that space.  By demolishing the original stall, the defendant would, of course, have provided the plaintiff with unimpeded access and use of the wall space.  However, by erecting the new stall in front of the wall space, the defendant in effect prevented the plaintiff from using that part of the external wall of the property.  While the new stall is an independent structure away from the exterior wall, the gap in between this stall and the exterior wall is only about 2.5 inches.  The plaintiff cannot gain access to the external wall of his property through that thin gap.  This thin gap between the wall space and the new stall is meaningless in the context of giving vacant possession.  Although the new stall is on government land, it substantially prevents and interferes with the plaintiff’s enjoyment of the right of possession of a substantial part of its property.  If the principle on the giving of vacant possession is recognized and applied, then on no account can it be said that vacant possession had been given by the defendant.

The licence

14.  The Food and Environmental Hygiene Department (‘the Department’) which has assumed the functions of the former Urban Council had continued to grant the defendant a licence to carrying on trading in the new stall.  This licence cannot be an answer to the defendant’s failure to render vacant possession to the plaintiff.  The defendant may well have a licence from the government to carry out trading in a fixed pitch wall stall on government land, but this is a separate issue from the question of his failure as a tenant in giving vacant possession of his rented premises to his landlord.  The two matters are distinct and separate.

Yu Shu Tung v. Buk Cheong Loong & Ors

15.  Reference was made by the judge to Yu Shu Tung v. Buk Cheong Loong & Ors (H.C.A. No. 6531 of 1989, judgment dated 7 November 1991).  In that case, the tenant of a ground floor shop had permitted the defendants who were stall holders to attach their stalls to the exterior wall of the shop.  The defendants held licences from the Urban Council to locate their stalls on pitches on the pavement on which the wall abuts.  The tenant then withdrew the permission and the defendants detached their stalls from the wall but re-erected them again only a few inches from the wall.  As the tenant wished to make use of the wall and gain access to the shop by opening up the wall, the landlord took action against the defendants on the ground that his reversion interest in the shop was injured. 

16.  The case of Cobb was relied upon by the landlord.  Godfrey J (as he then was) while recognizing the right of the landlord as stated in Cobb,refused to grant relief to the landlord on the ground that based on the licence granted by the Urban Council, the defendants were acting under lawful authority and in the absence of negligence, the landlord cannot complain of an injury to his property caused as the necessary and inevitable result of the actions of those acting statutory authority.  The case of Allen v. Gulf Oil Refining Limited [1981] AC 1001 was relied upon by Godfrey J.  Lord Wilberforce at page 1011 of the judgment held that,

17.  Lord Wilberforce further held that the qualifications to this principle were : 

18.  The licence in Yu Shu Tung was issued pursuant to the Public Health and Municipal Services Ordinance (Cap. 132).  The Urban Council had the power to allocate pitches in a street to hawkers after the Commissioner of Transport had declared that a street may be set aside for hawking purpose under the Hawker (Permitted Places) Declaration (‘the Declaration’) (Cap. 132, Sub. Leg. AG1).  After delivering the judgment, Godfrey J. delivered another judgment on 6 December 1991in which he ordered the Urban Council to be joined as a defendant and restored the case for argument.  He was concerned that the Urban Council might not have the power to grant the licence because the street in question was not subject to a declaration by the Commissioner for Transport.  We are not aware of the subsequent development of this case.  The judgment of 6 December 1991 was not cited to the judge. 

The plaintiff’s position

19.  In the present case, Ms Wu, counsel for the plaintiff, stated that Fuk Yuen Street is not one of the streets specified in the Declaration.  She submitted that the power by the Government to grant licences is now contrary to the Basic Law which protects the ‘right of private ownership of property in accordance with law’ (Article 6) and their right ‘to the acquisition, use, disposal and inheritance of property’ (Article 105).  She further submitted that Yu Shu Tung was wrongly decided although she was not able to state specifically why it was so.

Our view

20.  It is not necessary for us to examine whether the Department has the power to grant the licence to the defendant in the first place.  The Department is not a party before us.  It is also not necessary to examine whether, if it has such a power, its exercise is now no longer consistent with the provisions of the Basic Law.  It is further not necessary for us to decide on the correctness of Yu Shu Tung.

21.  Although the judge said he did not rely on the defence of statutory authority in finding for the defendant, he had dealt with Yu Shu Tung in detail.  It is only right we should state our views on the application of that case.  We are of the firm view that the principle in Allen (as adopted by Yu Shu Tung) is not applicable to a situation like the present one.  In Allen, the appellant was authorised by the Gulf Oil Refining Act 1965 (‘the Act’) to construct an oil refinery.  The preamble to the Act expressly stated that in order to meet the increasing public demand for the products of the appellant “it is essential that further facilities for importation of crude oil and petroleum products and their refinement should be available”.  After the refinery was constructed and in operation, the plaintiff brought an action against the appellant for nuisance caused by the operation.

22.  One can immediately see the particular context in which Allen was decided.  It was a claim based on tort and if the nuisance created by the operation of the refinery was the inevitable result of the ‘making or doing so authorised’, then such an action would not lie.

23.  In the present case, we are concerned with whether a tenant has delivered vacant possession of rented premises to his landlord.  The question has to be adjudged by the context of this special relationship of the parties and the law governing delivery of vacant possession ofa premises.  This by itself is distinguishable from the situation in Yu Shu Tung where the defendants were not in any contractual relationship with the landlord.  To extend the principle stated in Allen to the present situation is totally inappropriate. 

24.  Proceeding on the basis of the finding by the judge, the question of forfeiture and the absence of any written notice of termination by the defendant become irrelevant to the issue one has to decide in this case.

The plaintiff is entitled to judgment

25.  This being the case, the plaintiff must be entitled to judgment as follows :

Conclusion

26.  Accordingly we will allow the appeal, set aside the judgment and make the orders set out in the paragraph 25 above.  The defendant is ordered to pay the costs of the appeal and below.  A translation of the judgment will be provided to the defendant in due course.