LAU WAI KUEN KENNETH, Executor of the Estate of LAU WAN HEI, Deceased v. THE SECRETARY FOR JUSTICE for and on behalf of the Director of Lands AND OTHERS

HCMP 1925/2017

[2019] HKCFI 2310

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1925 OF 2017

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J U D G M E N T

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A.  INTRODUCTION

1.  This is the hearing of the summons dated 30 July 2018 (the “Summons”) taken out by the Secretary for Justice (“SJ”) as the 1^st defendant in these proceedings.

2.  By the Summons, SJ seeks, inter alia, determination of the following questions of law as preliminary issues:

(1)  Whether the plaintiff’s claim herein against and defence to the counterclaim of SJ in relation to the total sum of HK$11,903,908.40 or such other amount to be determined by the court are time-barred under section 4 of the Limitation Ordinance, Cap 347 (“LO”) or Part III of the Roads (Works, Use and Compensation) Ordinance, Cap 370 (“RWUCO”); and

(2)  Consequently, whether the plaintiff is entitled to any of the remedy or relief claimed against SJ.

3.  SJ submitted that the plaintiff’s claims are time-barred and both questions should be answered in SJ’s favour.  SJ further submitted that if the court is with SJ on these matters, by bringing claims which are time-barred, the plaintiff’s claims herein against and defence to the counterclaim of SJ are scandalous, frivolous or vexatious and/or otherwise abuse of the court process, and ought to be struck out by the court pursuant to Order 18, rule 19 of the Rules of the High Court, Cap 4A (“RHC”) and/or its inherent jurisdiction.

B.  THE PARTIES

4.  The plaintiff is the son and executor of the deceased, Lau Wan Hei (the “Deceased”).  The Deceased was at all material times the registered owner of various lots in Sai Kung (the “Lots”) which were resumed by the government under the RWUCO in 1995.

5.  SJ is holding the compensation payable in respect of the resumption. 

6.  The 2^nd defendant is the executor of the estate of Chan Muk Sang, deceased, who was named as one of the two purchasers (together with the Deceased) in the Sale and Purchase Agreement by which they purchased the Lots from the 3^rd defendant, the predecessor in title.  Although the 2^nd defendant was named one of the two purchasers, the 2^nd defendant did not contribute to the purchase price of the Lots and had no beneficial interest in the Lots, as confirmed in writing by the 2^nd defendant and Chan Muk Sang’s widow in a Chinese Memorandum & Confirmation dated 11 July 1995.

7.  The 3^rd defendant is the administratrix of the estate of Tsui (or Chui) Sing (or Shing), deceased (“Tsui Shing”).  The 3^rd defendant was the plaintiff’s predecessor-in-title in respect of the Lots.

8.  The 2^nd defendant has filed an acknowledgement of service confirming that he does not intend to contest these proceedings commenced by the plaintiff.  The 3^rd defendant is in the United States and the plaintiff will have to seek leave for service out of jurisdiction on the 3^rd defendant after the determination of the Summons.

C.  WHETHER THE PLAINIFF’S CLAIM IS TIME-BARRED UNDER S.4 LO OR S.28(1) RWUCO

9.  SJ’s case:

(1)  Section 4 LO: SJ argues that the Deceased should have commenced the action within 6 years from the letter dated 29 October 1998 in which SJ stated that (a) their office was unable to recommend the Government to pay out the compensation to the Deceased; and that (b) until a declaration by the court is obtained, the Government will not pay out the said sum of compensation to the Deceased.

(2)  Section 28(1) RWUCO: SJ argues that the Deceased should have served his claim on SJ before 31 September 1996 ie one year from the date of resumption.

10.  Section 4 LO states:

“(1)  The following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say--

(a)  actions founded on simple contract or on tort;

(b)  actions to enforce a recognizance;

(c)  actions to enforce an award, where the submission is not by an instrument under seal;

(d)  actions to recover any sum recoverable by virtue of any Ordinance or imperial enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture” (Emphasis supplied)

11.  Section 28(1) RWUCO states:

“(1) Subject to subsections (2) and (6), if a claim or an amendment thereto is not served on the Secretary before the expiration of the period specified in the fourth column of Part II of the Schedule in respect of that matter, the right to claim compensation therefor shall be barred.”

12.  The plaintiff contends that when considered in the light of the facts of this case, it is clear that section 4 of the LO and section 28(1) of the RWUCO are not applicable.

C1.  Salient factual context

13.  As a result of a notice of resumption dated 31 May 1995, the title of the Lots reverted to the Government on 31 August 1995 under section 13(3) of the RWUCO.

14.  Under a cover letter dated 20 September 1995 (the “20/9/1995 Offer Letter”)from the Director of Lands (the “Director”) to the Deceased’s then solicitors, Wong Hui & Co (“WH”), with three sets of offer letters (one for each of the Lots) enclosed therewith, the Director offered to pay compensation for the resumption of the Lots in the said sum (totalling HK$11,903,908.40),

“in full and final settlement of all claims, costs and demands including interest and professional fees which you [ie the Deceased] may have against the Hong Kong Government arising out of or in connection with the resumption of the said land under the Roads (Works, Use and Compensation) Ordinance (Cap 370).” (Emphasis supplied)

15.  Paragraph 2 of the 20/9/1995 Offer Letter further states:

“If you are prepared to accept this offer of compensation you should complete the attached slip and return it together with this letter to me within 28 days from the date of this letter failing which the said offer will automatically lapse and be deemed to be withdrawn. You will be required to sign a formal Agreement upon payment of compensation”

16.  Paragraph 3 of the 20/9/1995 Offer Letter further states if the Deceased did not accept the said offer, he might make a claim for statutory compensation under section 29 of the RWUCO.

17.  It is noteworthy that the 20/9/1995 Offer Letter contains two different offers:

(1)  paragraph 4 of the 20/9/1995 Offer Letter is a stand-alone offer of “provisional payment” made without prejudice to the Deceased’s right to make a claim to the Secretary for Transport for determination of the resumption compensation (“Provisional Payment Offer”).  For this offer, release of payment was expressly made subject to the checking of the Deceased’s title;

(2)  by contradistinction, the offer in paragraphs 2 and 3 of the same letter is a different offer “in full and final settlement” of all claims, costs and demands including interest and professional fees which the Deceased “may have” against the Government (“Full and Final Settlement Offer”).  For this offer, release of payment had not been made subject to the checking of the Deceased’s title. 

(3)  In fact, the pro forma reply slip enclosed with the 20/9/1995 Offer Letter contains two different options for the Deceased to choose from – the first option contained in the first square bracket (“the First Option”) represents the Full and Final Settlement Offer, and the second option contained in the second square bracket (“the Second Option”) represents the Provisional Payment Offer.

18.  It is common ground that the Deceased had accepted the Full and Final Settlement Offer in the 20/9/1995 Offer Letter by completing the three attached reply slips of acceptance by crossing out the Second Option in the reply slips and returned the same to the Director under a cover letter of 6 October 1995 (the “6/10/1995 Acceptance”) issued by WH.

19.  In a letter dated 9 May 1996 from the Legal Advisory and Conveyancing Office to WH, the Director on behalf of the Government stated inter alia:

“I am prepared to accept that your client is entitled to the release of compensation money and have accordingly requested Senior Solicitor Sai Kung to take steps in that regard.”

20.  This was further confirmed in another letter of 16 May 1996 from the Director:

“DLO/SK has been informed that Compensation in respect of the resumption of the above lots might be released to your firm. I trust you will hear from DLO/SK soon.”

21.  In reliance upon the offer and acceptance, as well as the Director’s confirmation of release of payment, the Deceased did not make a claim under the RWUCO, which was only open to him if he had refused the offer. 

22.  Despite the confirmation of payment, the Director subsequently raised various queries as to the Deceased’s entitlement to the compensation in relation to the Lots, which led to numerous correspondence between the Director and the Deceased’s then solicitors.

23.  Subsequently, the Director took the view that unless there was a court declaration in respect of the Deceased’s entitlement to the compensation, the compensation could not be released to the Deceased or to any other claimant.  For instance,

(1)  in a letter issued by the Director to WH dated 23 June 1998, the Director stated (at the third paragraph):

“You are advised that your client is required to commence proceeding in Court to obtain a Declaration that he had good title prior to resumption of the captioned lots and is entitled to the compensation arising therefrom in the sum of HK$11,903,908.40 [ie the said sum] … until the issue of title is resolved by the Court, this office will hold the sum of HK$11,903,908.40 in abeyance”. (Emphasis supplied)

(2)  In the letter dated 29 October 1998 (the “29/10/1998 Letter”) from the Director to WH, the Director stated that:

“Until a declaration by the Court is obtained, Government will not pay out the said compensation sum to [the Deceased]”

(3)  In the letter dated 23 November 1998 from the Director to WH, the Director informed the Deceased that:

“Government maintains the view that unless there is a court declaration in respect of entitlement to the compensation, the money cannot be released to [the Deceased] or to any other claimant”.

24.  Subsequent to the said letters, in 1999, 2014, 2016 and 2017, the Director continued to raise various queries on the Deceased’s title.  The Deceased (and after he passed away on 21 May 2007, the executor of his estate), through his solicitors, continued to address those queries by numerous correspondence:

(1)  the Director made further requisitions by a letter to WH dated 4 January 1999;

(2)  the plaintiff through his solicitors Lo, Wong & Tsui (“LWT”) issued a letter dated 9 April 2014 to the Director to address various queries made by the Director, enclosing various documents and information including an affirmation of the plaintiff and an affirmation of the 2^nd defendant;

(3)  the Director raised further requisitions by a letter dated 30 Jun 2014;

(4)  LWT on behalf of the plaintiff gave a substantive reply letter dated 7 March 2016 (enclosing therewith various documents) in which the plaintiff further addressed the requisitions made by the Director in its letter dated 4 January 1999;

(5)  On 19 June 2017, the Director issued another letter in which further requisitions were made.

25.  As submitted by the plaintiff, it is clear from the correspondence between the Director and the Deceased/plaintiff that the Deceased (and subsequently, the plaintiff) were given two options by the Director – either answer the requisitions to his satisfaction or obtain a court declaration.  In fact, even in 2017, shortly before the commencement of the present proceedings, the Director was still raising requisitions by his last letter dated 19 June 2017.  Further, during the numerous correspondence between the Director and the Deceased/plaintiff (in 1998-1999 and 2014-2017), the Director has never asserted that the Deceased/plaintiff’s entitlement to the compensation has been time-barred.  Limitation was only raised for the first time in the SJ’s Defence and Counterclaim filed in these proceedings.  Instead, the Director has repeatedly represented that it will not release the said sum until he is satisfied as to title or failing that, if there is a court declaration in respect of entitlement to the compensation.  Pending resolution of the plaintiff’s entitlement, SJ shall and agreed to “hold [the said sum] in abeyance”.

26.  The SJ has never fixed any time limit within which proceedings must be commenced by the Deceased/plaintiff for a court declaration in respect of entitlement to the compensation.  Nor did SJ ever mention any applicable statutory time limit.

C2.  SJ’s Submissions on section 4 of LO

27.  The SJ submitted that the plaintiff’s primary cause of action is one founded on contract.  The plaintiff in the Amended Statement of Claim (“ASoC”) claims for the amount of $11,903,908.40 by virtue of an “offer” as contained in the 20/9/1995 Offer Letter which was “accepted” by the Deceased.

28.  The SJ further submitted that pursuant to section 4 of the LO, action must be taken by the Deceased or his estate within 6 years of the accrual of the cause of action in breach of contract on 29 October 1998, and that should be, at the latest, by 29 October 2004:

(1)  The first level of the plaintiff’s pleaded case is premised upon that the payment of compensation to the Deceased by the Government was not subject to “any condition precedent that the Deceased must show that he had legal and/or beneficial title, estate or interest in the Lots and/or that he had a valid claim/entitlement to the compensation arising out of or in connection with the resumption of the Lots”. The plaintiff further pleads that the ex gratia offer from the Government in the 20/9/1995 Offer Letter “was also not expressed to be subject to contract”.

(2)  As the plaintiff’s pleaded case advances, it would mean that the Government should arrange payment of the compensation to the Deceased for the resumption of the Lots once the Deceased accepted the said ex gratia offer.

(3)  The Deceased did accept the said ex gratia offer.  The plaintiff pleads in the ASoC that “the Deceased chose to accept the offer, and thus on 3^rd October 1995, he completed three attached slips of acceptance of the offer as requested and returned the same to the Director of Lands on behalf of the Government under a cover letter of 6^th October 1995 issued by WH”.

(4)  On the plaintiff’s pleaded case, it would follow that the Government ought to have released the compensation to the Deceased upon receipt of those slips of acceptance from WH.

(5)  There is a second level of the plaintiff’s pleaded case.  The plaintiff further seeks to rely upon the Government’s reply by way of letter dated 9 May 1996 (see paragraph 19 above) that the Government was “prepared to accept that [the Deceased] is entitled to the release of compensation money…”.

(6)  On this second part of the plaintiff’s pleaded case, the Government should make payment to the Deceased of the compensation for the resumption of the Lots within a reasonable period of time of the letter dated 9 May 1996.

(7)  The Government however in the 29/10/1998 Letter (see paragraph 23(2) above) expressed that the question of the Deceased’s title to the Lots and entitlement to compensation were “complex”.

(8)  The Government went further to require the Deceased to “commence legal proceedings to obtain a declaration inter alia, that he is entitled to receive the compensation arising from the resumption of the captioned lots”.

(9)  The Government also made clear that “[u]ntil a declaration by the Court is obtained, Government will not pay out the said compensation sum to [the Deceased]”.

(10)  In other words, the Government’s clear and unequivocal stance in 1998 was that unless and until court proceedings were to be taken out by the Deceased, which were also to be determined in the Deceased’s favour, the Government would not release any compensation to the Deceased at that stage.

(11)  As such, SJ submitted that on the plaintiff’s own pleaded case, the Government would be considered to be in breach of their agreement and the plaintiff’s cause of action for breach of contract should accrue in 1998.

(12)  But notwithstanding the aforesaid matters, in the end, the Deceased/plaintiff did not commence any proceedings until 2017.

C3.  Section 4 of LO is not applicable in the present case

29.  As submitted by the plaintiff, the starting point is to consider the nature of the relationship between the plaintiff and SJ, the nature or basis of the plaintiff’s claims to the money now held by SJ and the capacity in which SJ is holding the compensation money.

30.  It is common ground that SJ is holding the compensation payable to the rightful owner of the resumed Lots.  The issue is whether the plaintiff has proved that the Deceased was the rightful owner and hence entitled to the compensation.  SJ has been treating this on the basis that the Deceased and now the plaintiff has to answer the requisitions of title raised as to the Deceased’s ownership of the Lots.  Failing that, SJ set a condition precedent to payment, namely obtaining a court declaration as to the plaintiff’s title.  Meanwhile, the money is being held by SJ “in abeyance” (see paragraph 23 above).

31.  It is important to note that there is no allegation from either party of any breach of contract or any wrong committed by either party.  In short, I agree the correct analysis is that the plaintiff is not suing SJ for breach of contract or any wrongful act.  The plaintiff is only suing for the necessary declaration as stipulated by SJ and then a payment pursuant to such declaration.  The plaintiff is not saying there is any breach of any Ordinance, whether of RWUCO or otherwise. 

32.  In other words, it is plain from the plaintiff’s ASoC that his claim is not for breach of contract or tort (section 4(1)(a) LO), enforcement of a recognizance (section 4(1)(b) LO), enforcement of an award (section 4(1)(c) LO), and/or recovery under an Ordinance (section 4(1)(d) LO).  In fact, none of these causes of action has been pleaded.

33.  Hence, section 4 of the LO is not applicable.

34.  I agree the best description of the capacity in which SJ is holding the compensation is to be found in the Director’s letter to WH as set out in paragraph 23(1) above.  Pending the plaintiff’s obtaining the court declaration, SJ was holding the compensation “in abeyance”.  Thus, the SJ can be a bailee, agent or trustee, in any event not covered by section 4 of the LO.  

35.  In addition to my holding above that section 4 of the LO is not applicable to the plaintiff’s claim herein, I further agree that for the purpose of section 4 of the LO, the limitation period would not begin to run because no cause of action had ever “accrued”.

36.  SJ argues that the plaintiff should have commenced the action within 6 years from the 29/10/1998 Letter, failing which the plaintiff’s claim is time-barred under section 4 of the LO.  I agree that this is wholly misconceived.

37.  A cause of action must have first “accrued” before the limitation period under section 4 of the LO would begin to run.  In Lam Ching Sheung v Personal Representative of the Estate of Tam Shui (unrep, HCA 2234/2008, 22 February 2013, CFI), as to when time starts to run for the purpose of section 4 of the LO, To J at paragraph 51 held that:

“… this [limitation] defence was wholly misconceived and based on a misunderstanding of the law and the plaintiff's case. Section 4 of the Limitation Ordinance provided that no actions founded on simple contract or on tort shall be brought after the expiration of six years from the date on which the cause of action accrued. Time started to run from the date when cause of action accrued. …”

38.  In Cheung Siu Ho v Pui Hing Construction Co Ltd (unrep, DCCJ 2198/2011, 10 July 2013), it was held at paragraphs 107 and 108 that “[i]f there was no breach of contract, no causes of action would accrue for the time to run”. 

39.  In this case, SJ has not pleaded (or explained why) the Director’s 29/10/1998 Letter would constitute a breach of contract or a tortious act or would otherwise give rise to the accrual of a cause of action to which section 4 of the LO applies.  In the 29/10/1998 Letter, the Director simply repeated the request to the Deceased that there should be a court declaration before the compensation could be released to him – the same request made in the Director’s letters dated 23 June 1998 and 23 November 1998.  Therefore, the limitation period under section 4 the LO would not begin to run.  No limit has been imposed as to when the court declaration is to be sought by the Deceased/plaintiff.

40.  Correctly analysed, the said sum can simply be characterized as a sum of money which SJ has agreed/undertaken to pay the plaintiff conditional upon the obtaining of a court declaration, and that SJ has agreed to hold the money “in abeyance” pending the court’s resolution.

41.  In such case, any cause of action for breach of that agreement would only accrue if, after the plaintiff has obtained the court declaration, SJ nonetheless refuses to pay the said sum to the plaintiff.  This is not the present situation.

C4.  SJ is estopped from running the limitation defence

42.  Further, I agree with the plaintiff’s submission that SJ is estopped from relying on the limitation defence in this case.

43.  In Chuang Yue Chien Eugene v Ho Yau Kwong Kevin [2002] 4 HKC 245, Ma J (as the Chief Justice then was) held (at 257E-F and 257I-258A) that the doctrine of estoppel is capable of barring any subsequent reliance on a limitation defence.  This principle was applied (at paragraph 13) in Re Leco Watch Case Manufactory Ltd [2015] 2 HKLRD 87, where Harris J set out (at paragraph 16) the elements of estoppel which would prevent a defendant relying on a limitation defence:

“(1)  The promise or representation must be clear and unequivocal in the sense that it would be reasonably understood in a particular sense by the person to whom it is addressed;

    (2)  The promise or representation must be made intending to affect the legal relationships between the parties; and

    (3)  the promisee must act upon it and alter his position.”

44.  In the light of the factual context as set out in paragraphs 13 to 26 above:

(1)  SJ had by the 20/9/1995 Offer Letter made an offer in full and final settlement of all claims the Deceased “may have” against the Government, which was accepted by the Deceased.  By the letter dated 9 May 1996, SJ further confirmed it had accepted that the Deceased was entitled to the release of compensation money.  Having accepted such offer, the Deceased could no longer make a written claim in accordance with section 29 of RWUCO.  The 20/9/1995 Offer Letter was clear and unequivocal and was obviously intended to affect the legal relationships between the parties.  Further, the Deceased had indeed acted and/or relied upon SJ’s offer and altered his position.  Payment was not subject to proof of title and no time limitation for proof of title was ever imposed or implied.

(2)  Despite the earlier confirmation of title, by various correspondence (including, inter alia, those referred to in paragraph 23 above), SJ has agreed with and/or represented to the plaintiff that the Government will pay the said sum to the plaintiff on condition that there is a court declaration in respect of entitlement to the compensation in his favour; and in the meantime, SJ shall and agreed to hold the said sum “in abeyance” pending the court’s resolution of the plaintiff’s entitlement.  No time limit was imposed for the obtaining of the court declaration.  Such agreement/representation was also clear and unequivocal and was obviously intended to affect the legal relationships between the parties.  In reliance and acting upon the same, the plaintiff had changed his position from enforcing the agreement (constituted by the 20/9/1995 Offer Letter and the 6/10/1995 Acceptance) to agreeing to supply further documents and information to address SJ’s various queries to the best of his ability so as to obviate the time and expense for a court declaration.  When this proved unsuccessful, the plaintiff has to institute legal proceedings for a court declaration in respect of his entitlement to the compensation.

45.  Applying the legal principles in Chuang Yue Chien Eugene and Re Leco Watch Case Manufactory Ltd, Supra, I agree that SJ is estopped from relying on any limitation defence in this case.

C5.  Section 28(1) of RWUCO

46.  Counsel for the plaintiff has confirmed during the hearing that, in these proceedings, the plaintiff does not make any claim for compensation under the RWUCO.  In the premises, it is not necessary and I do not propose to decide whether any claim for such compensation is time-barred under section 28(1) of RWUCO.

D.  CONCLUSION

47.  For the reasons stated above, the Summons is dismissed.

48.  I order that the costs of the application be paid by SJ to the plaintiff, such costs are to be taxed if not agreed with certificate for 2 counsel.

49.  The above order as to costs is nisi and shall become absolute in the absence of any application within 21 days to vary the same.

50.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.