EXPLORER 1881 LTD v. CONCEPT 1 OCEAN (HONG KONG) LTD

LDPD 246/2024

[2024]HKLdT 37

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO. LDPD 246 OF 2024

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DECISION

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1.  This is an interlocutory application taken out by a third party (hereinafter called “the Intended Respondent”) dated 15 March 2024 seeking to be joined as the 2^nd respondent to the proceedings.

Background

2.  By a Notice of Application (Form 22) filed to the Lands Tribunal (“the Tribunal”) on 29 February 2024, the applicant sought recovery of possession of 3/F, 23 Plantation Road together with carparking space No B1 (“the Premises”) on the ground that a tenancy of the Premises granted to the respondent had expired on 30 November 2023 (“the 2020 Tenancy”) and that in addition, the respondent had failed to pay the rent reserved in the 2020 Tenancy for the period since 1 August 2023.

3.  The 2020 Tenancy referred to was attached to the Notice of Application. It was in Chinese and dated 29 November 2020 whereby the applicant, Explorer 1881 Ltd, was supposed to have let the Premises to the respondent for a term of three years commencing from 1 December 2020 to 30 November 2023 at a monthly rent of $170,000 inclusive Government rent and rates but exclusive of management fees.

4.  Insofar, the respondent had not filed any Notice of Opposition.

Affirmation of the Intervener

5.  By an affirmation filed by the Intended Respondent attached to the interlocutory application, the Intended Respondent stated that:

(1)  The applicant, Explorer 1881 Ltd, is not the registered owner of the Premises[1] and the respondent, Concept 1 Ocean (Hong Kong) Ltd had never been the tenant of the Premises either. The 2020 Tenancy was a sham. Instead, the Intended Respondent has been the tenant of the Premises as registered in the Land Registry vide memorial 14093000180023 dated 4 September 2014 (“the 2014 Tenancy”).

(2)  The Intended Respondent has commenced action in the District Court on 15 March 2024 against; inter alia, the applicant and respondent alleging the same above, the action number being DCCJ 1424/2024.

(3)  The respondent, Concept 1 Ocean (Hong Kong) Ltd, in fact has been dissolved since 16 February 2024.[2]

(4)  The genuine tenant of the Premises has reported the case to police.

The 2014 Tenancy

6.  The 2014 Tenancy, which as registered in the Land Registry, shows that the Premises were let by Wah Fung Forest Resources Limited[3], the predecessor in title, to the Intended Respondent for a term of 2 years from 1 September 2015 to 31 August 2017 at a monthly rent of $80,000 inclusive of management fee, Government rates and Government rent. Prior to that there was also another tenancy agreement registered in the Land Registry dated 30 August 2013 whereby the Premises were let by Wah Fung Forest Resources Limited to the Intended Respondent for a term of 2 years from 1 September 2013 to 31 August 2015. This latter tenancy agreement was also preceded by another two dated 16 February 2009 and 31 May 2011 respectively between the same parties for a term of 2 years from 1 September 2009 to 31 August 2011 and another term of 2 years from 1 September 2011 to 31 August 2013.

7.  In other words, by reference to the record of the Land Registry, the Intended Respondent had been the tenant of the Premises since as early as from 1 September 2009.

8.  These earlier tenancies had not been produced in court but by reference to the 2014 Tenancy, there existed a clause 12 which stated as follows:

“Unless the Tenant not later than 3 months before expiration of the Term pursuant to Clause 11 gives prior notice in writing to the Landlord of the Tenant’s desire to terminate the tenancy hereby granted, this Agreement shall be automatically renewed for a further period of 2 years on the same terms hereof (including the automatic renewal of tenancy under this Clause 12) without the need for the parties to execute any document.”

9.  The validity of such a clause which is tantamount to grant a perpetual lease is subject to challenge. The clause which contains the commencement and duration of the term must also be precise.[4]

10.  In Berrisford v Mexfield Housing Co-operative Ltd [2011] UKSC 52 where the tenancy agreement commenced “from 13 December 1993 and thereafter from month to month until determined as provided in the Agreement” and clauses 5 and 6 thereof set out the means by which the parties could terminate the tenancy, the English Supreme Court held that while the tenancy could not take effect according to its terms as its duration was uncertain at its inception, the tenancy being in writing (and the tenant being an individual as opposed to a corporation) would be treated in common law prior to the enactment of the Law of Property Act 1925 as a tenancy for the life of the tenant[5], determinable before her death pursuant to the term of the tenancy. However, the English Supreme Court did not support jettisoning the certainty requirement as state in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386 that an arrangement such as that embodied in the Agreement could not be a valid tenancy as a matter of law, as it was for an uncertain, potentially perpetual, duration.[6]

11.  Goo and Lee, Land Law in Hong Kong, 4^th Ed also states at p 583 as follows:

“9.09 Leases for life or until marriage all suffer from lack of certainty of duration, and are generally void. Furthermore, in Hong Kong, a lease for life cannot be created by a Government lessee as it can only be created out of a freehold interest which the Government lessee does not possess.”

12.  Fortunately in the present case, I do not have to provide a definitive answer to the challenge because upon expiry of a tenancy for a fixed term, ie the 2014 Tenancy on 31 August 2017 or even earlier if the 2014 Tenancy was invalid, given that there was no express agreement on renewal or on any other terms, the fixed term would automatically be converted to a periodic tenancy by operation of law by virtue of the payment of rent by the Intended Respondent and its acceptance by the then landlord since September 2017.

13.  As stated recently in Yim Yau Ying v Wong Che (or Chee) Sing, DCCJ 1899/2019 (unreported, dated 19 April 2024) at §45, “a periodic tenancy does not expire without notice at the end of the period or each succeeding period which is determined only by a proper notice to quit (Halisbury’ Laws of Hong Kong [235.191])”.

14.  There is before me no evidence of payment of rent by the Intended Respondent since September 2017 but there is neither any evidence of notice to quit served by the registered owner of the Premises, Horn King Industrial Limited or its predecessor in title. At least, the Intended Respondent may have continued in possession as tenant at will.

15.  More particularly, the Intended Respondent is able to produce the following evidence (in original) in support of its current possession or occupation of the Premises:

(1)  Business registration certificate since 24 July 2014 to 24 July 2023 making use of 3/F, 23 Plantation Road, ie the domestic portion of the Premises as the business address;

(2)  Electricity bills since 11 November 2020 until 19 January 2024 in the attention of China Sea Investment Group (Hong Kong) Limited which has now changed its name to Horn King Industrial Limited since 9 November 2018 vide memorial 19011602470010 in the Land Registry;

(3)  Various bills of water charges dated 23 October 2020, 3 November 2020, 2 February 2021, 7 February 2022, 3 June 2022, 11 November 2022, 9 February 2023, 26 January 2024, 19 February 2024, 22 February 2024, 13 March 2024 in the attention of up to five different persons in respect of water consumption at the domestic portion of the Premises.

(4)  Bills of town gas charges dated 24 July 2020, 24 November 2020, 24 January 2022, 16 March 2023 and 24 January 2024 all in the attention of a Ms Li.

16.  In respect of the (3) and (4) above, Mr Wong Chor Cheung (“Mr Wong”), the representative of the Intended Respondent, explained that the domestic portion of the Premises have been sublet to 5 different persons on short terms. This coincides with what I found during the joint inspection with the parties on 23 March 2024 though Mr Wong had not produced any such short-term tenancy agreements.

17.  On the other hand, Mr Lo Hung Chiu (“Mr Lo”), the representative of the applicant, produced also the following:

(1)  An electricity bill dated 22 February 2024 in the attention of a Ms Huen who happens to be one of the five persons that was billed by the Water Supplies Department dated 19 February 2024 and 13 March 2024 in (3) of §15 above. However, the billing address was no longer the domestic portion of the Premises but a P O Box in Kowloon Central Post Office.

(2)  A bill of water charges in the attention of also Ms Huen dated 13 March 2024 mailing to the P O Box in Kowloon Central Post Office.

18.  Mr Lo however failed to produce any other evidence in support of the occupation by Concept 1 Ocean (Hong Kong) Ltd especially during the period of the 2020 Tenancy.

Explorer 1881 Ltd

19.  In the present case, Mr Lo had argued that the 2014 Tenancy was invalid in law. Either the Intended Respondent had departed from the Premises or in any way surrendered its tenancy so that the landlord has let the Premises to a different tenant, ie the respondent by granting the 2020 Tenancy.

20.  Mr Lo alleged that in any event Concept 1 Ocean (Hong Kong) Ltd must have obtained vacant possession in pursuance of the 2020 Tenancy but with respect, this was not necessarily the case. One such example can be seen in 萬士盛有限公司 v 鄧子禎, LDPE 426/2013 (unreported, 25 September 2013.

21.  Alternatively, where it is alleged that a new tenancy has been granted to someone other than the original tenant, there must be a change of possession. While a change of possession need not be a change of physical occupation, which is (or may be) different from legal possession, there is no evidence to support the case here.

Discussion

22.  Wah Fung Forest Resources Limited, who granted the 2014 Tenancy, was the predecessor in title as registered in the Land Registry. At the relevant time, however, the Premises had been subject to the following mortgages or charges:

-  Mortgage in favour of Dah Sing Bank, Limited vide memorial UB8188833 dated 22 August 2000

-  Sealed copy of a Charging Order absolute in favour of the Commissioner of Inland Revenue vide memorial 05081700190035 dated 18 December 2000 in pursuant of DCCJ 19986/1996

-  Sealed copy of a Charging Order absolute in favour of the Commissioner of Inland Revenue vide memorial 06021400140094 dated 12 March 2001 in pursuant of DCCJ 8790/2000 (which was re-registered vide memorial 11030102720033)

-  Sealed copy of a Charging Order absolute in favour of the Commissioner of Inland Revenue vide memorial 11072600700015 dated 20 June 2011 in pursuant of DCTC 5050/2010 (which was re-registered vide memorial 16051700540083)

-  Second Legal Charge in favour of Hong Kong Finance Company Limited vide memorial 13120500430025 dated 18 November 2013

-  Sealed copy of a Charging Order absolute in favour of the Commissioner of Inland Revenue vide memorial 14010300460040 dated 16 December 2013 in pursuant of DCTC 1114/2011, DCTC 5057/2011 & DCTC 3249/2012

-  Third Mortgage in favour of Marcellotino Limited vide memorial 14091000160174 dated 4 September 2014[7]

23.  It appears that Marcellotino Limited as the 3^rd Mortgagee exercised its power of sale in favour of China Sea Investment Group (Hong Kong) Limited vide memorial 16112801930058 dated 14 November 2016. China Sea Investment Group (Hong Kong) Limited then changed its name to Horn King Industrial Limited on 9 November 2018 vide memorial 19011602470010.

24.  As commented by the Court of the First Instance in Hong Kong Finance Company Limited v Wah Fung Forest Resources Limited, Horn King Industrial Limited & Jirong (HK) International Development Holdings Limited, HCA 1694/2020 (unreported, dated 7 June 2023) at §30, “it is perplexing why (Horn King Industrial Limited) would see fit to buy (the Premises), which was subject to two Legal Charges, the 3^rd Mortgage, and most importantly, (the 2014 Tenancy), which on its face gave (the Intended Respondent) the right to occupy (the Premises) indefinitely.” However, leave to appeal against this judgment was granted on 4 September 2023.

25.  Up to then, Explorer 1881 Ltd, the applicant in the present case, had not been in the picture. At trial on 22 March 2024, Mr Lo on behalf of the applicant produced a company structure diagram which is attached as Appendix 1 at the end of this judgment. That is, it is suggested that Explorer 1881 Ltd is the parent company of Horn King Industrial Limited, the registered owner of the Premises.

26.  Be it as it may, it is dubious that Explorer 1881 Ltd instead of Horn King Industrial Limited saw fit to grant the 2020 Tenancy to Concept 1 Ocean (Hong Kong) Ltd without care of whether the latter had obtained vacant possession. On the one hand, there is no evidence of occupation by Concept 1 Ocean (Hong Kong) Ltd during the 2020 Tenancy. With respect, the electricity bill and the bill of water charges produced by Mr Lo do not assist him when they were dated quite recently, practically not in the name of Concept 1 Ocean (Hong Kong) Ltd. In any event, Mr Lo failed to explain the relationship between Concept 1 Ocean (Hong Kong) Ltd and Ms Huen. It appears that Mr Lo was only able to obtain those electricity bill and the bill of water charges when Ms Huen had moved out of the domestic portion of the Premises or in any event changed her corresponding address to a letter box.

27.  On the other hand, Mr Wong on behalf of the Intended Respondent was able to get hold of those original copies of the bills of the public utilities for the period since, for instance, 24 July 2020, ie before the 2020 Tenancy was granted. Mr Lo tried to give a short shrift by suggesting that Concept 1 Ocean (Hong Kong) Ltd passed or left this to Mr Wong. But with respect, why should Concept 1 Ocean (Hong Kong) Ltd do so? On the balance of probabilities, the Intended Respondent has remained in possession of the Premises despite expiry of the 2014 Tenancy.[8]

28.  While Mr Wong tried to paint the picture that the respondent is fictitious or that the 2020 Tenancy was a sham, he cannot point to any direct evidence proving that either.

29.  It would be unrealistic to expect this Tribunal to make a finding of fraud on the paper without cross-examination. This being a joinder application, the Intended Respondent does not in fact need to establish fraud at this interlocutory stage. In any event, the applicant fails to prove that the Intended Respondent had been evicted or displaced by Concept 1 Ocean (Hong Kong) Ltd after the 2014 Tenancy. I agree therefore the Intended Respondent should be admitted as a respondent in this case.

Jurisdiction of the Tribunal

30.  Having ruled that, however, under section 8(8) of the Lands Tribunal Ordinance, Cap 17, the Tribunal shall have jurisdiction only in an application for possession or for ejectment, under the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) or otherwise.

31.  On the one hand, the applicant is not the registered owner of the Premises. As stated by Woo J (as he then was) in Good Profit Development Ltd v Leung Hoi [1993] 2 HKLR 176 at 183:

“The incorporation or acquisition of a private limited company to hold a landed property is nothing out of the ordinary, and if I may say so, a very common practice in Hong Kong. The mere fact that the shareholders in litigation have absolute control of the company which has no other business activity than dealing in and with the landed property being its sole asset does not ipso facto justify the court to depart from the general principles enunciated in Salomon v. Salomon [1897] AC 22.”

32.  On the second hand, there is no evidence before me that the applicant had granted possession to Concept 1 Ocean (Hong Kong) Ltd whilst in contrast, the Intended Respondent had obtained possession from the predecessor in title.

33.  For these reasons, I consider the present case falling outside the jurisdiction of the Tribunal.

Conclusion

34.  In conclusion, I dismiss the application for recovery of possession of the Premises by the applicant. Notwithstanding this, it will be up to the applicant to decide how to pursue remedy, if any, against Concept 1 Ocean (Hong Kong) Ltd under the 2020 Tenancy.

35.  In the present circumstances, I shall make no order as to costs of the interlocutory application taken out by the Intended Respondent.

Appendix 1