HUI FUNG v. SIT CHUNG YAN

[English Translation – 英譯本]

CACV 754/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 754 OF 2000

(ON APPEAL FROM LDNT NO. 224 OF 2000)

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JUDGMENT

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Hon Woo JA (delivering the judgment of the Court):

1. Mr Hui Fung, the Applicant (hereinafter “Mr Hui”) was the resident of Flat K, 1^st Floor, 531 Jaffe Road, Causeway Bay (hereinafter “Premises”).  Mr Sit Chung Yan, the Respondent (hereinafter “Mr Sit”) was the landlord of the Premises.

2. On 30 March 2000, pursuant to section 119A(1) Part IV of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7, Laws of Hong Kong) (hereinafter “Ordinance”), Mr Hui served a notice (Form CR 103) on Mr Sit, requesting Mr Sit to grant a new tenancy at the prevailing market rent.  Part IV of the Ordinance, to which section 119A(1) belongs, only applies to domestic tenancies.  By Form CR 104 and a Notice of Opposition (Form 7), Mr Sit opposed the grant of new tenancy to Mr Hui.  Mr Sit put forward a number of grounds in support of the opposition.

3. The case was heard before Tribunal Member W K Lo of the Lands Tribunal (hereinafter “Tribunal Member Lo”).  On 12 October 2000, Tribunal Member Lo ordered that Mr Hui’s application for a new tenancy be dismissed and that each party was to bear his own costs, but on the same day granted leave to Mr Hui to appeal the said orders.

4. On 30 October 2000, Mr Hui filed a Notice of Appeal against the rulings of Tribunal Member Lo.  The ground of appeal that he put forward was very simple: “this unit is used for domestic purposes and not commercial purposes and should be governed by Part IV of the Landlord and Tenant (Consolidation) Ordinance.  Therefore, the court should grant me a new tenancy at the prevailing market rent.”

5. The reasons for Tribunal Member Lo’s orders were set out in the Judgment that he handed down on 15 November 2000.  It is obvious that these reasons rested entirely upon his understanding of “domestic tenancy” and section 115A of the Ordinance.  Section 115 of the Ordinance provides that:

‘domestic tenancy’ (住宅租賃) means a tenancy of premises let as a dwelling; …

6. Section 115A of the Ordinance provides as follows:

(1)        Notwithstanding the purpose for which premises were let, in determining the nature of a tenancy for the purposes of this Part the following provisions shall apply ―

(a)     in any agreement in writing between a landlord and tenant, a term that the premises shall be used for a specified purpose shall be prima facie evidence that the premises are being used for such purpose;

(b)     notwithstanding any evidence as to whether premises were originally let as a dwelling or not let as a dwelling, premises which are being used primarily for another purpose shall be deemed to have been let for such other purpose; but where such primary user is user as a dwelling and in breach of any term in the agreement with the landlord, the onus is on the tenant to establish that such user has been agreed to by the landlord, expressly or by implication, or acquiesced in by him;

(c)     subject to paragraph (d), where there exists insufficient evidence as to whether premises were let as a dwelling or not let as a dwelling, the nature of the tenancy shall be determined by the primary user of the premises; …

7. At the hearing before Tribunal Member Lo, two tenancy agreements between the parties hereto in respect of the Premises were adduced as evidence.  Clause 8 of one of these agreements, dated 15 August 1996, stated that the Premises could only be used for “commercial-residential purpose”.  In this agreement, the landlord was stated to be Mr Sit and the tenant Mr Hui.

8. In the other tenancy agreement, dated 4 October 1998, the landlord was stated to be Mr Sit, whereas the tenants were stated to be Mr Hui and one “Yee Wo Residential Properties Co Ltd” (transliteration) (“怡和住房物業有限公司”).  Clause 8 of this agreement also stated that the Premises could only be used for “commercial-residential purpose”.

9. Tribunal Member Lo was of the view that “commercial-residential purpose”, which was the only user of the Premises as allowed by the two tenancy agreements, was not equal to “domestic purpose”.  He had the following to say in his Judgment at page 4:

In accordance with section 115A of the relevant Ordinance, I hold that the premises in question are prima facie used for ‘commercial-residential purpose’.  As ‘commercial-residential purpose’ includes commercial purpose, it is not equal to ‘domestic purpose’.  Therefore, the user of the premises as specified by the written tenancy agreement between the landlord and the tenant on 4 October 1998 is not for domestic purpose.

If the user of the premises specified in the tenancy agreement between the landlord and the tenant on 4 October 1998 was ‘commercial-residential’, and subsequently the tenant changed the primary user of the premises to ‘domestic purpose’, then, under section 115A(1)(b), the tenant bears ‘the onus […] to establish that such user has been agreed to by the landlord, expressly or by implication, or acquiesced in by him’.  At the hearing, the tenant (i.e. the Applicant) failed to adduce any evidence to show that the landlord (i.e. the Respondent) has agreed to or acquiesced in a change of the user from ‘commercial-residential’ to ‘domestic purpose’.

At the hearing, a lot of time was spent by the parties on the question whether the tenant has operated a guesthouse ‘without licence’.  In my view, given that the tenancy of the premises in question is not a domestic tenancy, Part IV of the relevant Ordinance does not apply, and therefore it is unnecessary to consider the evidence in this respect. [underlining added]

10. With respect, the above ruling of Tribunal Member Lo is in our judgment erroneous.  Although he was correct in saying that “commercial-residential purpose” includes commercial purpose and is not equal to “domestic purpose”, the term “commercial-residential purpose” is, in our view, linguistically capable of bearing at least the following two meanings:

(1)   can be for both commercial and residential purpose; and

(2)   is for both commercial and residential purpose.

11. The tenancy agreement between the parties dated 4 October 1998 specified that the Premises could only be used for “commercial-residential purpose’.  This does not mean that the Premises could not be used as a dwelling.  Tribunal Member Lo was therefore wrong in saying that the tenant “changed” the primary user of the Premises “to domestic purpose”.  This is because, given that the tenancy agreement expressly provided for both commercial and residential purposes, the agreement had expressly allowed the tenant to use the Premises for domestic purpose.   The use by the tenant of the Premises for domestic purpose did not, therefore, involve a change of the user specified in the tenancy agreement.  It follows that section 115A(1)(b) does not apply and the tenant does not bear “the onus […] to establish that such user has been agreed to by the landlord, expressly or by implication, or acquiesced in by him”.  On the contrary, commercial and/or residential purpose was a user specified in the tenancy agreement and, as Tribunal Member Lo pointed out, there was prima facie evidence under section 115A(1)(a) that the Premises were being used for commercial/residential purpose.  Even if Mr Hui used the Premises for commercial or residential purpose, he could not be said to have changed the user.  This was the major mistake made by Tribunal Member Lo. 

12. In ICS Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912-913, the UK House of Lords made the following observations, which also apply to Hong Kong, on the proper approach to the interpretation of documents: interpretation is the ascertainment of the meaning which the document in question would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.  The meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.

13. Had Tribunal Member Lo properly considered the evidence on the relevant factual background before he arrived at the aforesaid conclusion that “the user […] as specified by the written tenancy agreement between the landlord and the tenant […] is not for domestic purpose”, this conclusion would not have been wrong in law.  However, Tribunal Member Lo merely stated that “[i]n accordance with section 115A of the relevant Ordinance, I hold that the premises in question are prima facie used for ‘commercial-residential purpose’” and held that “Part IV of the relevant Ordinance does not apply, and therefore it is unnecessary to consider the evidence in this respect”.  It is clear that, when he held that the Premises were “not for domestic purpose”, Tribunal Member Lo only took into account the literal interpretation and meaning of the terms of the tenancy agreement and did not consider all the relevant background at the time of the agreement.  As stated above, the literal meaning of the terms of the tenancy agreement did not by itself support the finding that “the user […] as specified by the […] tenancy agreement […] is not for domestic purpose”.  In making this finding, therefore, Tribunal Member Lo:

(a)   failed to consider the evidence on the relevant facts and make the necessary findings of fact; and/or

(b)   as a matter of law, wrongly interpreted the relevant terms of the tenancy agreement.

14. Tribunal Member Lo dismissed Mr Hui’s application solely on the basis of his interpretation of the relevant law and of the literal meaning of the terms of the tenancy agreement.  He made no mention whatsoever of the background when the parties entered into the agreement.  Nor did he make any finding on the evidence regarding the actual primary user of the Premises, and such finding was likely to be crucial to the question whether Part IV of the Ordinance applied to the present case.  Findings may also have to be made on the various grounds put forward by Mr Sit for opposing the grant of a new tenancy, such as the alleged failure of Mr Hui to pay rent on time.  These are all questions of fact to be dealt with and determined by the Tribunal.  As Tribunal Member Lo erred in law, the appeal will be allowed and the case is to be remitted to the Tribunal for further hearing and determination on the facts and other aspects.

15. We also make an order nisi that each party is to bear his own costs.  This order is in line with the rationale behind section 119R of the Ordinance, namely that each party to the litigation is to bear his own costs unless any of the party conducts the litigation in a frivolous or vexatious manner.