TSE SHUI YING, THE SOLE ADMINISTRATRIX OF THE ESTATE OF NG KA MUK, DECEASED v. NG CHOI FAR

DCCJ 4862/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4862 OF 2013

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DECISION

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1.  An interesting point of law arises in connection withthe plaintiff’s present application pursuant to Order 14 and 14A of the Rules of the District Court, namely, whether a tenancy for life, which is a form of freehold estate, can be created in Hong Kong where only leasehold estate exists (except St John’s Cathedral).

2.  The plaintiff, in her capacity as the sole administratrix of the estate of the late Ng Ka Muk (“Deceased”), is the registered owner of the premises situated at Ground Floor (Flat A), No. 32 Li Po Lung Path, Hong Kong (“Premises”).  The defendant is the daughter of the plaintiff and the Deceased. 

3.  On or about 27 July 2009, the defendant purportedly entered into a tenancy agreement (“Purported Tenancy Agreement”) with the Deceased in respect of the Premises, which provided for the tenancy to run from 1 August 2009 “until the date of resumption (of the Premises)”.[1] In her affirmation in opposition to the present application, the defendant says the agreement between her and the Deceased was that the tenancy should run until resumption either by private developers or by the Government under compulsory sale for redevelopment.[2]  It is not in dispute that up until now no resumption of the Premises, whether by the Government or private developers, has taken place.

4.  The Deceased passed away on 25 March 2011.  On 9 February 2012, the plaintiff, in her capacity as the sole administratrix of the Deceased’s estate, became the registered owner of the Premises.  On 11 October 2012, the plaintiff sought to recover vacant possession of the Premises by serving on the defendant a notice to quit (“Notice to Quit”).  The defendant has refused to comply, hence the present action.

5.  The plaintiff seeks summary judgment against the defendant for vacant possession of and mesne profits in respect of the Premises; and in the alternative, determination of the following questions of law:

(a) Whether the Purported Tenancy Agreement is void for uncertainty of term;

(b) Alternatively, whether the Purported Tenancy Agreement constitutes a monthly tenancy which is determinable by one month’s notice; and

(c) Whether the plaintiff is entitled to vacant possession of the Premises upon serving the Notice to Quit on the defendant.

Legal Principles

6.  The principles applicable to applications for summary judgment are clear.  To resist an Order 14 application, the defendant must show that there are triable issues.  A concise statement of the standard approach in an application for summary judgment is to be found in the dicta of Ma J (as the Chief Justice then was) in Schindler Lifts (Hong Kong) Ltd. v. Ocean Joy Investments Ltd [2003] 1 HKC 438.  The court has to determine two questions: firstly, whether what the defendant says is believable as opposed to whether its version of events is to be believed; and secondly, if it is, whether what the defendant says amounts to an arguable defence in law. In determining the first question, the court should not embark on a mini trial of the action on affidavit evidence.  The burden of proof is not a heavy one.  It is not the function of the court at this stage to assess if a defence will succeed at trial.  Insofar as the second question is concerned, summary judgment will not be granted if there are arguable defences or serious disputes of law. Further, it is for the defendant to condescend on the particulars of the defences raised.  Per HH Judge Mimmie Chan (as she then was) in Ever Bright (H.K.) Construction Engineering Limited v Kosasih Muanto (DCCJ 1402/2010), unreported, 13 January 2011 at §6.  See also Hong Kong Civil Procedure 2014, Vol.1, §§14/4/9 and 14/4/12.

7.  On whether a question should be determined under Order 14A, Recorder Ma, SC (as the Chief Justice then was) in Rockwin Enterprises Ltd v Shui Yee Ltd & Ors [2003] 3 HKC 174 at §§17-27 explained the court’s approach in the following terms:

“ 18. Once seized of an application under Order 14A, the court’s approach is essentially a three‑step approach :

(1) Is the relevant question one of law or of the construction of a document?

(2) If so, is that question one that should be determined under the Order 14A procedure?

(3) If the answer to (2) is “yes”, what is the determination of that question and what orders should the court make as a consequence of determining that question?

…

20. Step (2) requires the court to be satisfied of the following:

(a) That the question of law or construction is one that is suitable for determination without a trial. In other words, the court has all the necessary facts and matters before it in order to determine the question of law or construction.

(b) That if so suitable and should it be determined by the court, that it will finally determine (subject to a possible appeal) the entire cause or matter or any issue or claim therein.

(c) Even if the above two conditions are fulfilled, that the court in its discretion is satisfied that the question is one that ought to be determined under Order 14A.

21. It is clear that the court has a residual discretion whether or not to embark on a determination of a question under Order 14A even where the first two requirements (set out in paragraphs 20(a) and (b) above) are fulfilled. This is clear from the word “may” in Order 14A, rule 1(1) and from the authorities.”

8.  It is the plaintiff’s case that the defendant has no defence to these proceedings because (a) the Purported Tenancy Agreement is void for uncertainty of term; (b) the defendant only held a monthly tenancy which is determinable by one month’s notice; and (c) the plaintiff, having duly terminated the Purported Tenancy Agreement by serving the Notice to Quit, is entitled to vacant possession of the Premises.

9.  In support of the argument that the Purported Tenancy Agreement is void for uncertainty of term, Miss Kay Seto, Counsel for the plaintiff, relied on the well established case law that all leases must be for a definite period so that a purported tenancy “for the duration of the war” in Lace v Chantler [1944] KB 368, a purported tenancy continuing “until the…land is required by the council for the purposes of the widening of” a certain highway in Prudential Assurance Co Ltd v London Residuary Body and Ors [1992] 2 AC 386, and a purported tenancy continuing until “resumption of land by the Government” in Li Ting Iu Tso with Li Fong Chun, as a Manager and Ors v Law See Chun (HCA 7691/1996), unrep., 20 March 2001, To J, were all held to be void because the term could not be ascertained at the date of commencement of tenancy. 

10.  The present case, Miss Seto submitted, falls squarely within Prudential and Li Ting Iu Tse, supra, and the lease purportedly created under the Purported Tenancy Agreement must be void as the date of any relevant “resumption of land” could not have been ascertained by the parties to the agreement at the time of commencement of tenancy.  By virtue of possession and payment of a monthly rent under the void lease, the defendant would become a monthly tenant of the Premises, and such monthly tenancy is determinable by either party giving one month’s notice and the plaintiff did terminate the same by serving the Notice to Quit. 

11.  In her affirmation in opposition to the plaintiff’s application, the defendant raises, inter alia, the defence that the Purported Tenancy Agreement should be construed as a tenancy for her life subject to the Deceased’s right to terminate the same in the event of acquisition by developers or the Government and upon giving one month’s notice to her.

12.  In arguing for the defendant, Mr. Douglas Lam, with whom Miss Sabrina Ho appeared, relied heavily on the recent judgment of the English Supreme Court in Berrisford v Mexfield Housing Co-operative Ltd [2011] UKSC 52 where the tenancy agreement commenced “from 13 December 1993 and thereafter from month to month until determined as provided in the Agreement” and clauses 5 and 6 thereof set out the means by which the parties could terminate the tenancy.  In upholding the arrangement between the parties, the English Supreme Court held that while the tenancy could not take effect according to its terms as its duration was uncertain at its inception, the tenancy being in writing (and the tenant being an individual as opposed to a corporation) would be treated in common law prior to the enactment of the Law of Property Act 1925 as a tenancy for the life of the tenant, determinable before her death pursuant to the term of the tenancy.  After the Law of Property Act 1925 came into force, the tenancy would be treated as one for a term of 90 years determinable after the tenant’s death by one month’s notice by virtue of section 149(6) of the same Act (which has no equivalent in Hong Kong).  See paragraphs 39 to 42 of the judgment of Lord Neuberger for his exposition of the law.  As the learned law lord explained at paragraph 50 of the judgment, one of the reasons the common law treated uncertain terms as tenancies for lives was to save arrangements which would otherwise be invalidated for technical reasons. 

13.  It should be noted that, while acknowledging that the certainty requirement as affirmed in Prudential, supra, remains good law, the English Supreme Court expressed disquiet about the state of the law (as Lord Browne-Wilkinson did in Prudential).  At paragraph 34 of the judgment, Lord Neuberger said:

“ …the law is not in a satisfactory state. There is no apparent practical justification for holding that an agreement for a term of uncertain duration cannot give rise to a tenancy, or that a fetter of uncertain duration on the right to serve a notice to quit is invalid. There is therefore much to be said for changing the law, and overruling what may be called the certainty requirement, which was affirmed in Prudential…on the ground that, in so far as it had any practical justification, that justification has long since gone, and, in so far as it based on principle, the principle is not fundamental enough for the Supreme Court to be bound by it…”

14.  Mr. Lam drew this court’s attention to the decision of the Lands Tribunal in Lam Yuk Kwong (林旭光) v Lau Kit Fai (劉潔暉) (LDPD 421/2013), unrep., 8 May 2013 where Deputy Member Kwok followed Berrisford v Mexfield, supra and found a tenancy for life to have been created by the former landlord and the defendant by entering into a tenancy for “N years from 1 January 2008 until demolition for redevelopment”.[3]

15.  A tenancy for life, Miss Seto submitted, suffers from lack of certainty of duration and is therefore void.  Here, even if the Purported Tenancy Agreement purported to grant a tenancy for life to the defendant subject to the Deceased’s right to terminate by giving one month’s notice in the event of acquisition by developers or the Government, it is still void because the timing of the event of acquisition was uncertain at the commencement of the tenancy.  Reference was made to the following passage in Goo and Lee, Land Law in Hong Kong, 3^rd Ed. at p 383:

“ Leases for life or until marriage all suffer from lack of certainty of duration, and are generally void. Furthermore, in Hong Kong, a lease for life cannot be created by a Government lessee as it can only be created out of a freehold interest which the Government lessee does not possess.”

16.  Miss Seto pointed out that (i) a tenancy for life amounts to a freehold estate (as opposed to a leasehold estate) at common law:  Berrisford v Mexfield, supra, at §36 per Lord Neuberger and at §116 per Lord Dyson; and (ii) a freehold estate cannot be created out of a leasehold estate: Megarry and Wade, The Law of Real Property, 8^th ed at §3-016. Here, the Deceased was only a Government lessee in respect of the Premises and was therefore incapable of creating or conferring a tenancy for life, which is a freehold estate the Deceased himself did not possess. 

17.  Miss Seto went on to distinguish Berrisford v Mexfield, supra, both on the facts (in terms of the fetter on the landlord’s right to terminate the lease) and as a matter of law (there being in Hong Kong no equivalent of section 149(6) of the Law of Property Act 1925 which converts a pre-1925 life tenancy into a 90-year lease), and submit that the certainty requirement as affirmed in Prudential, supra, remains good law and is a binding authority in Hong Kong.  She urged this court not to follow Lam Yuk Kwong, supra.

18.  Mr. Lam accepted that there is no freehold estate in Hong Kong and that no freehold estate can be created out of a leasehold estate.  He nonetheless submitted that it did not mean any attempt to create a freehold interest out of a freehold interest must necessarily be void when the same could be treated as an assignment of the entire leasehold interest to the grantee.  In this connection, Mr. Lam referred to Megarry and Wade, op cit, at §3-016 where the learned author refers to the case of Woodcock v Woodcock (1600) Cro. Eliz. 795 as the authority for saying that an attempt to create a tenancy for life out of a leasehold interest, ineffective at common law, would serve merely to give the whole lease to the grantee outright.  

19.  Mr. Lam observed that, other than the passage in Goo and Lee, op cit, there is no case authority to support the saying that there can be no life tenancy in Hong Kong or that no life tenancy can be created by a Government lessee.  He further observed that a claim for life tenancy featured in Parkmost Ltd v Wong Yeung On (黃養安), the Personal Representative of (黃哲聰), Deceased and Ors (HCA 1193/2006), unrep., 16 January 2008 at §36 and the court did not say there could be no life tenancy in Hong Kong.  Nor did the Court of Appeal say so when the matter went on appeal (CACV 53/2008 & CACV 383/3008, 18 February 2010, at §21).  In conclusion, Mr. Lam submitted that the question of law before this court was not a straight forward one.

20.  The legal issue in dispute thus falls in a narrow compass, that is, whether, given the peculiar land holding system in Hong Kong, there can nonetheless be a tenancy for life.

21.  Miss Seto submitted that the common law rule that uncertain terms were treated as life tenancies had no place in Hong Kong where a life tenancy, being a freehold estate, cannot be created by Government lessees.  Neither is there any equivalent statutory provision in Hong Kong to convert a life tenancy into a fixed term as section 149(6) of the Law of Property Act 1925 does. 

22.  Seemingly, what was available to the law lords in Berrisford v Mexfield, supra, to save arrangements from being invalidated for technical reasons is not deployable in Hong Kong.  Mr. Lam observed that the English decision did not draw a distinction between freehold and leasehold estates.  I am inclined to agree with Miss Seto that the law lords there did have the distinction in mind.  At paragraph 43 of his judgment, while dismissing an argument in reliance on Kusel v Watson (1879) 11 Ch D 129 that a tenancy for an uncertain term could not give rise to a life tenancy unless it was the parties’ intention to do so, Lord Neuberger commented that Kusel v Watson was of limited value as the agreement there could not have been created a tenancy for life as it was created by a lessee.

23.  However, a ruling that the ratio in Berrisford v Mexfield, supra, has no application in Hong Kong does not necessarily provide a definitive answer to Mr. Lam’s question as to whether any attempt to create a freehold interest out of a leasehold interest must necessarily be void.  It is of note that, having expressed misgivings about the state of the law, the English Supreme Court did not have to get rid of the certainty rule in the case at hand. Thanks to the scholarly research of Ms Berrisford’s counsel which availed the court of a way out of the predicament that the court would otherwise have to face, the English Supreme Court did not have to cast aside a fundamental tenet of the law of landlord and tenant in order to save the arrangement between Ms Berrisford and Mexfield.  Even so, Lord Dyson was not entirely happy with the result as he said:

“ 119. This is a just result which plainly accords with the intention of the parties. But it may legitimately be said that it is not satisfactory in the 21^st century to have to adopt this chain of reasoning in order to arrive at such a result. It is highly technical. There should be no need to have to resort to such reasoning in order to arrive at the result which the parties intended. That is why the radical solution of doing away with the uncertainty rule altogether is so attractive. ..”

24.  It should also be noted that Lord Neuberger expressed a strong inclination to find in Ms Berrisford’s favour on an alternative basis, namely, that if the arrangement did not create a tenancy, it nonetheless gave rise to a binding personal contract between the parties personally, albeit not capable of binding their respective successors, as no interest in land or other proprietary interest would subsist.  Lord Neuberger’s sentiment was shared by three other law lords.  

25.  This marks a very different approach to the one adopted in previous cases regarding the effect and validity of the contract itself.  In Lace, supra,Lord Greene MR had held that where an agreement attempted to create a lease but failed, it was impossible to give the agreement validity as a contractual licence between the parties themselves.  Lord Neuberger said:

“ 60. If the agreement is incapable of giving rise to a tenancy for some old and technical rule of property law, I do not see why, as a matter of principle, that should render the agreement invalid as a matter of contract…”

26.  Mr. Lam rhetorically asked: why should life tenancies be rendered void for technical reasons in Hong Kong but not in the United Kingdom?  To this question, this court as yet has no answer, not at least without mature consideration.

27.  As Sakhrani J said in Citic Ka Wah Bank Ltd v Lau Kam Luen [2008] 2 HKLRD, citing Rogers VP’s judgment in Re Lam Lam, ex p Bank of China (HK) Ltd (CACV 396/2002), unreported, 4 April 2003, House of Lords points should be left to mature consideration at trial.  In the instant case, the intended defence put forth by the defendant cannot be brushed aside as simply unarguable.

28.  Notwithstanding the able argument of Miss Seto, I have to decline her invitation to enter judgment summarily against the defendant.  For the same reason, I am not satisfied that the question before me is one that ought to be determined under Order 14A, RDC.

29.  I grant unconditional leave to the defendant to defend the plaintiff’s claim.  The defendant is directed to file a defence (and counterclaim, if any) within 28 days from the date hereof.  The plaintiff do file a reply (and defence to counterclaim, if any) within 28 days thereafter.  There be a cost order nisi that the costs of the present application be in the cause with a certificate for one counsel.

30.  I thank Counsel for their assistance.