LEUNG SANG v. TAK SHING INVESTMENT CO LTD

Property law - landlord and tenant - classification of business premises - exclusion from Part I of pre-war business premises since 1.7.84 which now fall mainly into Part V - limited protection to tenants under Part V but only where premises used partly for human habitation - first notice to quit may be declared to be of no effect and landlord may be prohibited from serving a second notice for a maximum period of 12 months - residual power of Commissioner to determine primary use under Part I even though Section 7A repealed - appeals to Tribunal therefrom - Sections 3(1), 7A, 32(aa), 124A and 124B Lands Tribunal (Consolidation) Ordinance, Cap. 7.

IN THE LANDS TRIBUNAL OF HONG KONG

Application No. L.T. 564 of 1984

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INTERLOCUTORY RULING

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Judge Cruden:

1. The Tribunal ordered that these two applications should be heard together. Both applications raised the same issues; the same Company was the respondent in both applications. All the parties were unrepresented and on the face of the pleadings it appeared that it might be desirable for consideration to be given to whether in the interests of justice the applications, which had been set down for hearing, should be adjourned to enable the parties to further consider their positions.

2. Application L.T. No. 564 is in respect of ground floor premises at No. 145 Thompson Road, Wanchai, Hong Kong. Application L.T. No. 565 relates to nearby ground floor premises at No. 141 Thompson Road, Wanchai, Hong Kong. Both premises were within pre-Second World War buildings completed before 16th August 1945. Before the 1st day of July 1984, they mere therefore clearly Part I premises under the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. Until 30th June 1984 all such pre-Second World War premises, whether business or domestic, were subject to the rent control and security of tenure protection of Part I. However, pursuant to Section 3(1)(i) of the Ordinance from the 1st day of July 1984, Part I ceased to apply to such premises if, since 4th May 1979, they have been used as business premises.

3. In practice this means that since 1st July 1984, Part I only applies to domestic premises. The effect of this recent important change in classification of premises, is that business premises which until 30th June 1984 were subject to Part I, may now be subject to Part V. The latter is principally concerned with imposing minimum notice of termination provisions for Part V premises, which prevail over any lesser termination provisions which may contractually exist between landlord and tenant. The present two applications are the first applications which have come before the Tribunal as a result of this statutory change of classification affecting promises which were, at least before 1st July 1984, within Part I.

4. The respondent landlord contends that both premises are business premises and no longer fall into Part I. On 1st July 1984 the respondent gave the applicants notice to quit and deliver up vacant possession on 31st December 1984. The notice was expressed to have been given pursuant to "Section 122(1b)" (sic) which we infer was intended to refer to Section 122(1)(b). The latter Section is the Part V provision which stipulates the minimum length of notice required to determine a tenancy:-

5. Because of certain procedural questions that have arisen it is unnecessary and undesirable for us to consider or determine, at this interlocutory stage, whether that notice complies with the requirements of Section 122(1)(b) and we do not do so.

6. After receipt of the notices under Section 122 the applicants, in both applications, filed in person the present two applications to the Tribunal which are in all material matters the same. These applications are expressly entituled and made pursuant to Section 124B(1) of the Ordinance and are the first applications to be made under that Section to this particular Tribunal.

7. I have already noted that under Part I a tenant enjoys both a restricted rent and statutory security of tenure. Part V premises are not subject to rent control and have no comparable security of tenure provisions. However, where Part V premises are used partly for human habitation, a tenant is given very limited tenure protection. For Section 124B provides that where such a tenant receives notice of termination he may apply to the Tribunal for the following two orders:-

8. Under this limited relief provision a tenant may be able to prolong his occupation for periods in the region of 2 years. This could be the position where a tenant, having receiving the first notice giving him 6 months in which to quit and deliver up vacant possession, applies under Section 124B and obtains an order prohibiting the serving of a second notice for 12 months. On the expiration of that 12 months the tenant would then be entitled to a further 6 months notice. These three various periods may in some circumstances, in aggregate, approximate 2 years.

9. If these two applications had raised issues limited to orders under Section 124B, then the Tribunal could have proceeded forthwith and determined the applications on that basis. In that event before it could have considered whether in its discretion it should have granted the tenants relief, it would first have had to consider whether the premises were of the kind which under Part V are entitled to apply for relief. Part V generally applies to business premises which do not fall within Part I and includes both pre-Second World War and post-Second World War business premises. However, orders under Section 124B are limited, under Section 124A, to premises which satisfy the following two conditions:

10. The complication which arose that caused us not to proceed forthwith with these two Section 124B applications was the additional pleaded ground in each application that:

"The said premises are being used and occupied by certain people including the applicant herein for both residential and business purposes therefore the said premises should not be excluded from the application of Part I of the Landlord and Tenant (Consolidation) Ordinance (Chapter 7). "

11. That pleading raised the issue whether the premises might still remain in Part I. In their submissions both applicants stated that they considered the primary user of the premises was domestic and that they were still Part I premises.

12. The Lands Tribunal on many occasions has to consider the question of user under Part I and primary user under Part II. It would have been convenient to all parties if that issue could have been determined in these proceedings but I am satisfied that the Lands Tribunal has no jurisdiction to decide that issue in the present proceedings. Nor if the present proceedings were amended would the Tribunal have jurisdiction. In view of the fact that this is the first time since the recent statutory change in classification that the Tribunal has had to consider this issue, it may be helpful if I were to explain why this curious position has arisen.

13. The Lands Tribunal's jurisdiction to determine user or primary user often arises in two different situations. First, where a landlord brings proceedings for possession a tenant, by way of opposition, may claim that either pre-war premises are domestic or post-war premises are domestic and therefore entitled to the tenure protection of Parts I or II respectively. However, the present applications are brought by the tenants and not the landlord. Indeed, the landlord is at present prevented from bringing any proceedings for possession, ever if the premises were Part V, for the time limited for giving notice has not expired.

14. The remaining jurisdiction of the Tribunal as to user, only arises where it exercises jurisdiction which it originally had, by way of appeal, from the Commissioner of Rating and Valuation's Part I Certificates of User under the former Section 7A and Part II Certificates of Primary User under Section 51. The differences between business and domestic user were previously relevant not only for classification but also under Part I for the assessment of the controlled rent which was computed on a different basis depending whether the premises were business or domestic. However, when business premises were excluded from Part I on 1st July 1984 the distinction became irrelevant for rent purposes. No doubt that was the reason why Section 7A which provided for the issue of Certificates of User for Part I by the Commissioner was repealed.

15. However, where a party before bringing proceedings or independently of any proceedings wishes to obtain a ruling from the Commissioner whether premises are subject to Part I he may still do so even though Section 7A has been repealed. For Section 3(2) provides:-

16. If a landlord or tenant obtains the Commissioner's determination as to user under Section 3(2) and is dissatisfied with that determination, he may appeal, pursuant to Section 32(aa), against the Commissioner's determination to the Lands Tribunal. Under this appeal procedure the Lands Tribunal would then have jurisdiction to determine user. The right of a landlord and tenant to apply to the Commissioner for a determination notwithstanding the recent repeal of Section 7A remains important. In some cases the Commissioner's determination will resolve the matter finally for the parties and there will be no need to have that issue determined in further proceedings before the Tribunal. Further, in view of the fact that Legal Aid does not extend to Part I premises but only to Part II premises, this is valuable machinery available to a person of limited means under which he may gain assistance. A landlord and tenant may also as a consequence, be assisted under the Commissioner's helpful advisory and mediatory services.

17. Both of the applicants have today expressed a desire to obtain a determination from the Commissioner under Section 3(2) before proceeding further with their present applications. It appears that at least one of the applicants had some time age approached the Commissioner but due perhaps to a failure in communication was sent to the Building Development Department. If the applicants were to approach the Commissioner afresh they will no doubt, now that they understand the procedure, in due course be furnished with his determination under Section 3(2).

18. I confirm that the Lands Tribunal could only become involved if after that determination either party were to appeal to us under Section 32(aa). I might point out that this appeal right may itself be difficult for a layman to find within the complex and lengthy provisions of the Ordinance. For the marginal note only summarises the appellate Section as a section under which the:-

"Tribunal may fix or apportion rent in certain cases. "

19. This now anachronistic marginal note was more relevant when, prior to 1982, the Section contained no appellate provisions but was limited to the fixing of rent and related matters. It does not reflect the new additional provisions of the Section which now commences:-

When the Ordinance is next revised, the alteration or expansion of the marginal note to refer to this right of appeal would be of considerable practical help.

20. The position therefore is that the issue whether the primary user of both premises is domestic has been raised on the pleadings and the Tribunal on these applications has no jurisdiction to determine that issue. If the primary user were domestic the premises would remain in Part I. In that event the notice to quit given under Part V is null and of no effect. The present applications would also consequentially have to be dismissed for want of jurisdiction. On the other hand, if the primary use of the premises is business, the premises do fall into Part V and the notice is prima facie valid. If that is the position the present applications could proceed. Indeed, they would constitute the only remedy available to the tenants. Under Section 124B, it may be noted, it is only necessary that an element, as distinct from a preponderance of domestic use, exists to provide jurisdiction. Namely, the tenants merely have to prove that the premises "are used partly for human habitation".

21. Both applicants seek an adjournment to enable them to apply to the Commissioner under Section 3(2). I have explained to the respondent that if an adjournment were granted it would suffer no immediate delay, for it is unable to commence its own proceedings for recovery of possession until at least the period of the present notice has expired. I also have pointed out that if the applicants are dilatory or do not pursue their application to the Commissioner, it is always open to the respondent, on expiration of due notice, to commence its own proceedings. Finally I explained that if the present applications are merely adjourned and ultimately it is determined that the premises are within Part V, then the applicants position is protected to the extent that they could have the present Section 124B applications restored.

22. Upon enquiry the respondent indicated that it did not object to the present applications being adjourned.

23. The Tribunal considered that in the circumstances the applications to adjourn should be granted. The following orders were made by the Tribunal on each application:-

DATED this 13th day of November 1984.