FORDTIME INDUSTRIAL LTD v. YIP SHING LAM t/a TRADITIONAL CHINESE NOODLE

HCMP 1373/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1373 OF 2014

(ON AN INTENDED APPEAL FROM LDPE NO. 757 OF 2012)

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BETWEEN

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D E C I S I O N

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Hon Kwan JA (giving the decision of the Court):

1.  This is an application of the respondent for leave to appeal to the Court of Appeal against the decision of the Lands Tribunal given by Deputy Judge Kot on 7 February 2014, in which the judge dismissed the respondent’s application to review her judgment on 9 October 2013 which was given after a three-day trial in August and September 2013. The judge refused leave to appeal on 23 May 2014 and the respondent renewed his application to this court by a summons issued on 6 June 2014.

2.  We think it appropriate to determine this leave application on paper without an oral hearing, pursuant to the power given in Order 59 rule 2A(5) of the Rules of the High Court.

3.  Three judgments in total were given by the judge.  We will refer to them as “the Possession Judgment”, “the Review Decision” and “the Leave Decision”.  At the review hearing as well as the leave application hearing, the respondent was represented by Mr Ambrose Ho, SC who appeared with Mr Norman Nip, the junior counsel who conducted the trial for the respondent.  So the respondent has had more than ample opportunity to present all his arguments, which did not find favour with the judge.

4.  The draft notice of appeal placed before this court is essentially the same as the draft considered by the judge in the leave application she heard.  The only change of substance is the addition of a new paragraph 4.  A total of 14 grounds of appeal are put forward.

5.  Mr Ho complained that in the Leave Decision the judge has not explained why the respondent does not have a reasonable prospect of success in the intended appeal in respect of any of the grounds advanced in the draft notice of appeal, as she was repeating the parties’ submissions and the findings in the Possession Judgment and the Review Decision.  We do not think that is a fair criticism.  The judge has already dealt with the arguments advanced on behalf of the respondent at some length in her two earlier judgments.  We think it is in order for her to address succinctly the arguments advanced in the leave application, as Mr Ho’s arguments at the third hearing did not depart materially from his arguments advanced earlier.

6.  We are in agreement with the judge that the intended appeal does not satisfy the threshold requirements in section 11AA(6) of the Lands Tribunal Ordinance, Cap 17 for leave to appeal to be granted on a point of law.  We do not think the appeal has a reasonable prospect of success, nor do we think there is some other reason in the interests of justice why the appeal should be heard.

7.  We do not propose to repeat the judge’s analysis and reasoning in her three judgments, with which we agree.  We would focus on the additional reasons why we are also of the view that the grounds of appeal do not have reasonable prospect of success.  We would concentrate on two broad grounds of appeal advanced by Mr Ho:

(1) the subject matter of the tenancy agreement is void for uncertainty in that the subject matter as stated therein, being a cockloft, did not exist at the time of the agreement (grounds 1 and 2 in the draft notice of appeal); and

(2) vacant possession of the suit premises cannot be ordered to be delivered up as it is just a void space (grounds 3 to 6 in the draft notice of appeal).

Subject matter of the tenancy agreement

8.  For present purpose, the relevant facts as found in the court below may be briefly stated as follows.

9.  By an assignment dated 29 May 2002, Wide Famous Holdings Limited (“Wide Famous”) took as the purchaser and assignee a property described as Shop A and B on the Ground Floor of Tsuen On Building together with the Mezzanine Floor A (also known as Shop 1).  Shop A is in the front portion and Shop B is in the back portion.  Shop A and Shop B together are known as Shop 1.  The respondent is at all times a director of Wide Famous.  Since the purchase of the property, it has been used by the respondent as a noodle shop.

10.  By an assignment dated 4 April 2005, Venture King Limited (“Venture King”) took as the purchaser and assignee a property described as Shop C on the Ground Floor and Cockloft C on the upper part of Ground Floor of Tsuen On Building.  Venture King assigned this property to Fordtime Industrial Limited, the applicant in these proceedings, by an assignment dated 17 September 2009.

11.  As found by the judge, the upper part of Ground Floor had been divided into four portions, forming Cockloft A to D.  Cockloft B and D are on the upper part of Shop C.  Cockloft A covered half of the upper part of Shop A.  Cockloft C covered the entirety of Shop B and part of Shop A[1].

12.  The judge further found the floor slab of Cockloft C did once exist[2] but had been removed by the time a representative of Venture King came to inspect Shop 1 in April 2005[3].

13.  The tenancy agreement that is the subject of the proceedings was dated 20 April 2005 and was entered into by Venture King as the landlord and the respondent as the tenant.  It was a standard form tenancy agreement in Chinese.  The subject matter of the tenancy was stated as Cockloft C of the building[4].  The duration of the tenancy was from 1 May 2005 to 30 April 2011.  Rent for the first two years was $2,700 a month, the third and fourth years was at $3,000 a month and the last two years $3,300 a month.  Under the heading of remarks, it was stated that both parties were aware that part of the floor slab of the cockloft had been demolished and the tenant agreed on the termination of the tenancy to be responsible to rebuild the same and reinstate the floor slab to its original state[5].

14.  The applicant took an assignment of Shop C and Cockloft C with the benefit of the tenancy agreement and received rent from the respondent upon notifying him of the change of ownership.  On the expiry of the tenancy agreement on 30 April 2011, the respondent stopped making payment to the respondent and did not reinstate the floor slab of Cockloft C, despite the repeated demands of the applicant.

15.  Mr Ho argued that given the judge’s finding that the floor slab of Cockloft C had been removed at the time of the tenancy agreement in April 2005, the subject matter of the tenancy as stated in the agreement, namely, Cockloft C, did not exist when the agreement was made.  He prayed in aid the dictionary meaning of cockloft.  Thus construed in its ordinary and natural meaning as gleaned from the dictionary, the subject matter of the tenancy must be understood to refer to a physical structure which presupposes the existence of a floor slab.  As the floor slab had been removed, it was just a void space and was inconsistent with the subject matter of the tenancy as stated in the agreement.  On that basis, the judge should have ruled that the tenancy agreement was void for uncertainty in its subject matter.

16.  The judge held that the subject matter of the tenancy agreement was Cockloft C without the floor slab.  It did involve a physical structure with walls and a ceiling but with the floor slab removed and with the requirement that the tenant was to reinstate the floor slab on the termination of the tenancy[6].  There was no uncertainty in the subject matter of the tenancy agreement.  We agree with the judge and would add the following.

17.  In construing an agreement, the proper approach is not just to have regard to the dictionary meaning of words.  On well established principles, one must have regard to the factual matrix and context.  The relevant factual matrix would include these matters known to both sides at the time of the agreement.

18.  First, there was the layout of the noodle shop, which has remained unaltered throughout.  There is a “false ceiling” on the front portion of Shop 1 which is used as a dining area where customers are served.  The back portion of Shop 1 is the kitchen with no false ceiling and the ceiling height in that part is over 16 feet[7].  This is the area where Cockloft C used to be but the floor slab was removed.

19.  Second, the reason why the floor slab was removed or could not be reinstated was because the back portion is used as a kitchen area.  The respondent would not be able to obtain a food licence for the noodle shop with a cockloft built above the kitchen.  It was for this reason that the respondent’s wife signed the tenancy agreement with Venture King[8].

20.  Viewed in this way, it made perfect sense for the respondent to enter into an agreement to pay a modest sum to the landlord every month for what appeared to be a void space.  Put more accurately, he was to pay for the right to maintain as a void space what used to be Cockloft C during the whole term of the tenancy.  And that was why it was expressly provided that the reinstatement of the floor slab of Cockloft C would be carried out at the respondent’s expense only on the termination of the agreement.

21.  Taking into consideration the factual matrix and context, the judge is clearly right in construing the subject matter of the agreement as Cockloft C without the floor slab, which is to be reinstated at the tenant’s expense on the termination of the tenancy.  Mr Ho is wrong to construe the subject matter of the tenancy agreement as a physical structure with a floor slab according to the dictionary meaning of the word cockloft.

22.  A three-dimensional quantum of airspace can exist in law as an independent unit of real property and such airspace can be leased.  This is supported by authorities, as pointed out by Mr Patrick Siu for the applicant, see Gray & Gray, Elements of Land Law (5^th ed) §1.2.33 and the cases cited at footnote 5, Macht v Department of Assessment of Baltimore City, 296 A2d 162 at 168 (1972) (a decision of the Court of Appeals of Maryland) and Trizec Manitoba Ltd v City Assessor for City of Winnipeg (1986) 25 DLR (4^th) 444 at 452 (a decision of Morse J of the Manitoba Court of Queen’s Bench).

23.  In Macht at 168, the court quoted from an earlier decision in 52 Op. Att’y Gen. 425 at 426 (1967):

“… The landowner’s right to use and develop the airspace above his land is well established in Maryland, however, there is little authority concerning the right to convey or lease airspace. In other jurisdictions, the trend of authority definitely favours a liberal interpretation of the landowner’s rights in airspace. The modern trend is to recognise airspace as an ‘independent unit of real property’, the owner of which is entitled to all the rights associated with land ownership. (Note), 64 Columbia Law Rev. 338 (1964). It appears that the prevailing authority would allow airspace to be conveyed, leased, subdivided, and have interests created in it, and estates carved out of it in the same manner as land.”

24.  Macht and the passage quoted above were cited with approval in Trizec.

25.  Under the tenancy agreement in question, the landlord in effect denied itself the use of the airspace over its property, namely, Cockloft C with the floor slab removed, for a price, similar to the situations in Macht and Trizec.  There is no merit in the respondent’s contention that the tenancy agreement is void for uncertainty of subject matter.

Ordering delivery up of vacant possession of Cockloft C

26.  In giving judgment for the applicant, the judge refused to order the respondent to reinstate the floor slab of Cockloft C, agreeing with the respondent’s submission that the Lands Tribunal has no jurisdiction to grant an order for specific performance[9].  She only ordered the respondent to deliver up vacant possession of Cockloft C to the applicant and that the respondent should pay the applicant mesne profits from 1 May 2011 until the delivery up of vacant possession.

27.  Mr Ho argued it is wrong in law to order delivery up of vacant possession of some void space as it would be impossible to enforce and execute.  He prayed in aid that an order for giving possession of land may be enforced by a writ of possession pursuant to Order 45 rule 3 of the High Court and argued that the definition of “land” in section 2 of the High Court Ordinance, Cap 4[10] presupposes the existence of something physical.  He cited authorities to demonstrate how a bailiff is to execute a writ of possession by entering into premises and evicting all persons and removing all furnishings.  So if there are no physical premises that can be entered into, it is not possible to carry out the execution of a writ of possession.  Mr Ho further argued that the parameters of Cockloft C were not certain enough for the judge to order vacant possession of it, and Mr Siu has not sought a variation of the order for vacant possession to set out in detail the parameters of Cockloft C.

28.  On the actual parameters of Cockloft C, the judge has found in the Possession Judgment that the floor slab was built for all four Cocklofts A to D[11].  She took the view it would be against common sense if the landing of the four cocklofts are not of the same height to form another level and this is supported by the evidence of the joint expert Mr Tse Hau Ming Terence[12].  She set out the evidence of Mr Tse from which it is apparent that the actual parameters of Cockloft C can definitely be ascertained and the exact measurement was mentioned[13].  There is no merit in Mr Ho’s contention of uncertainty in the parameters of Cockloft C.

29.  A writ of possession is but one way of enforcing an order for possession of land.  Mr Ho recognised that there may be invasion of airspace amounting to trespass (Gray & Gray, op.cit., §10.1.6) and that injunctive relief may be granted.  As stated by Slade J in Powell v McFarlane (1977) 38 P & CR 452 at 470 to 471 in discussing the element of factual possession for the purpose of possession of land, “the question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed …”.  In the present case, the exclusive physical control exercised by the landlord over Cockloft C is the right to allow the tenant to use the airspace within the four walls of Cockloft C.  By the order of delivery up of vacant possession granted by the court, the respondent is not permitted to use the airspace by maintaining it as a void above the kitchen area.

30.  We reject Mr Ho’s argument that it would not be possible to enforce and execute the order of vacant possession, even though it may require a few more steps for this to be achieved.

Other grounds of appeal

31.  We agree with the judge on the other grounds of appeal advanced by the respondent in grounds 7 to 14 and do not have anything to add to her reasons in the Review Decision at §§9 to 20.

Conclusion and costs

32.  For the above reasons, we dismiss the respondent’s application for leave to appeal.  We make a further order under Order 59 rule 2A(8) that no party may under rule 2A(7) request the determination to be reconsidered at an oral hearing inter partes, as this application is wholly without merit.

33.  We make an order nisi that the respondent is to pay the applicant’s costs of this application and we proceed to make a gross sum assessment.

34.  The applicant put in a statement of costs for $200,000, which is grossly inflated on any view, having regard to the work reasonably done and the fact that the respondent advanced before us substantially the same grounds as in the leave application before the judge.  We will reduce the applicant’s costs as claimed substantially.  The fees claimed in respect of solicitors’ work and disbursements apart from counsel’s fees are reduced from $150,000 to $15,000.  Counsel’s fees are reduced from $50,000 to $20,000.  The total amount of costs assessed by us is $35,000.

35.  Any party who seeks to vary the above order nisi and gross sum assessment shall lodge a written submission within seven days hereof, with leave to the other party to reply in writing within seven days thereafter.

[1] Possession Judgment, §6

[2] Possession Judgment, §§17 to 24 and 32

[3] Possession Judgment, §9

[4] In Chinese: 長安樓C座閣樓; the correct name of the building in Chinese is 荃安樓

[5] In Chinese: 雙方知悉閣樓部份地面已被拆去，租客同意終止租約時，負責起回閣樓地面，恢復原狀

[6] Leave Decision, §§12 and 13

[7] Possession Judgment, §8

[8] Possession Judgment, §9

[9] Possession Judgment, §§48 to 54

[10] In section 2, unless the context otherwise requires, “land” includes (a) land covered by water; (b) any estate, right, interest or easement in or over any land; and (c) things attached to land or permanently fastened to anything attached to land. 

[11] Possession Judgment, §22

[12] Leave Decision, §18

[13] Leave Decision, §16