Chan Yeung Kei v. Chan Yeung Fai

LT. No.:1518 of 1997

Headnote

Landlord and tenant-Part II monthly tenant subletting the whole of the premises divesting himself of all interests in the premises-at common law no right to recover possession because of lack of privity of estate-meaning of "landlord" in the Landlord and Tenant (Consolidation) Ordinance-jurisdiction of Land Tribunal in action for recovery of rent- family arrangement between brothers or tenancy

The applicant and respondent were brothers. Their father was a Part II tenant of the suit premises. After his death, the applicant took over the tenancy while it was arranged that the rent was to be paid by the respondent directly to the landlord. After a number of years of the respondent moved out and ceased to pay rent. The applicant alleged that he had sublet the premises to his brother right before the time the latter moved out. The respondent denied that there had been any subletting and alleged that his responsibility for paying rent was merely a family arrangement. Alternatively, he contended that there was no privity of estate. The subletting constituted a transfer or assignment of the head tenancy. The relationship of landlord and tenant therefore ended on subletting and the Lands Tribunal had no jurisdiction in this matter.

Held:(1) At law, there would have been no privity of estate between the monthly tenant and his monthly subtenant once the former had sublet the whole of the premises to the latter: Milmo V Carreras [1946] 1 K. B. 306 considered. This common law rule did not apply to a Part II tenant. (2) The relationship between a tenant and his subtenant was governed by the Landlord and Tenant (Consolidation) Ordinance. (3) Under the Ordinance, the tenant was still the landlord of his subtenant within the meaning of the Ordinance and was still entitled to apply for recovery of possession and rent and the Lands Tribunal had the jurisdiction to grant such reliefs. (4) On the evidence there was no subletting or any contractual relationship between the brothers.

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LT NO.: 1518 OF 1997

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Judgment

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Background

1. The applicant and the respondent are brothers. Together with their four sisters they were brought up in the suit premises of which their father was a Part II tenant. In 1987, the applicant acquired his own flat and moved out to live there. The father was an ivory carving craftsman and went into semi-retirement in 1983. Since then the applicant had been responsible for paying rent for the suit premises until his younger brother, the respondent took over from February 1990 when the father passed away. One by one their sisters got married and moved out of the suit premises. By the end of 1995 only the respondent and the mother remained living in the suit premises. In January 1996, the mother who had not been in good health for some time went for convalescence to live in a temple where her daughter worked. Rent from February 1996 was allowed to fall in arrears. The landlord took out distrain proceedings for rent in May or June. On 24th June the applicant paid into court four months' arrears of rent (February to May) and other charges. On being threatened with further legal proceedings, he paid the landlord's solicitors another three months' rent on 29th July 1996. In August 1996, he instructed the present solicitors trying to recover from the respondent arrears of rent. In January 1997 the mother passed away. In April 1997, by a form CR109 he notified the Commissioner of Rating and Valuation that he had sublet the premises to respondent as from 1st February 1996. The present application was instituted on 14th May 1997 seeking an order for possession and for arrears of rent from 1st February 1996.

Applicant's Case

2. The Applicant alleged that he was the tenant of the suit premises in place of his deceased father. The respondent had for some time intimated that he wanted to sublet the premises. To prevent him from subletting, he discussed the matter with the respondent in the presence of their mother in January 1996. As a result an oral monthly sub-tenancy to commence was created with an express provision against subletting.

Respondent's Case

3. The father left a will leaving all his property to the respondent. He said his elder brother, the applicant, was not pleased with it. The relationship of the brothers turned sour since the father's death. As the respondent had inherited all his father's property and as he was living in the premises, it was arranged that he should be responsible for paying the rent. The first rental receipt after the father's death was issued to the name of the respondent. When the applicant found out, he protested. He insisted that the rental receipt should be in his name. The respondent acceded to this and notified the landlord of the same. Thereafter, though the rent was still paid by the younger brother with his personal cheques, rental receipts were made out to the name of the elder brother. On 5th December 1995, the elder brother came up to the premises after attending a wedding banquet. He caused a disturbance and had a quarrel with his younger brother. The respondent then left the premises and did not return there ever since. He stayed a few nights with his sister and a few nights with friends until he rented a cubicle in Shatin on 5th January 1996. He denied there was any meeting or discussion with his elder brother after he left the premises on 5th December. He maintained there was never any subletting to him.

Jurisdiction

4. Mr. Gidwani, counsel for the respondent, submitted that if there had been a subletting, it would have been a transfer or assignment of tenancy. The elder brother was a monthly tenant and he granted a monthly sub-tenancy to his brother and had divested himself of all interests in the premises. The landlord and tenant relationship no longer existed. He cited a number of English authorities in support. Convenient reference to this legal principle can be found in one of these authorities: Milmo V Carreras [1946] 1 K. B. 306. Lord Green M.R. when delivering judgment of the Court of Appeal in that case said at P.310:

"For the purpose of this case, I think it is sufficient to say that, in accordance with a very ancient and established rule, where a lessee, by a document in the form of a sub-lease, divests himself of everything that he has got (which he must necessarily do if he is transferring to his so-called sub-lessee an estate as great as or purporting to be greater than, his own) he from that moment is a stranger to the land, in the sense that the relationship of landlord and tenant , in respect of tenure, cannot any longer exist between him and the so-called sub-lessee. That relationship must depend on privity of estate. I myself find it impossible to conceive of a relationship of landlord and tenant which has not got the essential element of tenure in it, and that implies that the tenant holds of his landlord, and he can only do that if the land lord has a reversion."

5. Applying this principle to the relationship between the brothers in this case, there would have been no privity of estate between them once the sub-tenancy was created. The relationship landlord and tenant could no longer exist. Therefore, it was argued the Lands Tribunal had no jurisdiction. Ms. Cheung , counsel for the elder brother, did not address me on this argument. No doubt Mr. Gidwani correctly stated the position of the parties at common law. If the elder brother was a tenant he would be a part II tenant as his father had been. His rights and liabilities as a tenant were also governed by the provisions of Part II of the Landlord and Tenant (Consolidation) Ordinance, Cap 7 (" the ordinance"). Therefore one must also look at these provisions. Part I, II, IV and V of the ordinance contain the same definition of landlord. Section 49 in Part II of the ordinance gives the definition of landlord as follows:

" 'landlord' includes any person, other than the Crown, who is from time to time entitled to receive rent in respect of any premises and, in relation to a particular tenant , means a person entitled to receive rent from such tenant."

6. By this section the elder brother would have been included as landlord even if he had sublet the whole of his term. Furthermore Sections 52 and 53 govern the duration of a Part II tenancy. Section 52 as we all know too well provides for the continuation of a tenancy after expiration of its contractual period. A part II tenancy can only be terminated under Section 53. One way is for the tenant to deliver up vacant possession. Another way is for parties to enter into new tenancy of a fixed term of not less than five years and with some restrictions in its provisions. The third way is when this Tribunal makes an order for possession. The grounds for making an order for possession are exhaustively laid down in Section 53(2). One of which is relevant to the instant case and is provided in paragraph (h):

" the tenant has sublet the whole or any part of the premises of which he is the tenant and does not occupy any part of the premises as his dwelling."

7. On the admission of the elder brother, he would be caught under this paragraph. If the landlord had applied for an order for possession, the elder brother would not have been able to resist it. However until the order for possession takes effect, the tenancy still exists and he would remain the principal tenant or the landlord of his subtenant within the meaning of the Ordinance. Whether or not he has a reversion or whether there was an element of tenure in such circumstances at law is beside the point. He could still apply for an order for possession in accordance with the Ordinance.

8. As to a Part II sub-tenancy, it can be terminated in any one of the above ways. It can also be terminated under Section 53(1)(c) when the head tenancy is itself terminated. When this happens, the Tribunal may in some cases order the sub-tenants to become the direct tenant of the landlord. The necessary implication of all these provisions is that the sub-tenant remains the tenant of the principal tenant as long as the head tenancy is not terminated. For all these reasons, I hold that this tribunal has the jurisdiction to grant the orders sought by the elder brother.

Sub-tenancy or none

9. The respondent younger brother was crossed examined at length by Ms Cheung. His credibility was severely criticised by her. He gave evidence as to how the rental receipts came to be made out to his brother. Ms Cheung submitted that he should not be believed as he failed to keep two important documents. The first one was the rental receipt made out to his name and the second one was the letter requesting the landlord to issue future rental receipts to the name of his elder brother. The will of the father was not produced. I do not know how the monthly tenancy was disposed of under the will. All I was told was that all the property of the deceased passed to the younger brother under the will. It was also not disputed that it was he who paid the rent and paid it with his personal cheque. In these circumstances, I am not surprised that the first rental receipt was issued to the name of the respondent. The elder brother was not living at the premises and he did not pay the rent and he did not contact the landlord for that matter. He said he left it to his younger brother to contact the landlord. Unless the landlord was notified by his younger brother, the landlord would not have issued the rental receipt to his name. Unless the younger brother was under pressure to do so, I do not see any good reason why he should of his own volition to write to the landlord to make out the rental receipt to his elder brother. Further the elder brother was able to produce a thick bundle of rental receipts in his name only that those for the first few months after his father's death were missing. No one offered any explanation as to their whereabouts. The elder brother said he looked at the rental receipts once or twice a year and he did not say how he came by those receipts he produced or why he did not have the one in dispute. Ms Cheung pressed the younger brother why he did not keep a copy of the letter. She was not satisfied with his answer that he did not think it an important document at the time. I failed to see her reasons for being dissatisfied. The date of this letter could certainly throw some light on the present dispute. No one could reasonably have foreseen its importance at that time. I accept the younger brother's explanation. I have no doubt that the younger brother was telling the truth. It was only after his elder brother had seen the rental receipt issued to his name and complained that he wrote to landlord requesting for change of name in future rental receipts.

10. The younger brother gave evidence that he left the premise for good because of the quarrel with his brother on 5th December. In the course of describing the disturbance and quarrel on that day he said his brother came up to the premises drunk after a banquet. The elder brother denied he was drunk and in fact he did not drink because of liver trouble. The friend who invited him to the banquet on that day was called to testify that he did not have any alcoholic drinks that night. Ms Cheung submitted because of all this evidence, the younger brother's version about the events on that day and thereafter should not be believed. To be fair to him, he did not and was not asked to describe the basis for his belief that his brother was drunk. He did not say his brother exhibited any common physical signs, like slurry speech, vomiting or unsteady steps. One cannot blame him for inaccuracy in description if the elder brother exhibited such violent outbursts as described that night.

11. The younger brother was also cross-examined on the receipt of a registered packet. He denied it was his signature though his identity card appeared on it. He guessed it might be his brother's but conceded that it was a pure guess without basis. He said some years ago he lost his identity card and the one he had now was the replacement issue. I have no doubt some male bearing the identity card of the younger brother collected the registered item from the post office on 11th July 1997. I do not know what the registered packet was. It was posted on the 9th July by the Solicitors for the elder brother. It might have been the court order in default but the date did not quite tally with the affirmation of service filed. Whatever the item was, it did not serve any useful purpose for him to deny his signature except for fear that this might be proof to contradict his contention that he never returned to the suit premises. There had been quite a number of other registered items in connection with these proceedings sent to the premises for him. None was collected by him. If he had been evading service, he could have easily evaded this one. Further the so called signature was written in capital letters and was therefore most legible, quite an unusual feature for a signature. The identity of the collector of this postal item was a mystery. However I accept the evidence of the younger brother that it was not his.

12. Something must have happened on 5th December 1995 or else the younger brother could not remember it was the same date as the wedding banquet he was not invited to. He said it was Mr. Yip's sister's wedding. Mr. Yip gave evidence that it was his brother's wedding. He must be right. The younger brother just made an honest mistake. Shortly after the dispute on that day, he rented a cubicle in Shatin. The mother understandably must have felt helpless and sad at the poor relationship between the brothers. As the younger brother no longer lived at the premises it would make sense for her to move to a temple to be near his daughter and to avoid being some kind of a football between contending brothers. As the mother moved out in January, it made good sense for the younger brother not to continue to pay rent as from February. Naturally, he should and in fact he did notify the landlord this. Ms Cheung kept pressing him in cross-examination that he did not send such letter. She argued that his evidence was self contradictory. The letter was dated 15th January. She said in the letter he told the landlord that he would in future no longer be responsible for payment of rent and yet he paid two months' rent on two occasions shortly afterward in January. I can see no merit in her argument. The younger brother made it very clear he would not be responsible for the payment of rent as from February when their mother no longer resided there. The two months' rent were paid in arrears for December and January. I do not see any contradictions between the content of the letter and the payment of arrears of rent due before the date of the letter. The younger brother also called a sister to give evidence. I accept her evidence about the poor relationship of the brothers. She had no motive to misrepresent her evidence. She is a close family member and had sufficient chance and knowledge to learn about the relationship of the brothers.

13. The elder brother certainly was not telling the truth about his feelings when he denied he had any grudge about his younger brother inheriting all his father's property. He denied that any serious dispute with his younger brother happened on 5th December. He was evasive when he was asked if knew the younger brother had not returned to the premises after that. The sister gave evidence which I accept that he rang to press her to give him his younger brother's address. The elder brother's evidence about how the subletting came about was scanty. The reasons for legalising and formalising the relationship with his brother was far from convincing. He said he had to do it to protect his mother as he was afraid that his brother might otherwise sublet the premises to others. I failed to see the logic of this. If he sublet only that part of the premises occupied by his brother, his logic or state of mind could be better understood. For if he sublet the whole of the premises to his brother, his brother would have exclusive possession of the premises and in theory could evict their mother. Of course, he was a layman and it might be too harsh on him to require him to understand this possible consequence. At least he should have reduce the agreement in writing. Even after giving allowance to the fact that he was a layman not familiar with tenancy law, I do not believe him. If he wanted to achieve what he hoped for, he could simply tell his brother in clear terms not to sublet.

Conclusion

14. I have no doubt that the younger brother was telling the truth about the arrangement of payment of rent for the suit premises. Certainly, it was a family arrangement. He was living there with his mother, and as he had inherited all the property from the father he did not have much ground for objection but to accept the arrangement to pay rent. When the mother moved out, I can well understand he felt no obligation to keep the arrangement to pay rent. This application by the elder brother for possession and recovery of rent must fail. There has never been any contractual relationship, let alone landlord and tenant , between the brothers. I dismiss the application and make an order nisi for costs with certificate for counsel to the respondent to be taxed if not agreed. There be liberty to apply.