顏僑生作為已故顏炳的遺囑執行人 V. Estate of 陳發, Deceased

DCCJ 2985/2015

[2022] HKDC 99

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2985 OF 2015

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JUDGMENT

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A. INTRODUCTION

1.  This is the trial of the plaintiff’s claim for vacant possession of a hut (the “Hut”)on Peng Chau Lot No 359 (the “Lot”) and mesne profits, etc.

2.  The plaintiff is the son and executor of the estate of 顏炳, deceased (the “deceased landlord”), who passed away on 11 October 2007.

3.  The defendant is the “Estate of陳發, deceased” (the “deceased tenant”). The deceased tenant (ie 陳發) was the original defendant in this case. On 15 September 2021, Master B Mak ordered that this action shall proceed in the absence of a person representing the deceased tenant and granted leave to the plaintiff to amend the title of the defendant to “Estate of陳發, deceased”. This is due to the fact that the deceased tenant passed away on 12 September 2019 and no one was willing to represent his estate.

B. THE PARTIES’ RESPECTIVE CASES

B.1 The plaintiff’s case

4.  The plaintiff’s case is as follows.

5.  Although the deceased landlord was not the registered owner of the Lot, the deceased landlord built the Hut in the 1960s and was entitled to exclusive possession of the Hut before he leased the same to the deceased tenant.

6.  By a written tenancy agreement dated 1 March 1973 (the “TA”), the deceased landlord let the Hut to the deceased tenant for a term of 2 years commencing on 1 March 1973 and expiring on 28 February 1975 at the monthly rent of HK$180.00 (the “fixed term tenancy”).

7.  After the TA expired, the deceased tenant continued to pay rent to the deceased landlord on a monthly basis. Since the late 1980s, the rent was increased to HK$350.00 per month.

8.  In February 2008, there was a dispute between the parties in relation to whether a sum of HK$500.00, being renovation and repair expenses incurred by the deceased tenant, could be deducted from the rent. The plaintiff took the view that the expenses could not be deducted from the rent. Since then the deceased tenant has failed to pay any rent.

9.  As such, the last occasion in which the deceased tenant paid rent was in October 2007. The deceased landlord and/or the plaintiff had requested the deceased tenant to pay rent and/or to vacate the Hut and the Lot, but to no avail.

10.  On 2 July 2015, the plaintiff commenced this action claiming against the deceased tenant for vacant possession of the Hut and mesne profits etc.

11.  It is the plaintiff’s case that upon the expiration of the fixed term tenancy a monthly periodic tenancy was created between the deceased landlord and the deceased tenant (the “monthly periodic tenancy”) and that the monthly periodic tenancy was terminated as from 1 November 2007 by reason of the deceased tenant’s failure to pay rent since that day. The plaintiff’s alternative case is that the periodic tenancy was terminated by the issue of the Writ of Summons herein.

B.2 The defendant’s case

12.  The defendant admits:-

(1)  the TA and the fixed term tenancy;

(2)  that after the expiration of the fixed term tenancy, the deceased tenant continued to pay rent of HK$180.00 to the deceased landlord and that the rent was increased to HK$350.00 per month since the late 1980s; and

(3)  that the deceased tenant failed to pay any rent since November 2007.

13.  However, the defendant:-

(1)  denies the title of the deceased landlord and/or the plaintiff to the Hut and asserted that the deceased landlord and/or the plaintiff was not the owner thereof;

(2)  avers that in or about November 2008, after the deceased landlord passed away the Hut was returned to the Hong Kong Government and the tenancy was thereby terminated and since then the deceased tenant and his family including his son Chan Wah has been paying Government rent and rates to the Government; and

(3)  admits that the plaintiff is the executor of the estate of the deceased landlord (the “Estate”) but avers that the Estate does not include the Hut and therefore denies that the plaintiff is entitled to bring this action on behalf of the Estate.

C. MY FINDINGS

14.  At trial, only the plaintiff gave evidence. The defendant did not appear. The plaintiff adopted his witness statement dated 15 October 2018 as his evidence-in-chief. His evidence was not challenged by the defendant. I accept the plaintiff’s evidence in full, which is consistent with contemporaneous documents, and make the findings of fact set out in paras 5 to 9 above.

15.  I make the following additional findings and rulings.

16.  First, after the expiration of the fixed term tenancy, by virtue of the deceased tenant’s continued payment of rent initially at HK$180 per month which was later increased to HK$350 per month, a monthly periodic tenancy is inferred by conduct:-

(1)  Where a tenant holds over after the expiry of his lease, but pays or agrees to pay any subsequent rent, a periodic tenancy is inferred: Woodfall: Landlord and Tenant (2021) Vol 1 at §§6.040 & 6.053.

(2)  The main factor which determines what kind of periodic tenancy should be inferred, in the absence of agreement, is the period by reference to which the rent is calculated: Woodfall, at §6.054.

17.  Second, the deceased tenant is not permitted to deny the title of the deceased landlord and/or the plaintiff to the Hut:-

(1)  It is a general rule that the tenant’s lease is liable to forfeiture if he denies his landlord’s title. The principle is analogous to the repudiation of a contract. It arises by virtue of an implied condition in every lease that the leasee shall not do anything that may prejudice the title of the lessor: Woodfall, §17.302. A denial of title may arise in one of two ways: (a) by matter of record; or (b) by act in pais. In modern times, there is a denial of title by matter of record where the tenant denies his landlord’s title in a pleading served by him in the course of proceedings: Woodfall, at §§17-303 & 17-304.

(2)  In Tang Chi Ho v Leung Woon Ling [1996] 2 HKLR 58, the Court of Appeal (per Godfrey JA at 59F-G) said:-

“In addition, it is submitted on behalf of the tenant that the landlord himself has no interest in the property and therefore cannot accordingly institute any proceedings against the tenant. This assertion of a jus tertii is not open to the tenant. A tenant is not permitted to deny his landlord's title. If then the present landlord is the landlord of the tenant, this allegation that the landlord has himself no interest in the property would afford the tenant no defence.” [Emphasis original.]

(3)  See also: Malcolm Merry’s Hong Kong Tenancy Law, 6^th edition, 2016 at p 55 in which the learned author stated the principle as follows:-

“A tenant may not deny his landlord’s title. This means that if a landlord purports to grant a tenancy and puts the tenant into possession of the property when in fact the landlord had no title to do so, the tenant is prevented (or, to use the legal phrase, ‘estopped’) from saying that his lease was invalid because some third person has a better title than the landlord….”

(4)  In any event, in the Modification of Tenancy dated 27 July 1964, Permit No 1010 (the “Permit”), the “Owner’s Name” of the structure to be built on the Lot was that of the deceased landlord, ie, Ngan Ping.

18.  Third, by reason of the deceased tenant and/or the defendant’s denial of the title of the deceased landlord and/or the plaintiff to the Hut, a notice to quit is not necessary to terminate the periodic tenancy and the plaintiff is entitled to claim possession of the Hut at once:-

(1)  While at common law a notice to quit is necessary to terminate a periodic tenancy (see Woodfall at §§6.032 & 6.055; Merry at p 47), the effect of a denial of title is that the landlord is entitled to treat the lease as at an end, and in the case of a periodic tenancy he need not serve notice to quit: Woodfall, at §17.309. In Doe d Calvert v Frowd (1828) 4 Bing 557, Best CJ said: -

“ … if a defendant denies the tenancy, there can be no necessity for a notice to end that which he says has no existence”.

(2)  As the Court of Appeal also said in Tang Chi Ho v Leung Woon-ling (supra) (per Godfrey JA at 59H).

“ … a periodic tenant who denies his landlord’s title is treated as having waived his right to a notice to quit, entitling his landlord to claim possession at once …”

19.  Fourth, by reason of the deceased tenant’s failure to pay rent when demanded and the fact that the last payment of rent was in October 2007, the monthly periodic tenancy was terminated as from 1 November 2007, and the deceased tenant and/or the defendant has since that date been occupying the Hut as a trespasser. The plaintiff’s right to sue relates back to the time at which his right to enter accrued, and he is entitled to sue the deceased tenant and/or the defendant for damages for trespass as from 1 November 2007. As Collins MR said in Ocean Accident and Guarantee Corpn v Ilford Gas Co [1905] 2 KB 493 at 497-498: -

“… in an action of trespass the right to sue, as against the wrong-doer, relates back after entry to the time at which the right to enter accrued, so as to give a right of action for trespass intermediate in point of time between the date of the right to enter and that of the actual entry.”

20.  Fifth, there is no evidence whatsoever to support the deceased landlord’s case that the Hut was returned to the Government of Hong Kong in or about November 2008. Indeed, it is the plaintiff’s unchallenged evidence that the Permit was still effective.

21.  Finally, there is no merit in the defendant’s allegation that the plaintiff is not entitled to bring this action as the executor of the Estate because the Estate does not include the Hut. The Schedule of Assets and Liabilities of the deceased landlord annexed to the grant of probate of the Estate clearly included the rights and interest of the deceased landlord in the Hut.

22.  In the premises, I find that the plaintiff succeeds in his claims against the defendant.

23.  The plaintiff’s claim for mesne profits is a type of damages for trespass. As explained in Woodfall at §19.012:-

“If the tenant holds over after the termination of his tenancy, he is liable to pay mesne profits. The expression mesne profits is the name given to damages for trespass where the trespasser is a former tenant of the landowner. The liability to pay mesne profits arises even where the landlord has in fact suffered no loss (e.g. because he would not have relet or occupied the property during the period of the trespass). ‘The principle is that a trespasser shall not be allowed to make use of another person’s land without in some way compensating that other person for that user.’ The liability of a former tenant for mesne profits will cease when he gives up possession, rather than the time (if later) when he notifies the former landlord that he has done so.”

24.  I find the plaintiff’s claim that mesne profits should be the same rate of HK$350 per month from 1 November 2008 and thereafter to be reasonable and accept it as the appropriate rate, as the amount of mesne profits should be the ordinary letting value of the property in question: Swordheath Properties v Tabet [1979] 1 WLR 285; Attorney-General v Stephen Chiu Kwok Chun [1985] 1 HKC 199; Woodfall at §19.013.

D. THE PLAINTIFF’S CLAIM FOR PRE-JUGDMENT INTEREST ON MESNE PROFITS

25.  As for the plaintiff’s claim for pre-judgment interest on mesne profits, it appears that there are two lines of authorities in Hong Kong as to whether pre-judgment interest on mesne profits should as a matter of principle be awarded.

26.  The first line of authority holds that pre-judgment interest on mesne profits should not as a matter of principle be granted:-

(1)  In Persaud v Glenealy Mansion Limited [1987] 1 HKC 112, the Court of Appeal refused to award interest on mesne profits. In applying Whitwham v Westminster Brymbo Coal and Coke Company [1896] 1 Ch 894, Kempster JA observed (at p 127C) that “the award of interest [on mesne profits] could overcompensate the plaintiffs”. The passage in Whitwham which the Court of Appeal applied reads as follows: “… in regard to interest claimed, I think that all interest ought to be excluded from the computation of damages. To give interest would be to treat the plaintiffs as having invested their damages at interest in the hands of the defendants” (at p 899 per Chitty J). Cons VP added (at p 125D) that it is unusual for interest to be awarded on mesne profits.

(2)  Similarly, in Purton Investment Limited v Hui Ping Kam, HCA 4174/1989 (unrep, 5 January 1990), the Court also refused to award interest on mesne profits whether under s 48 of the then Supreme Court Ordinance (Cap 4) or the common law, on the basis that the nature of the claim was a claim for the wrongful occupant’s use and enjoyment of the land (see para 11).

(3)  Whitwham and Purton was followed in Million Add Development Ltd v Nok Wah Logistic (Hong Kong) Ltd [2018] 1 HKLRD 636 in which the Court observed that the fact that the plaintiff in that case does not claim any pre-judgment interest on mesne profits is “in line with the court’s well-established approach, as an award of interest on mesne profits would overcompensate the plaintiff” (see paras 83 and 84) but awarded post-judgment interest from the date of judgment until payment. Million Add Development was recently cited with approval in Cheung Soon Chung v The Occupant(s) of Lot No 452 in DD 87 & Anor (unrep, DCMP 2702/2017; [2022] HKDC 46) in which the Court observed (at para 71) that an award of pre-judgment interest would overcompensate the plaintiff but that the plaintiff is entitled to post-judgment interest as provided for in s 50 of the District Court Ordinance.

27.  As to the second line of authorities: -

(1)  In Shine Empire Limited v The Incorporated Owners of San Po Kwong Mansion & Ors, HCA 3444/2001 (unrep, 28 January 2011), the Court, after conducting a detailed survey of many of the authorities including Whitwham and Persaud, distinguished Whitwham on the basis that that case was “a claim for interest as damages” which is different from the case before the court, which is concerned with a “claim for interest on damages under statutory provision”, and awarded pre-judgment interest on mesne profits (see para 43).

(2)  Pre-judgment interest on mesne profits was also awarded in inter alia Yim Kan v Tsang Siu Shing also known as Tsang Siu Sing, HCMP 1804/1998 (unrep., 21 August 2000) at para 60; Lam Ping Hing v Yeung Leung Wai, DCCJ 2673/2008 (unrep, 30 April 2010) at para 86(4); Chea Shiu Chow v Cheung Wai Keung, The Personal Representative of Cheung Chit Chiu, deceased and Cheung Soon Chung & Anor, HCA 1346/2012; [2019] HKCFI 2478 at para 143(2).

28.  After giving this matter careful consideration, I have come to the conclusion that pre-judgment interest on mesne profits should not be awarded to the plaintiff in the circumstances of this case: -

(1)  I am bound by the Court of Appeal’s decision in the Persaud case. As noted above, the holding of the Court of Appeal in that case is that “the award of interest [on mesne profits] could overcompensate the plaintiffs”.

(2)  Whitwham, which the Court of Appeal in the Persaud case applied, is cited with approval in McGregor on Damages, 21^st ed, at para 19-026 where the learned author stated:-

“In so far as the normal measure of damages in cases of wrongful occupation or wrongful use of land is the reasonable rental value of the occupation or user, there is no call to award interest; if given, it would spell a double recovery. So in Whitwham v Westminster Brymbo Co, Chitty J refused to award interest upon the damages given for wrongful use of land; this, he said, ‘would be to treat the plaintiffs as having invested their damages in interest in the hands of the defendant”.

(3)  Whitwham was also approved by the English Court of Appeal in Trafigura Beheer BV v Mediterranean Shipping Co SA [2008] 1 All ER (Comm) 385 in which Longmore LJ (with whom Tuckey and Lloyd LJJ agreed) said (at para 44):-

“There is, as it seems to me, a compelling analogy with cases about damages for the loss of use of a chattel or of land. It would be surprising for a claimant to be able both to recover damages for not having had the use of a chattel or the use of land and to recover interest for not having had the money which represents the value of the chattel or the land. It was on this basis that Chitty J declined to award interest on damages which he gave for the wrongful use of land in Whitwham v Westminster Brymbo Co ....” [Italics original; underlining added.]

(4)  In Whitwham, one type of damages which Chitty J awarded was the reasonable rent that the defendants would have to pay for the right to tip spoil onto the plaintiff’s land (see One Step (Support) Ltd v Morris-Garner & Anor [2019] AC 649 at para 110 per Lord Sumption JSC). In this connection, as noted by Chitty J (at pp 897-898), the official referee found that the sum was xl for damages and yl for interest, making a total of (x+y)l. In holding that the plaintiffs are entitled to damages on the basis of what would be a reasonable sum to be paid for the use of their land by the defendants for tipping purpose, Chitty J disagreed with the official referee and held that the plaintiffs are not entitled to the whole of (x+y)l, and in regard to interest claimed, said that all interest should be excluded from the computation of damage. It therefore appears that the interest claimed in Whitwham is interest on damages. This interpretation of Whitwham is supported by Trafigura Beheer BV in which Longmore LJ observed (at para 44) that in Whitwham Chitty J refused to award “interest on damages”.

29.  As to post-judgment interest, it should be noted that in Whitwham, Chitty J stated at the end of the judgment (p 900) that the sum of 550l was subsequently agreed by counsel in court as the amount of the damages to be awarded in accordance with the judgment, and for this sum his Lordship awarded interest at 4 per cent from the date of judgment. Post-judgment interest was also awarded in Million Add Development and Cheung Soon Chung (see para 26(3) above) and the cases cited in para 27 above.

30.  Accordingly, I enter judgment in favour of the plaintiff against the defendant as follows:-

(1)  The defendant do deliver vacant possession of the Hut to the plaintiff; and

(2)  The defendant do pay the plaintiff (i) mesne profits at the rate of HK$350 per month from 1 November 2007 to the date of this judgment; (ii) further mesne profits at the same rate up to the date when vacant possession of the Hut is delivered up.

31.  By reason of the matters aforesaid, I decline to award to the plaintiff pre-judgment interest on mesne profits. The plaintiff is however entitled to post-judgment interest as provided in s 50 of the District Court Ordinance, Cap 336.

32.  I also make an order nisi that the defendant do pay the plaintiff’s costs of this action to be taxed if not agreed with certificate of counsel.

33.  It remains for me to thank Mr Choy for the assistance he rendered to the court.