YAU FAT SHING t/a YAU YIM KEE FRUIT IMPORTER v. LEUNG YIU KONG t/a KWAN TAI LOONG FRUIT

DCCJ 1009/2017

[2021] HKDC 1259

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1009 OF 2017

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JUDGMENT

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1.  This action concerns a dispute over certain shop space in the Yaumatei Wholesale Fruit Market (“the Market”). The plaintiff now claims to recover from the defendant the possession of part of the space in his shop and mesne profits for its wrongful occupation. The defendant counterclaims against the plaintiff for trespass of a piece of land outside, but said to be forming part of, his shop premises.

Background and the parties’ versions as to how they came to occupy their shops

2.  The Market, popularly known as gwo laan (果欄), is situated in the Yaumatei District between Waterloo Road, Reclamation Street, Ching Ping Street and Ferry Street, with Shek Lung Street running through it.

3.  One of the older and more sizable laan (欄) operated there, among many others, has been福和果菜欄 (“FWL”).

4.  It is the plaintiff’s case, in gist, that since about 1950, FWL by way of a monthly sub-tenancy has been sub-letting part of the land occupied by FWL (“the Premises”) to the plaintiff’s late father 游炎 to operate his fruit wholesaling business trading under the name 游炎記. The Premises is known as Ground Floor, 1A Shek Lung Street.  Since sometime in 1960s, 游炎 by way of a monthly sub-sub-tenancy has been sub-letting a corner of the Premises to one 葉樞 to operate the latter’s fruit wholesaling business trading under the name 鈞泰隆. It is the plaintiff’s case that since the respective time above-mentioned, 游炎記 has been paying, and still pays, a monthly rent to FWL for renting the Premises, and 鈞泰隆 has been paying the plaintiff monthly rent until the more recent events mentioned below.

5.  The defendant’s case, on the other hand, is that:-

“In between 1960s and 1970 (the exact time cannot be ascertained), the predecessor(s) of the Plaintiff and of the Defendant jointly acquired the business of the said parcel of land then occupied by 福和果菜欄 aforementioned by means of a physical transfer (頂讓)”[1].

6.  It is the defendant’s case that it has never paid any rent to the plaintiff, but it “has to contribute a sum to the [Kowloon Fruit and Vegetable Merchants’ Association (九龍果菜同業商會)] on the first day of each lunar calendar month”[2] and the monthly sum so contributed currently is HK$2,300[3].  It is also the defendant’s case that the plaintiff has been honouring the same practice of paying such monthly contribution to 九龍果菜同業商會 (“the KFVM Association”) “mutatis mutandis”[4].

7.  On about 19 December 1966[5], Crown Land Permit No. K3270 (Superseding K-0504) was issued to one Wong Koon-hung as the operator of FWL in respect of Lot No. 1 & 2, Reclamation Street, Kowloon (“the Crown Permit”)[6], which commenced on 31 December 1966 and expired on 31 December 1967 and was renewable.  It is common ground that the Premises is part of the land permitted to be used by FWL under the Crown Permit.  The defendant now relies on the terms of the Crown Permit to run a defence that the sub-sub-tenancy claimed by the plaintiff was and is illegal and therefore void or unenforceable.

8.  In about 1989, the plaintiff took over the ownership and operation of 游炎記 from his father.  Since about the same time, a part of the Premises previous occupied by 游炎記 has been occupied by the younger brother of the plaintiff 游志成 to operate the latter’s fruit wholesaling business trading under the name 新志記.  In 1996, 游炎 passed away.  In 2007, the trade name of 游炎記 was changed to 游炎記果欄 (Yau Yim Kee Fruit Importer).  In May 2014, 游志成 passed away and 新志記 has since been operated by his widow 蔡妹妹.  Nothing significant turns on the above-mentioned changes.

9.  Along the years, there have also been some changes in the personnel owning and operating 鈞泰隆. I do not think it necessary to mention them all save the following.  According to the defence case, 葉樞, his son 葉鶴松 and 葉樞’s brother-in-law 梁植洪 were partners in 鈞泰隆.  In April 2007, 梁植洪 passed away.  In September 2008, his son, the defendant, registered in the Business Registration as the sole owner of 鈞泰隆, while 葉鶴松 continued to manage and run 鈞泰隆.  Again, nothing turns on them.

10.  It is common ground that the parties’ shops had been operated in the Premises in all these years without disputes, or at least without any serious disputes.

Events leading to the commencement of this action

11.  On 30 May 2016, 葉鶴松 unfortunately passed away quite suddenly.  The defendant in evidence said that 葉鶴松 was quite normal the day earlier, but was then sudden taken ill and shortly passed away.

12.  It is common ground that since 葉鶴松’s passing 鈞泰隆 has not opened its shop to conduct business.

13.  Also since 葉鶴松’s passing and from June 2016 onwards, and according to the plaintiff, 鈞泰隆 has stopped paying any rent to the plaintiff.

14.  In the evening of 4 July 2016, the plaintiff and his son met with the defendant’s cousin and the daughter of 葉鶴松 in a Chinese Restaurant on Reclamation Street to discuss the affairs of the Premises (“the Restaurant Meeting”).  The tenor of the evidence is that in that meeting, the plaintiff demanded the defendant to pay rent while the defendant’s camp accused the plaintiff of trespassing part of the defendant’s shop premises.  In the Restaurant Meeting a note written in Chinese handwriting apparently written and signed by 葉鶴松 and bearing the chop of 鈞泰隆 which said “由2016年四月至2018年9月止租鈞泰隆門前給由[游]炎記” was produced (“the Note”)[7] .  The defendant relies on the Note to support his case that 鈞泰隆 was not a tenant of the plaintiff.  I would also mention that there is a dispute as to who produced the Note in that evening. 

15.  The parties could not resolve their disputes in the Restaurant Meeting.

16.  There was an incident on 18 July 2016 in which the 鈞泰隆 camp called the police complaining of trespass by 游炎記.

17.  In March 2017, the plaintiff commenced this action.

Sorting out the boundaries and locations of various pieces of land

18.  The boundaries and exact locations of the pieces of land mentioned in the parties’ respective case are not at all clear.  The plan “Amended Annexure A”[8] annexed to the Amended Statement of Claim was a very simple hand-drawn plan depicting only the Premises as a rectangular shape measuring 168 inches in width and 180 inches in length with the defendant occupying an area at the lower right corner abutting Shek Lung Street measuring 55 inches in width and 54 inches in length.  The surroundings of the Premises were not depicted or indicated in the said plan.

19.  The defendant’s plan “Appendix A” annexed to his Defence and Counterclaim[9] was also a simple hand-drawn plan.  It also depicted the Premises as a rectangular shape, but measuring 390 inches in length and with no measurement of its width given.  鈞泰隆 was there depicted as also occupying the lower right corner of the Premises abutting Shek Lung Street, but the size of the land occupied by it was indicated to be 59 inches in width and 257 inches in length.  The part said to be trespassed by the plaintiff (shaded in grey in Appendix A) measured 59 inches in width and 125 inches in length, but it was situated in the middle of the part of land occupied by 鈞泰隆.  The part said to have been rented by 鈞泰隆 to the plaintiff to which the Note purportedly relate (depicted in red dotted line in the defendant’s Appendix A) measured 59 inches in width and 79 inches in length and it was depicted as immediately abutting Shek Lung Street.

20.  The parties in their witness statements, and the pictures they produced thus far, have not made these matters any clearer.

21.  On the first day of trial, this court tried to sort these matters out with counsel appearing for the parties.  The parties however could not come to any common ground regarding them.  I then adjourned the trial to obtain a single joint survey report to report, in particular, the boundaries, delineation and areas of the Premises and of 游炎記, 鈞泰隆 and 新志記 therein and the boundary of Shek Lung Street in relation to the Premises and these areas.  The report dated 13 January 2020 was then adduced (“the Report”)[10].

22.  As set out in the Report, and is now common ground or not serious disputed, and I so find, that:-

(a)  The actual measurements of the Premises are 175.5 inches in width and 191 inches in length.

(b)  The part of the Premises that has been and is now occupied by 鈞泰隆 is situated at the south-eastern corner of the Premises abutting Shek Lung Street and measuring 60.6 inches in width and 54 inches in length (“D’s Shop”).

(c)  That part of Shek Lung Street, unlike most streets in Hong Kong, does not have a raised pedestrian walkway, and with the goods and sundry items belonging to shops constantly being placed on Shek Lung Street, there was no clear visual boundary delineating the Premises and Shek Lung Street.

(d)  The Premises depicted in the defendant’s plan (being Appendix A to his Defence and Counterclaim) was inaccurate in that it depicted and included a large area of Shek Lung Street abutting the frontage of the Premises as part of the Premises, on which as shown by the pictures in Appendix 3 of the Report, the parties have been placing their respective goods.  In other words, the defendant has purportedly included part of Shek Lung Street as the Premises.

(e)  The part of “the defendant’s shop” said by the defendant to have been trespassed by the plaintiff (“the Grey Land”) is situated on the part of Shek Lung Street immediately fronting D’s Shop.

(f)  The piece of land described as “鈞泰隆門前” in the Note, and said to have been rented by 鈞泰隆 to the plaintiff is also situated on Shek Lung Street, but is situated beyond the Grey Land at a spot further away from D’s Shop (“the Frontage”).

23.  It is therefore now clarified that the plaintiff is claiming against the defendant for the recovery of D’s Shop, that the defendant is counterclaiming against the plaintiff for the trespass of the Grey Land, and the defendant is relying on the purported renting out of the Frontage to the plaintiff as evidenced by the Note in support of his case that 鈞泰隆 has never been a tenant of 游炎記.

The issues

24.  There are thus 3 broad issues to be resolved:-

(a)  Has D’s Shop been rented by the plaintiff (and his predecessor) to the defendant (and his predecessors) under a sub-sub-tenancy?  Or has the defendant’s predecessors acquired a right to use and occupy it from FWL?

(b)  Is the plaintiff liable to the defendant for trespassing the Grey Land?

(c)  Was or is the sub-sub-tenancy claimed by the plaintiff void or unenforceable by reason of illegality or as being contrary to public policy?

THE PLAINTIFF’S OR THE DEFENDANT’S VERSION REGARDING HOW D’S SHOP CAME TO BE OCCUPIED BY 鈞泰隆?

The plaintiff’s witnesses and their evidence

25.  The plaintiff called 3 witnesses - himself, his younger sister 游麗榕,and their sister-in-law 蔡妹妹.

26.  The plaintiff was born in 1947.  His evidence in gist was this.

27.  Since about 1939, his father’s elder brother 游栢 had been operating a fruit business by the name 游栢記 at the location known as No 1 Shek Lung Street.  Since 1945, his father 游炎 had been operating a small store on Shanghai Street, which was not profitable.  In about 1950, through the introduction of 黃禮和, the owner of 寶和欄, 游炎 rented from FWL the Premises, which was immediately next to 游栢記, to operate a fruit business.

28.  The plaintiff has been working with his father in 游炎記 since about 1963 when he was 16 years old.

29.  The plaintiff also produced a certificate from the KFVM Association certifying that 游炎記 joined as a member of the KFVM Association in October 1950[11]. As can be seen from the membership certificates of the KFVM Association produced by the plaintiff, the membership number of his father 游炎 was 181 and the plaintiff’s membership number is 804.

30.  Since about 1950, 游炎 had been paying monthly rent on the first day of each lunar month to one 黃福康, the then owner and operator of FWL.  Later, 黃福康 passed away and his nephew 黃冠雄 took over FWL.  黃冠雄 was the permittee in the Crown Permit.  游炎 then paid rent to him through one 黎勤. 

31.  黎勤, who is now over 90 years old, owned and had been operating, among others, 黎勤欄 at a shop premises in the Market also rented from FWL.  黎勤 is the current Chairman of the KFVM Association.

32.  To prove that 游炎記 has been paying monthly rent to FWL through 黎勤, the plaintiff produced a written receipt dated 22 May 2017 signed by 黎勤 acknowledging that 游炎記 has since 1950 been paying rent to FWL and that 黎勤 has been receiving monthly rent from 游炎記 on behalf of 黃冠雄 of FWL[12] .  黎勤 also attached a true copy of his HKID card to the said receipt.

33.  In mid 1950s, 游炎 got acquainted with 葉樞 through one Mr Ng. 游炎 then let 葉樞 operate a small stall for his fruit wholesale business at a spot outside the Premises.  In the 1960s, the government tightened control and 葉樞’s stall was obstructing the street.  游炎 then agreed to rent a corner of the Premises to 葉樞 to operate his business.  No written agreement was signed as they trusted each other.  The plaintiff was unable to remember what the rent had been, but it was paid on the first day of each lunar month by 葉樞 to the plaintiff’s mother. 

34.  In 1970s, 梁植洪 joined 鈞泰隆 as a partner of 葉樞 and his son 葉鶴松.  They had since been operating 鈞泰隆.

35.  The plaintiff’s mother was the main person of 游炎記 responsible for collecting rent from 鈞泰隆 and paying the rent to FWL through 黎勤.

36.  After his mother passed away in January 2010, his younger brother 游志成 or his wife 蔡妹妹 collected the rent of 鈞泰隆 from 葉鶴松.  The rent paid by 鈞泰隆 in 2010 to late 2014 was HK$1,900 a month, and from January to July 2015 was HK$2,300 a month.  Since August 2015, the plaintiff increased the rent substantially to HK$5,000 a month.

37.  Apart from paying rent to FWL,游炎記 has been paying the Premises’ due share of:-

(a)  the government rate charged to FWL;

(b)  the monthly management fee to the KFVM Association (in 2017, that was HK$120 a month which was increased in 2018 to HK$210 a month.  The plaintiff denied having to pay “contribution” to the KFVM Association at HK$2,300 a month as the defendant alleged); and

(c)  the electricity charges for the common areas in the Market.

38.  In this regard, the plaintiff’s evidence is that 鈞泰隆 has not been charged directly by, or has not been paying directly to, FWL or the KFVM Association these expenses, as it has been a tenant of 游炎記.

39.  In 1998, 游炎記 also in its name applied for an electricity meter for the supply of electricity to the Premises.  鈞泰隆 as a tenant of 游炎記 has been sharing the electricity supply under this meter and paying its share of electricity charge to 游炎記.

40.  The plaintiff’s second witness was his sister游麗榕, who was born in 1952.  Her husband has also been working in the Market since the 1960s.

41.  She gave the same evidence relating to how 鈞泰隆 came to occupy D’s Shop, which I will not repeat.  She had worked in 游炎記 for several years in the 1970s responsible for the accounting work.

42.  Her evidence was that at the time when she worked in 游炎記, she personally saw her mother collecting rent from 鈞泰隆.

43.  She and her sister 游麗娟 were the executrices of their mother’s estate.  They opened a savings account in Wing Hang Bank to receive the income of the properties belonging to mother and to pay the related expenses.  It is her evidence that the rent received from 鈞泰隆 since August 2010 (after she had obtained the Probate to her mother’s estate) was paid into this bank account.

44.  Essentially, the arrangement since 2010 up to August 2015 was that 游炎記, 鈞泰隆 and 新志記 would each pay the same amount monthly by way of rent, which amount was equivalent to half of the monthly rent paid to FWL.  Therefore, 游炎記 after paying FWL the monthly rent earned a monthly income equivalent to half the monthly rent paid to FWL.  The siblings had agreed to, and did, treat this sum as part of “the family fund” and would deposit the same into the said bank account for use by all the siblings.  Since August 2015 and after the increase of the rent to be paid by 鈞泰隆 to HK$5,000, this monthly rent of HK$5,000 paid by 鈞泰隆was also paid into this savings account.

45.  She produced a copy of the bank passbook^[13] of the said savings account showing the said payment-ins.  The passbook also contained annotations handwritten by her made contemporaneously next to all the relevant entries from August 2010 up to May 2016.

46.  The plaintiff’s third witness was 蔡妹妹.  She was the wife of 游志成.  She had been a housewife until 1989 when she started working in the Market assisting her husband operating 新志記. Since 1996 after 游炎 passed away, she and her husband had been entrusted by the plaintiff to collect the rent from 鈞泰隆 and to pay the rent to FWL through 黎勤 or his son 黎達強.  

The defendant’s witnesses and their evidence

47.  The defendant also called 3 witnesses – himself, Ip Lai Man May, the daughter of 葉鶴松 and 葉鶴鵬,the brother of 葉鶴松.

48.  The defendant is the son of 梁植洪.  He was born in 1961.  He worked in 鈞泰隆 from about 1982 to 1996.  He worked elsewhere thereafter.

49.  He confirmed in oral evidence that since 1996, he had not worked in 鈞泰隆 at all even though he was registered as its sole owner in the Business Registration of 鈞泰隆 since 2008, and that after the death of his father in 2007, 鈞泰隆 had been managed and operated solely by 葉鶴松.

50.  His evidence was that he was told by his father that in 1960s, 葉樞, his father 梁植洪, 葉鶴松, together with 游炎 purchased or acquired (the exact word he used in his witness statement was “頂讓”[14]) the business or the Premises from FWL. He could not give evidence as to any further details or information regarding this purchase or acquisition.  He indeed said expressly in his witness statement that he did not know any details pertaining to this purchase or acquisition, but only knew that:-

(a)  游炎記 and 鈞泰隆 each occupied their respective areas in the Premises and operated their businesses there;

(b)  they had agreed that each of them would pay half of the monthly management fee to the KFVM Association, which would be paid on the first day of each lunar month;

(c)  the management fee was paid to 黎勤, and after 2010, paid to one 阿祥;

(d)  such monthly management fee was HK$4,600 a month for the Premises at the time of his witness statement, and that 游炎記 and 鈞泰隆 each paid half at HK$2,300 each.

51.  He said he has never heard that 鈞泰隆 need to pay, or has paid, rent to 游炎記.

52.  Both Ip Lai Man May and 葉鶴鵬 filed a very short witness statement, respectively consisting of 4 and 5 paragraphs.  Ip Lai Man May was born in 1980.  She has not worked in 鈞泰隆 but had occasionally gone there to assist during weekends when she was 20 odd years old.  葉鶴鵬 has never worked in 鈞泰隆.  In their witness statements, they both only spoke about the Restaurant Meeting and the alleged trespass by the plaintiff.  Their evidence did not touch on this issue.

Discussion

53.  It is common ground that 游炎記 and 鈞泰隆 have been occupying, and operating from, their respective areas in the same shop premises, namely the Premises, for about 5 decades since 1960s; and that there was never any partition erected within the Premises separating the corner occupied by 鈞泰隆, even though the desk used by 鈞泰隆 and its other sundry items were arranged and placed in such a way that the corner formed its own space.  Evidently therefore, there must have been some sort of arrangement between the parties leading to this state of affairs.  In this connection, the introduction of 新志記 much later in 1989 did not affect the analysis as, among others, it is also common ground that 新志記 only took over part of the area originally occupied by 游炎記.

54.  To recap, the plaintiff’s version accounting for this state of affairs is that 游炎記 has rented the Premises from FWL since about 1950, and it was later on in 1960s that 游炎 sublet the corner to 葉樞 to become D’s Shop, and that is why FWL and the KFVM Association have been dealing with 游炎記 direct over the affairs concerning the Premises, and not dealing with 鈞泰隆 direct.  The plaintiff’s version is that 梁植洪 only joined 鈞泰隆 in 1970s.

55.  While the defendant’s version accounting for this state of affairs is that in 1960s, 葉樞, 葉鶴松, 梁植洪, 游炎 together purchased or acquired the business or the right to use the Premises from FWL, and therefore both 游炎記 and 鈞泰隆 did not need to, and actually did not pay, any rent to FWL, but they need to, and have been paying monthly, a substantial amount of “management fee” to the KFVM Association, which at the time of the defendant’s witness statement, was HK$4,600.

56.  Having considered all the evidence and for the reasons expressed below, I have no hesitation, on balance of probabilities, in finding in favour of the plaintiff’s version and rejecting the defendant’s version.

57.  First, the KFVM Association certified in writing that 游炎記 joined as a member of the KFVM Association in October 1950^[15]. The authenticity of that certificate and the fact that 游炎記 became a member of the KFVM Association in October 1950 were never challenged by the defendant at trial.  The fact that 游炎記 joined the KFVM Association so early is also corroborated by the membership number of 游炎, which as said, was 181.  In contrast, the membership number of the plaintiff (joined in 1978) was 804, and the membership number of 葉鶴松, as the only person in the 鈞泰隆 camp producing in this action a membership card in the KFVM Association, was 1074[16].   Moreover, there is no suggestion, not to say any evidence, that 游炎記 had been operating at some other premises in the Market from 1950 to 1960s.

58.  Second, I have carefully observed and listened to the plaintiff, 游麗榕 and 蔡妹妹 giving evidence.  All of them have filed a detailed witness statement exhibiting various documentary evidence and explaining them in detail there.  Their evidence was unshaken in cross-examination by Mr Cheung, counsel for the defendant, who tested their evidence quite extensively and particularly over the documentary evidence they produced.  游麗榕 was cross-examined quite thoroughly on almost every entry in the said passbook annotated as being related to payments of rent made by 鈞泰隆.  She was unshaken and was able to explain satisfactorily various related matters.  I find all 3 of them honest and reliable witnesses and I accept their evidence.  Based on the matters set out in this and the preceding paragraphs, I find that 游炎記 has been occupying and operating in the Premises since 1950.  This finding militates against the defendant’s version that it was in 1960s that 葉樞, 葉鶴松, 梁植洪, 游炎 together jointly acquired the right to occupy the Premises from FWL.

59.  Third, I accept the evidence of the plaintiff’s witnesses and find that monthly rent has been paid by 鈞泰隆 to 游炎記 and collected by the plaintiff’s mother, and later by 游志成 and 蔡妹妹 for its occupation of D’s Shop.

60.  Fourth, I find the factual account given by the plaintiff’s witnesses as to how 游炎記 came to occupy the Premises and how later in 1960s 鈞泰隆 came to occupy D’s Shop detailed, inherently coherent and probable, and that in many aspects it was supported by documents.  The plaintiff’s account in my view explained satisfactorily and reasonably why 鈞泰隆 only occupied a small corner in the Premises and why no partition has ever been erected.  On the other hand, if, as the defendant said, the said personnel together acquired or purchased the right to occupy the Premises to operate 2 shops under 2 different trading names, the inherent probability in my view would be that they would have shared the area more equitably and erected some sort of partition.

61.  Fifth, according to what was recorded in the membership card in the KFVM Association of 葉鶴松, he was 43 years old in 1994.  He was therefore only about 14 years old in mid-1960s.  I doubt he would be among the several persons who together “purchased and acquired” the Premises from FWL as the defendant said.

62.  Sixth, the plaintiff said it has been paying rent to FWL while the defendant’s case was that both 游炎記 and 鈞泰隆 did not pay any rent in all these years to FWL.  Whether rent was paid to FWL therefore is a key factual issue.  In support of the plaintiff’s case that 游炎記 has been paying rent to FWL for occupying the Premises since 1950, the plaintiff procured the issuance of, and produced, the receipt signed by 黎勤, the person receiving the rent on behalf of FWL for a very long time and who is the current Chairman of the KFVM Association.  However, the authenticity of this receipt was not seriously challenged by the defendant at trial.  I find the said receipt authentic, and despite it being only a piece of hearsay evidence, I attach weight to it.

63.  Moreover and importantly, the defendant’s own case is that 鈞泰隆 and 游炎記 need to, and did pay to, 黎勤 (or one 阿祥 receiving it on his behalf) the equivalent amount of what the plaintiff said was the rent, but the defendant said it was “management fee to the KFVM Association”.  This was disputed by the plaintiff who said the KFVM Association only collected small fees as disbursements for entertainment.  However, the defendant was unable to produce and evidence, documentary or otherwise, showing that the KFVM Association has charged or has received such alleged substantial “management fee”.  There was no response from the defendant as to the plaintiff’s case, supported by documents, that the KFVM Association already charged and collected management fees for the Premises (currently HK$210 a month).  Had the defendant’s such allegation been true, that the KFVM Association has been collecting year on year from each shop in the Market a monthly “management fee” of several thousands, the KFVM Association would have amassed and continues to amass very substantial wealth. I find the defendant’s such allegation highly improbable and was not substantiated by any evidence.  In the premises, I find that it is only a conjecture made up by the defendant to try to explain away the payment made by 鈞泰隆 each month of the same amount as being rent; and I find against it.

64.  Seventh, if 鈞泰隆 purchased or acquired the right to use the Premises in the manner the defendant said, in my view there must have been some reasons or considerations, and yet  no explanation whatsoever was given by the defendant, as to (a) why 鈞泰隆 only acquired and occupied such a small corner of the Premises while 游炎記 acquired and occupied the majority, bearing in mind that according to the defendant, 鈞泰隆 then had 3 partners, (b) why 鈞泰隆 has been paying the alleged “management fee” equally with 游炎記 when it only occupied a small corner and the latter occupied the majority of the space; (c) why in all these years there was no proper partition built separating the 2 businesses, (d) why, as the plaintiff pointed out, FWL and the KFVM Association have been dealing with 游炎記 directly pertaining to the Premises (which I find was the case) and the defendant was unable to produce any documents showing such dealing by them with 鈞泰隆.

65.  Eighth, as mentioned above, the defendant claimed in his witness statement that he heard about the defendant’s version from his father 梁植洪.  Having observed and heard the defendant giving evidence, I was under the clear impression that what he said he heard from his father was very vague and was completely lacking in details, and seemed to me was very much in the nature of a conjecture either by the defendant or even by his father, who was not privy to the earlier events as he only joined 鈞泰隆 in the 1970s.  I do not find the defendant’s such evidence reliable.

66.  Lastly, regarding the defendant’s reliance on the Note:-

(a)  It is common ground that 鈞泰隆 has all along been a wholesaler and its opening hours were from late night through to the next morning; while the business of 游炎記 in recent years was in retailing and therefore 游炎記 opened from late morning to the evening.

(b)  I accept the evidence of the defendant that 鈞泰隆 at some point in time had laid some cement on the Frontage forming it into some sort of low platform and that 鈞泰隆 considers it has a right over the Frontage (which as said, is in fact part of Shek Lung Street).

(c)  I accept the plaintiff’s evidence that during daytime when 鈞泰隆 was not opened, 游炎記 would like to use the Frontage; and that to avoid argument, 游炎記 had sought express permission from 葉鶴松.  I find that the Note was written and signed by 葉鶴松 signifying his permission; and that the Note was produced by someone from 游炎記 in the Restaurant Meeting.

(d)  None of the defendant’s witnesses could say that 鈞泰隆 has charged any fee for the permission and none was mentioned in the Note.  I find that no fee was charged by 鈞泰隆.

(e)  As the Frontage was part of Shek Lung Street, which was a public place, I find that on proper analysis 鈞泰隆 has no property right over it.

(f)  I thus find that the Note or the fact that 游炎記 has sought permission from 鈞泰隆over the use of the Frontage, or that 鈞泰隆 had purportedly given it to 游炎記 , were all neither here nor there regarding whether 鈞泰隆 was the tenant of 游炎記 in respect of D’s Shop.

67.  In the premises, I find as fact the plaintiff’s version and account as to how 鈞泰隆 came to occupy D’s Shop.  In sum, I find that 鈞泰隆 has been renting D’s Shop from 游炎記 under an oral tenancy since sometime in 1960s.

The defendant’s counterclaim

68.  Quite some trial time was taken up by the defendant’s counterclaim against the plaintiff for trespass.

69.  After the precise location of the land allegedly so trespassed was identified, namely the Grey Land, and in cross examination, the plaintiff readily admitted that as 鈞泰隆 has not opened for business after the passing of 葉鶴松, 游炎記 has at different times placed its goods and sundry items on the Grey Land, which at the time had provoked much reaction from Ip Lai Man May and 葉鶴鵬 who thought that the land “owned” by 鈞泰隆 was invaded right after the death of 葉鶴松.  As mentioned, police were called in relation to an incident that occurred on 18 July 2016.

70.  After the Report was adduced, it was not disputed (or not seriously disputed) that the Grey Land was situated on and was indeed part of Shek Lung Street, and therefore on proper analysis 鈞泰隆 has no valid claim of property right over the Grey Land.  I so find.

71.  In the circumstances, I find it unnecessary to delve into these incidents of alleged trespass.  As the Grey Land was part of public land over which 鈞泰隆 has no property right, I dismiss the defendant’s counterclaim for trespass.

WAS OR IS THE SUB-SUB-TENANCY CLAIMED BY THE PLAINTIFF VOID OR UNENFORCEABLE BY REASON OF ILLEGALITY OR AS BEING CONTRARY TO PUBLIC POLICY?

72.  The defendant’s contention is this.

73.  Since the Crown Permit was a mere licence and contained the condition that it was non-transferrable, FWL could not legally allow 游炎記 to occupy exclusively the Premises, nor could FWL grant a sub-tenancy of the Premises to 游炎記.

74.  The occupation of the Premises by 游炎記 from 1950 to 1972 therefore was in contravention of section 9 (later section 10) of the Summary Offences Ordinance (Cap 228)(“SOO”), which provided:-

“Any person who, except under and in accordance with a valid current licence or permit issued by a lawful authority, occupies any land which is not held under a Crown lease shall be guilty of an offence and shall be liable to a fine of one thousand dollars.”

75.  The oral tenancy granted by 游炎記 to 鈞泰隆 sometime in the 1960s was therefore tainted with illegality as it involved committing an offence.

76.  Section 10 of SOO however was repealed on 1 October 1972 and was replaced by section 4 of the Crown Land Ordinance (Cap 28) (“CLO”) which provided:-

“Unleased land shall not be occupied except under a license or a deed or memorandum of appropriation.”

77.  “Unleased land” is defined under section 2 of CLO as “land which is not leased land” and “leased land” was defined there as land “held under a Crown lease” or “vested in a person by an Ordinance”.

78.  It is necessary here to also mention section 6 of CLO[17] which further provided:-

“(1) If unleased land is occupied, otherwise than under a licence or deed or memorandum of appropriation, the Authority may cause a notice, requiring the occupation of the land to cease before such date as may be specified in the notice, to be posted in one or more places--

(a) on or near the land;

(b) on any property or structure on the land.

....

(4) Any person occupying unleased land, otherwise than under a licence or a deed or memorandum of appropriation, who without reasonable excuse does not cease to occupy the same as required by a notice under subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine of ten thousand dollars and to imprisonment for six months.

....”

79.  The CLO was renamed the Land (Miscellaneous Provisions) Ordinance in 1998 (“LMPO”).

80.  The defendant contends that the tenancy granted by 游炎記 to 鈞泰隆 continued to be illegal after October 1972, and therefore is unenforceable now, as it contravenes section 4 of the CLO and later section 4 of LMPO, relying heavily on the Court of Appeal case of Fung Siu Kam & Ors v Lo Shun Cheung [1984] HKC 107.

81.  In Fung Siu Kam , it was held, regarding a tenancy agreement granted in 1968 and continued by a series of agreements up to 1982 over a piece of Crown land occupied under a permit, that the statutory prohibition under section 4 of the CLO must have intended to prevent any contract purporting to confer exclusive possession of the land or any part thereof.  The reason given was contained in a short passage:-

“It is not every contract prohibited by statute which is wholly unenforceable: see vol 9 Halsbury's Laws of England (4th edition) 290 (423). As in the interpretation of all statutes one must ask what was the intention of the Legislature in so far as that is ascertainable from the language it has used. We should not interpret a statute so as to deprive a subject of rights which he would have at Common Law unless it is clear that the Legislature intended to take away those rights. The question here is whether the prohibition against occupation of Crown land was intended for the benefit of the public at large or merely for the benefit of the Crown as a land owner. It seems to me that the former must be the correct view. The nature of a licence itself prevents the licensee from allowing another into exclusive occupation, so that the Crown as land owner would already have the right to terminate the Plaintiff's licence and thus to defeat any tenancy by estoppel created in favour of the Defendants. The statutory prohibition must, I think, have been intended to prevent any contract purporting to confer exclusive occupation of the land or any part thereof.” (at 111D-H)

82.  Section 4 of LMPO and the case of Fung Siu Kam came to be closely examined subsequently by the Court of Appeal consisting of Rogers VP, Le Pichon and Yuen JJA in Yip Alice & Ors v Wong Shun (No. 2) [2003] 2 HKC 528.  The plaintiff now relies heavily on this case and submitted that this court should follow it rather than Fung Siu Kam.

83.  In Yip Alice, the plaintiffs sued for mesne profits for trespass and possession of a piece of land they entered in 1960s as squatters and which by 2 successive agreements made in 1986 and 1997 the defendant was given occupation of the restaurant situated thereon and managed it.  The plaintiffs won before Deputy High Court Judge Reyes SC (as he then was).  The defendant appealed and the issue calling for decision was essentially the same illegality point here.  It was common ground in the appeal that the land involved was “unleased land” within the meaning of LMPO.

84.  In her judgment, Le Pichon JA first observed that Fung Siu Kam was distinguishable.  However, as the appellant submitted that despite the distinction the contract there still purported to grant a right to “occupy” the land within the meaning of, and caught by, section 4 of LMPO and the contract was therefore still unenforceable, the learned Lady Justice went on to observe relating to the reason for judgment given in Fung Siu Kam, thus:-

“In Fung Siu Kam, Huggins VP considered that the question was whether the prohibition against occupation of Crown (now Government) land was intended for the benefit of the public at large or merely for the benefit of the Crown/Government. He seemed to suggest that they led to different consequences. The difference is not readily apparent since the public at large has no right to enter Crown/Government land, and the public can only indirectly benefit through the Crown/Government as landlord. Neither could it be said that the public interest has been harmed by the running of the restaurant, which would lead a court to deprive the plaintiff of the benefit of the contract. In this respect it may be noted that the Government has taken no steps against the restaurant, despite the fact that a number of departments knew of its existence. Moreover, it is difficult to see what benefits the public can derive from depriving the parties of their civil remedies. In the instant case, the person who stands to reap a windfall would be the defendant: he would be in the happy position of being able to retain all profits of the business and not having to pay the agreed monthly fixed fee to the plaintiffs for the privilege of running the restaurant.”

85.  The learned JA then considered the issue “whether as a matter of statutory construction, the effect of section 4 is to deprive parties of their civil remedies where the contract or its performance necessarily implicates an infringement of the section”[18]. Her Ladyship opined that section 4 and section 6 must be read together to ascertain the legislative intent and that when read together, the statutory scheme was that section 4 provided for a general prohibition which did not become unlawful under LMPO, and that the occupation of unleased land was rendered “unlawful” unless and until a notice issued under section 6(1) was not compiled with. Her Ladyship further noted that the issuance of a notice under 6(1) was discretionary rather than mandatory.  Her Ladyship then held that such being the scheme, it could hardly have intended that where a contract or its performance involved a contravention of section 4, the parties should be deprived of their civil remedies.  Her Ladyship further reasoned that the interpretation advocated by the appellant would render the acquisition of possessory title against the government land impossible as such adverse possession must necessarily have contravened section 4 of LMPO.

86.  The learned JA then considered and rejected the contention that the contract should not be enforced due to public policy reason and reminded that:-

“One important element of public policy is that stated by Lord Wright in Vita Food Products Inc. v Unus Shipping Co. Ltd. [1939] AC 277 at 293:

“Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be void are in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds.”

87.  The learned JA concluded:-

“In ascertaining the legislative intent behind section 4, one has to read that together with all relevant provisions of the Ordinance, in particular, section 6 and bearing in mind the difference between that regime and the old regime, i.e. section 10 of the Summary Offences Ordinance. Adopting that approach, the occupation of unleased land of itself is plainly not ‘unlawful’ for the purposes of the Ordinance although a civil action for trespass may be maintainable against the person occupying the land at the suit of the Crown/Government as a result. As a matter of construction, I see nothing in the Ordinance that requires depriving parties of their civil remedies in relation to the making or performance of a contract such as the management agreement, albeit that it can only be performed by occupying unleased land.”

88.  In a succinct judgment, Yuen JA first commented on Fung Siu Kam thus:-

“As for the defence based on the Ordinance, whilst this case is distinguishable on the facts from Fung Siu Kam in that no tenancy was created here, I share concerns about the decision in that case.”[19]

89.  The learned JA then held, and I quote:-

“26. However, just because a contract or its performance is implicated with breach of a statute, that does not entail that the contract should be avoided. Section 4 (and the rest of Part II) is silent as to the civil rights of parties who have dealings with each other regarding occupation of unleased land. “Where the [Ordinance] does not expressly deprive the plaintiff of his civil remedies under the contract, the appropriate question to ask is whether, having regard to the Ordinance and the evils against which it was intended to guard and the circumstances in which the contract was made and to be performed, it would in fact be against public policy to enforce it” (Chitty on Contracts, para 17-144).

27. In seeking to answer this question, the focus must be, not on what acts are prohibited by the legislation, but on whether the legislation is intended to prohibit the contracts in question (Chitty on Contacts, para 17-140).  

28. It seems to me, reading Part II as a whole, that it was intended to provide the Government as land-owner with “extra-civil law” remedies to enable it to manage its unleased land more effectively.  Thus …

29. Thus even if s.4 itself may be said to be “silent” as to the effect of its contravention, the way Part II is set out shows that the effect of its contravention is express - in the specific provisions of s.6. 

30. If the mischief of Part II is effective land management for the Government as land-owner, I do not see why s.4 should impact (independently, without more) upon the civil rights and remedies of private parties whose dealings involve the occupation of the land, and I can see nothing in Part II that points clearly (expressly or impliedly) to such an intention of the legislature. …”[20]

90.  Rogers VP agreed with the judgments of both JJA.

91.  In my view, Fung Siu Kam and Yip Alice decided differently on the interpretation of section 4 of LMPO regarding the question whether the effect of section 4 is to deprive parties of their civil remedies where the contract or its performance necessarily implicates an infringement of the section.  The former held such a contract unenforceable while the latter held it enforceable.  Both however were Court of Appeal decisions binding on this court. That being the case, this court in its humble and respective judgment finds the analysis and reasoning in Yip Alice more compelling and would follow it and hold that section 4 does not intend that its contravention would deprive 游炎記 of the civil remedies it otherwise has.

92.  I find support in the fact that Yip Alice has since been followed and applied in a number of cases, namely :-

(a)  譚煥弟 及 文玉英 LDPD 928/2014[21] , in which judgment was entered against the defendant tenant whose defence - that the contract was unenforceable due to illegality in that the subject land was government land permitted to be used by a third party under a government permit - was rejected;

(b)  關淑芝 及 司徒立豐  LDPE 525/2021[22], in which leave to appeal was refused to be given to the tenant when the Lands Tribunal rejected a proposed ground of appeal that part of the rented premises consisted of government unleased land which rendered the tenancy unenforceable; and

(c)  Top Winner Properties Limited v So Ma Kam & Another LDPD 2350/2017[23], in which the Lands Tribunal refused to set aside a default judgment as it rejected, among others, the defendant tenant’s argument that the tenancy was illegal and unenforceable as structure on the land contravened section 12 of LMPO.  Fung Siu Kam was cited but Yip Alice was followed.

93.  Mr Cheung also relied on the dictum of Leonard J in the Court of Appeal case of Li Wing-sun v Wu Man (1978) HKLR 575 and argued alternatively that the subject tenancy is nevertheless unenforceable today as the operative illegality lied in the subject tenancy contravening the repealed section 9 (and later changed to section 10) of SOO.  The dictum was:-

“… the occupation was continuous, and the change in law [repealing of section 10 of SOO and its replacement by section 4 of CLO] did not make it legal; it remained illegal although no longer an offence”[24] .

94.  However, in Fung Siu Kam Huggins VP, who was presiding Li Wing-sun, clarified what Leonard J said in Li Wing-sun and rejected a similar argument advanced in that case based on Leonard J’s said dictum, thus:-

“Mr. Justice Leonard did not consider what might have happened had the plaintiff acquired a new tenancy. He referred to a variation of the rent payable under the tenancy and took the view that the defendant held under "the original agreement as varied by the agreement to increase the rent", which he said was and remained illegal. He said at p. 579 :

"... the occupation was continuous, and the change in law did not make it legal; it remained illegal although no longer an offence".

It is argued that the emphasis there upon the continuity of the occupation showed that occupation begun under an illegal tenancy could never become lawful even if continued after the statutory provision creating the illegality had been repealed. I do not think the judge had any such proposition in mind.” (my emphasis)

95.  Thus, there is no basis for Mr Cheung’s such alternative argument. Moreover and with respect, the contention that the subject tenancy continues to be criminal today as it continues to contravene the repealed section 10 of the SOO, which was repealed almost 50 years ago, is most absurd, and I do not accept it.

96.  In respect of public policy reason, like Le Pichon JA in Yip Alice, I find it difficult to see what benefits the public can derive from depriving the parties of their civil remedies, and I also find it true here that the person who stands to reap a windfall would be the defendant: he would be in the happy position of continuing to remain in D’s Shop without paying anything.

97.  Moreover, at trial the parties did not disagree that many of the other smaller laans in the Market might very well have been operating their shops for decades under similar arrangements as the one between 游炎記 and 鈞泰隆 and in all these years the government has found it unnecessary to take any steps to change or disturb these arrangements.  Therefore, this court cannot see how it can conclude that the public would be benefitted by holding an arrangement such as these to be unenforceable, thereby potentially allowing such sub-tenants to reap a windfall, disturbing the status quo, and creating uncertainty and instability in the Market.

98.  By reasons of the above, I reject the defendant’s contention that the oral tenancy between 游炎記 and 鈞泰隆 was or is void or unenforceable for illegality or for being contrary to public policy.

ARREARS OF RENT AND MESNE PROFITS

99.  The defendant submitted that no arrears of rent or mesne profits ought to be awarded to the plaintiff as he should not be allowed to reap any benefit from an illegal act.

100.  Having dealt with the illegality point above and concluded that section 4 of LMPO does not intend to deprive the parties their civil remedies, I reject the defendant’s said contention as the plaintiff’s entitlement to rent and mesne profits is part of the civil remedies he otherwise is entitled to.

101.  It is not disputed that a valid notice to quit was served to take effect on the last day of the 8^th lunar month in 2016.  It is also not disputed that rent for D’s Shop has not been paid for the 5^th to 8^th lunar months of 2016.

102.  As given in evidence by 游麗榕 and shown in the bank passbook, which I accept, 鈞泰隆 has been paying 游炎記 rent in the sum of HK$5,000 a month since August 2015, albeit that some of the monthly payments were late.  I thus find that 鈞泰隆 has agreed to the increase in rent from HK$2,300 a month to HK$5,000 a month from August 2015 onwards.

103.  Therefore, rent for 4 months, totalling to HK$20,000, has not been paid by the defendant.  I would also assess mesne profits at the rate of HK$5,000 a month from 1 October 2016 until the delivery of vacant possession. 

DISPOSAL

104.  In the premises, I give judgment to the plaintiff and dismiss the counterclaim.  I would order the defendant to yield to the plaintiff forthwith vacant possession of the part of the Premises he occupies.

105.  I would also order the defendant to pay to the plaintiff arrears of rent in the total sum of HK$20,000 with interest at 5% per annum from the date of writ herein to the date of this judgment, thereafter at judgment rate until full payment, and mesne profits at HK$5,000 a month from 1 October 2016 until the delivery of vacant possession.

106.  On a nisi basis, costs of this entire action, including all costs reserved, if any, with certificate for one counsel, shall be paid by the defendant to the plaintiff.  This costs order nisi will become absolute within 14 days unless any party seeks to vary.

107.  Lastly, I thank all counsel for their assistance.