CHOI LAI KAM v. TANG KAM CHOI

HCA4165/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4165 OF 1997

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J U D G M E N T

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1. The Plaintiff's claim is against the Defendant for possession of land known as Lot No.855B in Demarcation District No.132, Tuen Mun, New Territories; an injunction against the Defendant entering or remaining on the property; damages to be assessed and costs.

2. The Plaintiff's case is that she became the owner of the suit land, which is agricultural land, in 1979. The Defendant is the personal representative and surviving spouse of one Lo Shing Man who had entered into a tenancy from year to year with the Plaintiff's predecessors-in-title. The Plaintiff gave Notice to Quit to Lo Shing Man and/or the Defendant on 26th September and 7th November 1979, but the Defendant has since failed or refused to give up vacant possession. Further the Defendant is wrongfully in occupation of the agricultural land, using it for occupation which renders the Government Lease liable to forfeiture.

3. The Defendant's case is that the tenancy is protected under Part II of the Landlord and Tenant (Consolidation) Ordinance, and the Notices to Quit given in 1979 were invalid to terminate it. In the alternative, the Notices were not validly served. In the further alternative, by allowing the Defendant to remain in occupation for 16 years without action, the Plaintiff had implicitly granted a new yearly tenancy. The Defendant denies breach of terms of the Government lease, and says in the alternative that if there was a breach the Plaintiff sanctioned it. The Defendant further pleads that the action is not maintainable because of laches and acquiescence on the part of the Plaintiff in allowing continued occupation without legal action since 1979, and in the alternative has waived her rights to take out the present action.

History

4. The following facts are not in dispute, uncontradicted, or otherwise sufficiently supported by agreed documents.

5. The Defendant, Madam Tang Kam Choi, married Mr Lo Sing Man in 1946 when she was 20 years old. They became friendly with Mr Lo's work colleague, Mr Li Chuen Chi and his wife, Madam Hon Sau Tin. On 11th June 1959, Madam Hon became the registered owner of the suit land, and on the same day Li Chuen Chi and Lo Shing Man entered into a written lease agreement whereby the land, which was referred to as agricultural land, was leased to Lo Shing Man from 1st July 1959 to 30th June 1969 at an annual rent of $150 per month.

6. Madam Hon died in 1965. She left the suit land to her son Li Shu Ming but it was not to vest in him until he reached the age of 30 years. Her executors were Yau Chuen Kwan and Madam Chau Sau Har. They agreed with Mr Lo and the Defendant an increased rent of $200 per annum. After the expiry of the term of the written lease, the executors allowed it to continue from year to year.

7. In 1972 Mr Lo died and the executors allowed the Defendant to continue as tenant on the same terms.

8. The suit land was vested in Li Shu Ming in 1979. By then he was married to the Plaintiff, Madam Choi Lai Kam. By a deed of gift dated 18th September 1979 he transferred the suit land to her. They subsequently divorced.

9. At some point the Defendant and her family took up residence on the suit land. I will deal with this further below. In any event, in 1968 the executors gave written permission for the erection of structures on the land. This was communicated to the District Office, Yuen Long, which issued a letter of approval for a period of one year for the erection and maintenance of existing structures on the land, but specified that the structures were to be used only for agricultural purposes and not for habitation. This approval was continued from year to year. The Defendant paid the annual fee for the Modification of Tenancy to the Government. At some time in the 1990s, the Defendant erected brick structures, and she and her family lived in them. The Lands Department on 13th August 1998 revoked the approval for Modification of Tenancy.

The Issues

10. The primary issue is whether or not the lease is a lease of agricultural land or a protected tenancy under Part II of the Ordinance. If it is agricultural land, the next question is whether the notices to quit were valid. If they were, the further questions of implied tenancy, laches and acquiescence, and waiver then arise.

Evidence

11. Both parties relied on their own witness statements. Each party, having filed one statement, filed a further one in rebuttal of what the other had said. Inevitably this involved some change from or inconsistency with what had been said earlier. The Plaintiff filed a third statement which was mostly a mixture of what she "strongly believed" and argument, with very few nuggets of fact in it. It might have been preferable if the statements had not been adopted as evidence-in-chief, but rightly or wrongly both counsel agreed that they should be.

The Plaintiff's Evidence

12. The Plaintiff's evidence is that she was told by the trustees of Lo's tenancy which was for agricultural purposes. She saw the land before she married Li Shu Ming. She saw sheds for rearing pigs and chickens and a small dilapidated hut which she presumed was used for resting but not habitation by the farmer.

13. After the Plaintiff acquired the land she told her solicitors to issue a Notice to Quit. They did on 26th September 1979. Then they told her the tenant was dead. They issued another Notice to Quit to Lo's personal representatives. She relies on the affirmations of solicitor's clerks relating to postal service of the Notices to Quit.

14. The Plaintiff told the Defendant in 1979 that she had become the owner of the land and on a number of occasions subsequently told her that the rent was too little. Though the Defendant appeared to agree, she said that she must consult her son about it; and ultimately no answer was forthcoming. This happened about every year since 1979. In the early 1980s the Plaintiff suggested that the Defendant buy the land; the Defendant offered $50,000 which the Plaintiff thought was too little.

15. The Plaintiff says that she never received any rent since she became the owner. She complained; the Defendant told her that she had paid, and if the Plaintiff had not received the money, it was her own fault and the Defendant should not be liable.

16. The Plaintiff had not received any rent by registered mail or any letters from the Defendant, though she had told the Defendant how to communicate with her. She had moved from her address in Yuen Long in 1987 and had told the District Lands Office, Tuen Mun, of the move. Nevertheless she had never received any rental payments from the Defendant.

17. The Plaintiff did not take any action to evict the Defendant because she could not afford to instruct solicitors. In February 1997 she heard about squatter's rights. She went to look at the land and found that there were some erections on the land. It appeared that the primary user had been changed. In early 1997 she asked the Defendant to deliver vacant possession but this was ignored. In about July 1997 she told the Defendant that she could not stay without paying rent; she must pay a new rental rate, together with all arrears, or go. The Defendant asked the Plaintiff to sell; the Plaintiff asked for $3.5 million; no agreement was reached. In 1997, she sought legal advice.

18. Cross-examined the Plaintiff said that she had gone every year to the suit land to see the Defendant, and had asked her to give back the land or compensate her. She had asked for an increase to $1,500 per annum. She had told the Defendant that if an increase of rent could not be agreed, the Defendant should give back the land, but the Defendant replied that it was not up to the Plaintiff to tell her to give it back because she had been promised it by the former owner.

19. She knew that the Defendant had been sending $200 per annum to her old address; but she had not accepted this because the figure was unreasonable. She had given a new address but the Defendant went on sending the money to the old one. She had never known that the land was being used for human habitation until she went there in 1997. Asked again if she had been there before 1997, she said that she had not and insisted that she had always thought that the Defendant had used it for pig and chicken farming rather than habitation. Re-examined, she said that communication had been by telephone up to 1997. She had always been claiming for compensation or for increased rent.

The Defendant's Evidence

20. The Defendant says that she is aged 72. When she was about 20 she married Lo Sing Man; that was in about 1946. Lo had a colleague at work called Li, whose wife was Hon Sau Tin. The families became close. In 1959 she and her husband wanted to buy the land but could not afford it. So Hon Sau Tin bought it and leased it to Lo Sing Man. Defendant knew that they paid $150 per annum. There were no structures on the land so they put up a wooden hut and kitchen shed, to live in. After one to two years, they decided to keep some poultry and with verbal permission of Madam Hon, they put up four chicken coops, three pigsties and a store.

21. Madam Hon died in 1965. The executors put up the rent to $200. They gave written permission to keep the structures. In 1969 the permission was registered with and approved by the District Office. They paid Modification of Tenancy fees to the Government thereafter and got receipts for them.

22. In 1972 Lo Sing Man died. The executors of Madam Hon agreed to let the Defendant continue to occupy the land at a rent of $200 per annum. Until 1979, she got receipts for the rental payments.

23. In 1979 the Plaintiff told the Defendant that she had become the owner of the land. After that the Defendant received some letters, to which, because she could read neither Chinese nor English, she did not pay any attention. These are identified in the statement as Items 21 and 22 in the Defendant's List of Documents. The documents which appear there are in fact the two Notices to Quit dated respectively 7th November and 26th December 1979.

24. After that the Plaintiff approached the Defendant on various occasions and asked her to pay rent or buy the land. No specific proposals for higher rent were ever made. She had indeed offered $50,000 for the land but that was in response to an offer by the Plaintiff to sell for $120,000, which the Defendant could not afford. The Plaintiff never asked her to move out. No agreement as to increased rent or sale was ever reached.

25. The Plaintiff had offered to sell for $2.5 million, and later for $3.5 million in 1997. She had previously asked for rent of $5,000 per month, some years before.

26. The Plaintiff never gave her any address so she sent the annual rent of $200 to the address of the Plaintiff which she obtained from the Land Registry. At one stage the Plaintiff asked for the cheques; the Defendant told her they had all been sent back by the post office and she did not know where they were now.

27. In 1990 because of the introduction of animal waste laws, the Defendant stopped raising pigs and chickens in exchange for compensation from Government. A few years later the wooden structures were demolished in a typhoon, and the Defendant, thinking she was the tenant, put up the three brick structures at a cost of $260,000. After that, there were negotiations for the sale of the land by the Plaintiff to the Defendant but no agreement was ever reached. Throughout, the Plaintiff never said anything about terminating the tenancy, nor did she ask the Defendant to move out, until March 1997 when correspondence came from the Plaintiff's lawyer.

28. In March 1998, the Defendant received a letter from the District Land Office saying that her family had breached the conditions of the Modification of Tenancy Permit. Her sons rectified the problems and in April 1998 the permit was renewed for a new term.

29. Under cross-examination, the Defendant said that she knew the suit land was agricultural land, but she had been allowed to build a house. Government permission, or ratification of the landlord's permission, had been obtained. It was put to her that the Government approval for Modification of Tenancy had specifically excluded human habitation but she insisted that the structure was allowed to be erected as a residence.

30. As to the Notices to Quit, the Defendant said that she had received correspondence but not read it because she was illiterate. Someone had posted something on the gate but children had kicked it around. It was put to her that in her written statement she had admitted receiving the Notices to Quit but she insisted that she had not known what the contents were.

31. The Defendant insisted that the Plaintiff had never told her to quit. She had all the time been asking her to buy the land at a price she could not afford. Later she admitted that the Plaintiff had told her to leave, but said that she had demanded compensation before leaving. No agreement about compensation or sale had ever been reached.

32. The Defendant said that the Plaintiff had not asked for $1,500 per annum but for $3,000 per month. Reminded of the figure of $5,000 given in her second witness statement she said that this latter figure must be correct.

Was the suit land subject to Part II of the Landlord and Tenant (Consolidation) Ordinance?

33. The suit land was let to the Defendant's husband in 1959. It was stated in the agreement to be agricultural land. I accept the Defendant's evidence that her husband rented the land for the family to live on. I accept that there was no building on the land, but that she and her husband erected wooden structures and lived in them. There is nothing to contradict this evidence. The Plaintiff's evidence that she saw only a structure which might have been used for resting and not habitation prior to 1972 may well be a mistake, but in any event does not mean that no one actually lived there. The Defendant and her family have lived on the suit land ever since 1959.

34. I have no doubt that the Defendant and her husband, with the consent of their landlord, also used the suit land for rearing pigs and chickens. This was communicated to the District Officer, as a kind of retrospective permission by the executors, in 1968, and approval was given for the existing structures. However, whatever may have been the Defendant's understanding of this approval, it quite specifically stated that the structures could only be used for agricultural purposes, and may not be used for domestic or industrial purposes or for human habitation. As I understand it, the Defendant has always been in breach of the Government lease, since she began dwelling on the land.

35. The Defendant says that Part II of the Ordinance applies. Counsel has referred me to the Ordinance as it stood in 1979. It is argued that the suit land comes under the definition of "domestic premises" in s.2, in that it was used wholly or primarily for human habitation, and "domestic tenancy" in s.51(1) because it was let as a dwelling; or, if it was not so let, it became so because in fact the primary user had become that of a dwelling with the consent of the landlord. The pig farming and chicken farming was a secondary user.

36. The Defendant further argues that the exclusion of "agricultural land" from the application of Part II, as it appears in s. 50(6)(c), does not apply. Section 50(6)(c) provides :-

"(6) This Part shall not apply to the following -

(c) a tenancy or sub-tenancy of agricultural land, which expression shall have the meaning assigned to it by section 36 of the Rating Ordinance, including such a tenancy or sub-tenancy where there is on the land a dwelling house occupied by persons working the land"

Agricultural land is defined in s.36 of the Rating Ordinance as :-

"land used as farm land, a fish pond, a market garden, an orchard or for animal husbandry".

37. Counsel argues that since the primary user was not animal husbandry, the suit land did not come within this definition.

38. It seems to me that Part II could not and did not apply to the suit land. Section 50(6)(c) excludes agricultural land which includes land on which there is a dwelling house occupied by persons working the land. By 1979 the Defendant's family was occupying a dwelling house of some sort on the land and the land was being used for animal husbandry. This was the situation covered by s.50(6)(c). I cannot see that it makes any difference whether the occupation or the animal husbandry was the primary user.

39. If I am wrong in this and regard must be had to what was the primary user of the land, it seems to me, on the available evidence and in particular the agreed documents, that in 1979 the suit land could not have been described as being used wholly or primarily for human habitation. The Defendant's evidence is that in the beginning her husband constructed a wooden hut and a kitchen shed which became the family home. In 1968 Government approval was obtained for eight structures, all of which were supposed to be for agricultural purposes. The dimensions are given in the schedule to the District Officer's letter which appears in the agreed bundle at p.67. In 1990, as it appears from the "acquittance roll" at p.104 of the bundle, the compensation which the Defendant obtained under the Livestock Waste Control Scheme was for ten structures, all of which were described as being for agricultural purposes, e.g. "chicken shed", "boar, sow and corridor" and the like. The situation was obviously not one of a dwelling house with a couple of pigs and chickens in the kitchen garden. Quite clearly the land was being used for animal husbandry.

40. I conclude that the tenancy was not a protected tenancy. It was a common law tenancy.

Notices to Quit

41. The Notices to Quit were served on the Defendant. There are agreed affidavits as to service, and the Defendant herself has identified in her witness statements, which she confirmed in evidence, the Notices to Quit as documents which she had received. The tenancy was continuing from year to year. Notice of half a year was sufficient at common law. The Notices and in particular that dated 7th November 1979, were given more than half a year prior to the date of expiration of the current year of the tenancy, namely 1st July 1980. They were valid.

Implied Tenancy

42. Both parties were sufficiently inconsistent in their evidence for me to say that neither was totally trustworthy. However, it is clear from the evidence of both of them that since 1980 they have been in contact at least annually. The Plaintiff has, on her own admission, been asking for more money from the Defendant; and there have been various unsuccessful attempts to reach agreement for sale and purchase of the suit land.

43. The Plaintiff says that she insisted throughout the period that the Defendant quit; the Defendant denies this.

44. The Defendant sent the rent money each year since 1980. In 1980 she sent it to the Plaintiff's solicitors who returned it saying that the Plaintiff intended to take proceedings against her. Thereafter she sent it to the Plaintiff's address at Kam Tin. The Defendant has produced copies of the returned envelopes for 1983, 1985, 1986 and 1987 onwards. The Plaintiff says she moved house in 1987. It seems unlikely that the Plaintiff gave the Defendant any new address; but at the same time there is no explanation as to why the Defendant went on sending money to an address from which her letters were constantly returned. In any event the payments were certainly being returned from 1983 onwards. The Plaintiff had obviously had legal advice in 1980 about the possible effect of accepting rent. It is more probable than not that the Plaintiff never accepted any payment of rent from 1980 onwards.

45. A new tenancy cannot therefore be set up on the basis of rent accepted after the Notice to Quit. Nor would a mere demand for higher rent imply a new tenancy because there was never any consent to it. I do not see how allowing the tenant to remain could set up an implied tenancy even if the Plaintiff did not actually continue to renew her demands that the Defendant quit the suit land, in the absence of some other act such as acceptance of rent.

46. I conclude that there was no implied tenancy.

Laches and Acquiescence

47. The Defendant's pleaded particulars in respect of laches and acquiescence are the same. The Plaintiff says that because there is a statutory limitation period the defence of laches is not available. She relies on Incorporated Owners of Chungking Mansions v. Shamdasani, [1991] 2 HKC 342 in support of this. There is no doubt that a statutory limitation period exists but it has not been reached. I accept that the defence of laches is not available.

48. The Defendant pleads that the Plaintiff was aware of her rights since 1979 but took no legal action; that though she approached the Defendant to discuss the review of rent and the sale of the land, she never indicated to the Defendant that she would take action to evict her; and that the Defendant in reliance on and induced by this conduct, believed that the Plaintiff had abandoned her right to take further steps and had therefore paid the Modification of Tenancy fees to the Government and incurred a sum of $260,000 in building three brick huts.

49. It is indeed the case that since 1980 and up to 1997, the Plaintiff has taken no legal action to eject the Defendant, following the valid Notices to Quit. She says she could not afford it and that may very well be true. As I have indicated there have been discussions, but no agreement, about increase of rent and about the sale of the land to the Defendant. In effect the situation was one of protracted and very slow negotiation between the parties over 17 years.

50. The Plaintiff says that she kept on telling the Defendant to quit; the Defendant denies this. The Plaintiff's evidence that she told the Defendant to pay more or leave, to be met with the reply that it was not for her to tell the Defendant to leave because the former owner had promised her the land, certainly has the ring of truth and I believe it. Given that the increase of rent or the possible sale were always under discussion, it is however possible that the demand to quit was not constantly reiterated but rather that the Plaintiff, being unable to afford legal action, did not bother much about the situation until, as she says, she heard about "squatter's rights" in 1997.

51. The question is whether the Defendant in reliance on the Plaintiff's conduct believed that the Plaintiff had abandoned her right to take further steps and had, in reliance on this belief, paid the Modification of Tenancy fees to the Government and incurred a sum of $260,000 in building three brick huts.

52. The Defendant relies on the following passage in Willmot v. Barber, [1880] 15 Ch D 96 at pp105-106 :-

"It has been said that the acquiescence which will deprive a man of his legal rights must amount to fraud, and in my view that is an abbreviated statement of a very true proposition. A man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights. What, then, are the elements or requisites necessary to constitute fraud of that description? In the first place the plaintiff must have made a mistake as to his legal rights. Secondly the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant's land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff's mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly, the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right. Where all these elements exist, there is fraud of such a nature as will entitle the Court to restrain the possessor of the legal right from exercising it, but, in my judgment, nothing short of this will do."

53. The question here is whether the Plaintiff encouraged the Defendant in her expenditure of money or in the other acts she has done, either directly or by abstaining from asserting her legal right.

54. It is clear from the Defendant's evidence that she thought, at least since 1968, that she had a Government-approved right to dwell on the suit land. She was mistaken in this, in that she thought that the letter of approval from the District Office was approval for her to live on the suit land, when it quite specifically excluded human habitation. That is obviously why her husband in the first place and later she herself paid the annual fees for Modification of Tenancy. It had nothing to do with any action or inaction on the Plaintiff's part.

55. As to the building of the brick huts, the Defendant says that she did this because she thought she was the tenant and because the original wooden huts had been damaged by a typhoon. Now she may well have thought she was the tenant. She told the Plaintiff that she had been promised the land by the former owner. But I do not see how she can properly have thought that she was the tenant, or thought she was still the tenant on the basis of any action or inaction on the part of the Plaintiff.

56. The Defendant had received the Notices to Quit in 1979; that she could not herself read them is irrelevant, because she obviously had family members who could; so she must have known that she had been given Notices to Quit. She knew that, although she was sending off $200 per annum by way of rent, it always came back to her; so she had never paid any rent since 1980. She knew that the Plaintiff wanted either more rent, or a sale, but neither had ever been agreed. So she must have known, if she had thought about it, that her position was precarious; and that she was simply doing a masterful job of putting things off while remaining in occupation without any proper title.

57. In short, if the Defendant thought she was the tenant, it was her own mistake and not any mistake that she was led into by the Plaintiff. If she acted on that mistake, she did not do so because of any encouragement on the Plaintiff's part. It follows that the defence of acquiescence must fail.

Waiver

58. In support of this the Plaintiff relies on the same particulars as for laches and acquiescence. In effect the waiver is based on the alleged acquiescence. If the defence of acquiescence fails, which it has, the defence of waiver must fail with it.

Relief

59. It follows that the Plaintiff has the right to recover the suit land and damages for mesne profits since 1980. There is no evidence as to what the Plaintiff might have made from the land if she had recovered it then. She says she asked for $1,500, but there is no evidence as to whether or not that was a fair market price. So I can only base mesne profits on the rent of $200 per annum.

Judgment in favour of the Plaintiff for

1. Possession of the suit land;

2. Injunction against the Defendant, whether by herself, her servants or agents or otherwise from entering upon or remaining on the suit land;

3. Mesne profits at the rate of $200 per annum from 1st July 1980 to the date hereof; and

4. Costs (nisi) to be taxed if not agreed.