TSUI AH FONG v. CHEUNG BIK HAR AND OTHERS

LANDLORD and TENANT – Landlord and Tenant (Consolidation) Ordinance (cap. 7) - Part IV - notice of termination (CR 101) given less than 6 months before date of termination - waiver - subject matter of sub-tenancy being exclusive use of one room and shared -use of flat – sub-tenant in de facto possession of whole flat – application for grant of a new sub-tenancy - Tribunal satisfied that applicant should be granted new tenancy immediately from landlord - principal tenancy continuing under Part IV - in absence of tenant's consent, Tribunal has no power to direct the grant of a new tenancy immediately from landlord - sections 119(2), 119D, 119P of cap. 7.

IN TEE LANDS TRIEUNAL OF HONG KONG

Lands Tribunal Application No. 2431/87

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JUDGMENT

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1. This complicated dispute concerns a flat in Quarry Bay in a building which was completed in 1971. It is owned by Madam Ng Ching Lin and Mr. Ko Chu (“the landlords”). The flat is number 24 on the 10th floor, and is situated at 993 King's Road. It consists of two rooms, a kitchen and toilet, covering approximately 260 sq. ft. (see Exh. 6). By a tenancy agreement dated the 14th July 1985 (Exh. 5) the flat was let to Wong Siu Hung (“Mr. Wong”) for, a term of two years from the 15th July 1985 to the 14th July 1987 at a rent of $900.00 per month. It was expressly provided in the agreement that Mr. Wong could sublet but could not "transfer to other peopie".

2. For all practical purposes, the present occupants of the flat are Madam Tsui Ah Fong ("Madam Tsui), her husband, and her three sons, aged 8, 12 and 16 years. They have lived there since September 1985. In that month, Mr. Wong moved from the flat, together with his wife ("Madam Cheung") and child, to their present address, namely, Block E on the 16th Floor of Gee Lan Mansion, Westlands Court, 5 to 11 Westlands Road, Quarry Bay. They have lived there continuously up to the present time. They are purchasing these premises by instalments. I do not know the size or layout of these Premises, but neither Mr. Wong nor Madam Cheung has suggested that they are inadequate for the needs of their family, which is shortly to be expanded by the birth of another child.

3. The precise circumstances leading upto Madam Tsui’s occupation of the flat, and her claims to be entitled to the exclusive use and possession of the entire flat, are hotly disputed. But, it is not disputed that, at or about the time she moved into the flat, she signed a tenancy agreement dated the 30th September 1985 (Exh. 1), in which she was described as “the tenant” and Madam Cheung was described as the "the Principal Tenant". It is accepted that all discussions were held between Madam Tsui and Madam Cheung. But, I find as a fact that, at all material times, Madam Cheung was authorised by her husband, Mr. Wong, to enter into an agreement with Madam Tsui for her to live in the flat. The precise scope of that agreement is in dispute, but for all practical and legal purposes, I consider that Madam Tsui has to be regarded as the sub-tenant of Mr. Wong, who is the tenant of the landlords.

4. The factual and legal complexities of this case stem essentially from the decision of Mr. Wong and Madam Cheung to move their home from rented premises to premises to be purchased by them. They decided to become "owner-occupiers" instead of “tenant-occupiers". Reduced to its simplest terms, their evidence is that they intended to retain some interest or control over part of the flat as a place of refuge if their plans to become "owner-occupiers" did not work out as expected. For that purpose, they contended that it was always intended and agreed that Madam Tsui should. only have the exclusive use and possession of the front cubicle of the flat, but be allowed to use the rest of the flat jointly with Mr. Wong and his family. Madam Tsui contends that, from the time when she first inspected the flat, it was always agreed that her tenancy or sub-tenancy should comprise the entire flat. The tenancy agreement (Exh. 1) purported to confine the tenancy (or sub-tenancy) to the front cubicle, simply because Madam Ng Ching Lin, who was present when Madam Tsui moved into the flat, accused Madam Cheung of subletting in breach of the agreement dated the 14th July 1985 (Exh. 5). Accordingly, the express restriction of the premises comprised in the sub-tenancy to the front cubicle of the flat was arguably a mere device intended to preclude the landlords from asserting a claim that Mr. Wong had incurred a forfeiture of his tenancy.

5. These and other problems come before the Tribunal because on the 22nd July 1987 Madam Tsui made an application for a new tenancy. Her application was addressed solely to Madam Cheung as the only respondent, and was strictly an application for the grant of a new sub-tenancy. It is perhaps significant that the words "Front room" were added, in handwriting, to the typed description of the premises, which more accurately referred to the entire flat. I don't know when or why this amendment was made. I can only speculate that it was made because of the description of the premises in the tenancy agreement (Exh. 1). However, it must have been made before Form 13 was filed, since there was no formal amendment of Form 13 until the hearing. Form 13 was amended at the hearing to show that Madam Cheung was the principal tenant or the agent of Mr. Wong, and to join other parties in the circumstances which will be later revealed.

6. Madam Cheung did not file a Notice of Opposition, but she and her husband attended and gave evidence at the hearing. The hearing .of this dispute occupied the Tribunal for nearly 6 hours, spread over two days. This was largely duo to delays and difficulties in ascertaining the real intentions of Madam Cheung and Mr. Wong. At first, they wanted to oppose the grant of a new tenancy on the ground that they wanted to recover the front room for “self-occupation”. But, later this contention was abandoned. Eventually, they sought to oppose the grant of a new tenancy or sub-tenancy to Madam Tsui on grounds which are not allowed by section 119E of the Landlord and Tenant (Consolidation) Ordinance (cap. 7). All this emerged in the course of attempting to ascertain the real scope of the agreement made in September 1985 and the subject matter of the sub-tenancy.

7. The immediate parties proved to be very difficult witnesses. Apart from evasions and contradictions, their demeanour ranged from unreasonable to truculent. Each side was determined to wage a ferocious battle over their claims to property which does not belong to them, namely the entire flat. The conflict between them is not one which can be resolved simply by preferring the evidence of one party where there is conflict between them. In order to arrive at my findings of fact, I have had to be somewhat more selective. In general, I incline to prefer the evidence of Madam Tsui, but, in some respects she has exaggerated her case and strayed from the truth or realistic probabilities.

8. Before I set out my findings on the essential facts in dispute, I must deal with the preliminary matter of the validity of the notice of termination (CR 101) given by Madam Cheung (Exh. 2). This is dated the 29th March 1987 and purports to terminate the tenancy of the :front room on the 29th September 1987. I find as a fact that this was received by Madam Tsui on or about the 4th or 5th April 1987, having been sent to her by post. In my view, this notice did not comply with section 119(2) of cap. 7 since it was not given at least 6 months before the date of termination. However, such technical defects can be waived by the other party; and I am satisfied that Madam Tsui did so in the present case. I do not suppose that she was aware that she might be entitled to disregard it as being insufficient. But, I consider that she waived this irregularity by taking advantage of the larger part of the 2 months allowed by the statute for indicating her response. On the, 19th May 1987 she completed Form CR 102 (Exh. 3), in which she commented at some length on Madam Cheung's reasons for seeking to recover the subject matter of the sub-tenancy. After' being given Form CR 105 on or about the 30th May 1987, Madam Tsui again took advantage of the delaying features of section 119D of cap. 7. Her application to the Tribunal for the grant of a new tenancy was made on the 22nd July 1987. In all the circumstances, I do not consider that it would be just for me to now hold that Madam Tsui is entitled to continue to occupy the premises which she actually enjoys until she is given a valid notice of termination, complying strictly with section 119(2) of cap. 7. From what she said in evidence and her conduct between receiving the CR 101 and her application to the Tribunal I find that she waived any defect in the Notice of Termination.

9. The description of the premises in the tenancy agreement (Exh. 1), the form CR 101, and the Form 13 all suggest that the subject matter of the sub-tenancy was merely the front room of the flat. Madam Cheung further sought to support her contention that she only agreed to let the front room to Madam Tsui by suggesting that the market rental for the entire flat in 1985 would have been in the region of $2,000.00 to $2,300.00 per month, whereas Madam Tsui merely agreed to pay a monthly rental of $1,200.00. I am not prepared to accept Madam Cheung's evidence on market rents in 1985 or in 1987. She considers that the current market rent for the flat would be between $2,300.00 and $2,600.00 per month, yet Madam Ng Ching Lin, one of the landlords, feels that the current rent for the flat should be $2,100.00 - $2,200.00 per month. None of the interested parties has placed before the Tribunal any reliable evidence of market rents in 1985 or in 1987. I can only rely on my judicial experience of dealing with many cases involving tenancy disputes over similar premises at and about that period and subsequently.

10. I am confident that a rent of $1,200.00 for a single room of 90 sq. ft., which is the size of the front room of the flat, would have been greatly in excess of the prevailing market rent for similar accommodation in the area of Quarry Bay in 1985. The agreed rent works out at $13 per sq. ft. My experience suggests that rents for similar accommodation in similar locations, between 1985 and 1987 have risen to a level of approximately $8 per sq. ft. from a base of about $4 per sq. ft. in 1985. In fact, Mr. Wong apparently negotiated a new rent for the flat in or shortly before July 1985 at a rate of $3.40 per square foot (Exh. 5). If the rent payable by Madam Tsui was intended to be for the entire flat, the rate per sq. ft. would be approximately $4.50. The figure is, in my view, closer to the prevailing market rent for this kind of accommodation in 1985. These features and circumstances lead me to find as a fact that Madam Cheung promised to let the entire flat to Madam Tsui for $1,200.00 per month, when she first inspected the front room in August 1985. I also find as a fact that when Madam Tsui moved in and signed Exh. 1 in September 1985, one of the landlords, Madam Ng Ching Lin, was present and protested at the apparent intention to transfer the entire flat to Madam Tsui. I consider that it was this intervention, and the obvious fear of action being taken by the landlords, which prompted Madam Cheung to describe the subject matter of the sub-tenancy as the front room in Exh. 1, and to leave behind a bed in the area which is described as a small room and living area on Exh. 6. Her suggestion, supported in part by her husband, that she wished to retain a right to live in part of the flat in case their plans for their own home did not work out, is in my view, an afterthought conceived solely for the purpose of these proceedings. According to Mr. Wong, the bed was left behind because it would not fit into their new home.

11. Although Madam Tsui claims that she had no real option; and signed the tenancy agreement (Exh. 1) reluctantly or unwillingly, I consider that she must have acquiesced in the description of the demised-premises, as it appears in that agreement. I think that she did so because she realised that she would still have the use of the rest of the flat and would not have to share it with anyone except Madam Cheung, whose intended and actual use would be, and has been token rather than real. For all practical purposes Madam Tsui obtained in September 1985, and has enjoyed for the past two years, what she was promised in August 1985.

12. The Tribunal is enjoined to conduct its proceedings informally. It is not bound by rules of evidence and can act on information from any source. But, it is not allowed to dispense with rules of the substantive law. From my earlier findings of fact, there is a strong temptation to come to the pragmatic conclusion that Madam Tsui is, and has been for the last two years, a sub-tenant of the entire flat. But, it is a well established principle of law that parole or oral evidence cannot be admitted to add to, vary or contradict a written instrument. The soundness of this basic principle is demonstrated by the fact that there are certain well-known exceptions! The law must bend occasionally to deal with practical situations which require different treatment. But, the only recognised exception which would entitle me to find, as a matter of law, that Madam Tsui- is a tenant of the entire flat, is that which deals with agreements which are partly oral and partly in writing. In other words, I would have to find that Exh. 1 did not embody the whole agreement of the parties thereto before I could act on oral evidence which would add to, or vary, that agreement.

13. In the present case, I consider that I can only do so to a limited extent. The intervention of Madam Ng introduced a new factor. Implementation of the oral agreement made between Madam Tsui and Madam Cheung in August 1985, carried a risk of forfeiture of Mr. Wong’s tenancy and the proposed sub-tenancy. In September, I consider that they probably agreed that Madam Tsui should have the exclusive use of the front room, together with a right to use the rest of the flat in common with Madam Cheung. Having regard to the limited and contingent nature of Madam Cheung's interest in the rest of the flat, the rent of $1,200.00 would be a realistic market rent for that qualified use of the flat. I find as a fact that such was the agreement which the parties settled on in September 1985.

14. In the absence of any ground for opposing the grant of a new tenancy, Madam Tsui is entitled to a new tenancy. As to the terms of that new tenancy, section 119J requires the Tribunal to have regard to the terms of the current tenancy and all relevant circumstances. Normally, the Tribunal grants a new tenancy on the same terms as the current tenancy, save for the amount of rent. The burden of showing that there should be some change lies on the person asserting that there should be some alteration. In the present instance, I consider that there is a case for altering the terms so that Madam Tsui’s enjoyment of the flat can be placed on some more certain and secure basis. The present arrangement is not entirely satisfactory. Apart from creating an opportunity for disputes over the shared portion of the flat, the arrangement may induce the landlords to take proceedings to forfeit Mr. Wong's tenancy for breach of condition. I make no comments on the likelihood of their success, as no such application is before me.

15. The best solution would be for Madam Tsui to have exclusive use of the entire flat under a tenancy immediately from the landlords. Indeed, when Madam Ng Ching Lin indicated that she was willing to do just that, I invited Mr. Wong to consent to such a solution. He declined for the reason that it would be unfair to him, as he had not been given notice to terminate (CR 101) his tenancy. In certain circumstances, the Tribunal has power to impose the solution I had in mind. See section 119P of cap. 7. Accordingly, the landlords having indicated their consent, I further. directed that they be added as respondents to this application before reserving my decision in this case.

16. Having had an opportunity of careful consideration of the facts of this case, and the various statutory provisions, I have come to the conclusion that I cannot order that any new tenancy granted to Madam Tsui should be held immediately from the landlords. The difference between sub-sections (2) and (3) of section 119P is not: easy to perceive, but I am of the view that neither can be invoked in the present case. Firstly, Madam Tsui has not given notice of her interest to the landlords in the specified form (CR 107). Secondly, both sub-sections contemplate some action being taken by the landlord to terminate the tenancy. No such action has been taken to terminate Mr. Wong’s tenancy. Although the contractual period ended on the 14th July 1987, it continues indefinitely until he is given a valid notice of termination (CR 101) or it is terminated by notice on his part, surrender, or forfeiture. It may be that the landlords could eventually recover possession on the basis that Mr. Wong has sublet part of the premises and does not occupy any part thereof as his dwelling (Cf section 119E(1)(f); section 53(2)(h)). But, for present purposes, I must recognize that Mr. Wong’s tenancy still exists and cannot be terminated at short notice. On the contrary, it may take several months for it to be brought to an end by legal proceedings. Until such time, he is legally entitled to enjoy the flat as a source of regular income, and to negotiate a price for surrendering it to the landlords, even though he-has absolutely no need or intention of using it for personal occupation.

17. In the very unusual circumstances of the present case I regard it as particularly unjust that I am obliged (by section 119D(1) to grant a new sub-tenancy to Madam Tsui on terms which will enable Mr. Wong to enjoy the full benefit of the increased rent payable from the 30th September 1987. But, that is a consequence of legislation which in many respects confers on tenants rights which are greater, or financially more beneficial, than those enjoyed by the true owners of domestic premises. In recent years, the legislature has done much to restore to owners their common law rights over their property, as well as giving greater recognition of the legitimate interests of sub-tenants, who are often not able to ascertain the true legal status of the person to whom they pay their deposits and monthly rents. But, the legal and economic position of the legislative creature known as the "principal tenant" remains firm and powerful. Al though I regard Mr. Wong’s refusal to consent to the landlords’ proposal to grant a tenancy directly to Madam Tsui as wholly unreasonable and unjust, there is nothing in any of the statutes conferring jurisdiction upon the Tribunal which enables it to deprive Mr. Wong of the benefits which he enjoys as the principal tenant of the flat. There are, regrettably, no means whereby the Tribunal- can override Mr. Wong's legal rights as the tenant of the flat.

18. For the aforesaid reasons, I am left with the task of determining the prevailing market rent for the subject matter of Madam Tsui's sub-tenancy. If she were entitled to the exclusive possession of the entire flat, I would have found that the prevailing market rent in September 1987 was in the region of $2,100.00 per month. That is on the basis of $8 per sq. ft., as well as the landlord's opinion of what the current rent should be. In my view, this figure must be discounted to take account of the fact that some 172 sq. ft. of the flat has to be shared with the tenant (Mr. Wong) on a basis which is precarious, in the sense that it may be taken away, at short notice, if the landlords are able to show that Mr. Wong has acted in a manner which entitles the landlords to forfeit) his tenancy. Furthermore, some allowance must be made for potential disputes over the use of the shared area. At present, I consider that the risk of disturbance on this account is slight. Basically, I have to ask what a willing sub-tenant would pay for the right to use this flat for another two years, but knowing that there is already a risk that it may not last that long because of action which might be taken by the landlords. Using $8 per sq. ft. as the prevailing market rent, and assuming that Madam Tsui has the exclusive use of the front room and shares the rent equally with Madam Cheung and Mr. Wong, a figure of $1,408.00 for the subject matter of the sub-tenancy is arrived at. But, in practice Madam Tsui has enjoyed more than half of the rest of the flat. She has paid the management fees in full (Exh. 9). In all these unusual circumstances, I consider that the prevailing market rent is $1,600.00 per month. There will be an order that Madam Tsui be granted a new sub-tenancy for 2 years from the 30th September 1987 until the 29th September 1989 at a monthly rent of $1,600.00 exclusive of rates and management fees, on the same terms as the agreement dated 30th September 1985, save that Madam Tsui’s right to use the rest of flat in common with the principal tenant (Mr. Wong) should be expressly stated in the new tenancy agreement.