WHOLLY EARN INVESTMENT LTD. v. CHUI WAI LEUNG t/a PAK LAI STEAM LAUNDRY CO.

HCA 3675/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. A3675 OF 1998

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J U D G M E N T

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1. This action was commenced by writ of summons issued on 10 March 1998 wherein the Plaintiff claimed vacant possession of premises; mesne profits; further and/or other relief and costs.

2. On the first day of the trial Mr Yeung, counsel for the Plaintiff, sought leave to amend the statement of claim with the effect that the original claims for vacant possession and mesne profits were abandoned and replaced by a claim for a declaration that the Defendant had been in wrongful and unlawful occupation of the premises between 28 February 1998 and 12 August 2000.

3. There being no objection from Mr Yue, counsel for the Defendant, I granted leave to amend.

4. Putting it shortly the reason for this was that the action had been overtaken by events in that on 12 August 2000 the premises (the subject of the dispute between the parties) were resumed by the Government, and the title was then vested in the Financial Secretary Incorporated under section 5 of the Lands Resumption Ordinance (Cap 124)).

5. In consequence of that resumption the Plaintiff sought compensation under Cap 124, but the assessment of that compensation was refused by reason of the Defendant's occupation of the premises on the date of the resumption.

Background

6. The premises in question are the Ground Floor (including a cockloft) at 10A Davis Street in Hong Kong in respect of which an occupation permit was issued on 9 July 1954 stating that they were to be used for domestic purposes.

7. In June 1986 the Plaintiff purchased the premises and, in July of that same year, granted a tenancy of them to Madam Cheung Po Sheung who thereafter ran a laundry business from the premises, such business being known as Pak Lai Steam Laundry Company Limited.

8. The tenancy agreement entered into between Madam Cheung (who was expressed therein as trading as Pak Lai Steam Laundry Company) and the Plaintiff, was dated 12 June 1986 and was for a period of three years. It was an express term of the agreement that the premises were to be used only for business purposes.

9. Subsequent receipts for rent were made out to Madam Cheung "trading as Pak Lai Steam Laundry Company".

10. In 1989 the tenancy was renewed for a period of 2 years and it was an express term of that renewal agreement that the premises were to be used only for business purposes.

11. In 1991 and 1993, there were further such written agreements between those parties which agreements repeated the express term regarding user.

12. In May 1995, a tenancy agreement was entered into (in respect of these same premises) between the Plaintiff and the Defendant, who is the brother-in-law of Madam Cheung.

13. That agreement was for a term of 2 years, (between 1 July 1995 and 30 June 1997) and it too contained an express provision that the tenant (the Defendant) would use the premises "only for business purposes."

14. In August 1997, the Plaintiff gave to the Defendant notice to quit the premises pursuant to Part V of the Landlord and Tenant (Consolidation) Ordinance (Cap 7).

15. During his tenancy the Defendant had, in his application for a business registration certificate, certified that his residential address was in Belcher's Street in Hong Kong - not at 10A Davis Street.

16. Earlier this year the Defendant - through his solicitors - applied to the Commissioner of Rating and Valuation for a "certificate of primary user of premises." The certificate that then issued pursuant to this application certified that:

"The primary user of the ... premises [10A Davis Street, G/F (including cockloft)] on 12 January 2000 (date of inspection) was non-domestic."

17. No further steps, by way of appeal or query, were pursued by the Defendant or his legal advisers in respect of this certificate.

18. The Defendant continued in occupation of the premises until the Government's resumption and he then vacated them.

The Issues

19. The evidence before me provided by the Defendant and his sister-in-law Madam Cheung (for the Defence) was that between 1986 and 1995 Madam Cheung (and her family) in addition to occupying the premises for business purposes also lived there; that between 1991 (when the Defendant became involved in the laundry business) and 1995 (when he formally took over that business) he also resided there in a room at the rear of the premises; and that between 1995 (when she made over the laundry business to the Defendant) and 2000 Madam Cheung and her family continued to live at the premises in the cockloft.

20. The evidence before me provided by Lu Leung Shing (for the Plaintiff) was that, if indeed that was the case, neither he nor other directors or employees of the Plaintiff were aware of it and that they had not consented to it or acquiesced in such an arrangement.

The law

21. I have been fortunate in this case to have had appearing before me, Mr Dominic Yeung counsel for the Plaintiff, and Mr Jonathan Yue counsel for the Defendant. They have, if I may say so, led me through the tangled under-growth, which is the Landlord and Tenant (Consolidation) Ordinance (Cap. 7), with both clarity and persuasion. Both counsel tell me, and I accept, that the only question for me to answer is this:- "what was the primary user of the premises at the relevant time - was it domestic or otherwise?" Putting it another way - "what was the nature of the tenancy?" and, depending on the answer to that question does Part IV or Part V of the Ordinance apply?

22. In seeking to decide the issue of 'primary user' (which, if I find it to be other than domestic, removes it from any Part IV consideration), it seems plain to me that such term means 'principal use' (as opposed to subsidiary or associated use) and a use which is not "derived from, caused by, based on, or dependent on anything else". [The New Shorter Oxford English Dictionary 1993].

23. In his submissions on the law Mr Yeung for the Plaintiff urged upon me a number of matters not least of which were the relevant sections of Cap. 7 itself - and in particular s.115A for determining the nature of a tenancy - and the judgment in Kwong Cheung Sun v. Ko Wing On [1982] HKC 404.

24. In his submission Mr Yue, for the Defendant, also addressed me upon the statutory provisions, before taking me to the judgment in Chan Kwok Kwan v. Chan Cheong Wai t/a Chan Cheong Kee Store [1980] HKLR 450 and referring in passing to Bulistock Ltd v. Lam Ying [1983] HKC 217.

The Plaintiff's case

25. Put shortly the Plaintiff's case is that, on the evidence, the tenancy agreement between the parties specified that the premises were to be used for business purposes and nothing else, and that they were in fact primarily used for such purposes as is confirmed by the certificate of primary user issued by the Commissioner of Rating and Valuation.

26. Further evidence pointing to that primary user is to be found in the fact that in all written dealings between the parties the Defendant expressed himself as the business proprietor; the fact that all rent receipts and correspondence delivered to him by the Plaintiff were addressed to the business "Pak Lai Steam Laundry Company"; the fact that the business was not a small scale family business but a substantial enterprise; and the fact that the Defendant registered his residential address as being elsewhere.

27. In addition to these facts, which are not disputed on the evidence, there is evidence from the Plaintiff that it had no knowledge of the domestic facilities to the rear of the business premises and in the cockloft, and there had been no approval of, or acquiescence to, any such domestic use as claimed by the Defendant.

The Defendant's case

28. Again put shortly the Defendant's case is that the photographs in evidence show the area of the premises used for domestic purposes exceed that area used for business purposes and that other evidence in this trial clearly demonstrates that since 1986 the Plaintiff had knowledge of the domestic use and had acquiesced to such use.

Application of the Law to the Evidence

29. The Notice to Quit dated 22 August 1997 issued by the Plaintiff to the Defendant was issued upon the basis that the premises fall within Part V of the Ordinance. If they do not, then that notice is of no effect. If the premises fall within Part IV then they are specially excluded from Part V - see section 121(2)(c).

30. Part IV applies to a domestic tenancy and section 115A sets out the criteria for determining whether a tenancy is indeed domestic. Included in that section are provisions to the effect that:-

(1) a clause in the tenancy agreement specifying use is prima facie evidence that the premises are being used for such purpose - s.115A(1)(a);

(2) an onus of proof lies on the tenant to establish the agreement or acquiescence of the landlord to a user which is in breach of a tenancy agreement - s.115A(1)(b);

(3) the terms of an occupation permit may be taken into account - s.115A(2)(b);

(4) normal additional uses of premises consistent with the domestic nature of a tenancy having regard to specified matters may be taken into account - s.115A(2)(c);

(5) a certificate as to primary user is prima facie evidence of the facts set out therein - s.115A(9)

and (6) parties may apply to the Lands Tribunal to determine primary user - s.115A(10).

31. In relation to (1) and (2) above, as I say these place an onus on the defendant to show that whilst he may have been in breach of a term of the tenancy agreement that the Plaintiff was aware of it and agreed or acquiesced to it.

32. However, even if he succeeds in doing that in relation to his domestic occupancy of the rear part of the premises, and even if he succeeds in doing that in relation to the domestic occupancy of the cockloft by his sister-in-law Madam Cheung and her family (as licencees of the Defendant), that does no more than establish that a part only of the premises was occupied for domestic purposes and I am concerned with the primary purpose of the occupancy of the premises as a whole. If I should find - as did the Commissioner for Rating and Valuation after what, in the absence of any evidence to the contrary, I can only assume was the usual detailed inspection of the premises prior to the issuance of the certificate - that the primary user of the premises as a whole was business then it cannot assist the Defendant at all to show that the Plaintiff knew that he, and other members of his family were coincidentally living there, and that the Plaintiff consented to that arrangement.

33. Whilst on the evidence before me I might be satisfied that during the relevant period the Defendant was indeed residing at the rear of his business premises, and that Madam Cheung and her family were residing in the cockloft as licencees and rent free of the Defendant I am unable to say that I am satisfied that the Plaintiff was aware of that fact, let alone consented to it. Whilst it may be that the Plaintiff (in the form of Mr Lu who gave evidence before me, and/or his father) had no objection to the Defendant himself living in an area to the rear of the shop premises I cannot, on the evidence before me, take the matter any further than that.

34. In any event, as I have said, it does not assist the Defendant if I conclude, as indeed I do, that the primary user of these premises as a whole was business - the laundry business; and that any domestic user was purely ancillary and incidental to that primary user, or dependent upon it.

35. In my view, the most compelling evidence in this case as regards the question of primary user is to be found in the Commissioner's Certificate - a certificate sought by the Defendant and issued after an inspection of the premises witnessed by the Defendant. He chose to accept that certificate and not to appeal against it. Before me he has not sought to adduce fresh evidence to rebut the evidence relied upon by the Commissioner's Inspectors.

36. As Mr Leung has succinctly put it, given the Defendant's evidence before me that the premises as depicted in the photographs were the premises as seen by the Inspectors, it must follow that the Inspectors found on the same evidence before me that the primary user was business - it certainly was not domestic.

37. As to the evidential value of the certificate itself I have been referred to the judgment of Leonard VP in Kwong Cheung Sun v. Ko Wing On where he says at page 407:

"These certificates are, we consider, having regard to the statutory provisions relating to them, of great evidential worth which is in no way lessened by the care evinced by the staff of the Department of Rating and Valuation in their preparation. It must not be overlooked that before the certificate is issued, the premises have been visited. True, the officials concerned measure the individual parts of the premises and attribute to each part a percentage user and they may well be wrong (as the trial judge thought they were here) in their attributions. They also, however, have an opportunity, by their visit of assessing the overall effect of the occupancy, an advantage not enjoyed by the trial judge. When the intimation (as to the right of appeal) to the tenant endorsed on the certificate is ignored, his position becomes the more untenable. The trial judge is, of course, entitled to look at all the evidence to see if the prima facie evidence afforded by the certificate is rebutted but it was for the respondent to show that it is rebutted not for the appellant to show that it is not."

38. Whilst the evidence of the nature of the occupation permit (which was issued in 1954) is of no great assistance to me given the actual use of the premises since before 1986, I have been assisted by the evidence before me relating to the size and profitability of the laundry business run by the Defendant and, before him, by his sister-in-law Madam Cheung. It was plainly substantial.

39. I am quite satisfied that the primary user of the premises known as Ground Floor (including cockloft) 10A Davis Street Hong Kong during the relevant period was non-domestic - it was business user; that accordingly the premises fall within Part V of the Ordinance, and the Notice to Quit dated 22 August 1997 brought the Defendant's tenancy to an end on 28 February 1998.

40. Accordingly, I make the declaration sought by the Plaintiff that the Defendant was in wrongful and unlawful occupation of the premises between 28 February 1998 and 12 August 2000.

41. I make a costs order nisi in favour of the Plaintiff.