CHAI POW-HONG v. LAM SHU-FUNG AND ANOTHER

Lands Tribunal Case No. 4053 of 1994

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HEADNOTE

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Property law - Landlord and Tenant - Domestic Premises - Application for Possession for Own Use - Landlord by Succession - Surrender of Principal Tenancy - Sub-tenancy - Landlord and Tenant (Consolidation) Ordinance, Cap. 7 Part II, s. 50(6)(o) - Termination of Tenancy.

          The subject property was let to the respondent on an uncertain date and tenure and other conditions cannot be ascertained. The respondent sub-let parts to, inter alia, the co-respondent. The co-respondent's sub-tenancy was created, and he took possession, after 10th June 1983. The applicant inherited the subject property from his grandfather who died in 1989. On 14th January 1994, the respondent still in possession of the subject property, the applicant entered into a written tenancy agreement with the respondent for a term of 2 years commencing 1st May 1994 with express prohibition against sub-letting. Before the 2 year term actually started, the respondent agreed to surrender the tenancy and in fact vacated the subject property on 31st August 1994. On or about 4th May 1994 the applicant sent a hand written registered letter asking "all occupiers" to vacate by 31st August 1994. The letter was returned by the post office. On 31st August 1994 a copy of the same letter was posted inside the subject property when the applicant discovered, allegedly for the first time, that there were 16 sub-tenants in the subject property. In November 1994, after the respondent had surrendered possession, the applicant applied to the Tribunal for possession order against the respondent for own use pursuant to provision in Part II of the Landlord and Tenant (Consolidation) Ordinance. The co-respondent opposed.

Held: (1) Applying common law, the applicant as successor-in-title stood in same position as his grandfather vis-a-vis principal and sub-tenancies governed by the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. (2) Applying common law, the tenancy agreement dated 14th January 1994 entered into between the applicant and the co-respondent cannot prejudice or affect subtenants lawfully in possession. (3) Upon the respondent surrendering the principal tenancy, existing sub-tenants lawfully in possession at the time became direct tenants under the applicant. (4) After the respondent has surrendered possession, the applicant had no cause of action against the respondent for possession order and must terminate the co-respondent's tenancy by valid notice under the relevant Part of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 before seeking order for possession against the co-respondent. (5) On the true interpretation of s. 50(6)(o) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, Part II of the Ordinance applies to a tenancy created on or after 10th June 1983 only if the tenant thereunder was in possession before 10th June 1983.

L.T. Case No. 4053 of 1994

IN THE LANDS TRIBUNAL OF HONG KONG

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REASONS FOR DECISION

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1. The applicant obtained an order by H.H. Judge Cruden made on 18th January 1995 for possession against the respondent. On 23rd February 1995, the co-respondent came before me seeking leave to join as co-respondent to oppose. Leave was granted. Today, after hearing the case between the applicant and the co-respondent, I dismissed the applicant's case. I now set out in writing the reasons for my decision as I have told the parties.

2. According to the applicant's evidence, the residential property known as First Floor, 7 Man Wai Street, Kowloon ("the subject property") was owned by his grandfather. The elder Mr. Chai passed away in December 1989 and the applicant became the immediate next successor-in-title of the subject property. When the applicant took over the subject property, he knew that it had been rented to the respondent by his grandfather for quite some time.

3. Sometime after the applicant became the registered owner of the subject property, he signed a tenancy agreement with the respondent dated 14th January 1994 for a term of two years commencing 1st May 1994 ("the re-grant agreement"). The re-grant agreement is in the usual form of tenancy agreement printed in Chinese that can be bought from the local bookshop. It contains a clause prohibiting sub-letting, assigning, etc. But the re-grant agreement bears no evidence of having stamp duty paid thereon nor was it endorsed by the Commissioner for Rating and Valuation.

4. Then sometime in March 1994, allegedly the respondent told the applicant that he would surrender the tenancy of the subject property. In view of this, according to the applicant, he sent a letter hand-written in Chinese dated 4th May 1994 addressed to "the occupier(s)" of the subject property saying that since the respondent had indicated that he would surrender his tenancy "all occupiers" must vacate the subject property by 31st August 1994. This letter was sent by registered mail but the applicant admits that it was returned by the post office. The next thing that happened was a visit by the applicant to the subject property on 31st August 1994 purportedly to accept delivery of vacant possession. However, according to the applicant, on that day although the respondent was there and handed over the keys to the subject property to the applicant, the applicant discovered that there were 16 other people living there. Apparently the subject property was partitioned into a number of rooms and had two double-decker beds in the living area. The applicant says that he was unable to ascertain the identity of some of the people living there because they were un-cooperative. He then posted a copy of the letter dated 4th May 1994 on a pillar inside the subject property. Although the respondent did move out as from 31st August 1994, the other 16 people continued to live there.

5. Then on 4th November 1994, the applicant issued proceedings under Part II section 53 (2B) of the Landlord and Tenant (Consolidation) Ordinance, against the respondent only, for an order for possession for own use as he was about to get married. On 18th January 1995, the respondent being absent, on the strength of the evidence of the applicant confirming the particulars in his written application (Form 22), H.H. Judge Cruden made the order for possession against the respondent in favour of the applicant.

6. The applicant's Form 22 is misleading in that it refers to the re-grant agreement between the applicant and the respondent and makes no mention of the fact that the respondent had already surrendered the tenancy. The only ground for possession stated therein is own use on account of marriage pursuant to section 53(2B) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. When I asked why he did not tell the whole truth to the Tribunal earlier, the applicant said his main concern was to obtain possession against the sub-tenants and that he had been advised by lawyers that if he obtained a possession order against the principal tenant the sub-tenants would have to vacate as well. The applicant produced a copy of the notice of intention to marry of which I have no doubt.

7. The co-respondent went on oath to say that he moved into the subject property in or about 1985. The respondent at that time sub-let a room to the co-respondent. Later, the precise date he could not recall, he moved to another room. He does not know when the other occupants (15 of the 16 in all in 1994) moved into the subject property. He insisted that he had never received any notice to quit from the applicant through the mail or in person. He confirmed that he saw the applicant on 31st August 1994 which was also the date the respondent moved out of the subject property. But he only had knowledge of the present proceedings when the applicant told him the Tribunal had made an order for possession against the respondent. The co-respondent informed me that 3 of the 16 occupants have died since 31st August 1994, leaving only 13 now living in the subject property.

8. In the light of the circumstances outlined, it would be tempting to first determine whether the respondent's tenancy comes within Part II or Part IV of the Landlord and Tenant (Consolidation) Ordinance. Unfortunately, the applicant is unable to produce any written tenancy agreement, if there was one, between his grandfather and the respondent. Even upto today, the applicant has not been able to ascertain when the respondent moved into the subject property. There is simply insufficient evidence for the Tribunal to determine whether the tenancy with the respondent falls within either Part II or Part IV of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. Fortunately, as will become clear here-in-below, this question was not crucial for the co-respondent's case.

9. The first issue that really concerned the Tribunal was whether the latest sub-tenancy granted by the respondent to the co-respondent came under Part II of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. Section 50(6)(o) of the Ordinance provides that Part II does not apply to a tenancy created on or after 10th June 1983 of premises of which the tenant is not already in possession under another tenancy or sub-tenancy. Section 116(2)(a) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 provides that Part IV does not apply to any tenancy to which Part II applies.

10. According to the co-respondent, and there is no reason to disbelieve him, he first moved into the subject property in 1985. This initial sub-tenancy must, therefore, come under Part IV by virtue of the combined effect of section 50(6)(o) and section 116(2)(a) of the Ordinance. Sometime after that, the co-respondent moved to another room in the subject property. This move must have created a new sub-tenancy, i.e. the latest one. This latest sub-tenancy being one created after 10th June 1983 of another room which the co-respondent was not already in possession, there can be no doubt that it also comes within Part IV of the Ordinance.

11. It is trite law that the applicant as landlord by succession is bound by sub-tenancies validly granted by the respondent. Irrespective of whether the principal tenancy between the applicant's grandfather and the respondent came within Part II or Part IV of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, if it prohibits the subletting without consent, the applicant clearly would have the right to forfeit the principal tenancy and all sub-tenancies thereunder. However, there is no evidence that the principal tenancy granted by the grandfather prohibited sub-letting. The Tribunal must, therefore hold that sub-letting by the respondent during the term of the principal tenancy granted by the grandfather was lawful and bound the grandfather and the applicant. By the way, judging from the notice dated 4th May 1994 written by the applicant to "all occupiers", the applicant's evidence that prior to 31st August 1994 he had no knowledge of sub-letting by the respondent is difficult to believe.

12. The re-grant agreement dated 14th January 1994 between the applicant and respondent is an irrelevant complication and a futile effort on the part of the applicant. If the original principal tenancy to the respondent inherited by the applicant falls within Part II of the Ordinance, section 52A says that it may be effectively surrendered only with endorsement of the Commissioner for Rating and Valuation. The applicant and the respondent could not simply replace a Part II principal tenancy agreement with the re-grant agreement. If the original principal tenancy to the respondent inherited by the applicant fell within Part IV of the Ordinance, the applicant and the respondent would be to enter into the re-grant agreement. In either case, since the Landlord and Tenant (Consolidation) Ordinance is silent on this point, common law principles should apply. Woodfall on Landlord and Tenant 17.044, quoting long established case authorities which I need not repeat here, says that the surrender of a lease does not prejudice or extinguish a sub-lease previously granted, the same is true in the case of a surrender and regrant. I may add that to depart from this principle, quite plainly, would defeat the whole purpose of Part II and Part IV the Ordinance which protect sub-tenancies as well. A landlord and his principal tenant should not be allowed to deprive lawful existing sub-tenants under the principal tenant of their rights by altering the terms of the principal tenancy.

13. Whilst the precise status of the original principal tenancy cannot yet be ascertained, the more inquisitive mind might pause to consider whether the re-grant agreement fell within Part II of the Landlord and Tenant (Consolidation) Ordinance because it was entered into after 10th June 1983 of premises of which the respondent was already in possession and so it was not disapplied by section 50(6)(o) of the Ordinance. This turns on the interpretation of "a tenancy created on or after 10th June 1983 of premises of which the tenant is not already in possession under another tenancy or sub-tenancy", i.e. whether "in possession under another tenancy or sub-tenancy" refers to the date the tenancy under consideration was created or to 10th June 1983. Although the wording is, to say the least, ambiguous, I would venture to suggest that "in possession under another tenancy or sub-tenancy" refers to 10th June 1983. Otherwise it would give rise to the peculiar phenomenon that a Part IV tenancy could be converted into a Part II tenancy.

14. Accordingly, I held that the re-grant agreement does affect the sub-tenancies subsisting immediately before the re-grant agreement came into effect. It follows that although the re-grant agreement prohibits sub-letting by the respondent, sub-tenancies created by the respondent before the re-grant agreement came into effect remain lawful and protected by the Ordinance.

15. The Landlord and Tenant (Consolidation) Ordinance is also silent on the effect on sub-tenancies of the surrender of possession by the respondent on 31st August, 1994. Again, relying on the principle referred to in Woodfall on Landlord and Tenant, I held that upon surrender of possession by the respondent as principal tenant, all sub-tenants lawfully occupying respective parts within the subject property became the applicant's direct tenants. In particular, the co-respondent became a Part IV tenant directly under the applicant.

16. The other effect of the respondent having surrendered his tenancy on 31st August 1994 to the applicant is that the applicant had no cause of action under the Landlord and Tenant (Consolidation) Ordinance against the respondent when he applied for possession on 4th November 1994. Hence any order obtained herein by the applicant against the respondent is a nullity.

17. In the premises, the applicant desiring to seek possession against the co-respondent for own use must follow the procedure prescribed in Part IV of the Landlord and Tenant (Consolidation) Ordinance. This starts with service of a valid CR 101 under section 119 of the Ordinance on the co-respondent to give notice of termination of tenancy, stating clearly that he would oppose application for grant of a new tenancy. After that, if the co-respondent applies for grant of a new tenancy pursuant to section 119D of the Ordinance, the applicant must prove his case of own use under section 119E of the Ordinance. If the co-respondent does not apply for a new tenancy, the applicant may apply under common law for an order for possession upon termination of tenancy due to effluxion of time.

18. In this case, the applicant never served a valid form CR 101 on the co-respondent. Instead the applicant issued proceedings under Part II section 53(2B) of the Ordinance which is misconceived. This application against the co-respondent must fail and was therefore dismissed.

Dated this 11th day of May, 1995.