R. v. LAU Kung-shing AND ANOTHER

HEADNOTE

CONSTITUTIONAL LAW - Hong Kong Bill of Rights (Cap.383) - Landlord and Tenant (Consolidation) Ordinance (Cap.7), s.53(7F), (7G) -

The defendants owned a flat which they had purchased, subject to an existing domestic tenancy. In February 1990 they applied to the Lands Tribunal for an order for possession on the ground that they reasonably required the flat as a residence for themselves. Two months later the tenant consented to deliver up vacant possession, without any order of the Lands Tribunal. The defendants never resided in the flat, but sold it with vacant possession in June 1990. In 1992, they were charged with assigning premises without the authority of the Lands Tribunal contrary to section 53(7B) of Cap.7. At the trial the prosecution relied on section 53(7F) whereby the defendants were deemed to have obtained an order for possession.

Held: Section 53(7F) was inconsistent with Article 11(1) of the Hong Kong Bill of Rights and was repealed on the 8th June 1991.

IN THE DISTRICT COURT OF HONG KONG

CRIMINAL JURISDICTION

CASE NO. 477 OF 1992

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REASONS FOR VERDICT

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1. The Defendants in this case are husband and wife and were, until the 27th June 1990, the registered owners of premises known as Flat A8, 13th Floor, Chung King Mansions, 36-44 Nathan Road, Kowloon ("the flat"). They acquired the flat in 1988, subject to a tenancy in favour of Madam 'Ishwari' Melwani ("the tenant"), who had lived there for about 18 years. On the 7th February 1990, solicitors then acting on their behalf filed a 'notice of application with the registrar of the Lands Tribunal in accordance with Form 13 (Exh P1), seeking on order for possession under section 53(2)(b) of the Landlord and Tenant (Consolidation) Ordinance (Cap.7) on the ground that they required the flat for occupation as a residence for themselves and members of their family. No order for possession under section 53(2)(b) of Cap.7 was ever made by the Lands Tribunal. However, in or about March or April 1990 the tenant yielded up vacant possession of the flat as part of the terms of an agreement with the defendants, whereby the defendants purchased premises on the 16th floor of Chung King Mansions, which belonged to the tenant and her husband. The purchase price was $1,000,000, which I find was higher than the market price for similar premises subject to an existing tenancy. The excess was intended as compensation to the tenant for giving up possession of the flat owned by the defendants. The defendants did not occupy the premises as their residence. Instead, on the 27th June 1990 they assigned the premises to Mr. and Mrs KOO for $788,000.

2. These matters came to the notice of the Rating and Valuation Department. On the 19th and 23rd October 1991 the defendants were interviewed by a Valuation Referencer of that department. Each defendant made a voluntary statement in writing, admitting substantially the facts set out above (Exh. P2 and P3). They have pleaded not guilty to the following charge preferred against them by the Attorney General:-

Statement of Offence

3. Assignment of the premises without the authority of the Lands Tribunal within 24 months of obtaining an order for possession as provided by Section 53(7F)(b), contrary to Section 53(7)(a)(ii) and Section 53(7B) of the Landlord and Tenant (Consolidation) Ordinance, Cap.7.

Particulars of Offence

4. LAU Kung-shing and TAN Jui-chih, on the 27th day of June, 1990, in Hong Kong, by virtue of Section 53(7F)(b) of the Landlord and Tenant (Consolidation) Ordinance, Cap.7, being deemed to have obtained on the 7th day of February, 1990 an order for possession under Section 53(2)(b) of the said premises known as 36-44, Nathan Road, Flat A8, 13th floor, Chung King Mansion, Kowloon, assigned the premises without the authority of the Lands Tribunal within 24 months of the possession order.

5. It will be necessary to set out and consider very closely the details of the relevant statutory provisions in order to deal with Mr. Lee's submissions on the application to these provisions of the Hong Kong Bill of Rights Ordinance (Cap.383 of the Laws of Hong Kong). But, in order to deal with Mr. Lee's first submission it is only necessary to state that the relevant statutory provisions are to be found in Part II of Cap.7, which only applies to domestic tenancies of post-war premises.

6. Mr. Lee submitted that the prosecution had failed to prove beyond reasonable doubt that the flat was the subject of a domestic tenancy. He drew attention to the definition, rules, and factors which may be taken into account for determining the nature of a tenancy contained in subsections (1)(2) and (3) of section 51 of Cap.7; and pointed out that there was no evidence that the flat was ever "let as a dwelling." In addition, there was evidence to the effect that the flat, or part of it, was being used for non-domestic purposes, namely as an office and showroom for Mr. Melwani's mail-order garment business, carried on under the name of Macombor Inc. Fashion Creators. Furthermore, there was no evidence to show the amount of space used in, or the gross profits resulting from, this non-domestic user of the flat.

7. It is the case that the evidence of non-domestic user was elicited from Madam Melwani in cross-examination. Her evidence also showed that one of the three rooms in the flat was used as an office for her husband's business. It contained two desks, two chairs, a measuring table and telephone. From time to time there would be finished garments, brought to the flat by tailoring out-workers, which would be measured and packed in the office before being dispatched to customers overseas. The address of the flat was given as the showroom on the stationery of the business (see Exh. D3); and a signboard bearing the business name was on the outside of the main door. None of this evidence was challenged or modified by other evidence. It is fair to say that Madam Melwani's evidence was very thin. She was clearly a most reluctant witness; and claimed to be unable to remember many things. I have considered this evidence of non-domestic user, as well as the other gaps in the evidence; but I am satisfied beyond reasonable doubt that the evidence points to the flat being primarily used for domestic purposes.

8. Madam Melwani described herself as a housewife. She merely answered the telephone in the office when her husband was absent from Hong Kong on business. They had lived in the flat for 18 to 20 years. One room was used as an office and the other two rooms as their residence. Customers did not come to the flat to buy clothes. The orders came from the United States of America. Mr. Kevin Eaton, a valuation surveyor from the Rating and Valuation Department, testified that he knew Chung King Mansions very well. Most of the shops are located on the ground, first and second floors of the building. There are no shops on the upper floors, although some of the units on the upper floors may be used as beauty parlours or guesthouses. Furthermore, the defendants formally admitted that Exh.P1 was a copy of the application (Form 13) they made to the Lands Tribunal on the 7th February 1990 and the grounds stated therein. In my view, the statement in the Form 13 as to the amount of the rent and those in paragraphs 2 and 3 of the grounds and particulars are admissible as admissions by the defendants or as forming part of the res gestae in the form of statements explaining and accompanying their act of applying to the Tribunal for an order for possession on the ground mentioned in section 53(2)(b) of Cap. 7. In my view the rent of $3,336.60 per month, instead of some round figure, points clearly to the flat being used as domestic premises subject to or controlled by Part II of Cap 7, rather than domestic premises governed by Part IV, or business premises. Even without the statements in the Form 13, I am satisfied beyond reasonable doubt that the flat had for many years been used as the tenant's home, in part of which her husband used to carry on part of his mail order business. It is not a case of two people living in a place primarily used for business activity.

9. I turn now to Mr. Lee's more substantial submission that the statutory provisions, upon which the prosecution relies in this case, have been repealed because they do not admit of a construction consistent with Cap.383. For the purposes of this case the relevant provisions are contained in sub-sections 7(a), (7B)(7F) and (7G) of section 53 of Cap.7. They were enacted at different times and are now expressed in the following terms:-

(7) Subject to subsection (7A), a person -

(a) who has obtained an order for possession of premises under subsection 2(b) or (c) shall not for a period of 24 months after the date of that order -

(i) let the premises or any part thereof; or

(ii) assign, transfer or part with possession of the premises or any part thereof except, in a case of an order for possession under subsection (2)(c), where the assignment, transfer or parting with possession is solely to facilitate the rebuilding of the premises;

(7B) Without prejudice to subsection (8), a person who contravenes subsection (7) commits an offence and is liable on conviction on indictment to a fine of $500,000 and in addition, on a second or subsequent conviction, to imprisonment for 12 months, and in any case to forfeit a sum not exceeding the equivalent of -

(a) in the case of a contravention of subsection (7)(a)(i), 2 years' rent calculated at the rate at which the premises were let without the authority of the Tribunal or the Commissioner; or

(b) in the case of a contravention of subsection (7)(a)(ii), the difference at the date of the contravention between the market value of the premises with vacant possession and the market value of the premises with the former tenant or sub-tenant in possession. (Added 6 of 1980 s.5. Amended 29 of 1983 s.15)

(7F) Where, in an application for possession of premises under subsection (2), the applicant alleges a ground mentioned in paragraph (b) or (c) of subsection (2) and -

(a) an order for possession is granted with the consent of the tenant or sub-tenant; or

(b) the application does not proceed and the tenant or sub-tenant consents to deliver up vacant possession of the premises. The applicant shall be deemed, for the purposes of subsections (7), (7G) and (8), to have obtained an order for possession under paragraph (b) or (c) of subsection (2); and, in a case mentioned in paragraph (b) of this subsection and for the purposes of fixing the commencement of the period mentioned in subsection (7), the date of the order shall be deemed to be the date upon which the application for possession is issued from the Tribunal. (Added 76 of 1981 s.36)

(7G) Any applicant who has obtained an order for possession under paragraph (b) or (c) of subsection (2) shall be presumed, until the contrary is shown to have knowledge of that order, of the application for possession, of the ground alleged upon which the order was obtained, of the outcome of the application and of any consent given by the tenant or sub-tenant in connection with the order or the delivery of vacant possession. (Added 76 of 1981 s.36)

10. Before I deal with counsel's submissions, it may be helpful to make some general observations on the legislation and to indicate further findings of fact.

11. Section 53 deals with a wide range of matters connected with tenancies and subtenancies, which are subject to the statutory protection against eviction of tenants afforded by Part II of Cap.7. Essentially, it provides that a tenancy continuing under section 52(1), after the contractual period thereof has come to an end, can be terminated when the tenant delivers up vacant possession (s.53(1)(a) or when an order of the Lands Tribunal takes effect (s.53(1)(b)). Before the Lands Tribunal can make an order for possession it must be satisfied that the landlord has proved one of the eight grounds set out in subsection (2). The 24 months' restriction on disposal of the premises only applies to cases where the landlord recovers possession because he reasonably requires the premises as a residence for a parent, a child over 18, or himself (s.53(2)(b)); or because be intends to rebuild the premises (s.53(2)(c)). The protection afforded to the tenant by Part II ceases once vacant possession is delivered up. Thereafter, the only right of the former tenant is to receive compensation if he can show that the order was obtained by the landlord's misrepresentation or concealment of material facts or the landlord has contravened subsection (7). (Cf. subsection 8). It is to be noted that there is nothing in Cap.7 which gives any protection to a tenant after he has surrendered possession under section 53(1)(a), even if he was induced to do so by misrepresentation or concealment of facts; and even if the former landlord has contravened subsection (7).

12. On the whole of the evidence in this case, and the contents of exhibits P1, P2 and P3 in particular, I am satisfied beyond reasonable doubt that the defendants made an application to the Lands Tribunal on the 7th February 1990, seeking an order for possession of the flat under section 53(2)(b) of Cap.7 on the ground that they reasonably required it as a residence for themselves.

13. Thereafter, no further steps were taken to obtain that order from the Tribunal, but the defendants obtained vacant possession from the tenant as a result of their agreement at or about the end of March or early April 1990. The defendants have never used the flat as their residence. They sold it on the 27th June 1990 for $788,000. Furthermore I find that the market value of the flat at that date with the former tenant in possession would have been $650,000.

14. On behalf of the defendants Mr. Lee contended that subsections (7F) and (7G) are "presumptive" provisions which do not admit of a construction consistent with Article 11(1) of the Bill of Rights, which provides:

"Everyone charged with a criminal offence shall have the right to be presumed innocent until proved guilty according to law."

15. The statutory provisions, Mr. Lee argues, do not pass the tests of rationality or proportionality laid down in R. v. Sin Yau Ming [1992] 1 HKCLR 127. Accordingly, they are repealed by virtue of section 3(2) of Cap.383. Mr. Nunns sought to answer these points by contending that subsection (7F) is a definition section and gives rise to no conflict with any provisions of the Bill of Rights; whereas subsection (7G) can be justified having regard to the four factors indicated by Mortimer J in R. v. Wong Hiu Chor and others (Mag. App Nos 227/92, 484/92 and 718/92; 4th December 1992) at pp.23-4.

16. When subsection (7) was first enacted the statute contained no sanction for its contravention. In 1980, contravention of subsection (7) was made a criminal offence by the addition of subsection (7B). (See section 5(d) of Ordinance No.6/80). Subsection (7F) was not introduced until December 1981 (see s.36 of Ordinance No.76/81), probably as a result of the decision of the Court of Appeal in Chu Kin Ying v. R (Criminal App. No.232 of 1981; 4 August 1981), where the conviction was quashed, inter alia, because the tenant delivered up vacant possession after proceedings had been commenced, but before the court made a consent order, in the form of an unusual "Tomlin" order, which did not specify the ground on which the so-called "judgment" for possession of the premises was granted.

17. In my view it is clear that, in December 1981, the legislature intended that the restrictions on disposal and the criminal sanctions for contravention thereof, i.e. ss(7) and (7B) should be extended to a wider category of persons, so as to include those who started legal proceedings for an order under section 53(2)(b) or (c), but recovered possession without any order at all, or pursuant to a consent order on some other ground. Adopting for the moment Mr. Lee's description of subsection (7F) as a "presumptive" provision, the legislature has used a form of words which create what is commonly called an irrebuttable presumption of law. As Professor Kenny pointed out earlier in this century, such presumptions, though in form connected with the law of proof, are in truth rules of substantive law disguised in the language of mere adjective rules. No amount of proof to the contrary from any source can dislodge the presumed fact. That being the case, it can be argued that the language of subsection (7F) is not connected with the rules of evidence, but with the scope of the substantive civil and criminal law. And, as I have already indicated, the legislature was clearly in an expansionary mood when it enacted that provision.

18. Mr. Lee relied upon Salabiaku v France (1988) 13 EHRR 379 to support his argument that even presumptions of law now have to be justified by the tests of rationality and proportionality. Insofar as his submission was based on the passage from the judgment of the European Court of Human Rights cited by Kempster JA in R v. Sin Yau-ming [1992] 1 HKCLR 127, at 158-9, I would respectfully agree and accept the proposition implied in his submission. However, in a passage not cited in R. v. Sin Yau-ming, the European Court said at P.387:

"... in principle the Contracting States remain free to apply the criminal law to an act where it is not carried out in the normal exercise of one of the rights protected under the Convention and, accordingly, to define the constituent elements of the resulting offence. In particular, and again in principle, the Contracting States may, under certain conditions, penalise a simple or objective fact as such, irrespective of whether it results from criminal intent or from negligence. Examples of such offences may be found in the laws of the Contracting States."

19. The manner in which the substantive criminal law is applied to persons may involve infringement of other rights, such as those protected by Articles 3, 4 and 5 of Hong Kong Bill of Rights. But, so long as the application or extension is achieved without impinging upon the presumption of innocence, I consider that no question of infringing Article 11(1) of the Hong Kong Bill of Rights can arise. In the case of Salabiaku v. France, the Customs Code merely penalised smuggling of prohibited goods, but deemed persons in possession of prohibited goods as liable for the offence of smuggling, although possession was not an essential ingredient of the offence. Had the relevant provisions made it an offence to be in possession of prohibited goods, it is clear, in my view, that the Eurpoean Court would have held that no question of conflict with the presumption of innocence would have arisen.

20. In the present case, it is not suggested that the relevant statutory provisions are inconsistent with any provisions of the Bill of Rights other than Article 11(1) - the presumption of innocence. Accordingly, it seems to me that the real question is whether the legislature, by enacting subsections (7F) and (7G) in December 1981, simply enlarged the scope or application of the criminal offence which it had created in February 1980. Or did it seek to do so by a procedural or evidential device designed to overcome problems of the kind encountered in Chu Kin Ying v R, supra?

21. I think that I can safely say that distinctions of that kind were not uppermost in the minds of members of the legislature in 1980 or 1981. In December 1981, they clearly intended that the restrictions on resales or relettings (s53(7)), and the penal consequences for contravening those restrictions (s.53(7B), should be applied to persons who had not actually obtained an order for possession under paragraphs (b) or (c) of subsection (2) of section 53 of Cap.7, but had achieved the same objective as a result of simply commencing legal proceedings and getting the tenant's agreement to deliver up vacant possession of the premises. That is precisely the situation in this case, because I am satisfied that, it has been proved beyond reasonable doubt that the defendants assigned the flat well within the 24 months period. I am satisfied that they did so with full knowledge that they had applied for an order under section 53(2)(b) of Cap.7. They knew that their application did not proceed to a hearing, and that the tenant consented to deliver up vacant possession of the flat about two months after their application to the Lands Tribunal.

22. I consider that I must first construe the statutory provisions in Cap.7 in accordance with the domestic law of Hong Kong. If that exercise results in an apparent infringement of the presumption of innocence enshrined in Art. 11(1) of the Bill of Rights, the question whether it has been repealed by section 3(2) of Cap.383 depends upon whether it is consistent with "a universal concept of justice." (Cf R. v. Sin Yau Ming [1992] HKCLR 127 at 159) Alternatively, it may depend upon whether they are "arbitrary or unreasonable" in light of the "Siracusa Principles." (Cf. R. v. Wong Hiu Chor and others M.A.227, 484 and 718 of 1992; 4th December 1992; per Mortimer J). But if, properly construed according to domestice law, the provision does not involve any infringement of Art 11(1) of the Bill of Rights, because it is not involved with the proof of quilt, the provision in question is not repealed by section 3(2) of Cap.383, even though it may seem arbitrary or unreasonable. I must confess that I am attracted by the notion that, in 1981, the legislature chose the deeming provision in subsection (7F) merely as a form of shorthand for enlarging the scope of the criminal offence it created by enacting subsection (7B). But, after the most anxious consideration of this aspect of the present case, I do not think that the impact of the Bill of Rights can be avoided. If subsection (7F) were really intended to re-define the scope of the restrictions and the offences one would expect it to be extended to all provisions where the phrase "... has obtained an order for possession ..." appears. Yet, the deeming provision of subsection (7F) does not apply to subsection (7A), with the result that a person who is deemed to have obtained an order for possession cannot apply to the Tribunal for permission to assign, if circumstances change after possession has been obtained. This omission is very strange, when one recalls that the amendment to subsection (7), by the addition of the words "Subject to subsection 7A", was made by the same provision which introduced subsection (7F). I can only conclude that the latter was introduced to overcome problems of proof; and accordingly now has to be justified under the Bill of Rights.

23. When considering whether these statutory provisions pass the tests of "rationality" and "proportionality", I do not think that it is relevant to consider the reasons why the tenant consented to deliver up vacant possession of the flat or whether the Tribunal would or should have made any order. But, I agree with Mr. Lee that the presumed fact, i.e. obtaining an order under section 53(2)(b), does not follow rationally or realistically from the proved facts of the tenant's consent after an application has been filed in the Lands Tribunal. Furthermore, the net effect of subsection (7F) is to relieve the prosecution of the burden of proving an essential element of the offence, without anything to moderate the irrebuttable nature of the provision. Accordingly, I am satisfied that subsection (7F) does not admit of a construction consistent with Cap.383; and was therefore repealed on the 8th June 1991. Without the aid of the provision there is clearly no sufficient evidence to show an essential ingredient of the offence. The defendants are entitled to be acquitted.

24. In view of that conclusion it is strictly not necessary to say anything about sub-section (7G). I have not had any argument on whether the words "until the contrary is shown" impose a legal or evidential burden on the accused. This subsection does not suffer from the same defects in subsection (7F); and it may be that the subsection does no more than state what a court might infer in all cases except, perhaps, those involving landlords who are overseas and appoint attorneys to handle their property.

25. For the aforesaid reasons I find the defendants not guilty. It remains for me to thank counsel for their very detailed and helpful written submissions and assistance.

(B.W.M. Downey)
District Judge