LIU CHUN KUI AND OTHERS v. LIU WING FAT

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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The Background

1. A Tso is an institution for holding ancestral land. The Liu Yau Pak Tso (the Tso) is the owner of a piece of land in the New Territories (the land). The plaintiffs are the registered managers of the Tso. Under section 15 of the New Territories Ordinance (Cap. 97) the managers "... shall, after giving such notices as may be prescribed, have full power to dispose of or in any way deal with [the land] as if [they] were sole [owners] thereof, subject to the consent of the Secretary for Home Affairs ..." By an oral agreement made on about 23 January 1978, the managers of the Tso leased the land to the defendant at a rental of $300 a year. In 1994, the Tso gave notice to quit to the defendant. The notice to quit purported to terminate the tenancy on 31 January 1995.

2. That much is common cause, and, if there is nothing more, Mr Kwan does not argue that the plaintiffs are not entitled to an order for possession.

3. But the defendant says there is more to the matter than that. He denies that the plaintiffs were entitled to terminate the lease as they purported to do. It is not easy from reading the defendant's defence to ascertain precisely why he says this. The allegations are somewhat mixed up, and it is not always clear whether the defendant is alleging an express term, an implied term or facts from which a conclusion in law in his favour should be drawn. However, Mr Kwan's helpful closing submissions settle the mud somewhat. In his written skeleton closing, he states the issues as follows -

4. Mr Li's approach to the issues is similar. I agree that Mr Kwan has set out the issues fairly. I will deal with these issues as set out above.

The Terms of the Tenancy

5. The allegations in the defence on this issue are -

          "4. The Defendant avers that -

(6) It was further agreed that a notice of termination would not be served on the Defendant in respect of the Property unless the Tso had come to a unanimous decision to dispose the Property by sale or to develop the Property and is subject to the consent of the Land Officer as provided in Section 15 of the New Territories Ordinance.

6. From this, what the defendant says were the express terms of the agreement to lease the land is not entirely clear. In order to ascertain this, it is necessary to go to his evidence.

7. In his written witness statement signed on 30 January 1996, which he affirmed to be true, the defendant says that on about 23 January 1978 he attended a meeting of the managers and elders of the Tso. He asked them to rent the land to him. They said that squatters occupied the land so they could not do so. But they said that, if he did not mind the fact there were squatters on the land, they could let the land to him as it would be better for the land to be let to a member of the Tso rather than outsiders. They said that he could give the squatters some money so they would leave. The defendant asked the managers and elders if he could use the land as a car park. They agreed. He also asked if there was any term to be set for the lease. The defendant said in his statement that "I could occupy the land for as long as I paid the rent", meaning, presumably, that this is what the managers and elders said. He said "I also remember that I was told that possession of the property would not be recovered from me unless there was a unanimous decision of the Tso to sell or develop the Property".

8. In his oral evidence, the defendant told me that he wished to lease the land to operate it as a car park. He asked the managers and elders how long the tenancy would last. He was told, as a member of the Tso, as long as he paid the yearly rent, he could continue to rent the land. He was asked if there was any discussion about how the tenancy would be terminated. He said the managers made suggestions. They said that if they wanted to take back the land they had to obtain the unanimous consent of all members before they could do so. He was asked if any other things were said about the termination of the lease. The defendant told me that it was said that "if the land was to be sold for development, and we would also agree, if the government would take back the land for use, and if the land was not to be developed, the lease was to continue". He was asked if agreement was reached on the-way the lease would be terminated. The defendant said "A meeting had to be held and at the meeting if everyone agreed to recover the land from me, I would be given one year's notice." The defendant said that there were some 300 to 400 members of the Tso at that time. He and his six sons were members. He confirmed that termination of the lease required the consent of these 300 to 400 members. The defendant confirmed, in answer to questions from me, that, without any request from him, the managers and elders proposed, in effect, that they would not be able to terminate the lease unless he agreed. After some shilly-shallying, he said that he was surprised by this attitude.

9. So, the defendant says that the managers and elders of the Tso, without any request from him, suggested that the Tso should bind itself to a lease that, in effect, would last for as long as the defendant pleased. The Tso would not, without the defendant's agreement, be able to develop, sell or dispose of the land in any way, whatever the circumstances.

10. That, I find, is not credible. I cannot accept that any reasonable person in his right mind would, in ordinary circumstances - and there is no suggestion that there was anything extraordinary in the relevant circumstances - agree to such a ridiculous bargain, let alone actually propose it. Even excluding the defendant's alleged right to veto any proposal to terminate the lease, and that of his own sons, the defendant's evidence that the managers and elders agreed - even proposed - that every member of the Tso - several hundred people - even assuming that every member was old enough to articulate a view - must agree to the termination is not worthy of belief.

11. This would be my finding even if the defendant had been a witness apparently without blemish. He was not. He did not impress me at all. He was evasive, and, in my view, not persuasive.

12. Accordingly, I find that there were no extraordinary express terms governing the termination of the lease as alleged by the defendant.

Estoppel

13. The defendant raises the issue of estoppel in this way -

14. In my view, there is nothing here, and nothing in the evidence, that could possibly raise an estoppel against the plaintiffs.

15. On the defendant's case, he entered into a commercial bargain under which he would get the land for what was admittedly a low rent for the purpose of using it as a car park. To enable him to use it for this purpose, he had to obtain vacant possession of the property, which he undertook to do himself, and prepare the land so that it could be used as a car park. The defendant did all this, and has used the land for the commercial purposes he had in mind since 1978. The defendant got just what he had bargained for. There was, in my judgment, no underlying assumption in the minds of the managers and elders, or that of the defendant, that the defendant would be allowed to remain in possession of the land for as long as he chose to occupy it.

16. It may be possible to argue, on the defendant's case, that there was an assumption that the defendant would be allowed to remain in possession for a reasonable time to allow him to recoup his outlay, but he has operated a car park on the land for nearly twenty years. It cannot possibly be said that it would be unconscionable for the Tso to seek to recover the land after this length of time.

17. Accordingly, I reject the defendant's plea of estoppel.

The Consent

18. The next defence put up by the defendant is that the plaintiffs cannot, because of section 15 of the New Territories Ordinance, terminate the lease without the consent of the Secretary for Home Affairs. The allegation is -

"14A. The Secretary for Home Affairs has not given his consent under Section 15 of the New Territories Ordinance Cap. 97 for the Plaintiffs to claim possession of the Property and/or resume possession of the same. In the premises, the Notice to Quit is of no effect whatsoever and the Plaintiffs are not entitled to claim for possession of the Property."

19. Section 15 speaks about the exercise of the power "to dispose of or in any way deal with" the land requiring the consent. The "land" concerned is land "held from the Crown", and, in terms of section 2, includes "every estate and interest in land". It is not necessary to decide whether or not the termination of a lease is a dealing with the land under this section because it appears to me that the Secretary for Home Affairs has consented to the termination. The section does not require any formality in the granting of the consent. The purpose of the need for the consent is to ensure that the managers' power is not abused. In this situation, consent may be inferred from evidence that the appropriate authority knew about the proposal or action to terminate, and raised no objection. The unchallenged evidence is that the Secretary, through his officers, knew about the Tso's wish to terminate the lease, and said and did nothing to indicate that it disapproved of this. Indeed, on 10 July 1993, the appropriate officer wrote to the managers, in effect, encouraging the termination so that certain government plans could be implemented. This-is consistent only with a consent that the lease should be terminated.

20. I hold that consent sufficient for the purposes of the section was given.

21. But even if it were not given, the point raised by the defendant is a double-edged sword. If consent to terminate a lease is required, a fortiori, consent is required for the grant of a lease, and, it is common cause, such consent was not given. So, if the termination is void, so is the lease. The defendant would not be entitled to remain in possession under it, and there is no estoppel under which the plaintiffs can be prevented from evicting the defendant.

Custom

22. The defendant further argues, even if were not an express term of the lease that termination required the consent of every member of the Tso, it is the law, by custom, that this is the case.

23. There is, of course, no express mention of any custom in the defence. But, the defendant says, this is alleged in paragraphs 4(3), 12 and 13 of the defence. Those paragraphs say -

24. I have only the defendant's evidence on this point. My attention has been drawn to no other source from which the alleged custom can be inferred.

25. In his written statement, the defendant says that is the custom of his village and Tso "for as long as I can remember" that when agricultural land is leased "if there is unanimous agreement within the Tso to sell or redevelop Tso land, or if the Government has issued a notice in the Gazette to resume the land, the Tso would give at least one year's notice to the tenant". He goes on to say that it has also been the custom of the Tso "for as long as I can recall that major decisions affecting the Property of the Tso, including disposal of Tso lands, could only be made if there was unanimous consent amongst the members".

26. In his oral evidence, he said that he knew about the custom because he had been told by the managers and the elders, and he had seen the managers and the elders carry out the custom.

27. The first custom alleged by the defendant is not relevant to this action. I am not concerned with the sale or redevelopment of Tso land, nor with resumption by the government.

28. As to the second custom alleged, assuming that the managers' decision to terminate was a major decision affecting the property of the Tso, I do not accept the defendant's evidence regarding it. Apart from the defendant's general lack of credibility, in my view, it is unlikely that there is a custom that no major decision affecting land can be made unless every member of the Tso, whatever his age and mental state and wherever he might be, consents. The whole purpose of section 15 of the New Territories Ordinance is to avoid the difficulty of decisions of the Tso having to be made by an unwieldy number of members, some of whom may be unable exercise a vote.

The Result

29. It seems to me that the defendant has raised no basis for concluding that the Tso is not entitled to terminate the lease and resume possession.

Possession

30. Accordingly, I grant to the plaintiffs an order that the defendant deliver up possession of the land. This the defendant is to do not later than 1 May 1997.

Other Remedies

31. The plaintiffs also claim damages to be assessed or mesne profits.

32. The basis on which the plaintiffs seek damages is that given by the Landlord and Tenant Act 1730, which provides that, if the tenant "wilfully" holds over, the landlord is entitled to be paid at the rate of "double the yearly value of the lands". Having heard the defendant give evidence, I do not believe he ever genuinely thought that he had a right to stay on. Accordingly, I hold that the plaintiffs are entitled to damages on the basis of the defendant "wilfully" holding over. I award damages to be assessed on this basis.

Costs

33. There seems, on the face of it, no reason why the defendant should not pay the plaintiffs' costs. Accordingly, I make an order nisi that the defendant pay the plaintiffs' costs.

The Counterclaim

34. It follows from what I have said that the defendant's counterclaim must be dismissed, with an order nisi that the defendant pay the plaintiff's costs.