CHEUNG CHUNG YEE v. 王慶培 AND OTHERS

HCMP 2/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 2 OF 2017

(ON AN INTENDED APPEAL FROM DCCJ NO. 4225 OF 2015)

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D E C I S I O N

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Hon Cheung JA (giving the Decision of the Court) :

1.  This is the plaintiff’s renewed application for leave to appeal from the judgment of Deputy District Judge Brian Mak dated 19 October 2016. The Judge refused leave.

2.  The plaintiff failed in his application before the Judge to strike out the defence and counterclaim of the defendants on the ground that it discloses no reasonable defence.  Further he failed in his application for a summary determination of the following issues of law arising from the dispute, namely,

1) whether the licence agreements have the effect of conferring a contractual licence or creating an interest in land instead;

2) whether, on the basis of the oral agreements, the defence and counterclaim exist as a fact and in the absence of a written instrument signed by the plaintiff in terms as alleged by the defendants, the oral agreements have the effect of conferring interest in land to the defendants (to form the subject matter of a counterclaim); and

3) whether the oral agreements are admissible to vary, add to, or contradict the express terms of the licence agreements relating to the defendants.

3.   The parties have asked that this application be determined solely on the basis of their written submissions without a hearing.  We will deal with the application on paper.

I.  Background

4.1 The dispute between the parties is over eight residential properties in a three-storey building erected on Lot 1408RP in DD106 (the ‘premises’) in the New Territories.

4.2 In between 1991 and 1992, one Regent Power Industrial Limited (‘Regent’), the plaintiff’s agent, entered into eight separate written licence agreements with each of the 1^st to 8^th defendants (the ‘licence agreements’).  In consideration of the licence fee paid or to be paid by each of the defendants, the plaintiff granted them the use and enjoyment of the respective premises for a fixed term of 20 years.  Particulars of the eight licences are as follows :

Licencees	Premises	Licence deposit & licence fee (HK$)	Date of Licence Agreement	Start date of licence	Expiry date of licence
1st Defendant	Unit A, G/F	$50,000 $124,000	24.12.1991	01.01.1992	31.12.2011
2nd Defendant	Unit B, G/F	$50,000 $108,994.40	23.12.1991	01.01.1992	31.12.2011
3rd Defendants	Unit A, 1/F	$50,000 $114,000	08.11.1991	01.01.1992	31.12.2011
4th Defendant	Unit B, 1/F	$50,000 $104,000	05.11.1991	15.11.1991	14.11.2011
5th Defendants	Unit C, 1/F	$50,000 $93,960	05.11.1991	15.11.1991	14.11.2011
6th Defendant	Unit D, 1/F	$50,000 $104,000	17.11.1991	01.01.1992	31.12.2011
7th Defendant	Unit C, 2/F	$50,000 $124,992	30.11.1991	01.01.1992	31.12. 2011
8th Defendant	Unit D, 2/F	$50,000 $135,000	20.11.1991	01.01.1992	31.12.2011

4.3 Upon expiry of the licences, on 11 April 2012 and 13 April 2012, the plaintiff gave notices to each of the 1^st to 8^th defendants demanding them to quit the premises but they refused to do so.

4.4 On 14 September 2015, the plaintiff commenced the present proceedings against the 1^st to 8^th defendants for recovery of the premises and damages for wrongful occupation of the premises.  The 1^st defendant, 1^st named 3^rd defendants, 1^st named 5^th defendants and 7^th defendant (the ‘defendants’) filed a joint defence and counterclaim.  The other defendants did not take any action.

4.5 The defendants pleaded that during the negotiations of the licence agreements, Regent, on behalf of the plaintiff, represented to the defendants that the premises were intended to be sold to them upon the plaintiff’s obtaining the Government’s approval and permit for the sale (the ‘representation’).  It was orally agreed between the plaintiff, or Regent on behalf of the plaintiff, and the defendants that the plaintiff would transfer the entire beneficial interest in the premises to each of them upon obtaining the Government’s approval, and, that the plaintiff would grant licences to the defendants to occupy the respective premises permanently upon expiry of the licence agreements (the ‘oral agreements’).  The defendants further pleaded that there was a common intention between the plaintiff and the defendants that the defendants would own the entire beneficial interest in the respective premises upon entering into the licence agreements.  The defendants pleaded that the licence fee and licence deposit for each of the premises were above their respective market value for the entire beneficial interest of the premises at the time when the licence agreements were entered into.  In reliance on the representation and the oral agreements, the defendants had incurred expenditure on the premises.  The defendants pleaded that accordingly they are entitled to remain in possession of the premises.

4.6 The defendants pleaded that they are alternatively holding the entire beneficial interest in the premises by operation of resulting trust, constructive trust and proprietary estoppel, and hence, they are entitled to remain in occupation of the premises.  They pleaded a counterclaim for a declaration that the plaintiff holds the respective premises on trust for the defendants and alternatively, for an order that the defendants be permitted to and are entitled to occupy the respective premises for life.

II.  Principles

1)  Leave to appeal

5.1 In order to obtain leave, the plaintiff must show that his appeal has a reasonable prospect of success or there are some other reasons in the interests of justice that the appeal should be heard : Section 63A, District Court Ordinance, (Cap. 336).

2)  Appeal against exercise of discretion

5.2 In refusing the plaintiff’s application to strike out and for a summary determination of the questions of law, the Judge had exercised a discretion.  The function of the appellate court on appeal is not to exercise the discretion afresh but will only interfere with the decision if the plaintiff can show that the discretion was wrongly exercised on principle or had taken into account irrelevant consideration or had ignored relevant consideration.

5.3 It is not clear from the judgment itself what is the basis for the plaintiff’s applications.  It appeared that the plaintiff was saying that the terms of the oral agreement could not be gathered from the licence agreements and written agreements.  In the Judge’s Decision on refusing leave, he referred to the plaintiff’s shifting his ground and the plaintiff accepted then that the Court is bound by the content of the defence in the striking out action.  The Judge then identified the two principal grounds relied upon by the plaintiff in the application for leave, namely,

(1) the alleged oral agreements conferring interest in land are inadmissible; and

(2) on the basis that the oral agreements are inadmissible, it would not be possible for the defendants to have acquired any proprietary interest in land through investments.

5.4 The plaintiff elaborated on these grounds in his written submission before us.  He said that the foundation of the defence and counterclaim is the oral agreements reached by the parties, but such a basis is unsupportable because

(1) oral agreements to contradict written documents are inadmissible as a matter of law : Chitty on Contract, Hong Kong Specific Contracts, 4^th edition, paragraph 8-071 and Tsang Chuen v. Li Po Kwai [1932] AC 715, at 727 to 728.

(2) an oral agreement to confer interest in land (whether immediate or in the future) is unsustainable as a matter of law : Sections 3 and 6 of Conveyancing and Property Ordinance (‘CPO’) and Chitty on Contract, Vol. 1 General Principles, 32^nd edition, paragraphs 13-104 to 13-105; Chu Kit-yuk v Country Wide Industrial Ltd [1995] 2 HKLR 162, at 167 5-10 and Daulia Ltd. v Four Millbank Nominees Ltd [1978] Ch. 231, at 238G-H, 240G-H, 243B.

(3) The concept of proprietary estoppel/interest rests upon the common intention between the parties in that, by investing in land, both parties contemplate that the investor would have an interest in the land.  When the existence of the licence agreements is not in issue and the investment of the defendants were made after entry into occupation pursuant to the licence agreement, no question would arise that their investment could confer an interest in land to them.  The very fact of the licence agreements militates against the intention.  It is especially so when the requirement is the intention must be common to both the plaintiff and the defendants.  When the oral agreements are inadmissible, it would not be possible for the defendants to have acquired any proprietary interest in the land through investments.

5.5 It appears that these grounds are common to both of the plaintiff’s applications.

III.  Our view

6.  Our view is that the threshold for leave to appeal is not satisfied.  In our view it is not reasonably arguable that the Judge was wrong in the exercise of his discretion.  The case is not suitable for a summary determination.  The existence of the oral agreement has to be properly dealt with in a trial of this action and cannot be determined in a summary way.  The crux of the matter is that the parol evidence rule is not applicable where the parties had agreed or intended that the terms of the agreement are both written and oral : Chitty on Contracts 31^st Ed. Vol. 1 paragraph 12-098.  Whether the parties had so agreed and intended is a matter that must be determined first.  This also has an effect on whether sections 3 and 6 of the CPO are applicable.  The defendants’ case on proprietary estoppel etc. is only their alternative case which should also be considered in a full trial.

IV.  Conclusion

7.1 Accordingly the application for leave to appeal is refused.

7.2 The plaintiff is to pay the defendants the costs of the application which we assess summarily at $45,000 ($30,000 of which is counsel fee).

Mr K. M. Chong and Mr Alvin Chong, instructed by Kenneth C.C. Man & Co., for the plaintiff

Mr Albert Cheung, instructed by Ho and Wong, for the 1^st defendant, the 1^st named 3^rd defendant, the 1^st named 5^th defendant, and the 7^th defendant