PANG SAI YU the manager of ‘PANG SHE YAN TSO’ v. WINNER DAY INVESTMENT LTD AND OTHERS

CACV 140/2024, [2025] HKCA 1133

On appeal from [2024] HKCFI 548

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 140 OF 2024

(ON APPEAL FROM HCMP NO. 788 OF 2014)

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D E C I S I O N

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Hon Cheung JA (giving the Decision of the Court) :

I.  Introduction

1.  This is the renewed application of the 1^st, 2^nd and 4^th defendants by summons dated 17 March 2025 (as amended on 12 May 2025), seeking a stay of execution pending appeal against the judgment of Deputy High Court Judge Winnie Tsui (as she then was) (‘Judge’) dated 14 March 2024 ([2024] HKCFI 548) (‘Judgment’). Unless otherwise stated, we will adopt the same definitions used in the Judgment.

2.  Having considered the papers, we are of the view that it would be appropriate to dispose of this application on paper.

II.  Background

3.  The background facts and the parties’ respective cases are more fully set out at [1]-[19], [33]-[43] and [73]-[145] of the Judgment. For the purpose of this application, it suffices to highlight the following.

4.  Pang She Yan Tso (彭思隱祖) (‘Tso’) is the registered owner of the Lots. Since 2004, Pang Sai Yu 「彭世裕」 (‘PSY’) and Pang Kwan Cheung 「彭坤祥」 (‘PKC’) had been the two managers 「司理」of the Tso. In October 2017, PKC passed away. The Tso acts through its only manager, PSY, in this action.

5.  The 2^nd and 4^th defendants are members of the Tso. The 4^th defendant was an officer 「值理」of the Tso from March 2006 to June 2013. The 4^th defendant is also the sole director and shareholder of the 1^st defendant.

6.  It is the plaintiff’s case that since 2006, the defendants[1] have exclusively occupied the Lots for operating the car park business without its consent. The plaintiff had no knowledge that the Lots were used as a car park by the defendants until it made the discovery in 2013. Such exclusive occupation amounts to trespass.

7.  The plaintiff also claims against the 4^th defendant for breach of fiduciary duties. Knowing that the Lots belong to the Tso and the Tso had never authorised any of the defendants to use them, the 4^th defendant allowed the 2^nd defendant, and caused the 1^st defendant, to exclusively occupy the Lots.

8.  The plaintiff further claims against the 1^st and 2^nd defendants for knowing receipt and/or dishonest assistance. As the 1^st and 2^nd defendants knowingly and dishonestly took part in the 4^th defendant’s wrongful acts of breach of fiduciary duties, it would be unconscionable for them to retain the benefit or profit derived from the business.

9.  In the premises, the plaintiff seeks, inter alia, to recover possession of the Lots and elects to seek damages for trespass, in the form of mesne profits, against the defendants.

10.  The defendants deny all claims by the plaintiff. It is the defendants’ case that in late 2005, PKC, one of the two managers acting on behalf of the Tso, granted an oral lease of the Lots to the 2^nd defendant at an annual rent of $1,000, together with a yearly option to renew. The oral lease commenced on 1 January 2006. In late 2006 and each subsequent year (until late 2012), the 2^nd defendant exercised the option and paid the annual rent to the Tso.

11.  Between 2006 and 2008, the 2^nd defendant incurred a total sum of $702,000 on site formation works on the Lots and operated a car park there. In 2008, the 2^nd defendant sub‑leased the Lots to the 1^st defendant. PKC was informed and he gave his consent to the arrangement. Since then, the 1^st defendant has continued to operate the car park on the Lots. In late 2013 and late 2014, the 2^nd defendant sought to exercise the option to renew the oral lease by paying the annual rent to the Tso but the Tso refused to accept them.

12.  The defendants contend that the Tso was in breach of the oral lease by refusing to accept payment for the rent for the years 2014 and 2015. The defendants further claim that the Tso was estopped from denying the 2^nd defendant’s right to renew the oral lease.

13.  In the premises, the 2^nd defendant seeks a declaration that he is entitled to exercise the option to renew the oral lease and an order for specific performance or damages. As an alternative, the 2^nd defendant asks for the sum of $702,000 for the enhanced value of the Lots under restitution.

14.  At the trial, the defendants raised a new issue that the plaintiff is under the burden to prove ouster vis-à-vis the 2^nd and 4^th defendants. It is the defendants’ contention that the 2^nd and 4^th defendants, being members of the Tso, are beneficial co-owners of the Lots. No action of trespass can be maintained against them unless there is ouster. The plaintiff has to show that the 2^nd and 4^th defendants have occupied the Lots to the exclusion of other members of the Tso.

III.  The Judgment

15.  After an eight-day trial, the Judge handed down the Judgment on 14 March 2024, upholding all the plaintiff’s claims against the defendants and dismissing the 2^nd defendant’s counterclaim. The relevant findings by the Judge may be summarised as follows :

1)  The oral lease alleged by the defendants did not exist. The alleged conversations with PKC in late 2005 (concerning the oral lease and the site formation works) and 2008 (concerning the sub‑lease) did not take place.[2]

2)  The 2^nd defendant has since January 2006, and he, together with the 1^st defendant, have since October 2007 been in exclusive possession of the Lots and have been operating a car park for profit. Neither PKC nor PSY had any knowledge about it before 2013. Such exclusive possession of the Lots is without the consent or authorisation of the Tso.[3]

3)  At any annual worship day ceremony, members of the Tso would not be in a position to find out that the Lots had been leased to the 2^nd defendant. This is because in general the lot numbers of the land leased out or its location would not be recorded in the accounting books and would not be read out on the day.[4]

4)  The site formation works had been carried out at the Lots. However, because of the lack of documentary evidence, the Judge was unable to find who had paid for the works and how much had in fact been paid for such works.[5]

5)  Some time in 2013, the 4^th defendant crossed out the identity of the paying party in the entries for 2009 to 2013 in the accounting books by substituting it in each entry with the words ‘PTU’. He did so to conceal the true identity of the paying party, to cover up the 1^st and 2^nd defendants’ use of the Lots from members of the Tso, and to conceal his own involvement in it.[6]

16.  On the issue of ouster, the Judge rejected the defendants’ submissions on the ground that ouster is not an issue disclosed by the pleadings. Further, since the defendants asserted in the pleadings that their right to occupy the Lots was pursuant to the oral lease and the sub‑lease, it must be taken to mean that they have been occupying the Lots on an exclusive basis. The Judge also did not accept the defendants’ proposition that the Tso cannot grant a lease to a member because co‑owners of land cannot confer exclusive possession on one of the co‑owners.[7]

17.  In the premises, the Judge ordered the defendants to deliver up vacant possession of the Lots to the plaintiff and awarded damages in the favour of the plaintiff.

IV.  The defendants’ appeal

18.  By a Notice of Appeal dated 11 April 2024, a Supplementary Notice of Appeal dated 24 June 2024 and a Further Supplementary Notice of Appeal dated 17 March 2025 (all of which were amended on 12 May 2025), the defendants seek to set aside the Judgment. Their grounds of appeal may be summarised as follows :

1)  Ground 1: The Judge erred in law in rejecting the defendants’ contention that the plaintiff could not confer exclusive possession of the Lots to the 4^th defendant, who is a male member of the Tso and hence holds a lifetime interest in the Lots.

2)  Ground 2: The Judge erred in law in ruling that, since the issue of ouster was not canvassed by the pleadings, the plaintiff’s trespass claim did not call for an enquiry whether there had been an actual expulsion of other members of the Tso by the 4^th defendant.

3)  Ground 3: The Judge erred in overlooking a list of evidence when ruling breach of fiduciary duties by the 4^th defendant, and dishonest assistance and/or knowing receipt by the 1^st and 2^nd defendants.

4)  Ground 4: The Judge, when finding that the 4^th defendant concealed the defendants’ involvement in the car park business, overlooked his references to the Lots in the accounting books.

5)  Ground 5: The Judge overlooked the significance of the site formation works carried out on the Lots that it was impossible that no members of the Tso discovered such works.

6)  Ground 6: The Judge erred in law in not giving any credit to the enhancement works carried out at the Lots by the 2^nd defendant.

V.  Defendants’ summons below for stay of execution

19.  By a summons dated 27 June 2024, the defendants applied for stay of execution pending appeal. At the time when the stay application was made at the court below, the defendants, pursuant to the Notice of Appeal and the Supplementary Notice of Appeal, only appealed against the Judge’s rulings on the trespass claim (Grounds 1 and 2) and the counterclaim (Ground 6).

20.  On 23 December 2024, the Judge dismissed the defendants’ application ([2024] HKCFI 3685; ‘Decision’). The Judge’s ruling is summarised as follows :

1)  The defendants’ ground for the stay application only concerns the orders relating to the Lots. They have not put forward any reason for staying the order for damages.[8]

2)  Assuming that the defendants succeeded in appeal and trespass claim would be dismissed, based on the findings and rulings in the Judgment, the plaintiff should still be entitled to the orders relating to the Lots. In light of the undisputed fact that only the managers of the Tso have the authority to manage its properties, the defendants’ use of the Lots for car park was not authorised by the Tso and the defendants should cease operating the car park and return the Lots to the Tso. Hence, there is no reason to stay the execution of the orders relating to the Lots.[9]

3)  Further, even if the plaintiff’s trespass claim was dismissed, the defendants would remain liable to pay equitable compensation under the other causes of action. Even if the defendants’ counterclaim succeeded, it would serve as a set off against the equitable compensation payable by the defendants. However, the defendants have not shown that they would not be liable to pay the plaintiff if they succeeded on appeal. In any event, the defendants have not put forward any reason for staying the order for damages. As a result, there is no reason why the order for damages should be stayed.[10]

VI.  Renewed application for stay

21.  The defendants put forward the following reasons for their renewed stay application :

1)  The defendants’ appeal has a strong likelihood of success.

2)  The 1^st defendant’s business would suffer irreparable damages if stay were not granted as it derives its income solely from operating the car park on the Lots.

3)  If the defendants succeeded in the appeal, the plaintiff would be unable to repay the defendants because the bank accounts of the Tso are now frozen.

4)  No prejudice would be occasioned to the plaintiff if stay is granted.

22.  The plaintiff’s position is that the Summons should be dismissed on the following grounds :

1)  The defendants’ appeal has no merits.

2)  There is a delay of more than three months for the defendants to take out the renewed stay application.

3)  The plaintiff had been deprived of the Lots for a long time. Prejudice would be occasioned to the plaintiff if stay is granted.

VII.  Principles

23.  The principles governing an application for a stay of execution pending appeal are well-established and stated as follows in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 :

1)  An appeal does not operate as a stay of execution (Order 59, rule 13(1) of the Rules of the High Court (Cap 4A)).

2)  The burden being on an appellant to justify its claim for a stay, it has to demonstrate that good reasons exist for a stay pending appeal. If the appeal is strong, that may itself be enough for a stay to be granted. However, if the appeal is only arguable, the appellant would need to provide the court with additional reasons to justify a stay, e.g. that the appeal would be rendered nugatory if a stay were not granted.

3)  In assessing the strength of the appeal for the purpose of a stay application, it is impracticable and undesirable to go deeply into the merits. A broad-brush approach is called for.

VIII.  Our view

24.  At the outset, we note that much of the submissions made on both sides are directed towards the merits of the appeal against the Judgment. We do not find it necessary or appropriate to be drawn into an assessment of the degree of merits (or lack of merits) in the various grounds of appeal. Taking a broad-brush approach, we take the view that the merits of the appeal do not of themselves justify the grant of a stay. The Judge’s decision on the alleged lease is based on a finding of fact by her. The defendants’ arguments on the law have no ground to stand unless they could successfully challenge the finding on the lease.

25.  Where there is no very strong ground of appeal, the starting point is that the winning party should be entitled to the fruits of his success. It is necessary for the appellant to show additional good reasons to justify a stay.

26.  In our view, the defendants are unable to demonstrate any good reasons to justify a stay.

27.  First, we refuse to accept the defendants’ submissions that the 1^st defendant would suffer irreparable damage if stay is not granted for the orders relating to the land.

28.  As the Judge found at [20] in the Decision, it is not disputed that only the managers of the Tso have the authority to manage the Lots. Even on the defendants’ case, the alleged oral lease was granted by PKC alone to the 2^nd defendant. Applying the unanimity principle, the oral lease, even if it existed, would not be binding on the Tso.[11] For this reason alone, the defendants’ operation of the car park on the Lots was not authorised by the Tso and the defendants should deliver vacant possession of the Lots to the Tso.

29.  The plaintiff had been deprived of the use of the Lots since 2006. If stay were granted, the plaintiff would suffer prejudice when the defendants continue to operate the car park business on the Lots for profits.

30.  Second, we are unable to accept the defendants’ argument that they would be prejudiced if stay is not granted for the orders relating to the damages. It is not the defendants’ suggestion that the assets of the Tso are not sufficient to repay them if the appeal succeeded. Even if the bank accounts of the Tso are now frozen, there is no reason why the defendants would be unable to enforce an order setting aside the Judgment, such as by way of garnishee order, to recover the damages already paid.

31.  In the circumstances, in the absence of any good reasons to justify a stay, we will refuse to grant a stay of execution of the Judgment.

IX.  Conclusion and costs

32.  Accordingly, the defendants’ summons is dismissed. As to the costs of this application, we order the defendants to pay the plaintiff’s costs to be summarily assessed on papers. The plaintiff is to file and serve its statement of costs within 10 days and the defendants are to file and serve their objection within 10 days thereafter.