KENWELL LTD v. LIU KIN KWAN GARY AND LAM TAT CHOW (BOTH TRADING UNDER THE NAME OR STYLE OF 昌盛公司, A FIRM)

DCCJ 3616/2023

[2025] HKDC 1188

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3616 OF 2023

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DECISION

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1.  On 4 March 2024, this court handed down a decision which, inter alia, entered interlocutory judgment under Order 14 (“the Judgment”)  granting plaintiff’s possession of Lot 746RP in D.D. 99 (“the Premises”).

2.  The defendants’ subsequent application for, inter alia, leave to appeal against the Judgment was also dismissed by the court on 31 March 2025.

3.  According to the plaintiff, on 8 April 2025, the bailiff has served the defendants a Notice to Occupier to Quit for the Premises to be delivered to the plaintiff before 15 April 2025 but this has not been complied with (paragraphs 7 and 8 of 6^th Affirmation of Chow Sik Lun, Hearing Bundle p. 69). 

4.  On 14 April 2025, the defendants had lodged a draft Notice of Appeal with the Court of Appeal to leave to appeal.

5.  The defendants had also taken out a Summons for Stay of Execution of the Judgment (“the Summons”)  on 22 April 2025 which the court shall deal with below.

Background

6.  The background of the case was stated in paragraphs 7-23 of the decision dated 4 March 2024 and needed not be repeated here.

Legal principles

7.  The starting point is Order 59, rule 13(1):

“Except so far as the court below or the Court of Appeal or a single judge may otherwise direct-

(a)  An appeal shall not operate as a stay of execution or of proceedings under the decision of the court below;

(b)  No intermediate act or proceeding shall be invalidated by an appeal.”

8.  As such, an appeal does not automatically operate as a stay of execution. The court will only consider exercising its discretion to grant a stay of execution pending appeal if the appellant can demonstrate there are good reasons to justify a stay (Asparouh Ianev Dimitrov as administrator of the estate of Kaloian Ianev Dimitrov (Deceased)  v Dominic Tak Ming Lau and Anor CACV 568/2020, [2021] HKCA 1196)

9.  As to what constitutes good reasons, Hon Litton J.A. stated:

“Plainly the intention is that a party should not be deprived of the fruits of a judgment in his favour except on good grounds being shown. Obviously if an applicant were able to demonstrate that he has very strong grounds of appeal, that something has grievously gone wrong with the process of law in the court below, then this court would be inclined to make such order to ensure that the appeal would not be rendered nugatory in the meanwhile. In those circumstances perhaps the court may not examine very closely the financial situation of the appellant. On the other hand if the grounds appear weak then the court look more closely into the alleged impecuniosity and prospective financial ruin.”

(World Trade Centre Group Limited Baker & McKenzie (a firm)  v Resourceful River Limited and Anor CACV 70/1993)

10.  Further, Hon Woo JA stated:

“The most important consideration in respect of whether a stay of execution should be granted is whether there are strong grounds of the proposed appeal…That hurdle is higher than that of chances of success for considering whether leave to appeal should be granted.”

(ASHA HARKISHIN PREMSINGH otherwise known as ASHA HARKISHIN PREMSING nee ASHA JETHANAND KIRPALANI v HARKISHIN ISARSINGH PREMSINGH KISHINANI otherwise known as HARKISHIN ISARSING PREMSING KISHINANI otherwise known as HARKISHIN ISARSING PREMSING HCMP 3436/2000)

11.  In the Asparouh case, Hon Au JA (quoting the principles laid down by Ma J (as he then was)  in the case of Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84)  in devising the following principles:

(1)  The existence of a strong appeal will usually by itself be a good reason for granting a stay. However. If there exists only an arguable appeal, the appellant must provide additional good reasons to justify a stay, namely, the appeal would be rendered nugatory if a stay was not granted;

(2)  The court must not sat any stage forget the position of the successful party. It is always relevant to consider the prejudice that would be caused to the successful party in the event of a stay is granted and if necessary, to impose conditions so as to minimize the prejudice caused to him. A fortiori, the court must also consider any contention that the appeal would be rendered nugatory to him (in the event that the appeal is dismissed)  should a stay of execution be imposed;

(3)  Ultimately, the court embarks on a balancing act and uses its common sense, but bearing in mind at all times the starting point that the successful party is not to be deprived of the fruits of his success.”

12.  Mr. K M Chong, Counsel for the plaintiff, submitted that the Court of Appeal decisions in the World Trade case and the Asha case showed that “unless there are strong grounds of appeal”, no question of successful appeal being rendered nugatory should arise. Further, he argued that such “strong grounds” necessarily means a “higher hurdle” than the test for application for leave for appeal.

13.  Mr. Chong also suggested that, as only the Star Play case (which was a Court of First Instance decision), and not the abovementioned Court of Appeal decisions, was produced before the court in the Asparouh case, “strong grounds of appeal” should remain as the minimal requirement.

14.  I disagree.

15.  In an application for stay of execution, the court is given a discretion and there has to be a sliding scale for consideration.

16.  In the Asha case, Hon Woo JA only mentioned that the most important consideration was having “strong grounds of appeal”, but he did not elaborate on other considerations. Hon Litton JA was clearly talking about this sliding scale: if there were very strong grounds of appeal, then the court need not scrutinise other (alleged)  good reasons too closely. On the other hand, if the grounds were weaker, then the court would need to do so.

17.  None of these decisions appeared inconsistent with the principles distilled down and stated in the Asparouh case.

18.  Nevertheless, what is abundantly clear is that the minimum requirement for a stay of execution upon any “weaker” grounds of appeal (before the court would scrutinise other alleged good reasons)  is “the existence of an arguable appeal (that is, one with reasonable prospect of success)” (the Star Play case and the Asparouh case).

Considerations

19.  Firstly, I am not satisfied that the defendants have persuade the court that they have an arguable appeal.

20.  I have considered this case on two occasions already. In my first decision (dated 4 March 2024), I have taken the defendants’ case to the highest and found that (paragraph 33 of that decision):

“…they cannot be lawful sub-tenants of the Wui on 22 August 2023 (the date of commencement of this action)  because any tenancy relationship between MWC (and/or Fortune)  and the Wui has been determined before that date in all circumstances.”

21.  In the subsequent application for leave to appeal decision (dated 31 March 2025), even when the court considered the new evidence attempted to be adduced by the defendants on a de bene esse basis, the court has come to the same conclusion (e.g. paragraphs 30 ad 31)  and found that there was no “reasonable prospect of success” in the appeal. Thus, the court refused to grant leave for appeal.

22.  Thus, the Summons must fail even at the first hurdle.

23.  Nevertheless, the defendants have submitted other reasons for stay (paragraphs 3-6 of the 4^th Affirmation of Liu Kin Kwan Gary, Hearing Bundle p. 62-64):

a.  they have been in occupation of the Premises for over 20 years and there is a Lands Department proposal for land resumption;

b.  they have incurred substantial investments on vehicle repair equipment and a covered structure (at the estimated costs of HK$200,000);

c.  Without a stay, there would be an inability to claim compensation from the land resumption and irreparable harm to loss of business and livelihood;

d.  To mitigate prejudice to the plaintiff, the defendant also offered to release HK$266,000 held by their solicitors on stakeholder account to the plaintiff, and would undertake to continue to pay rent to the plaintiff at HK$14,000 monthly.

24.  The defendants have not produced any financial records or other evidence to support their claim of the value of investments, income and loss of the business so the court is not in the position to scrutinise such claims. As such, these claims remain bare assertions.

25.  Further, for the defendants’ concern about the possible loss of land resumption compensation, this is a monetary loss which can be compensated by damages.

26.  Needless to say, the plaintiff has refused the defendants’ offer of the sum of money and the monthly rent. It made it clear that its position is for the use of the Premises itself and not to take rent from it.

27.  The court also needs to consider the prejudice to the plaintiff: it has been the tenant of the Premises since 23 June 2023 but without being able to enjoy vacant possession for some 2 years. A stay of execution would delay this even further.

28.  Thus, when exercising a balancing act, the balance clearly lies in favour of not granting a stay of execution.

29.  There is a final matter.

30.  One day before the hearing, the solicitors for the defendants has filed an affirmation (“Affirmation of Chung Lim Tung”)  which exhibited a Notice of Proposal for Land Resumption published by the Lands Department by G.N. 1322 on 1 March 2024 pursuant to s.2A, Land Resumption Ordinance (“LRO”).  This Notice made reference to the Premises so the defendants argued that this showed that the Government was keen for its resumption. The defendants would need to deliver vacant possession if there was no stay of execution and thus lose the compensation as a user of the Premises.

31.  Given that the Affirmation of Chung Lim Tung was very late, the solicitors for the plaintiff objected that they were not given the chance to peruse or respond to such evidence.

32.  Subsequent to the hearing, the plaintiff took out a Summons for retrospective leave to file and serve the 7^th Affirmation of Chow Sik Lun in reply to the Affirmation of Chung Lim Tung (“7^th Affirmation of Chow Sik Lun”). The defendants quite fairly consented to this Summons.

33.  The 7^th Affirmation of Chow Sik Lun exhibited a Notice of Resumption of Land under s.4, LRO dated 10 July 2025 by G.N. 4235 which did not make reference to the Premises. Of course, this Notice was published after the hearing.

34.  The plaintiff argued that this Notice would show that although the government had proposed resumption on 1 March 2024, the recent Notice of Resumption under s.4 of LRO (which concerned an order of resumption)  showed the government has decided not to resume the Premises.

35.  My view is that this may show that there is no order for resumption of the Premises up until now. However, this only goes to the degree of likelihood of an imminent resumption and thus compensation to the defendants if there was a stay. In any case, the court has already considered any degree of this possibility in coming to the decision (see paragraphs 23c and 25 above).

Order

36.  I would therefore dismiss the Summons and order that the costs of the application be to the defendants with certificate for one counsel.

37.  The plaintiff shall lodge and serve a summary bill of costs with 21 days of this order and the defendants shall lodge and serve a summary list of objections 21 days thereafter. Costs will be assessed summarily by way of paper disposal.

Mr K M Chong and Mr Alvin Chong, instructed by Messrs Samuel Chow Solicitors, for the plaintiff

Mr Chung Lim Tung, of Messrs Peter Mo & Co., for the defendants

DCCJ 3616/2023

[2025] HKDC 528

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3616 OF 2023

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DECISION

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1.  On 4 March 2024, this court handed down a Decision (“the Decision”) which, inter alia, granted plaintiff’s possession of Lot 746RP in D.D. 99 (“the Lot”) after hearing, inter alia, an application made by the plaintiff under Order 14.

2.  The defendants subsequently took out two applications:

a.  Summons dated 28 March 2024 for leave to appeal against the Decision (“the Summons for leave to appeal”); and

b.  Summons dated 5 July 2024 for leave to adduce further evidence (“the Summons to adduce further evidence”).

3.  The two Summons were heard together on 20 January 2025 and the following is the decision.

Background

4.  The background of the case was stated in the Decision (see paragraphs 7-23 of the Decision) and needed not be repeated here.

The Summons to adduce further evidence

5.  As the defendants are applying to adduce new evidence in support of the application for leave for appeal, the court will deal with this application first.

6.  The defendants invited this court to assess the new evidence on a de bene esse basis, which the court agreed. Indeed, much time in the hearing was spent by Ms. Lorinda Lau (“Ms. Lau”), counsel for the defendants, taking the court through the new evidence.

7.  The legal principles concerning granting leave to adduce new evidence at the appeal stage is trite: Ladd v Marshall [1954] 1 WLR 1489. Three conditions needed to be satisfied:

a.  It must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial (“Condition 1”);

b.  The evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive (“Condition 2”); and

c.  The evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible (“Condition 3”).

8.  Even if the three conditions are not satisfied, the court would still have a residual discretion and flexibility to admit fresh evidence in exceptional circumstances (Solicitor (529/2018) v Law Society of Hong Kong (No. 2) [2021] 5 HKLRD 445)

9.  For this application, the defendants have disclose two categories of documents:

a.  Documents exhibited as “LKKG-17” to “LKKG-32” in the 3^rd Affirmation of Liu Kin Kwan Gary (Hearing Bundle B, p.439 -659, “the 1^st Category Documents”)

b.  Documents exhibited as “LKKG-33” to “LKKG-36” in the 3^rd Affirmation of Liu Kin Kwan Gary (Hearing Bundle B, p.660-700, “the 2^nd Category Documents”)

The 1^st Category Documents

10.  Subsequent to the Order 14 summary judgment, the defendants has obtained the 1^st Category Documents from Man Whi Chung (“MWC”) and / or Fortune Nine (Hong Kong) Limited (“Fortune”). It was, of course, the defendants’ claim that they were the sub-tenants of another claimed tenant of the Lot, namely MWC and Fortune. MWC is the director and shareholder of Fortune.

11.  In summary, these are documents which are or relate to:

a.  Payments of rent by MWC / Fortune to various alleged members of the Wui;

b.  Payments by MWC / Fortune to various parties (e.g. Inland Revenue Department for Property Tax, surveyor’s fees, legal fees etc.) on behalf of the Wui up to March 2023;

c.  Minutes of meetings with the IRD which showed that the managers of the Wui recognised MWC as a tenant (but also confirmed that there was no signed tenancy agreement at the relevant time).

12.  Regarding condition 1 of Ladd and Marshall, the defendants submitted that, as sub-tenants, these documents (which related to the alleged “head tenancy arrangements” between MWC / Fortune and the Wui) were entirely outside their knowledge and control. Many documents dated back to 2005 and were stored in various warehouses under control of MWC and Fortune, who only disclosed such on 28 June 2024.

13.  Regarding condition 2, the defendants submitted that these evidence contradicted the evidence of the two Wui managers that “since 1996…the Wui has never grant any tenancy of its land to anyone and no question would arise that” MWC or Fortune “be a tenant of the Wui...” and “that at no time has” MWC or Fortune “paid any rent to the Wui for the use or occupation of…the Lot…” (paragraphs 3(a) and (d) of the Affirmation of Man Ping Nam and Man Tai Sang, Hearing Bundle A p.384-385).

14.  In my view, such documents only shows the arrangements between MWC / Fortune and the Wui and its alleged members. They may support that :

a.  MWC / Fortune has been paying rent to each alleged individual members of the Wui including the managers (who received their respective rents as members of the Wui);

b.  There has been arrangements that MWC / Fortune would pay upfront various outgoings of the Wui (Property Tax, various fees etc.) and such would be deducted from the rents due to the members before distribution; and

c.  The managers were aware of such arrangements.

15.  Clearly, such evidence does not dispute the findings in the Decision that there was no tenancy agreement in writing since 1986 (in fact the new evidence affirmed this) and in law, these arrangements would be a tenancy at will (see paragraphs 25-33 of the Decision).

16.  I find no contradictions to the allegations in the Amended Statement of Claim that the Wui at no time granted any tenancy to MWC and / or Fortune: the Wui granted the 1986 tenancy to Man Ching Ip, the father of MWC. There was no evidence of any written tenancy since.

17.  In the Decision, the court has already considered the defendants’ case by taking it to the highest. The 1^st Category Documents simply lend more support to the defendants’ case.

18.  Such new evidence would not alter the findings of the court that the conduct of MWC / Fortune / the Wui / the members of the Wui showed that the arrangements was a tenancy at will, which would have ended on 23 June 2023 (some 3 months after the last distribution of rent to the members of the Wui). This was the date “when the landowner doing any act inconsistent with continuation of his relation with the tenant-at-will, i.e. when the Wui granted the 2023 Tenancy to the plaintiff…” (see paragraph 30(b) of the Decision).

19.  As far as condition 3 is concerned, I have no problem in finding that the 1^st Category Documents are apparently credible.

20.  In my view, the defendants already have problems satisfying Condition 1: whilst the defendants, as alleged sub-tenants, may not know exactly what documents might exist between the apparent head-tenant and apparent landlord that support such relationship, it must be obvious to anyone that the crux of this action was the nature of such a relationship. Yet, the defendants did not provide evidence (under the 3^rd Affirmation of Liu Kin Kwan Gary, hearing bundle B, p. 419-437) of any attempts to obtain such evidence before the Order 14 hearing nor any reasons for the failure in such attempts to show that they have, indeed, exercised due diligence.

21.  More importantly, the 1^st Category Documents clearly do not satisfied Condition 2. None of these documents showed that there any further extension of the 1986 Tenancy (or the alleged 1988 Novated Tenancy Agreement) in the terms as alleged in writing. In fact, as stated above, the new evidence actually confirmed that there was no further written tenancy agreement. The new evidence is therefore irrelevant to the finding in law that there was only a tenancy-at-will in the relevant time.

22.  The defendants’ claim clearly rests upon being able to show that they were the sub-tenant of the Wui since the determination of the tenancy-at-will on 23 June 2023. The new evidence are also not relevant to such an issue.

The 2^nd Category Documents

23.  These documents concerned land resumption of the Lot (amongst others) which may show that the defendants would be depraved of compensation under the land resumption scheme if the plaintiff succeeds in this action.

24.  As such, these are evidence that may show the motive of the defendants to defend this action and perhaps may concern matters of damages (assuming that the defendants have any chance to succeed). They are clearly not relevant in influencing the Decision.

25.  In conclusion, none of these new evidence are of a determinative character for the court to give a decision materially different from the Decision. As such, this Summons should be dismissed.

The Summons for leave to appeal

26.  The legal principles are trite: the applicant must satisfy the court that the appeal has a “reasonable prospect of success” which means that he is “required to show more than just an arguable case” although “he does not have to demonstrate that the appeal will probably succeed”. (s. 63A(2), District Court Ordinance, Cap. 336, SMSE v KL [2009] 4 HKLRD 125, Wynn Resorts (Macau) SA v Mong Henry (孟享利) [2009] 5 HKC 515)

27.  The grounds for appeal, as stated in the Notice of Appeal is as follows.

Acquiescence and estoppel

28.  The first ground is that the Judge erred in law and / or in fact in concluding that the defence is based entirely upon the lawfulness of the head tenancy of MWC and/or Fortune but ignored the issues of acquiescence and estoppel which were also raised.

29.  The argument put forth by the defendants only goes so far as the arrangements of MWC paying rents to the members of the Wui including the two managers and also of various payments MWC made on behalf of the Wui (see paragraph 11 above). Further, MWC and the defendants were “allowed” to do various renovations and incurring expenses.

30.  It is important to note that there is no dispute that there was no written tenancy agreement after the 1986 Tenancy. MWC’s evidence was that the 1986 Tenancy (which was for a term of 10 years) was extended on the same term except the rent upon the managers acceding to “the wish of the majority” of the members, and the managers also approved of the arrangement of direct payment of rent to the members by MWC.

31.  Thus, as stated in the Decision, taking the defendants’ case to the highest (relying on the concept of tenancy by estoppel, acquiescence or otherwise), this extension would be for another 10 years, i.e. until 2006. I cannot see how the argument of tenancy by estoppel is applicable for the period beyond this date:

a.  It is not the case of MWC that there were any representations from the managers that the 1986 Tenancy was to be extended indefinitely (instead of being extended “on the same term”) in 1996.

b.  MWC also did not give evidence there were further representations from the managers or the Wui regarding further extensions of the 1986 Tenancy beyond 2006 and thus any reliance by MWC upon such representations to his detriment beyond 2006.

32.  Ms. Lau also referred to Covered Markets Ltd. v Green [1947] 2 All E.R. 140 and argued that (paragraph 52 of the Skeleton Submission for the Defendants):

“…it was held that the tenancy may held over for the same term, i.e. 10 years. It was at least an issue as to whether the head tenancy would only expire in 2026.”

33.  In the Covered Market case, the term of tenancy had expired but the tenant had been allowed to remain in possession and to continue to pay the same rent. The landlord served a notice to quit some 4 to 5 years after the expiring of the lease. It was held that:

“…the tenant for 7 years carried on his business under his lease and has been allowed to stay on for several years after the termination of that period…the proper inference from the circumstances is that there was a yearly tenancy on the termination of the 7 years…”

34.  I cannot see how this case can help the defendants: it was not held that as long as the tenant was allowed to stay on and pay the same rent (and incur any expenses on the land), a renewal of lease for another 7 years would be inferred. Instead, it was held that this inferred only a yearly tenancy. The defendants’ case goes far beyond the ambit of this: their claim is that MWC, being allowed to stay on and to pay the same rent after the claimed renewed 1986 Tenancy ran out in 2006, could infer a second renewal of 10 years’ term until 2016, and after that yet a third renewal until 2026.

35.  Of course, as a matter of law, any tenancy for a term exceeding 3 years (inclusive of renewal) would require the support of a deed to be enforceable. The defendants’ case was that the 1986 Tenancy was extended, without a deed, all the way to 2016. This claimed “renewed” tenancy can only be, in law, an “interest at will” (paragraphs 28 and 29 of the Decision). This legal position is not challenged in the appeal.

36.  As such, I cannot see how the defendants has a “reasonable prospect of success” of showing “a real or bona fides defence” under this ground.

Adverse possession

37.  This was put forward as a “further or alternative” ground of appeal. The vague possibility of an adverse possession claim was raised during the hearing.

38.  This claim was not pleaded in the Defence. Instead, it was pleaded that the defendants were “lawful subtenants” of the Wui via the tenancy of MWC (paragraph 15 of the Defence and Counterclaim).

39.  Further , it was never the case of MWC that he was in adverse possession of the Lot: he stated (paragraphs 17-19 of the Affirmation of MWC) that:

“the managers…acceded to the wishes of the majority of the Wui’s members that I should continue to be the tenant of the Land Lots with an annual rent of HK$3 million.”

40.  I cannot see how there is an “alternative” case of adverse possession: one cannot claimed to be a lawful tenant and then argued that if that claim failed, he was in adverse possession. Claiming to be a lawful tenant must at once dispel any notion of having an animus possidendi. This is the basis of paragraph 38 of the Decision.

41.  The defendants also sought to argue that the defence of adverse possession would require expert evidence in Chinese Customary law or discovery of the operation of the Wui regarding members’ introductions and rights etc.. Given the above findings, I cannot see how any of such would be relevant.

The Action should be consolidated with the High Court case and be transferred

42.  This ground stated that the court has only considered “procedural efficiency” in the Order 14 application without considering other factors like: (a) avoiding inconsistent finding of the core issue (i.e. the lawfulness of the Head Tenancy); (b) proceeding to a full trial for core issues to be determined by witness evidence; (c) avoiding irreparable damages caused to the defendants.

43.  However, the alleged Head Tenant, MWC, the plaintiff in the High Court case, has ample opportunity to put in his Affirmation. Indeed, the court has taken his evidence to the highest and the application of law was based upon this exercise. As such, I cannot see how the fact that there is another on-going action should, by itself, be a ground to be considered under an Order 14 application here.

Plaintiff’s lease unable to be registered in the Land Registry

44.  This ground does not appear in the Notice of Appeal nor canvassed in the Defendants’ submissions. It was only raised in the 3^rd Affirmation of Liu Kin Kwan Gary which submitted that, according to the Land Search Record on 2 July 2024, “registration withheld” was shown against the plaintiff’s lease and “it is highly possible that the lease is invalid and/or illegal” and thus “one of the reasons why the case should go to trial”.

45.  I agree with Mr. Chong, counsel of the plaintiff, that the validity of an instrument depends on the law and not the registration at the Land Registry. Registration may only affect its priority.

46.  In any case, I am satisfied that this withholding of registration has now been resolved in favour of the plaintiff and that the plaintiff’s lease is now registered according to the latest Land Search.

47.  In conclusion, this summons should also be dismissed.

Order

48.  I would therefore order that the Summons to adduce further evidence and the Summons for leave to appeal should both be dismissed with costs to the plaintiff to be taxed if not agreed with certificate granted for one counsel.

49.  The plaintiff shall lodge and serve a summary bill of costs with 21 days of this order and the defendants shall lodge and serve a summary list of objections 21 days thereafter. Costs will be assessed summarily by way of paper disposal.

Mr K M Chong and Mr Alvin Chong, instructed by Messrs Samuel Chow Solicitors, for the plaintiff

Ms Lorinda Lau and Mr Alvin Cheng, instructed by Messrs Peter Mo & Co., for the defendants

DCCJ 3616/2023

[2024] HKDC 352

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3616 OF 2023

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DECISION

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1.  There are three Summons before the court: two related applications under Order 14 taken out by the plaintiff on 26 September 2023 (P’s 1^st Summons”) and 23 November 2023 (“P’s 2^nd Summons”) and an interlocutory injunction application taken out by the defendants on 26 September 2023 (Ds’ Summons).

2.  The plaintiff discovered a clerical error in the Statement of Claim (regarding the lot number, the correct number being D.D. 99 Lot 764RP, “the Lot”)) subsequent to P’s 1^st Summons, so P’s 2^nd Summons was taken out after the Amended Statement of Claim to reflect the amendment. The substance of the application has not changed so the court is essentially dealing with the same application by the plaintiff seeking judgment be entered for possession of that part of the Lot occupied by the defendants as identified in the Amended Statement of Claim (“the Premises”).

3.  D’s Summons is essentially for an injunction to restrain the plaintiff from interfering with reasonable and lawful enjoyment of the Premises etc.

4.  The plaintiff is the tenant of the Lot granted by the registered owner of the Lot on 23 June 2023 (the “2023 Tenancy”) and sought exclusive possession of the Premises which it alleged had been unlawfully occupied by the defendants.

5.  The defendants ran a workshop on the Premises and claimed that they were the sub-tenant of another claimed tenant of the Lot, namely a Mr. Man Whi Chung (“MWC”) and / or a company called Fortune Nine (Hong Kong) Limited (“Fortune”). MWC is the director and shareholder of Fortune.

6.  The parties’ summons are related and if the court accedes to P’s 2^nd Summons, there would be no need to deal with D’s Summons. Therefore, the court shall deal with the former first.

Background

7.  There is no dispute that the Lot was registered in the name of the “Man Shui Tong Wui”, a business t’ong (“the Wui”) since the date of of the Block Crown Lease.

8.  In 1986, the Wui granted a tenancy to 4 tenants (the “1986 Tenancy”), one of whom was a Mr. Man Ching Ip (“MCI”), the father of MWC. As above, MWC is the director and shareholder of Fortune.

9.  According to Clause (1) of the 1986 Tenancy (Hearing Bundle page 216), the term of lease was for 10 years until the 30^th day of the first month of the lunar calendar in 1996.

10.  Clause (7) of the 1986 Tenancy provided (as I translate):

“…at the end of the lease period if party A (i.e. the Wui) still does not require the lot for development, then party B (i.e. the 4 tenants) will have priority to extend the lease but the rental sum will be subject to separate negotiation…”

11.  The 1986 Tenancy expired by effluxion of time around February 1996.

12.  However, MCI passed away in 1994 before the expiry of the 1986 Tenancy. MWC (as the administrator of the estate of) and / or Fortune had apparently taken over as the claimed tenant. There is no dispute that MWC and / or Fortune have been in occupation of the Lot since then.

13.  The crux of the dispute concerns this “head tenancy”: i.e. whether MWC had exercised the rights of renewal of the 1986 Tenancy after it expired in 1996 and to what extent in law the tenancy might be renewed under the circumstances as claimed.

14.  MWC, in his affirmation, claimed that the 1986 Tenancy was novated in 1988 to account for the change of use from fish pond to container storage and this “novated” tenancy had been extended on the same terms (except rent) in March 1996.

15.  The events surrounding the claimed renewal of such tenancy, according to the Affirmation of MWC (paragraphs 17 - 19, Hearing Bundle page 92-93), were as follows:

a.  the registered managers of the Wui, Mr. Man Ping Nam and Mr. Man Tai Shan (collectively, “the Managers”) orally agreed to renew the tenancy agreement in mid-January 1996;

b.  the Managers then went back on their words and refused to grant the tenancy in March 1996. But due to the “protest of the members of the Wui”, the Managers “acceded to the wishes of the majority of the members” so that MWC continued to be the tenant of the Lot paying an annual rent of HK$3M.

c.  MWC paid this rent to the members of the Wui according to the share of entitlements of each member instead of paying directly to the Wui. MWC claimed that this way of distribution was approved by the Managers.

16.  The Managers (paragraph 3(a) of their Affirmation, Hearing Bundle page 41) denied that there has been any tenancy agreement between the Wui and MWC and / or Fortune at all times. They also denied any “oral agreement” to extend the 1986 Tenancy in mid-January 1996 nor any such “acceding to the wishes of the members” in March 1996 (paragraph 21 of their 2^nd Affirmation, Hearing Bundle page 105).

17.  It is of note that a contemporaneous document in form of a letter from MWC’s solicitors to the Wui’s solicitors dated 19 June 1996 (which MWC himself produced as exhibit “MWC-3” in his affirmation, Hearing bundle page 320) stated:

“Our clients were quite disappointed that we have not received any reply from your client regarding our clients’ proposal to renew the tenancy…

We have been instructed by our clients that they have great concerns regarding the following…

…The tenancy was expired on March 18, 1996, please advise us as to how the tenancy can be renew…”

18.  As such, this letter, written in June 1996, directly contradicts MWC’s own evidence that there was an agreement to renew or extend the 1986 Tenancy in January or March 1996.

19.  The Managers also denied that MWC and / or Fortune had paid any rent to the Wui. It would seem that the evidence from MWC did not dispute this because he claimed to have paid the annual rent directly to the members (as stated in his affirmation as above). However, the defendants’ counsel, Mr. Cheng stated in his submission that MWC has paid rent to the Wui (paragraph 11(6), P.4 of his skeleton submission).

20.  This slight confusion is perhaps not very relevant to the current case. What is not in dispute is that there was no further written tenancy agreement entered by the parties (paragraph 11(5), Page 4 of Mr. Cheng’s skeleton submission) and that MWC and / or Fortune had been in occupation of the Lots since 1996.

21.  As stated above, the defendants’ case was that they have been the “sub-tenants” of the Premises since 2004 under a sub-tenancy granted by Fortune. Since then, the defendants have been paying rent to Fortune.

22.  On 23 June 2023, the Wui granted the 2023 Tenancy to the plaintiff for a term of 3 years and 2 months with option to renew. The 2023 Tenancy has been registered with the Land Registry.

23.  On 30 June 2023, the Wui gave notice to all occupiers of all its lands and asserted that the occupations were unauthorised, thus the plaintiff commenced the present proceedings to recover the Lot.

Legal Principle

24.  The legal principle for granting a summary judgment is trite: the defendant must show that there are triable issues and that there is “fair probability or reasonable grounds” that “a real or bona fides defence” existed with “credible assertions” in the defence and not “a mere sham”, “frivolous and practically moonshine”. However, whilst the court may assess the credibility of assertions against contemporaneous documents, the court must not embark on a mini trial on affidavits.

Considerations

25.  The defendants’ defence is only based upon that the assertion they were sub-tenants by virtue of a tenancy agreement with Fortune and, as such, they were lawful sub-tenants of Fortune’s predecessor. Thus, the defence is based entirely upon the lawfulness of the head tenancy of MWC and/or Fortune.

26.  Firstly, as stated above, the evidence from contemporaneous document clearly contradicts the defendants’ case that MWC has renewed the 1986 Tenancy (as novated in 1988) in March 1996

27.  Secondly, even if the court ignores this contradiction and accepts MWC’s evidence in its entirely, there is no dispute that this “renewed” or “extended” tenancy is a 10 year lease not in writing.

28.  As a matter of law, all lease of land for a term exceeding 3 years must be made by deed otherwise they are void for the purpose of creating interest in land (para. 235.073, Halsbury‘s Law of Hong Kong, 2^nd ed, Vol.36)

29.  As such, this claimed “renewed” tenancy was only an “interest at will” determinable at any time despite consideration having been given. (Chan Yeuk Mui v. Ng Shu Chi [1999] 3 HKC 702, CA, the judgment of Rogers JA at 708A-G)

30.  Therefore, even on the defendants’ case, this tenancy at will would have ended:

a.  upon expiry of 1 year from its creation, i.e. around March 1997 (para. 6.09, Butterworths Hong Kong Conveyancing and Property Law Handbook, 2020 ed.); and / or

b.  the landowner doing any act inconsistent with continuation of his relation with the tenant-at-will, i.e. when the Wui granted the 2023 Tenancy to the plaintiff on 23 June 2023 (Jarman v. Hale [1899] 1 QB 994. Granting tenancy to another party was, of course, a clear act of discontinuation of relation with any claimed tenancy at will.

31.  Indeed, any claimed “renewed” tenancy in 1996 on the same term (i.e. on a 10 year lease) as the 1986 Tenancy even if it was made in form of a deed (which it was not) would have expired in 2006.

32.  Nemo dat quod non habet is a well-established land law: “no person gives what he or she does not possess. A person cannot assign a greater interest than the interest he possesses” (Farquharson Bros & Co v. C King & Co. [1902] AC 325)

33.  As such, even taking the defendants’ case to the highest, they cannot be lawful sub-tenants of the Wui on 22 August 2023 (the date of commencement of this action) because any tenancy relationship between MWC (and / or Fortune) and the Wui has been determined before that date in all circumstances.

34.  Mr. Cheng did not raise any dispute in law but argued that there were triable issues regarding factual disputes, for example, whether the running of the Wui have followed proper customs regarding the granting of the “renewed” tenancy, whether the rents were paid to the members or the Wui etc.

35.  I think these arguments in facts are irrelevant because, as stated above, I have made the assumption that all factual disputes are settled in favour of the defendants.

36.  Mr. Cheng also challenged the validity of the 2023 Tenancy. He suggested that the Managers could not properly grant a tenancy without some custom procedures e.g. holding a meeting of the members of the Wui etc.

37.  I note that the 2023 Tenancy was signed by the Managers (Hearing Bundle page 219). There is no dispute that the Managers were the registered managers of the Wui or that the document was forged. It is trite that only the registered managers have power to grant a tenancy and the decision of members is irrelevant:

“Under the NTO regime, the power to deal with Tso property is conferred solely on the managers and no one else, and that they shall act unanimously…” (Ng Chung Ying, Dayas v. Tang Man Kit & Anr. HCMP 1439/2021)

38.  Mr. Cheng also mentioned a possibility of an adverse possession action but I cannot see any basis for that: even on MWC‘s evidence, he has been paying rents to the members of the Hui all these years which is prima facie against any assertion that he has any intention to possess.

39.  Finally, Mr. Cheng also submit that there were other on-going actions related to the head tenancy in the High Court and thus this court should not make any decision but perhaps wait for this action to be consolidated.

40.  Whilst I agree that procedural efficiency is a consideration for case management, this should not override the underlying policy of a summary judgment: that a defendant should not delay the plaintiff obtaining judgment by raising a non-meritorious defence.

41.  The court must therefore consider what is raised in this action: the fact that various actions have been commenced in other courts on similar matters does not mean that the defendants in this action have a meritorious defence.

Conclusion

42.  In conclusion, I am not satisfied that there are triable issues in the action. I would therefore grant summary judgment to the plaintiff.

43.  Given this finding, I also see “no serious question to trial” to support the defendants’ application for an interlocutory injunction. I will accordingly dismiss Ds’ Summons.

Order

44.  I will give the following orders:

a.  Ds’ Summons be dismissed;

b.  The plaintiff be granted an Order for Possession for the Premises against the defendants;

c.  The plaintiff be granted interlocutory judgment for trespass against the defendants for damages to be assessed by a Master in Chambers; and

d.  The cost of the action, inclusive of Ds’ Summons and P’s 2^nd Summons, be to the plaintiff to be taxed if not agreed, with certificate for counsel.

Mr Chong Kai Man, instructed by Messrs Samuel Chow Solicitors, for the plaintiff

Mr Alvin Cheng, instructed by Messrs Peter Mo & Co., for the defendants