RICH TREND LTD v. 張文房 AND OTHERS

HCA 906/2022

[2023] HKCFI 2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 906 OF 2022

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REASONS FOR DECISION

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A. INTRODUCTION

1.  This is the Plaintiff’s application by summons filed on 25 July 2022 (the “P’s Summons”)  for:

(1)  the continuation of paragraph 1 of the ex parte injunction order granted by the Lok J on 23 July 2022 (“Ex Parte Injunction Order”)  restraining the Defendants from (inter alia)  entering into or trespassing upon the land known as Lot 776 (“Lot 776”)  in DD 216 New Territories together with the building thereon (“Subject Property”), until final determination of these proceedings or until further order of the Court; and

(2)  a mandatory injunction that the Defendants shall forthwith take steps to demolish and remove various structures and/or installations as specified in paragraph 2 of P’s Summons.

2.  By Order of B. Chu J dated 29 July 2022, the Ex Parte Injunction Order was continued as against the 2^nd Defendant until final determination of P’s Summons or further order of the Court.  

3.  The Plaintiff (through its counsel, Mr. Andrew Mak[1])  confirmed to the Court that for the purpose of P’s Summons, the Plaintiff now only seeks interim relief as against the 2^nd Defendant.

4.  Having considered the evidence filed and the arguments put forward by counsel of both parties, I made the orders set out in Section E below at the hearing on 1 August 2023, with reasons to follow, which are now set out below.

B.  BACKGROUND

5.  As a matter of brief background:

(1)  The Subject Property is a small village house situated on Lot 776 of DD 216, which was developed as part of a single development with a total of 12 lots (namely, lots 769, 770-776, 778, 780-782)  (“12 Lots”), all in the same area. 12 similar sized small houses have been erected on these lots. 

(2)  The Plaintiff claims to be the developer of these lots, and claims to have possessory title and ownership over Lot 776 Subject Property by way of adverse possession, or alternatively proprietary estoppel, which claim is the subject of separate pending proceedings in HCA 432/2022 (“Pending HCA”). 

(3)  The Plaintiff is currently the registered owner of 7 of the 12 Lots. In particular, in respect of one of the 12 Lots, namely, Lot 775, P commenced HCMP 1716/2012 and succeeded in claiming title and ownership thereof on the ground of adverse possession and proprietary estoppel: see Wong Koon Wah v Rich Trend Limited & Ors [2020] HKCFI 3094.

(4)  As regards Lot 776 (on which the Subject property is situated), there is no dispute that the registered owners were Wong Kwong Ming (“KM Wong”)  and Wong Si Man (“SM Wong”)  until 31 October 2008, when it was assigned to a company known as Magic Bright Development Limited (“Magic Bright”), a company incorporated in the British Virgin Islands (“BVI”)  on 26 August 2008, which, according to the company search records produced by the Plaintiff, had been struck off the register since 16 July 2018 and dissolved on 4 July 2023.

(5)  KM Wong, SM Wong and Magic Bright are respectively the 1^st, 2^nd and 3^rd Defendants in the Pending HCA, in which the Plaintiff is claiming possessory title of Lot 776 on the basis (inter alia)  that the Plaintiff had (through a series of transactions)  acquired a right to develop the 12 Lots and went into possession thereof since 1996, and continued to be in possession, incurring expenditure for the purpose of building/renovating the 12 houses thereon and completing the development. This is, in gist, the factual basis upon which the Plaintiff is claiming to have possessory title and ownership over Lot 776 and the Subject Property by way of adverse possession, or alternatively proprietary estoppel.

(6)  The Plaintiff’s shares were sold to a company known as Kingsway Company Limited on 28 July 2020, and it is the Plaintiff’s case that since then, the Plaintiff had been carrying out renovation works of the 12 small houses on the 12 Lots (including the Subject Property)  and also started to rent out the small houses on the 12 Lots.

(7)  By a tenancy agreement dated 28 May 2022, the Plaintiff rented out the 2^nd Floor and Roof of the Subject Property to a Mr. Tsang (“Tenant”)  for 2 years at a monthly rent of HK$19,560.

(8)  According to the Plaintiff, until mid-July 2022 and before the alleged trespass of by the Defendants, the Ground Floor and 1^st Floor of the Subject Property were undergoing some final renovations, which the Plaintiff expected to finish in 2 or 3 months, after which the Subject Property would be ready to be rented out.

(9)  As pleaded in the Statement of Claim filed herein by the Plaintiff on 15 August 2022, the Plaintiff’s claim against the Defendants is for trespass on the Subject Property. It is alleged that between 17 July 2022 and 23 July 2023 (when the Ex Parte Injunction Order was granted), the Defendants wrongfully entered into and remained in the Subject Property without prior knowledge, consent or approval of the Plaintiff, which amounted to trespass.

(10)  The 1^st, 2^nd and 4^th Defendants filed a defence to the claim on 9 February 2023, alleging (inter alia)  that: (i)  the Plaintiff is not entitled to a right of possession of Lot 776 and the Subject Property; (ii)  Magic Bright purchased the property from KM Wong on 31 October 2008 and is the sole legal and beneficial owner; (iii)  the Defendants were authorised by Magic Bright to carry out renovations and decorations works at the Subject Property; (iv)  although Magic Bright has been struck off the Companies’ Registry in BVI since 2018, it is in the course of applying for its restoration.

(11)  As regards the alleged authorisation from Magic Bright, the 1^st, 2^nd and 4^th Defendants pleaded reliance on a purported authorisation letter dated 30 March 2018 (“March 2018 LOA”)  from Magic Bright to the 2^nd Defendant in their answer to the Plaintiff’s request for further and better particulars filed on 7 July 2023.

6.  The events which occurred on 17 July 2022 which led to the Plaintiff’s application for the Ex Parte Injunction Order do not appear to be denied by the 1^st, 2^nd and 4^th Defendants:

(1)  On 17 July 2022, the electricity supply of the Subject Property was suddenly cut off. The Tenant went to check if it was due to any decoration works which was being carried out by P. However, the Tenant saw a group of 5 men (being the 3^rd to 7^th Defendants)  (“Group”)  standing at the front door of the Subject Property.

(2)  The leader of the Group then required the Tenant to open the entrance door, who then rushed into the 1^st Floor of the Subject Property, telling the Tenant that they represented the owner of the Subject Property, and alleging that the Plaintiff (who signed the Tenancy with the Tenant)  was not the true owner.

(3)  The Group then occupied the 1^st Floor of the Subject Property, and installed a CCTV camera on the exterior wall of the Ground Floor. The Group remained in the Subject Property and refused to leave despite police intervention.

7.  Under the Ex Parte Injunction Order, the Defendants were restrained from (inter alia)  entering or remaining in the Subject Property, and the Plaintiff also gave undertakings not to carry out renovation works at the Subject Property and would hand over the keys to the locks of the Ground Floor and 1^st Floor of the Subject Property to the Plaintiff’s solicitors who would keep the keys as stakeholder.

C.  LEGAL PRINCIPLES

8.  It is trite that an applicant for interlocutory injunction is required to show (i)  serious issues to be tried on the merits, and (ii)  that the balance of convenience lies in favour of granting the injunction: American Cyanamid Co v. Ethicon Ltd [1975] AC 396.

9.  In the context of land disputes, the right to obtain interlocutory injunction is not limited to the registered owner of the land in question.  Instead, it extends to a person in possession of the land: see Billion Star Development Ltd v Wong Tak Chuen [2012] 2 HKLRD 85 at §38(1)  per Au J (as he then was).

10.  For an injunction concerning trespass to land:

(1)  The court is concerned with the protection of a property right, which, if not protected by an adequate remedy, becomes diminished.

(2)  Therefore, damage suffered is not a prerequisite to the grant of an injunction in such a case, nor is the triviality of the interference alone sufficient reason to justify a departure from the general rule of granting injunctions.

 See: Billion Star, supra  at §38(4).

11.  Where the plaintiff seeks a mandatory injunction, the applicable principles are set out Music Advance Limited v The Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041 at §12, in particular:

(1)  the fundamental principle is that the Court will take whichever course that appears to carry the lower risk of injustice if it should turn out that it is wrong (§12(d));

(2)  notwithstanding the general rule that a court will have to feel a “high degree of assurance” that the injunction would be rightly granted, an exception arises where it is shown that the withholding of an interlocutory mandatory injunction “would in fact carry a greater risk of injustice than granting it even though the court does not feel the high degree of assurance” (§12(g));

(3)  thus, if a plaintiff in seeking an interlocutory mandatory injunction cannot demonstrate more than a serious question to be tried, it will have to show that the balance of convenience tilts so much in its favour that justice requires such an injunction to be granted (§12(h)).

12.  The above are not in dispute between the parties.

D.  SERIOUS ISSUE TO BE TRIED

13.  Having carefully considered the parties’ evidence, I am of the view that the Plaintiff has satisfied the threshold of showing a serious issue to be tried on its claim for trespass.

D1.  The Plaintiff’s claim to possessory title of Lot 776 and the Subject Property

14.  The Plaintiff’s claim for possessory title (by way of adverse possession and/or proprietary estoppel)  of Lot 776 on which the Subject Property is situated is currently being litigated in the Pending HCA and is yet to be determined.

15.  As was held by Mr. Recorder William Wong SC in his decision dated 2 February 2023[2] in relation to the Plaintiff’s application against the 1^st and 2^nd Defendants for default judgment on the basis that they had failed to file any defence:

“12….there are at least two issues which would require full investigation by the Court before a default judgment can be safely granted. First, the status of the Plaintiff in relation to the subject property as the Plaintiff is not the registered owner of the same. The issue of whether the Plaintiff has ever been entitled to exclusive possession of Lot No.769, 770 to 775, 778, 780 and 782 in D.D. 216 since around 1996 is a live one.

15. Further, as far as the 1^st, 2^nd and 4^th Defendants are concerned, the key issue is whether Magic Bright Development Limited, a BVI company and the registered owner of the subject property, had given authorization to the 1^st to the 8^th Defendants to carry out renovation and decoration works at the subject property.”

16.  I agree with the learned Recorder’s view (at paragraph 17 of his decision)  that the factual disputes between the parties herein (including, amongst others, when the Plaintiff first went into possession of Lot 776)  cannot resolved in a summary manner and will have to be resolved at trial.

17.  For the purpose of supporting its application for interlocutory injunction, the Plaintiff has provided affirmation evidence on the chain of title of Lot 776, with supporting contemporaneous documents, and how the Plaintiff came to acquire the development rights in respect thereof and entered into possession. It is plain to me that the Plaintiff has raised at the very least a serious issue to be tried, which is not a high threshold to cross.

18.  In any event, insofar as the 1^st, 2^nd and 4^th Defendants are disputing the Plaintiff’s claim to possessory title, contending that the Plaintiff did not enter into possession of Lot 776 in 1996, and that Magic Bright remains the rightful owner thereof, no one with direct knowledge of the chain of title and historical events relating to possession of Lot 776 and the Subject Property has given evidence on the Defendants’ behalf in this action. The 2^nd Defendant, who filed affirmation evidence in opposition to P’s Summons on behalf of himself and the 1^st and 4^th Defendants, does not have direct knowledge of these matters.

D2.  The 2^nd Defendant’s alleged authorization from Magic Bright

19.  The acts of the Defendants relied on by the Plaintiff as constituting trespass during the period between 17 and 23 July 2022 have not been denied by the 1^st, 2^nd or 4^th Defendants. These include:

(1)  entering into the 1^st Floor and Ground Floor of the Subject Property;

(2)  installing CCTV camera on the external wall of the Subject Property;

(3)  occupying the 1^st Floor and Ground Floor of the Subject Property and refusing to leave despite police intervention;

(4)  damaging the lock of the main entrance door of the Subject Property on about 20 July 2022.

20.  The only justification provided is that the 2^nd Defendant was allegedly authorised by Magic Bright to enter into the Subject Property to carry out decoration works.  But the purported reliance by the 1^st, 2^nd and 4^th Defendants on such alleged authorisation is not without problems.  

21.  First, insofar as the 2^nd Defendant relies on the March 2018 LOA from Magic Bright to him, Magic Bright has been struck off the register on 16 July 2018 and was dissolved on 4 July 2023.  Although there is no expert evidence adduced by the parties as to the effect of dissolution of a BVI company, but applying common law principles, upon dissolution of a company, the authority of its directors cease, and as a result, agents of the company (the 2^nd Defendant in this case)  who derive authority from such directors also cease: see Bowstead and Reynolds on Agency, 2^nd Ed, §10-018.  It therefore follows that any authority which Magic Bright may have given to the 2^nd Defendant to enter into the Subject Property would already have ceased since 4 July 2023.

22.  I should also add that the 2^nd Defendant produced no evidence to show that steps are being taken for the restoration of Magic Bright. The email correspondence produced by the 2^nd Defendant with Hunte & Co plainly do not show that such steps are being taken.  In fact, the emails do not refer to Magic Bright at all. Up to now, there is no evidence to show that anyone has been engaged to carry out works for the restoration of Magic Bright to the register in the BVI. 

23.  By reason of the aforesaid, the current state of the evidence is such that the 2^nd Defendant (whether by himself or his agents)  simply has no valid authority from Magic Bright to enter into or use the Subject Property.

24.  Mr. Mak further submits that upon Magic Bright’s dissolution, the prima facie position is that its assets would vested in the Hong Kong Government unless the company is restored to the register. Given my views on the cessation of any authority that may have been given to the 2^nd Defendant upon Magic Bright’s dissolution, it is unnecessary for me to rule on this further proposition for present purposes.

25.  Second, Mr. Mak argues that the March 2018 LOA from Magic Bright to the 2^nd Defendant is a “recent fabrication” by reason that:  

(1)  During the ex parte on notice hearing of the Plaintiff’s application for injunctive relief on 23 July 2022, the 2^nd Defendant mentioned that there existed an authorisation letter but did not produce a copy.

(2)  At the return day hearing on 29 July 2022, the 2^nd Defendant referred to and relied on a purported authorisation letter (dated 15 July 2022)  and produced a copy to the Court, which is a letter dated 15 July 2022 from Magic Bright to the 2^nd Defendant authorising him to negotiate with potential buyers who may be interested to purchase the Subject Property (“July 2022 LoA”).

(3)  In the 1^st affirmation of the 2^nd Defendant opposing P’s Summons, he also mentioned that the Defendants were authorised by Magic Bright to carry out decoration works at the Subject Property, but he chose not to exhibit any document in support.

(4)  It was only when the Plaintiff applied for default judgment and upon the order of the Court dated 27 October 2022 that the 2^nd Defendant produced the authorisation letter (being the March 2018 LoA)  in his 2^nd affirmation filed on 25 November 2022.

26.  The 2^nd Defendant has not provided any explanation as to why he purported to rely on a different authorisation letter on the return date hearing and later in his 2^nd affirmation to justify the Defendant’s entry into the Subject Property.

27.  I agree with Mr. Mak that these circumstances put in doubt the genuineness of the March 2018 LOA, and further supports my conclusion that the Plaintiff has clearly shown a serious issue to be tried on its claims for trespass in this action.

28.  Ms. Virginia Leung (Counsel for the 2^nd Defendant)  argues that Ex Parte Injunction Order should be discharged on the ground of delay, in that Magic Bright purchased the Subject Property in October 2008, and P’s Summons for injunctive relief was only taken out in July 2022, 14 years later. Such submission on delay is, with respect misplaced, as it is not in dispute that the alleged trespass warranting an application for injunction only occurred on 17 July 2022, and the application for interlocutory relief was made by the Plaintiff a few days later on 23 July 2022.  There is thus no delay at all.

29.  I also cannot agree with Ms. Leung’s submission that the Plaintiff is not entitled to an interlocutory injunction in the present case unless its possessory title is finally established and determined in the Pending HCA.  According to the trite legal principles governing applications for interlocutory injunctions as set out in American Cyanamid  (see §8 above), the Plaintiff only needs to show a serious issue to be tried.

D.  BALANCE OF CONVENIENCE

30.  As regards balance of convenience, I am of the clear view that such balance lies in favour of continuing the Ex Parte Injunction Order, which effect is only to preserve the status quo in place prior to 17 July 2022 when the Defendants’ alleged acts of trespass occurred.

31.  There is no dispute by the 2^nd Defendant that the Plaintiff has been carrying our renovation at the Subject Property since 2020. There is also evidence to show that the Plaintiff is renting out the 2^nd Floor and Roof of the Subject Property to the Tenant, and intends to rent out the other parts the Subject Property after renovation or put the Subject Property up for sale after such renovation. 

32.  The presence of the Defendants at the Subject Property would mean that the renovation works cannot continue, the quiet enjoyment and use of the Subject Property by the Tenant may be interfered with, and the Plaintiff may suffer financial and reputational harm that will either be difficult to quantify or otherwise irreparable.  The value of the Subject Property in the market may also be adversely affected by reason of concerns of quiet enjoyment, such adverse effect on value would also be difficult to quantify.

33.  On the other hand, it is difficult to see what prejudice the 2^nd Defendant would suffer from the continuation of the Ex Parte Injunction. The 2^nd Defendant does not purport to have any beneficial interest in the Subject Property. The 2^nd Defendant also has not provided any evidence as to its relationship with Magic Bright, and how it can be said that preventing the 2^nd Defendant (and his agents)  from entering into or using the Subject Property would affect the 2^nd Defendant’s own interest (as opposed to Magic Bright’s interests).

34.  In any case, Magic Bright has been struck off and now dissolved, and there is no evidence provided to the Court that any steps are being taken to restore it to the register.

35.  In any event, any loss which the 2^nd Defendant may suffer as a result of the interlocutory injunctions is protected by the undertaking as to damages provided by the Plaintiff.

36.  I am also of the view that the balance of convenience lies clearly in favour of a mandatory injunction to require any items which the Defendants had installed at the Subject Property during the period 17 to 23 July 2022 without consent of the Plaintiff to be removed.  As confirmed by Mr. Mak at the hearing, the only item installed at the Subject Property by the Defendants is a CCTV camera on the external wall of the Ground Floor of the Subject Property.

37.  I agree with Mr. Mak’s submission that such installation of the CCTV camera serves no purpose and would obstruct the use and enjoyment of the Subject Property by the Plaintiff and/or its Tenants.  No loss would be caused to the 2^nd Defendant by their removal.

E.  DISPOSITION

38.  For the reasons above, the Court makes the following orders:

(1)  Paragraph 1 of the ex parte injunction order granted by the Honourable Mr. Justice Lok on 23^rd July 2022 be continued as against the 2^nd Defendant until final determination of these proceedings or until further order of the Court;

(2)  The 2^nd Defendant shall forthwith, and in any event within 28 days, take all necessary steps to demolish and remove the CCTV camera on the external wall of the Property (as defined in of the ex parte injunction order granted by the Honourable Mr. Justice Lok on 23^rd July 2023)  as identified in Exhibit CYF-25 of the 1^st Affirmation of Cheng Yin Fong dated July 2022, and the Plaintiff shall grant reasonable access of the Property to the 2^nd Defendant (and/or his designated agents/representatives)  for such purpose.

(3)  There be liberty to apply

(4)  Costs of and occasioned by P’s Summons dated 25 July 2022 be the Plaintiff’s costs in the cause.