LAW SEE CHUN v. YU KIN KEUNG

Property law - claim for vacant possession by principal tenant from two sub-tenants of business premises situate in New Territories - part of suit premises Tso owned land - nature of head tenancy including whether periodic or fixed term - sub-tenants disputed principal tenant's title and purported to enter into new tenancy at a lower rent direct with owners - whether High or District Court costs - Held:

IN THE LANDS TRIBUNAL OF HONG KONG

Application No. L.T. 161 of 1994

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REASONS FOR JUDGMENT

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1. In these consolidated applications the Applicant claimed vacant possession from the Respondents together with arrears of rent and mesne profits from 1st August 1993 in respect of business premises being portions of Lots 808, 809, 810 and 803 in Demarcation District No. 39 situate in the New Territories, Hong Kong.

2. The Applicant claimed that he was the principal tenant of the suit premises on a "yearly basis" under a tenancy agreement dated 16th April 1988 from Mr. Lee Yuk Wing, Mr. Lee Hoi Shun and Madam Tsang Kiu at an initial rent of $18,000 per annum but increased from 1st July 1993 to $23,400 per annum. The two applications were consolidated pursuant to an order of the Tribunal dated 22nd September 1994. At the trial the consolidated applications were heard together.

3. In the Applicant's claim against the Respondent Yu Kin Keung ("Yu"), he pleaded that as principal tenant he had sublet the portions of Lots 809 and 803 to Yu under an agreement dated 28th June 1988 for 3 years from 1st July 1988 at a rent of $4000 per month. The tenancy agreement provided that the suit premises were let for car repair purposes. On expiration of the initial term Yu remained in possession under a monthly tenancy until, by an endorsement dated 6th May 1993, the tenancy was renewed from 1st July 1993 to 30th June 1996 at a rent of $10,640 per month.

4. The claim against the Respondent Chan Sung Hoi ("Chan") pleaded a similar sub-tenancy but in respect of portions of Lots 808, 809, 810 and 803. The sub-tenancy agreement dated 30th April 1988 was for a duration of 3 years from 1st June 1988 at a rent of $4500 per annum. The tenancy agreement provided for the suit premises to be used for storage but the evidence established they were also used for car repair purposes. It was pleaded that when the agreement expired on 31st May 1991, Chan continued in Possession as a monthly tenant until, by an endorsement dated 6th May 1993, the sub-tenancy was renewed for 2 years from 1st July 1993 at a monthly rent of $12,000 per annum.

5. In their Notices of Opposition both Yu and Chan admitted that they had respectively paid the claimed increased first month's rent due on 1st July 1994 of $10,640 and $12,000 per month. Both admitted that they remain in possession but have made no subsequent payments to the Applicant. In summary, the common defence was that the Applicant had no lawful right to sublet the land.

6. The Respondents pleaded that the sums paid to the Applicant for the alleged first rental instalments, due on 1st July 1994, under new tenancy agreements, were only made because of the Applicant's false and untrue representation that he had the right to grant the sub-tenancies. Further, that when these matters were raised with the Applicant he informed the Respondents that they need not pay further rent until the title issue was resolved but could pay rent direct to the owners. Finally, if the tenancies were valid the Respondents sought relief against forfeiture.

7. On the evidence and in the light of the submissions of Counsel on adverse claim, title paramount, estoppel and related legal issues, it is first necessary to consider the nature of the Applicant's estate or interest in the suit premises. Counsel for the Applicant submitted that the 1988 head tenancy agreement was a periodic yearly tenancy of alternatively a periodic 5 yearly tenancy. Counsel for the Respondents submitted it was a fixed term tenancy for 5 years.

8. This difference between the parties in part occurred because the head tenancy agreement was merely evidenced in writing by a memorandum drafted by the parties. Indeed, none of the dealings between any of the parties was evidenced by any professionally prepared documents. It was not until after the present dispute arose that any of the parties sought legal advice. When the factual evidence is considered, it will become apparent how misunderstandings have thereby been increased and the dispute, in some areas, unnecessarily complicated.

9. I record that Mr. Lee Hoi Shun signed one copy of the head tenancy agreement and Mr. Lee Yuk Wing another copy. The latter copy also had endorsed thereon Madam Tsang Kiu's chop. I also record that both copies were entituled with the statement that the "Land Owner" was "Ha Wo Hang, Shau Tau Kok, New Territories, Lee Yuk Wing, Lee Hoi Shun and Tsang Kiu."

10. Other than the manner of execution, the copies were in identical form. Although expressly silent on duration, each provided for payment of a yearly rent. The tenancy agreements went on to refer to devaluation of the currency "from year to year" and on that ground provided for a 30% increase in rent every 5 years. There was also provision for an abatement of the annual rent in the event of part of the land being resumed. The contents of the Memorandum, as a matter of construction, evidence the creation of a periodic and not a fixed term tenancy.

11. There was also oral evidence given by all the parties to the head tenancy agreement which referred to duration. The Applicant stated that the duration. of the tenancy was indefinite with no expiry date. Madam Tsang Kiu, an elderly illiterate lady called by the Applicant, had no recollection of the 1988 agreement. She stated that in 1988 she had let the land to a man called Lee Ming and went on to say he might have another name.

12. The Applicant also called Mr. Lee Yuk Ming. Although he first claimed to be the owner of Lot 808, he later changed his evidence and stated that in 1988 he carried out the head tenancy negotiations for his uncle Mr, Lee Hoi Shun. He then described his uncle as the owner of Lot 808. He stated that Mr. Lee Hoi Shun was also known as Mr. Lee Ming. Later again he stated that the land was owned by several persons. Madam Tsang Kui he believed, was the owner of one of the other Lots, but he was not sure of its number. He understood that the head tenancy was for 5 years expiring on 30th June 1993.

13. Mr. Lee Hoi Shun was called by the Respondents. Mr. Lee's vague response to several questions detrimentally affected the overall reliability of his evidence. He did refer to the head tenancy being for a period from 1st July 1988 to 30th June 1993. In 1990 he stated he told a meeting that he would not relet the land in 1993. As to the position in 1993, he repeatedly stated that it was then necessary for the tenants to "surrender" their tenancies. If Mr. Lee Hoi used that term in its strict legal sense, that would certainly have been one method, without any notice requirement, of terminating a periodic tenancy.

14. When considering the whole of the evidence on the nature of the head tenancy. I remain satisfied that the terms of the Memorandum clearly record the creation of a periodic tenancy. The Memorandum does not contain any fixed term provisions nor any ambiguities which might, after clarification from other evidence, support the creation of a fixed term tenancy. So far as the oral evidence is concerned, the Applicant's understanding of the nature of the tenancy, corresponds with its written terms.

15. Madam Tsang Kiu has no recollection of precisely what occurred. The Applicant's evidence conflicts with Mr. Lee Yuk Wing and Mr. Lee Hoi Shun's testimony. I found the evidence of the latter to be generally unsatisfactory. On these findings the evidence falls far short of establishing circumstances were parol evidence would be admissible to vary the terms of a written agreement. I hold that the head tenancy agreement created a periodic and not a fixed term tenancy.

16. The distinction between a periodic and a fixed term tenancy was important. At common law a periodic tenancy is of indefinite duration determinable by notice to quit. In contrast, at common law, a fixed term tenancy, does not require a notice to quit. A fixed tenancy comes to an end upon the expiration of its specified term. The Respondents conceded that written notice of termination had not been served on the Applicant.

17. As to the duration of the present head tenancy, I find that rent is expressly payable yearly. The only reference to 5 years is in relation to rental increases. In the absence of express provision to the contrary, yearly tenancies arise where rent measured with reference to a year, is paid and accepted. I find this occurred during the period from 1st July 1988 until at least 30th June 1993, Further, in this tenancy agreement, there was express written provision for payment of yearly rent. There are no provisions of the' head tenancy agreement which conflict with the creation of a yearly tenancy.

18. I hold that the 1988 head tenancy was a yearly tenancy at an initial rent of $18,000 per annum subject to the rent being increased by 30% every 5 years, so long as the tenancy continued. At common law a yearly tenancy, in the absence of other agreement, may be unilaterally terminated upon either party giving to the other, one-half year's notice.

19. The present yearly tenancy being of business premises, is subject to Part V of the Landlord and Tenant (Consolidation) Ordinance, Cap.7. Under Section 122 thereof, mandatory statutory minimum notice requirements, are imposed. Further, where Part V applies, unlike the common law, notice of termination must be served in respect of fixed term tenacies as well as for periodic tenancies.

20. Section 121(2) lists the tenancies which are not subject to Part V. The principal business premises exception is where the duration is for a fixed term of 3 years or more. So the statutory minimum of not less than 6 months notice, applies only to fixed terms of less than 3 years and to periodic tenancies. Hence the attempt by the Respondents to establish that the head tenancy was for a fixed term of 5 years.

21. In view of the Tribunal having held that the 1988 agreement created a yearly tenancy of business premises, it was subject to Part V. Under Part V, the head tenancy would therefore continue, as a matter of statutory law, until duly terminated by service of the appropriate notice of termination. The landlord would be obliged to give not less than 6 months notice while the tenant could give a shorter notice of 1 month - Section 122(1)(b).

22. When the Applicant gave evidence he asserted that he had never received any notice of termination of the head tenancy. The Respondents called Mr. Lee Hoi Shun who confirmed that he had never given any written notice of termination to the Applicant. After describing the tenancy as expiring on 30th June 1993, he went on to state that "Before its expiry I made not attempt to terminate it." On the evidence I find that the yearly head tenancy had not been terminated by any lawful notice expiring on 30th June 1993 or any earlier or later date.

23. The Notices of Opposition disputed that Lee Hoi Shan was the registered owner of the suit premises and his right to grant the head tenancy. The Respondents pleaded that Lee Hoi Shan alone purported to grant the tenancy in the names of himself, Lee Yuk Wing and Tsang Kiu. This was soon contradicted by the evidence of Mr. Lee Yuk Wing when he produced the other copy of the head tenancy agreement. I confirm that the latter copy was chopped by Tsang Kiu and signed by Lee Yuk Wing. The copies clearly evidence the creation of a tenancy in the names of Lee Yuk Wing, Lee Hoi Shun and Tsang Kiu as landlords.

24. The pleading that Lee Hoi Shun was not the registered owner of the suit premises may be relevant but under Part V is not decisive. This is because for the purposes of Part V, "landlord" is defined by Section 120 in these quite different terms:

25. The essential element, under Part V, is therefore not ownership but entitlement to receive rent. This is why where status under the Ordinance is not in issue, the Tribunal discourages the time consuming efforts of some parties, to prove ownership by producing Crown leases, new grants, assignments and similar valuable and often mortgaged documents.

26. Where the status of a landlord is in issue, evidence of ownership will, of course, usually be relevant. This position has arisen in the present application. However, the dispute is not between landlord, tenant and a third party claiming to be the landlord. The issue is indirectly raised by the sub-tenants opposing forfeiture of their sub-tenancies for non-payment of rent. It is raised to found defences on the grounds of adverse claim and title paramount.

27. Counsel for the Respondents accepted, that the burden of proof of owners adverse claim and title paramount, rested on the Respondents. I would also record that the Respondents not only attacked the status of Lee Hoi Shun as not being the owner of the suit premises but also alternatively pleaded that he was neither the lawful tenant or the authorised agent of the registered owners.

28. The ownership issue was complicated by the fact that the suit premises are in the New Territories, where land registration records are unfortunately often either incomplete or not updated. In addition, at least part of the suit premises, is Tso or Clan land. Tso land is held in trust for ancestral worship and generally for the benefit of members off the clan. Although not cited, I would refer in passing on this traditional form of ownership, to the judgment of Deputy Judge Robert Tang QC Kan Fat-tat v. Kan Yin-tat [1987] HKLR 516. Further, Section 15 of the New Territories Ordinance, Cap.97 provides for the appointment and registration of a Manager for any land registerd in the name of a clan.

29. The Tribunal was referred to same of the District Lands Office records relating to Lots 803, 808, 809 and 810. These show that Mr. Li Chu was appointed Manager of Lot 803 on 2nd March 1961. Later memorials record that Mr. Li Chu, as Manager of the Li Ting Iu Tso, on 8th August 1985 and on 6th March 1989, appointed Madam Tsang Kiu as his attorney. Mr. Li's address on both those occasions was in England. The powers of attorney were not produced and I am therefore unaware of their extent. Unless they were restricted, they well have been wide enough to have authorised Madam Tsang Kiu, to let Lot 803 to the Applicant. In any event, the Respondents have clearly failed to prove that she did not have that power. All the evidence points to the contrary.

30. The Land Office records show that Mr. Li Kang Wan was appointed the Manager for the Li Chiu Pun Tso, in respect of both Lots 809 and 810, on 5th December 1962. The position of Lot 808 appears to be a little more complicated. It is clear that the original Crown lease granted on 27th March 1905 was to the Li Ting Tsoi Tso. On 12th January 1911 ownership was divided. Thereafter there were registered successions and assignments. The last registered owners are Cheung Li also known as Li Keng Po as to one-third share and Li Yuk Wing as to the remaining two-thirds share.

31. However, no assignments or other primary docments were produced in respect of those two memorials which each bear a registration date of 24th May 1989. The Notices of Opposition, in paragraphs (b), plead that in 1988 the registered owner of Lot 803 is the Li Ting Iu Tso and of Lots 809 and 810 the Li Chiu Pan Tso. Those pleadings correspond with the Land Office records. They also accurately plead that on the grant of the head tenancy the registered owners of Lot 808 were Li Hoi Man as to one-third and Li Hoi Cheung as to two-third shares.

32. I record that it was later on 24th May 1989 that Cheung Li and Li Yuk Wing were registered. Neither Li Hoi Cheung, Li Hoi Man or Cheung Li gave evidence. Mr. Li Yuk Wing, also known as Mr. Lee Yuk Wing, although he signed as one of the landlords, only became a part owner of Lot 808 after the head tenancy was granted. In any event he stated that in 1988 he had merely negotiated that tenancy on behalf of his uncle Mr. Lee Hoi Shun.

33. Mr. Lee Hoi Shun during his evidence, confirmed that the Respondents as sub-tenants, carried on a car garage and repair shop business at the suit premises. After he orally told them to surrender their tenancies he denied that he received from them any rent. He alleged he did not know anything about arrangements relating to their undisputed continued occupation. He simply repeated that he told the Manager that he would not let the suit premises after 30th June 1993.

34. The Lands Office records do not expressly refer to Mr. Lee Hoi Shun. Some of the predecessors-in-title of the present registered owners of Lot 808, have similar names and may well be relatives. The fact that Mr. Lee Hoi Shun was willing to comply with the request of the Manager, suggests that he may have been only referring to Lots 809 and 810, owned by the Li Chiu Pun Tso. The evidence is open to the inference that Mr. Li Hoi Shan, although not the Manager, was a member of the Li Chiu Pan Tso.

35. It may be that Mr. Lee Hoi Shun, as a member of the Tso, in 1988 dealt with their land as agent. Earlier when Mr. Lee Yuk Wing gave evidence, he informed the Tribunal of developments concerning the Respondents continued occupancy after 30th June 1993. He stated that the Respondents signed a new tenancy agreement with "us" and paid rent to "our representative" from 1st August 1993. He later described that representative as their Treasurer, Mr. Lee Ping Wah. At that later stage he claimed, that Mr. Lee Ping Wah represented both Mr. Lee Hoi Shan and Madam Tsang Kiu.

36. After the Respondents first closed their case on the conclusion of Mr. Lee Hoi Shun's evidence, there was evidence that in mid-1993, efforts were made by at least some Tso representatives, to let the suit premises direct to the Respondents. Further, from 1st August 1993 the Respondents ceased paying rent to the Applicant and commenced paying rent to persons claiming to be the owners. On the evidence considerable uncertainty still exists in relation to a number of material matters. The new tenancy agreement direct to the Respondents was not produced. It would presumably have included the names of the new landlords.

37. Some of these uncertainties were referred to during the Respondents closing submissions. Counsel for the Respondents candidly acknowledged that the Respondents faced major evidential difficulties. Counsel explained that Mr. Lee Hoi Shun's evidence had not come up to the Respondents expectations. Counsel referred to the Respondents case as suffering from what he described as a lacuna on some material issues.

38. Counsel then continued to develope his twofold legal submissions. In summary these were first that the head tenancy was for a fixed term of 5 years and without any necessity for notice that term had expired. Secondly, that any estate or interest of the Applicant had been displaced by the owners granting a new tenancy direct to the former sub-tenants.

39. Counsel before completing these submissions, informed the Tribunal that a further witness, Mr. Lee Ping Wah, had now become available and was expected to arrive in Court by 2.30 p.m. Counsel gave notice that he would then apply for leave to re-open his case to call Mr. Lee Ping Wah. On Mr. Lee's arrival this application was pursued. Counsel stated that it earlier been intended to call Mr. Lee but that the previous evening he had told Yu that he wished to be excused. The Respondents had not obtained any witness summons against Mr Lee to ensure his attendance.

40. Counsel for the Respondents stated that Mr. Lee's evidence would be material as it would cover matters on which Mr. Lee Hoi Shun had failed to give evidence. Counsel for the Applicant opposed leave being granted. When considering whether to grant leave I took into account, adverse to the Respondents, the fact that it was only at that late stage, during an interchange with the Tribunal after their case was closed, that observations were made on what Counsel described as a lacuna.

41. After considering all matters relevant to the exercise of the Tribunal's discretion, leave was granted. In evidence-in-chief Mr. Lee asserted he was responsible for dealing with all Tso matters. Mr. Lee stated that in 1990 a meeting of the Tso, including Mr. Lee Hoi Shun, was held. According to Mr. Lee Ping Wah the meeting considered the head tenancy agreement was null and void and the Tso wanted to recover possession.

42. Mr. Lee Ping Wah conceded that no written notice of termination was given to the Applicant or the Respondents. At that stage he alleged that Mr. Lee Hoi Chun and he simply told the Applicant to deliver up possession. The next step occured in July 1993 when Mr Lee Ping Wah called on the Respondents and told them that their tenancy expired on 30th June 1993 when they would have to leave. Mr. Lee Ping Wah stated that he showed them the assignment and satisfied them he acted for the owners. The assignment was never produced in evidence.

43. During this visit Mr. Lee Ping Wah claimed he told the Respondents that they would have to sign a new tenancy agreement from him or move out. When the Respondents informed him that they had existing tenancy agreements, he told them to go and discuss the matter with the Applicant. They were also asked to inform the Applicant that the owners wanted the suit premises back.

44. Mr. Lee Ping Wah then gave evidence of a village meeting on 15th August 1993 at which he stated the Applicant and the Respondents were also present. Mr. Lee alleged that he told the Respondents that the Applicant's tenancy was illegal and had expired. The meeting agreed to grant a new tenancy agreement direct to the Respondents. Mr. Lee stated that the first month's rent of $16,500 due on 1st August 1993 was paid by the Respondents.

45. Under cross-examination Mr. Lee Ping Wah first asserted that he was appointed Manager in 1984 and had a Government document to prove his appointment. He then produced a document dated 7th November 1992 issued by an Assistant Land Officer, pursuant to Section 15 of the New Territories Ordinance, approving the appointment of Mr. Li Tin Sang and Mr. Lee Ping Wah to replace Mr. Li San Yin as Managers, with effect from 5th January 1984.

46. However, upon further cross-examination this document for present purposes became largely irrelevant. This was because Mr. Lee Ping Wah admitted that the appointment was not for the Li Chiu Pun Tso or Li Ting Iu Tso but in respect of the Li Tsit Wing Tso. The latter Tso owned other land but not any of the Lots of the suit premises. He further admitted he was not the owner nor the Manager of any Tso owning Lots 803, 808, 809 or 810.

47. Mr. Lee Ping Wah's explanation was that the owners of Lots 808 and 809 had asked him to handle their tenancy matters. These owners, he alleged, were Li Ping Wan, Li Ping Po and Li Chu. According to the Land Office records Lots 809 and 810 are owned by the Li Chiu Pun Tso. The current registered Manager, according to a memorial dated 5th December 1962, is Li Kang Wan. I observe that the Manager of Lot 803 is Mr. Li Chu, who was resident in England; when he granted powers of attorney to Madam Tsang Kiu. I confirm that the Land Office records show Lot 808 to be in private ownership.

48. Mr. Lee Ping Wah stated that Mr. Li Ping Po and Mr. Li Chu are in England. However, he went on to state that Mr. Li Ping Wan not only lives in Hong Kong but was in Court. Under further cross-examination he agreed that in 1993 he asked the Respondents to go and discuss their tenancies with the Applicant because he was not sure of the legal position of the head tenancy. When asked why he did not obtain legal advice, his curt reply was that he did have to go to any solicitors.

49. Ar the end of Mr. Lee Ping Wah's evidence, the Tribunal asked Counsel for the Respondent whether he had now closed the Respondents case. Counsel replied that he had only been granted leave to call the additional evidence of Mr. Lee Ping Wah. The Tribunal explained that it was for Counsel to decide which witnesses to call. If after closing his case, he wished to call further evidence, it was open for him to make the appropriate application. Counsel then asked for time to take instructions whether to apply to call Mr. Li Ping Wan. After conferring with his instructing solicitors, Counsel informed the Tribunal, that he had no further application and formally closed the Respondents case.

50. In comparision with the lengthy evidence on the head tenancy, the evidence on the sub-tenancies was short. The Applicant produced the two sub-tenancy agreements for 3 years duration from 21st July 1988. After continuing as monthly tenancies, the Applicant stated that the sub-tenancy agreements were later renewed in terms of the endorsements on each agreement. The endorsement on Yu's agreement was from 1st July 1993 to 1995 at a monthly rent of $10,640 and further provided that from 1st July 1995 to 30th June 1997 the rent was to be increased by 20%. The endorsement on Chan's agreement was for a monthly rent of $12,000 from 1st June 1993 to 31st July 1997.

51. Both the endorsements were dated 6th May 1993 but unsigned. However, it was undisputed that Yu and Chan had paid the first month's rent at the increased rate. It is equally undisputed that they remained in possession. The Applicant's very brief evidence-in-chief confirmed the material facts of his claim. Cross-examination on the sub-tenancies was also limited. The questions were largely concerned with the continuation of the head tenancy after 30th June 1993. The Applicant admitted that his tender of rent to the landlords after 30th June 1993 was rejected on the ground that they wanted to recover vacant possession.

52. When Yu gave evidence, he agreed that he had paid the Applicant the increased monthly rent of $12,000 for the month commencing 1st July 1993. However, he stated that during July he was approached by Mr Lee Ping Wah with whom later in August he signed a new tenancy agreement. Since 1st August 1993 he stated he had not paid rent to the Applicant but instead had paid rent of $8,250 per month to Mr Lee Ping Wah.

53. Chan gave similar evidence stating that in August 1993, Yu and he had signed a new joint tenancy agreement with the Tso, at a monthly rent of $16,500, to which they each contributed $8,250 per month. Chan also agreed that he had paid the Applicant an increased rent monthly rent of $10,640 for the month commencing 1st July 1993 but thereafter from 1st August had only paid rent to the Tso.

54. I find that the endorsements dated 6th May 1993 on each sub-tenacy agreement were unsigned. However, I further find that both Yu and Chan, in terms of the endorsements, paid the increased monthly rent due for the month commencing 1st July 1993. They both also remained in physical possesion of the suit premises. The facts may well give rise to part performance and other questions. Quite apart from any such questions, I am satisfied that subject to that Applicant having the necessary power, Yu and Chan at least continued in possession as sub-tenants from 1st July 1993, at agreed increased monthly rents of $12,000 and $10,640 respectively.

55. The major part of Yu and Chan's evidence related to the initial approach by Mr Lee Ping Wah during July 1993 when he told them that the head tenancy to the Applicant had been terminated. Mr. Lee Ping Wah showed each of them Tso records, which he told them established the owners right to terminate the Applicant's head tenancy. When they raised the position of their sub-tenancy, they each stated that Mr Lee told them to go and discuss that position with the Applicant. Mr. Lee in his evidence confirmed that he suggested that course, because he was not uncertain of the correct legal position of the head tenancy and sub-tenancies.

56. Both Yu and Chan alleged that during subsequent discussions with the Applicant he told them temporarily to pay the rent to the Tso, pending his dispute with the owners being resolved They alleged that later he told them the dispute was not resolved. According to them as the dispute was unresolved and Mr. Lee Pak Wan assured them that the Applicant's head tenancy had expired, they signed the new tenancy agreement direct with the Tso. The Applicant denied that he told them to pay rent to the Tso until the dispute was resolved.

57. On the ownership issue, the at times inconsistent evidence, failed to establish that the owners of Lots 803, 808, 809 and 810 were other than those appearing in the Land Office records. The last registered particulars of the Tso land went back some years. It may well be that some members or other persons have been exercising de facto control or acting as agents. I record that for Lot 803 there are registered powers of attorney in favour of Madam Tsang Kiu.

58. I am also satisfied that at least informal meetings of some members of the relevant Tsos took place between 1990 and 1993 when the grant of the head tenancy to the Applicant was discussed. It appears that those attending the meetings wished to recover possession of the suit premises. However, at its highest, the evidence established a desire to recover possession only from 1st July 1993. There were never any attempts to recover possession from any earlier date. Apart from isolated comments from Mr. Lee Ping Wah that the head tenancy was illegal, all the evidence pointed to 1st July 1993 as being the earliest date from which vacant possession was sought.

59. Indeed, even on Mr. Lee Ping Wah's own evidence, the earliest date on which he requested the present parties to give up possession was on 30th June 1993. The new direct tenancy agreement only commenced on 1st August 1993. Further, the nature of Mr. Lee Ping Wah's authority to act and the precise identity of the owners, was never established in the evidence to the Tribunal's satisfaction. It is clear on the evidence that from the grant of the head tenancy on 1st July 1988 the owners, during the next 5 years, did not take steps to challenge its validity or terminate its existence.

60. The evidence strongly supported the inference that the owners accepted the validity of the original head tenancy. There was certainly powerful evidence of their acquiescence from 1988 to 1993 of the existence of the head tenancy and the sub-tenancies. I am satisfied that 1988 head tenancy was a lawful and binding agreement.

61. The fundamental misconception of the owners concerned not the legality but the nature of the head tenancy. They acted on the erroneous assumption that it was a 5 year fixed term tenancy which would expire without notice. The reality was that the agreement created a periodic tenancy. Further it was a yearly tenancy subject to the provisions of Part V of the Landlord and Tenant (Consolidation) Ordinance.

62. If the owners wished to terminate the head tenancy on 30th June 1993 that object could very simply have been achieved by duly serving a valid 6 months notice of termination. It is common ground that no such notice was given. If the yearly tenancy had not been subject to Part V. it would alternatively at common law, have required one-half year's notice to quite It was equally undisputed that no common law notice to quit was served.

63. Counsel for the Respondents submission. that no such notice was necessary, was based on the rejected allegation that the head tenancy was for a fixed term of 5 years. If the tenancy had been for a fixed duration of that length it would, of course have been excluded from Part V in terms of Section 121 (2) (a).

64. Counsel went on to submit that by Section 6 of the Conveyancing and Property Ordinance, Cap, 219 parol tenancies purporting to exceed 3 years, only took effect as tenancies at will. A tenancy at will is determinable at the will of either party. In the case of a tenancy at will, not subject to Part V. 6 months notice would not be necessary. So far as the present yearly head tenancy is concerned. Section 6 is irrelevant. The tenancy is a yearly tenancy subject to Part V requiring 6 months notice of termination.

65. Counsel for the Respondent had not supplied a List of Authorities but from the Applicant's List referred to Industrial Properties (Barton Hill) Ltd v. Associated Electrical Industries Ltd [1977] 1 QB 580, 596, 597. Counsel for the Applicant had relied on the judgment of Lord Denning MR, in the Court of Appeal, as an example of the well settled general principle of tenancy law, that a tenant is estopped from denying his landlord's title. It was also held that the estoppel may continue to exist after the tenancy's expiry. Lord Denning referred to the general principle at page 597:

66. Counsel for the Respondents submitted that in the present case, the owners adverse claim permitted the sub-tenants to dispute the principal tenant's title. This submission was based on two factual allegations. First, that the payment of rent by the Respondents to the owners, constituted a denial by the sub-tenants of the principal tenant's title. This submission is misconceived. Where a tenant denies his landlord's title it does not create rights in favour of a tenant.

67. To the contrary, this principle although raised by the Respondents, is concerned with the wrongful denial of a landlord's valid title. Where it applies it creates a right of forfeiture in favour of the landlord. The position is clearly set out in 1 Woodfall's Law of Landlord and Tenant (29th Edn) paragraph 17.308. Curiously this paragraph was relied upon by the Respondents. This particular principle is also dealt with in paragraphs 17.302 to 17.307. Where there is denial by a tenant, a landlord may forfeit without notice - paragraph 17.309.

68. Denial of title therefore creates rights in favour of landlords and principal tenants but not for tenants or sub-tenants. Quite apart from whether those rights arose, they were never exercised by the Applicant. To the contrary, by suing the Respondents, he has elected to affirm the sub-tenancies. The more arguable submission advanced was whether the Respondents since 1st August 1993, by jointly paying the sums of $16,500 per month received by Mr. Lee Ping Wah, have attorned to third persons having an adverse claim.

69. To succeed on this second submission, the Respondents would have had to establish the validity of the owners adverse title. If the owners were debarred from making an adverse claim against the principal tenant, there could be not valid attornment. In that event, the Respondents would continue to be estopped from denying the Applicant's right to sub-let to them. So long as the Part V head tenancy is not duly terminated, the owners are debarred from making any adverse claim.

70. The remaining factual issue is whether the Applicant directed the Respondents to pay rent direct to the owners. If so, did that constitute an acknowledgment of the owners adverse claim? There is a conflict between the parties whether the Applicant gave any such direction. However, even on the Respondents evidence the alleged direction, at least initially, was only on a temporary basis, pending the resolution of the head tenancy dispute.

71. I record that the monthly sums paid from 1st August 1993, were less than the rent paid to the Applicant for the month of July 1993, The difference in the monthly amounts may provide evidence that they were not necessarily paid pursuant to any direction from the Applicant. The direct payments corresponded with the rent agreed with Mr. Lee Ping Wah and were described by the Respondents as payment of that rent. Those payments represented a saving to the Respondents a saving of $6140 per month or $73,680 per annum.

72. When I consider the whole of the evidence I am unsatisfied that the Applicant gave the alleged direction. If he had done so, it would still be necessary to consider whether the temporary nature of the arrangement, amounted to an acknowledgment of the owners adverse claim. I find that the evidence fails to establish that the Applicant agreed to surrender his interest as principal tenant under the sub-tenancies or represented or acknowledged that they had expired or been terminated. Further, none of his actions or representations give rise to any estoppel in favour of the Respondents.

73. The Respondents submissions suffer from several further weaknesses. These include the unsatisfactory evidence as to the identity of the persons who may have granted the new unproduced direct tenancy agreement. Further, were those unidentified persons the owners, or authorised by the owners to grant the direct tenancy? Assuming without deciding, that it was the several different lawful owners who purported to grant the tenancy, their powers would have still been subject to any existing lawful interests.

74. On the evidence I hold that the owners title was subject to the lawful yearly tenancy to the Applicant. True the owners by giving 6 months notice, could very easily have terminated the head tenancy. If they had done so, it would then certainly would have been within their power to grant a new tenancy, direct to the Respondents. It remains common ground that no such notice was given. The owners failure to terminate the head tenancy, equally debars them or the Respondents from asserting title paramount or any other adverse claim.

75. On these findings, the Respondents closing legal submissions become largely irrelevant. They simply do not arise on the facts. Accordingly, the Respondents opposition fails. The Respondents also each filed a Counterclaim for rates to which the Applicant filed a Defence. Curiously the counterclaim was never canvassed in evidence or referred to in submissions. It must be dismissed.

76. Counsel for the Respondents in terms of the Notices of Opposition asked for relief against forfeiture. All orders of the Tribunal for vacant possession, made where the cause of action is limited to non-payment of rent, are subject to the mandatory statutory rights, in favour of tenants, contained in Section 21F, Supreme, Court Ordinance, Cap,4. Counsel for the Respondents asked that time for payment of the arrears only run from the handing down of reasons for judgment. Under Section 21F, the Tribunal fixed time at 4 weeks to run from the date of judgment.

77. After judgment was delivered Counsel for the Applicant applied for costs on the High Court scale on an indemnity basis together with a Certificate for Counsel. Counsel for the Respondents submitted that costs on a District Court scale were appropriate and opposed the grant of a Certificate. The Tribunal has in the present proceedings an unfettered judicial discretion as to costs. Under Section 12 of the Lands Tribunal Ordinance Cap., 17 it may order costs on any of the scales of those two Courts.

78. Although not decisive, the Tribunal in the exercise of its discretion, usually has regard to quantum. It does so against the background that the jurisdiction of the District Court for claims for recovery of land is limited to rateable values not exceeding $100,000. It appears that the suit premises may not be rateable. However, current rateable values, calculated as at 1st July 1993, are generally very close to then current rents.

79. The first month's new rent paid from 1st July 1993 to the Applicant was equivalent to $271,680 per annum and if payable to the owners $198,00 per annum. Both those annual rents would have been supported a rateable value well above the jurisdiction of the District Court. This would have required any proceedings to be commenced either in the High Court or the Lands Tribunal. When I take these and other relevant factors into account, I consider costs should be awarded on a High Court scale.

80. Although the conduct of the Respondents case, including consideration on two occasions after their case was closed whether to call further evidence, may have been unusual, in my view it fell far short of the circumstances, where indemnity costs might properly be awarded. Costs were therefore awarded to the Applicant on the party and party Scale of the High Court to be taxed if not agreed. It was also a proper case for a Certificate for Counsel.

81. On these findings judgment was granted in favour of the Applicant and the following orders made:

Dated this 26th day of March 1995.