Li Kam wing v. Chan Kam kan and Another

Lands Tribunal Case No. 2999 of 1995

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HEADNOTE

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Property law - Landlord and Tenant - Domestic Premises - Application for Possession for Failure to Pay Rent - Validity of Sub-Tenancy - Right of Sub-Tenant

The subject property was let to the respondent for a term of just over two years expiring on 16th February, 1996 at a rent of $8,260 per month. After the applicant landlord had obtained an order for possession by the Tribunal against the respondent for failure to pay rent, the co-respondent appeared to oppose possession against him. In support of his case, the co-respondent alleged that he moved into the middle room in the subject property in or about March or April of 1994 by arrangement with the respondent. He produced a note purportedly signed by the respondent in March 1994 stating the grant of a three year sub-tenancy to the co-respondent at $4,000 per month with rent for the whole term already paid in one lump sum of $144,000. The co-respondent then alleges by oral evidence in court that he was granted a sub-tenancy for two years at a rent of $3,000 per month. In addition, the co-respondent claims that he has paid well over $100,000 into the applicant's bank account as rent as evidenced by payment slips. The applicant says he did not consent to any grant of sub-tenancy nor did he let the premises to the co-respondent.

Held: (1) On the true construction of the principal tenancy agreement, there was no prohibition against sub-letting of part of the subject property. (2) Since both alleged "sub-tenancies" extend beyond the expiry date of the principal tenancy, they are invalid. (3) In view of the inconsistent terms and conditions of the "sub-tenancies", there was no intention to create a legal relationship between the respondent and co-respondent. (4) Even if there was intention to create a legal relationship by way of a tenancy, in view of the inconsistent terms and conditions, there was insufficient certainly to render the tenancy enforceable by the co-respondent against the respondent. It follows that the co-respondent without the rights of a lawful sub-tenant cannot hold out against the applicant landlord. (5) On the evidence, the payments into the applicant's account as rent cannot be attributed to the co-respondent. (6) In view of the self-contradicting evidence from the co-respondent, disbelieve the co-respondent's case. (7) Since the co-respondent does not come with clean hands, he cannot seek equitable relief or remedy, if any. (8) At best, the co-respondent only has a licence by the respondent to occupy which was automatically terminated upon forfeiture of the respondent's principal tenancy. (9) Order for possession forthwith against the co-respondent.

L.T. Case No. 2999 of 1995

IN THE LANDS TRIBUNAL OF HONG KONG

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JUDGMENT

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The applicant is the owner of the residential property known as the Rear Portion, the First Floor of No. 30-32 Cross Street, Wanchai ("subject premises"). The respondent was the tenant at the subject premises. On 30th November, 1995, the Tribunal granted possession of the subject premises to the applicant against the respondent on the ground that the respondent had failed to pay rent since 16th March 1995. The co-respondent then applied to join in to resist execution against him alleging that he had been a sub-tenant of the middle room inside the subject premises. Trial of issues between the applicant and the co-respondent took place on 7th May, 1996 but had to be adjourned part-heard to 3rd June, 1996 to enable the co-respondent to gather more evidence. Judgment was reserved after hearing all the evidence on 3rd June, 1996. I now set out my findings and decision below.

2. According to the applicant, and there can be no serious dispute from the co-respondent on this matter, the respondent was granted a tenancy for just over two years commencing the 17th January, 1994 and terminating on 16th February, 1996 ("the principal tenancy") for a rent of $8,260 per month. The tenancy agreement, Exhibit A1, is the familiar off-the-shelf version in Chinese containing a Clause 2 which prohibits sub-letting and assignment of the principal tenancy. Moreover, the parties added a Clause 11 which prohibits sub-letting without the consent of the landlord. The applicant maintains that he has never given consent to the respondent to sublet. However, it is trite law and quite clear that nothing in the written agreement for the principal tenancy prohibits sub-letting of part of the subject premises.

3. The co-respondent says that he was granted a sub-tenancy for the middle room in the subject premises by the respondent in or about March 1994 and he was definitely in possession of that room in April 1994. According to evidence of the co-respondent given in court under oath, the duration of the sub-tenancy was two years commencing April 1994 and the rent was $3,000 per month. The co-respondent then produces a piece of paper (Exhibit R1) purportedly signed by the respondent which states that the respondent borrowed HK$144,000 from the co-respondent as advance payment of rent at $4,000 per month for a tenancy for three years at the subject premises. It is simple arithmetic that the rent for three years at $4,000 per months works out to be $144,000. To complicate matters further, the co-respondent also alleges that he had been dealing with the applicant and paying rent to the applicant by crediting the applicant's bank account. He has produced several bundles of bank pay-in slips in support of this. See Exhibits R2 to R6. A friend of the co-respondent states in evidence that on at least two occasions he has effected payment into the applicant's bank account at the request of the co-respondent as loans to the co-respondent to help him to pay rent. At first sight, such evidence may be taken to suggest a direct tenancy between the applicant and the co-respondent.

4. The applicant at the hearing on 7th May, 1995 said that he did not know the co-respondent until he sought to levy execution against the respondent. The co-respondent, on the other hand, is adamant that he has been dealing with the applicant for over a year after the respondent had disappeared. He had met the applicant many a time previously and had handed cash to the applicant for payment of rent. In addition, the co-respondent has called two witnesses, a next door neighbour and a friend, to confirm sightings of the applicant being together with the co-respondent. At the hearing on 3rd June, 1996, the applicant in effect admitted that he had seen the co-respondent before he commenced the present application. On at least one occasion, the applicant was shown some bank pay-in slips (Exhibit R3) by the co-respondent whereupon the applicant wrote something and handed them back to the co-respondent. In short, it is safe to say that there is overwhelming evidence of contact between the co-respondent and the applicant for some time before the present application. The applicant explains that he had contact with the co-respondent because when the respondent failed to pay rent under the principal tenancy, he went to the subject premises where he was met by the co-respondent who claimed to be a cousin of the respondent. The applicant spoke with the co-respondent about rent arrears and, as confirmed by evidence from the co-respondent, satisfaction was forthcoming by way of credit payments into the applicant's bank account. Hence, it is not difficult to see, the applicant treated the co-respondent as agent for the respondent. As far as the applicant was concerned, he had no idea who paid money into his bank account and he had never regarded the payments as satisfaction for the co-respondent's own liability, if any, towards the applicant.

5. This case is most perplexing, but by no means uncommon. The Tribunal has to unravel all the conflicting evidence to determine the legal relationship inter se the parties. I shall start with the premise, as I have earlier observed, that the respondent may without the consent of the applicant sub-let part of the subject premises to the co-respondent. With regard to the sub-tenancy evidenced in writing dated 15th March 1994 (Exhibit R1) for three years at a rent of $4,000 per month supposedly granted to the co-respondent by the respondent with rent for the full three years already paid, the memorandum is not clear as to whether the whole or only part of the subject premises was leased to the co-respondent. Given that the respondent was living at the subject premises at the time and in view of the amount agreed as rent payable by the co-respondent, it may be taken that the sub-tenancy relates to only part of the subject premises. However, both the "sub-tenancy evidenced in writing" and the "oral sub-tenancy" alleged by the co-respondent suffer from one fatal defect - their respective duration extends beyond the principal tenancy. It is axiomatic that no sub-tenancy can be granted for the term longer than that of the principal tenancy. On this ground alone, I must hold that both said "sub-tenancies" are invalid. But this is not the end of the matter. Evidence relating to the two inconsistent "sub-tenancies" may suggest that there was intention between the respondent and the co-respondent to create a legal relationship, this coupled with actual occupation of the middle room in the subject premises, may be taken as entitling the co-respondent to some sort of sub-tenancy for less than the remainder term of the principal tenancy. My view is that the co-respondent is the author of his own undoing. First, the inconsistent terms and conditions of the two invalid "sub-tenancies" he has disclosed cast serious doubts as to the existence of any intention between the respondent and the co-respondent to create a legal relationship. Secondly, even if there was intention to create a legal relationship, the terms and conditions of the two "sub-tenancies" cannot be reconciled and reduced into a contractual tenancy sufficiently certain as to be enforceable by the co-respondent against the respondent. When a "sub-tenant" does not have an enforceable tenancy vis-a-vis the principal tenant, he is likewise unable to hold out against the landlord. Thirdly, the co-respondent's case is that by Exhibit R1 he had paid to the respondent $144,000 as advance payment of rent. But then why would the co-respondent bother to arrange and effect payments of into the applicant's bank account? Apart from Exhibit R1, there is no other, objective evidence of the loan of $144,000 such as money changing hands between the co-respondent and the respondent. There is such self-contradictory evidence from the co-respondent himself that I cannot believe he told the truth about his alleged tenancy arrangements with the respondent or the applicant. As to the payments credited into the applicant's bank account, the pay-in slips per se of course do not tell by whom or for what purpose the amounts were paid. In fact, so many of the payments evidenced by the pay-in slips were made in 1994 when the respondent was still residing at the subject premises that perhaps there is some truth in the applicant's contention that the respondent colluded with the co-respondent by letting the latter have use of the slips he the respondent obtained by payments with his own money. Even if the money came from or were on account of the co-respondent, the amounts must be treated as payment towards rent under the principal tenancy because according to the co-respondent's own case he had paid all three years' rent under his own "sub-tenancy" in March 1994.

6. The applicant is not all above board either. He gave the impression, now proven wrong, that he did not know the co-respondent. I would like to think he lied because he thought it would make his case for re-possession stronger. But in this case, and in this case only, it matters not whether the landlord has told the truth. The burden is on the co-respondent to establish his right to remain in occupation. Where the co-respondent fails to do so, the Tribunal cannot deny the applicant his proprietary right for his momentary aberration.

7. Having considered all the evidence, and taking into account all factors and circumstances, I find that the co-respondent did not have a tenancy from the respondent. If the co-respondent claims to have any equitable right or remedy, say a tenancy by sufferance or a tenancy by estoppel, he must come with clean hands. But he has so tainted himself with his own incredible stories that he does not have clean hands. At best, the co-respondent had only a licence from the respondent to occupy the middle room of the subject premises on payment of a fee. This licence was automatically terminated upon forfeiture of the respondent's tenancy by order of the Tribunal made on 30th November, 1995.

8. Even if by any fluke the co-respondent is a direct tenant of the applicant, and some or all of the pay-in slips produced by the co-respondent evidence of payments of rent on account of his direct tenancy, clearly the co-respondent has not been punctual and regular with rental payments thereby causing unnecessary inconvenience to the applicant for which an order for possession forthwith is appropriate.

9. Accordingly, I order:-

(1) vacant possession of subject premises to the applicant forthwith,

(2) the co-respondent do pay to the applicant on the first day of each calendar month mesne profits at the rate of $4,000 per month from 1st December 1995 until delivery of vacant possession, leave to pay all arrears within one month from the date of delivery of this judgment,

(3) stay of execution until 30th July, 1996 subject to payment of mesne profits and arrears as ordered, and

(4) there be no order as to costs.