HAU GAY YAU v. WONG MUK DIN

DCCJ 777/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 777 OF 2002

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JUDGMENT

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Introduction

1. In this matter the Plaintiff is asking for possession of land in the New Territories currently occupied by the Defendant upon which the Defendant has, at very considerable expense, built a dwelling house for himself and for his family and, also, substantial sheds in which he breeds pigs for slaughter. There is a history to this going back to 1976 which will provide an understanding of how this action now comes about.

Background

2. The Plaintiff and his brother (now deceased) are together the owners of agricultural land referred to as Lot Nos. 1075, 1076, 1080, 1081 and 1085 in demarcation district 92 which is close to Sheung Shui in the Northern New Territories and which I will refer to as "the land". Prior to 1976 the Defendant had operated a pig business, as he described it - I presume it was a small pig farm at Shatin. He was then introduced to the Plaintiff by a mutual acquaintance, a Mr. Ng. As a result of discussions between them it was agreed that the Defendant should take over the tenancy of the land at the then annual rent of $4,000. The previous tenant who had also farmed there sold to the Defendant for $24,000 some fairly basic farm buildings that had stood there for many years. This sale is evidenced in writing and its translation in English is at page 158 of the bundle. As so often happens the parties recollections as to what was said and agreed 27 years ago is divergent but for present purposes this does not matter. The Plaintiff says that the intention was to let this for the growing of market vegetables and the breeding of some pigs. The Defendant says it was let to him so that he could principally breed pigs by making use of the existing buildings that he had purchased from the outgoing tenant for that purpose and this is what he did. There is no doubt that the land was entirely given over to pig farming for the whole of the Defendant's occupation of it which continues to the present time.

3. Initially the Plaintiff repaired the buildings that he had purchased including a small and basic residence for him and his family. All proceeded uneventfully for the following 18 years or so. The Plaintiff and his brother who had inherited this land from their, now deceased, father were also owners of adjoining plots which were similarly let by them. The Plaintiff does not appear to have retained much of an interest in the land in terms of making frequent visits to it to ensure that it was being properly looked after by his tenant. He is and has been for all of his working life a member of the merchant navy working as a ship's engineer and therefore spending periods of time out of Hong Kong. Much of the time he has worked on local shipping routes but at other times undertaking long ocean going employment. As will be seen the rent that has been charged has been expressed as an annual rent and has been collected annually, when the two men would meet at a restaurant and the Defendant would pay over the rent for the year.

4. From the start of the Defendant's occupation the tenancy had been a purely oral one. In 1984 the parties agreed an increased annual rent of $6,000. As with much New Territories land this property was subject to flooding particularly given its proximity to the Shing Mun River. In May 1989 following the passage of a typhoon the land became completely flooded and beyond use or habitation. The buildings were washed away and the livestock was drowned. The Defendant and his family were obliged to abandon it but he continued to retain it by paying the Plaintiff the agreed rent. The Defendant then took over another pig farm at Kam Tin for 6 years but returned to occupy the land again in 1995.

The Position since 1995

5. One needs to examine with some care the parties relationship once the Defendant decided that he and his family should return to live on the farm. From contemporaneous documents it appears that this decision was made in 1994 because at page 159 there is a translation of a letter written in November 1994 by the village representative to the District Land office. Its terms are self-explanatory - in the letter the representative asks that the Defendant be allowed to retain what was left of the buildings on the land following the 1989 typhoon so that they might be used as part of the pig farm. What had encouraged the Defendant's return was the fact that the Government had decided to lower the riverbed in order to reduce the incidence of flooding.

6. The Defendant says that when he decided to return he told the Plaintiff that he proposed to rebuild the pig farm from scratch and that he wished to spend between $2 million and $3 million in doing so. The Defendant's case is that they discussed the matter including the length of the tenancy. He told the Plaintiff that it would have to be for 10 to 20 years, having regard to the amount of his investment. He told the Plaintiff, in some detail, what it was that he was proposing to build. The Plaintiff agreed to this and at page 157 there is the Plaintiff's letter dated 20 November 1995 to the District Lands Office which is the Plaintiff's consent for the Defendant to build "pig sties and a human residence". It asks the Lands Office to approve this building work.

7. The Plaintiff's version of this is that the Defendant had asked him for permission to rebuild the house because of its dilapidated state and in order to do so he had to provide the written permission for the Lands Department to see before they would authorise this work. He agreed to the Defendant's request and told the Defendant to rebuild the house in the way that the original building had been erected. He says that it should have been a modest affair - 450 square feet and 12 feet 6 inches high. Sufficient to accommodate a few people. It could also be used for storage. At this time, in 1995, the Plaintiff says that he also warned the Defendant that because land prices were high he might sell the property provided he found a purchaser willing to pay the right price. Up till 1995 the tenancies had been for 5 year terms which had been renewed. Now, says the Plaintiff, because of the prospect of a sale by him the tenancies were reduced to 2 year terms. This he says happened in November 1995 and because the Defendant wished to repair and refurbish the original house he asked him to think it over before committing himself to the expense of doing these works. The Plaintiff says that every year thereafter when the annual rent was paid by the Defendant he would remind the Defendant of the prospect that he might sell if the price was right.

The Change of Sovereignty

8. The crucial evidential dispute starts from around the time that Hong Kong was to revert to Chinese sovereignty. Page 161 is the translation of what purports to be the first tenancy in writing between these parties. It is dated 1 June 1997 for a period of 2 years at the now increased annual rent of $14,000. The lease includes provision for the land to be surrendered, in the event of non-renewal, as it is and without the landlord having to pay the tenant any compensation for improvements to it or on it. The Plaintiff has said that this was all in accordance with what they had agreed particularly in view of his repeated warnings to the Defendant that he might sell. Not surprisingly, the Defendant's evidence on this bears no resemblance to what the Plaintiff has told me. He says that the lease was now in writing because the Defendant was very concerned that after the change of administration the new sovereign might renege on the promise made by Mr. Deng Xiao Ping that there would be no changes made to the way of life in Hong Kong and that there might be expropriation of land. For that reason he wished for proof, by means of this document, that he was the owner and that the land had only been let to the Defendant. The Defendant's version of events was that by 1997 he had done some works on the land, mostly to the pig sties, and he now wanted to do something about the house. According to him the Plaintiff told him that "he could set his heart at ease". He could rebuild the house and further improve the pig sties. He would let the land to him for as long as Deng Xiao Ping had mentioned - meaning for 50 years beyond 1997 and the rent could be reviewed every 5 or 6 years, which had been the position hitherto.

9. In the light of that assurance and believing that all would be well for the foreseeable future he increased his investment in the land.

The Lease dated 1 June 1999

10. This is the document now sued on (page 87). It evidences a 2 year tenancy also at an annual rent of $14,000. It contains the same term that the land will be surrendered as is with no compensation for improvements made to it by the tenant. It is witnessed, as was the previous lease, by a village representative.

11. The Plaintiff's version is that this merely continues the regime that was introduced by him in 1995 for 2 year tenancies with the caveat, about which the Defendant would have been in no doubt at all, that the Plaintiff might sell if the right offer came along. But the Defendant says that this piece of paper was an "insurance policy", my expression not his, in case matters got difficult post-1997. The true terms of the tenancy were oral that he could expect to remain on the land for many years to come, build on it and rent would be looked at every 5 or 6 years.

A $3 - $4 million Investment

12. Having been given permission to build and with the all important assurance that he could stay long term the Defendant has ploughed a lot of money into this property. He says that he built the house between April 1999 and August 1999 - that is to say straddling over the end of the previous tenancy and the start of the present one. He telephoned the Defendant to tell him that he was about to start building the house, and was again assured that all would be well - "rest your heart at ease!". The house cost $600,000 to build. This and the other improvements and the building of the pig sties come to between $3 and 4 million. The Defendant has put in many receipts to substantiate this expenditure. There are also a number of photographs which amply demonstrate the level of investment by him. A handsome house, in New Territories style and dimensions, within the limits set as to the size and height of such properties by the government and, equally important, the extensive sheds for pig breeding. He lives there with his wife and family. He says that this is now a large pig farm by current standards. He has 2,800 pigs including 290 sow's for breeding. He has imported breeds from the USA. Sow's give birth twice a year and pigs are sent to market when they are 10 months old.

13. The Plaintiff says this development was done without his knowledge. He never went to the land when this was going on. There are fierce dogs there. He was frightened to visit. The Defendant says that this was all agreed by the Plaintiff who in any event saw what was going on because he would come to the adjoining property which he also owns to collect rent from his tenant there. The Plaintiff says that when he gave permission for rebuilding he expected modest re-development. The Defendant always knew and agreed to the surrender of the land without compensation.

Who is to be believed?

14. There is much potential for legal argument in this matter and Mr. Kwong for the Defendant has raised substantial points of law without showing me a single authority for his wide ranging submissions. Equally Mr. Ching for the Plaintiff has demonstrated a languid approach to the task at hand. I desire to say this, because often a judge is grateful to the advocates for their assistance, which is usually very real, but in this matter such assistance has not been forthcoming.

15. Ultimately, the case, I believe, resolves itself essentially into a question of fact. The principal issue to decide is whether the parties really intended to contract on the basis of the lease in writing (p. 87) or whether the agreement was to remain purely an oral agreement as it had been from 1976 to 1999. If the evidence is such that the written document at p. 87 contains the terms of the agreement then, subject to some of Mr. Kwong's undeveloped legal submissions, the Defendant must be in real difficulty. Nevertheless, if the evidence persuades me that the written document was merely something for the Chinese authorities, if things went wrong after 1997, and the verbal arrangements held good to the effect that the Defendant could occupy the land, as he had done hitherto, with rent reviews every 5 or 6 years, then I would have thought that no reliance can be placed on the written lease and the Plaintiff is probably stuck with his verbal assurances that the Defendant could stay and spend, build and develop the land in the way that he has done.

16. There is of course great force in Mr. Kwong's point that nobody in their right mind would expend this sort of money on the basis of a short lease with no right to compensation if the lease was not renewed. You only do what the Defendant has done when you have the assurance of long term occupation. Whilst that submission has the merit of common sense and logic, ordinary human experience shows that people frequently do behave in completely irrational and unexpected ways.

17. Both parties have reason to provide untruthful accounts of their dealings together. The Plaintiff no doubt sees the chance of getting his hands on a well stocked and developed farm as a going concern to be re-let at an enhanced rent or sold for a good price without having to compensate the outgoing tenant. The Defendant has every motive to lie in order to protect a very large financial outlay and indeed his livelihood. This is everything that he has worked for.

18. Ultimately, I have had to consider all of the evidence - the inherent likelihood of one version over the other and of course the way in which the witnesses have given their evidence.

19. The Plaintiff starts with the great advantage of the Defendant's signature on the lease, albeit a home-made document which fails to record all five lots as having been purportedly let. The 1997 lease includes the five lots. I have no explanation why this only recites these three lots and leaves out the other two? This only serves to demonstrate the home-made nature of the document. When confronted in the witness-box by the document itself the Defendant panicked and made the quite absurd and hitherto unheralded allegation - quite contrary to the rest of his case pleaded or otherwise - that he had not seen this document before and that his signature had been forged. Subsequently, he relented and withdrew that allegation. The fact that he was prepared to make it is something that I have to bear in mind against him in deciding whether to accept his overall version of events.

20. Approaching the evidence in the way that I have indicated I have come to the conclusion that I prefer the Defendant's version of events. Fundamentally he has come over as an honest, hard-working individual. His aberration in initially suggesting that he had never seen the written lease at p. 87 and that his signature had been forged is I think explicable as temporary panic rather than as indicative of a dishonest witness. The Plaintiff on the other hand I have not found to be a convincing witness notwithstanding that he has the starting advantage of relying on a written agreement. My sense of this, on a balance of probabilities, is that he was content to keep the Defendant as a long term tenant and that he was prepared and agreeable for him to develop the farm. I am satisfied that he knew that the Defendant was going to embark on what was, for him, very substantial and expensive re-development. I find as a fact that he assured the Defendant that he could stay for a very long period of time. Whilst he may not have meant that it could literally be for as long as 50 years after Hong Kong's handover I am content to say that the 10 to 20 years that the Defendant has also mentioned was spoken of as well the words that the Defendant could "put his heart at ease". The representation was clearly there that as he had been the tenant for so many years and that he had paid his rent timeously he could look forward to a further substantial period after he had completed the rebuilding of the house and the pig sties. Without that I am certain that the Defendant, who had consulted his family including one of his sons who is a highly educated person, would not have embarked on such an expensive venture if he knew that he ran the risk of having to leave, uncompensated, after just two years.

21. I am perfectly satisfied that the written agreements were not there to regulate the parties legal relationship but as a post 1997 "insurance policy" if things got difficult for the Plaintiff in proving that he owned the land. At all events I am satisfied that he believed that they were capable serving that purpose. I find as a fact therefore that the Defendant continued to occupy the land on a purely oral agreement for a periodic tenancy as before with rent reviews every five years. The Plaintiff had always viewed this Defendant as a long term tenant who had paid his rent on time and who would therefore provide him with a secure regular, if modest, income from the land with an increase to be looked forward to every 5 years.

The Result

22. This being my view of the evidence it must follow that the Plaintiff must fail on his claim based, as it is, on the written tenancy agreement which I have found does not regulate or govern the Defendant's occupation of the land. On this basis alone the claim must fail and must therefore stand dismissed.

23. Even if I am wrong in this view of the evidence and the written agreement somehow applies then I would have found that by virtue of the Plaintiff's promises he must now be held to be estopped from relying on the terms of the agreement, which on its face, gives him the right to recover possession after two years and without compensation. To allow him to blow hot and cold when he has encouraged the Defendant in the belief that he could look forward to being the tenant for many years to come and to spend millions of dollars would be unconscionable and something which the court could not sanction.

24. Mr. Kwong has also sought to run a number of other points of law which he has not attempted to support by reasoned argument. These ranged from the argument that the estate of the Plaintiff's deceased brother should have been joined as a Plaintiff, to an issue as to whether the written lease is admissible because it had not been stamped at the time that it was entered into, to the question of whether the lease could entitle the Plaintiff to possession of all of the land because it only purports to let only three of the lots as opposed to the five that were actually occupied. I find it unnecessary to provide any definitive answer to these issues, undeveloped as they have been, and barely engaged by Mr. Ching in reply. I am content to decide this case on the basis that I have indicated which for the reasons that I have given mean that the Plaintiff is unable to rely on the written lease. The claim must therefore stand dismissed with an order nisi that the Defendant must have his costs of the action on a party and party basis.