LEUNG WAI IP v. CHAN MING FAI

DCCJ 677/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 677 OF 2014

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DECISION

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Introduction

1.  This is the defendant’s summons to seek leave to appeal against the judgment I made on 9 May 2016 (the “Judgment”).

2.  The test to grant leave to appeal is well known:  leave should not be granted unless the appeal has a reasonable prospect of success; or there is some other reason in the interests of justice why the appeal should be heard[1].

3.  Reasonable prospect of success means the prospect of succeeding in the appeal must be “reasonable” and therefore more than “not fanciful”, without having to be “probable”[2].

The Defendant’s Arguments[3]

4.  The defendant pleads several defence and counterclaim in his Amended Defence and Counterclaim, which include constructive trust, resulting trust, promissory estoppel and adverse possession; now he only intends to appeal on the issue of adverse possession.

5.  The defendant does not seek to challenge any factual findings.

6.  The defendant’s arguments hinge on the ground that there was in law an oral monthly periodic tenancy created between the plaintiff and the defendant.  It follows that the defendant’s possession of the Property[4] ought to be regarded at law (by statute) as adverse upon non-payment of rent pursuant to S.12 (2) of the Limitation Ordinance, Cap.347 (the “LO”).

7.  Now the defendant argues that he was an overstaying tenant, whose intention to possess was strongly inferred or even presumed, the court should have found that adverse possession had been made out.

8.  I re-organize the defendant’s argument in the following three grounds:

a.   an oral monthly periodic tenancy was created between the plaintiff and the defendant;

b.   such oral monthly periodic tenancy needed not be pleaded; and

c.   by virtue of S.12 (2) LO, even the defendant did not plead the oral monthly periodic tenancy, the court still ought to have found the defendant had possessed the Property adversely.

9.  My quick response to the defendant’s argument is that the creation and existence of a tenancy agreement are mixed questions of fact and law, as nothing happens in vacuum. 

If An Oral Monthly Periodic Tenancy Had Been Created

10.  According to the Amended Statement of Claim, as the defendant’s elder brother, Mr Chan Ming Chun (“Mr Chan”) once mentioned and assured to the plaintiff in words of the effect that “我細佬同你供樓當係交租畀你”; and “有咩事我搞掂，我一力擔承，趕阿輝 (i.e. the defendant) 走”, then the plaintiff allowed the defendant to remain at the Property temporarily, subject to, inter alia, that the plaintiff have full right to demand the defendant to leave the Property at any time (§§3(3) – (5) of the Amended Statement of Claim) [HB 13-14] [5].

11.  I found the above as a fact.

12.  On the other hand, the defendant pleaded in §§8 – 10 of the Amended Defence and Counterclaim that [HB25-26]:

“8.   In about 1991, through the introduction of Mr Chan, the Plaintiff orally promised (“the Promise”) to sell the Property to the Defendant for a notional consideration of HK$400,000 payable by way of the Defendant’s settling the outstanding insalments of interest  and capital under the Mortgage.  It is common understanding of the parties that the Defendant is to be responsible for the payment of premium to The Hong Kong Housing Authority where necessary upon request.

...

10.   In pursuance of the Promise, in about July 1991, the plaintiff gave the defendant:

(a)     keys to the Propety;

...

(d)      vacant possession of the Property.”  (with emphasis added)

13.  In §§16(c)(xix) of the Amended Defence and Counterclaim [HB33], the defendant pleaded :

“the licence[6] is illegal or unlawful in contravention of the relevant provisions of the Housing Ordinance (Cap.283), including Sections 17B and 27A thereof and the Schedule thereto, and hence void and of no legal effect”

14.  As shown, the Amended Defence and Counterclaim directly contradicts the defendant’s submission that the permission (the Promise) granted in 1991 was clearly a tenancy with exclusive possession.

15.  I reject the defendant’s argument in this aspect.

Should The Oral Monthly Periodic Tenancy Be Pleaded

16.  The defendant argues that the oral monthly periodic tenancy is not required to be pleaded.  I disagree.

17.  In Kwok Chin Wing v 21 Holdings Ltd & Anor (2013) 16 HKCFAR 663 at §§21 – 23, Ma CJ makes salutary remarks on the importance of proper pleadings that:

“21. It should by now really be quite unnecessary to issue yet another reminder on the rationale behind pleadings. The basic objective is fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party's case) so that proper preparation is made possible, and to ensure that time and effort are not expended unnecessarily on other issues: Wing Hang Bank Ltd v Crystal Jet International Ltd. It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced. As the Court of Appeal remarked in Wing Hang Bank Ltd v Crystal Jet International Ltd:

“(2) In a trial, particularly where evidence is given by witnesses, it becomes extremely important that each side knows exactly what are the live issues. Where issues are sought to be introduced that have not been adequately or properly pleaded, amendments must be sought unless the consent of the other party or parties has been obtained. It will simply not do for unpleaded issues to be “slipped in” when evidence is being given in the hope that the other side is not sufficiently alert to object.”

22.    In the present case, much reliance was placed on the Plaintiff's testimony given in cross-examination to evidence the assertion made before us to the effect that the Rockapetta Group companies accepted a joint and several liability in respect of the Plaintiff's loans.  It is simply not permissible for an issue to be raised in this way: one does not sift through the evidence adduced in a trial in the hope that something was said that can conceivably found a cause of action. Issues, I would reiterate, must be properly pleaded unless for some reason the pleadings have assumed a less significant role in the proceedings. I would perhaps also observe here that in any event the said passage from the Plaintiff's testimony at best indicates only a subjective intention on his part. This is not admissible to establish the terms (or even the existence) of an agreement.

23.    The purpose of pleadings, in clearly and unambiguously setting out the true extent and nature of a dispute not just for the benefit of the parties but also for the Court in managing and trying cases, remains important under our system of civil justice. The retention of the old rules as to pleading as well as the introduction of new provisions over four years ago under the Civil Justice Reform, reinforce this.”

18.  Further, pursuant to O.18, r.8 of the Rules of the District Court, a defendant to an action for recovery of land must plead specifically every ground of defence on which he relies:

“Matters which must be specifically pleaded (O.18, r.8)

8. (1) A party must in any pleading subsequent to a statement of clam plead specifically any matter, for example, performance, release, any relevant statute of limitation, fraud or any fact showing illegality –

(a) which he alleges makes any claim or defence of the opposite party not maintainable; or

(b) which, if not specifically pleaded, might take the opposite by surprise; or

(c) which raises issues of fact not arising out of the preceding pleading.

(2) Without prejudice to paragraph (1), a defendant to an action for recovery of land must plead specifically every ground of defence on which he relies, and a plea that he is in possession of the land by himself or his tenant is not sufficient...” (with emphasis added)

19.  In the defendant’s Amended Defence and Counterclaim, the defendant had never pleaded there was a tenancy agreement between the plaintiff and him; instead, the defendant pleaded other relationships that would exclude the existence of a tenancy agreement.

20.  Pursuant to §§8 and §§16(c) of the Amended Defence and Counterclaim [HB25 and 29-33], the defendant took the keys and the vacant possession of the Property because he agreed to purchase the Property, instead of being a tenant.

21.  On the other hand, the plaintiff had never admitted there was a tenancy agreement between the defendant and him.  Pursuant to §§3(8) of the Amended Statement of Claim [HB14-15]:

“In the premises, the Defendant was at all material times occupying the Property under a licence granted by the Plaintiff to him in the circumstances and on the terms as pleaded in paragraph 3(5) above ...”

22.  For the above reasons, I am in the view that if it was part of the defendant’s case that there was an oral monthly periodic tenancy, the defendant should plead it clearly; however, the defendant had never done so.  Further, the defendant’s case was some courses of action that excluded the tenancy relationship.

The Operation of S.12(2) of the Limitation Ordinance

23.  Pursuant to S.12(2) of the LO:

“(2) A tenancy from year to year or other period, without a lease in writing, shall, for the purposes of this Ordinance, be deemed to be determined at the expiration of the first year or other period, and accordingly the right of action of the person entitled to the land subject to the tenancy shall be deemed to have accrued at the date of such determination: ...”

24.  The defendant argues that by the operation of such section, the tenancy is deemed to be terminated 1 month after non-payment of rent (i.e. July 2001); the defendant’s possession is deemed to be adverse from the date of termination (i.e. July 2001).

25.  Such argument builds on the assumption that there was a tenancy agreement between the plaintiff and the defendant. However, it is not the case.

26.  I ruled that the plaintiff allowed the defendant to stay at the Property temporarily for an indefinite period and the plaintiff had full right to demand the defendant to leave at any time, upon demand.  In that case, only a license, instead of a tenancy, was created.

27.  A purported tenancy for an indefinite period is void for uncertainty and is, in law, to be treated as a licence only: see West Coast International (Parking) Ltd v Secretary for Justice, [2001] HKEC 1037 at §§37 – 39 where Deputy High Court Judge Muttrie referred to Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386 and held as follows:

37.   The Government also argues that a tenancy cannot be terminable on a contingency. It is a requirement of all leases and tenancy agreements that the term created is of certain duration. See Prudential Assurance Co. Ltd v. London Residuary Body [1992] 2 A.C. 386 (H.L.(E.)) at 395 G-H, per Lord Templeman:

"A grant for an uncertain term does not create a lease. A grant for an uncertain term which takes the form or a yearly tenancy which cannot be determined by the landlord does not create a lease."

38.   The plaintiff says that the position here is not the same. The tenancy would not be uncertain because it could still be terminated on three months' notice. The only difference is that the three months' period could only be relied on, once the Government had decided to build on the land.

39.   I do not think this can be right. Lord Templeman approved, at page 390J, a very old dictum by Anthony Brown J reported in Say v. Smith (1563) Plowd. 269:

"every contract sufficient to make a lease for years ought to have certainty in three limitations, viz. in the commencement of the term, in the continuance of it, and in the end of it; so that all these ought to be known at the commencement of a lease, and words in a lease, which don't make this appear, are but babble..." (with emphasis added)

28.  Hence, I reject the defendant’s argument.

Conclusion

29.  For the above reasons, I reject the defendant’s argument and application.

30.  Costs follow the event.  By summary assessment, I order that the defendant to pay HK$79,070 as costs of this hearing forthwith.  I also grant certificate for one counsel to the plaintiff.

31.  I thank the assistance of both counsels.