CHAN KWEI CHE, KITTY AND ANOTHER v. CHAN SIU LUNG t/a KWAN KEE ENGINEERING

DCCJ 5894/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5894 of 2006

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DECISION

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INTRODUCTION

1.  This is the Defendant’s application for the determination of a question of law pursuant to O.14A of the Rules of the District Court with a view to final determination of this case.  The Plaintiffs opposed.

THE CLAIM

2.  This action concerns the Ground Floor of Kam Ling Court, No.12 Whitty Street, Hong Kong (“the Property”).  In 1982, Leong Hon Chio (“LHC”) and Leung Tsz Chiu (“LTC”) became the registered owners of the Property as tenants in common in equal shares.  In 1992, LTC passed away.  One of the Plaintiffs, Chan Kwei Che, Kitty (“CKC”), is the surviving wife of LTC.  The Plaintiffs are claiming as administratrices of LTC’s estate.

3.  The Plaintiffs complained that the Defendant has been occupying the Property in the absence of any tenancy or licence or payment since 12 December 2003.  They therefore claim against the Defendant for, among other things, ½ share of the mesne profit for the latter’s occupation of the Property since that date until delivery up of vacant possession of the Property.

4.  I have some preliminary observations.

5.  First, the Plaintiffs made it clear in the pleading that they are claiming as administratrices of the estate of LTC.  But the Defendant did not take issue as to the correctness of the title of the writ.  As I was not asked to scrutinise the validity of the Plaintiffs’ claim on any other basis, I would confine myself to considering the application under O.14A.

6.  Secondly, the Plaintiffs did not expressly plead trespass.  I say ‘expressly’ because the Plaintiffs’ plea about the Defendant’s wrongful occupation of at least the share of the Property owned by LHC’s estate effectively spelt out the allegation of trespass.

7.  Thirdly, while the claim is for mense profit until the Defendant’s delivery up of the vacant possession, there is no claim for possession of the Property.  However I am not surprised about that, in the light of the conflicting stance of the co-owners of the Property in this dispute.

THE DEFENCE

8.  The defence is that the Defendant has been occupying the Property pursuant to a non-exclusive licence of LHC, the other co-owner.

9.  The Defendant revealed more of the background:  LHC and LTC are brothers and sons of the late Leung Kwan Tai (“LKT”).  In about 1987, the two brothers took over the electrical and water engineering business of LKT and incorporated Kwan Kee Electrical & Water Engineering Co. Ltd. 群記工程有限公司(“the Company”).  They were the only 2 shareholders and directors of the Company.  Upon the death of LTC in 1992, LKT took up the directorship vacancy of the Company until he too passed away in 2000.

10.  The Defendant was said to be the half brother of LHC and LTC and had been an employee of the Company since 1988.  The Defendant also became the last appointed director of the Company in July 2000 to take up the directorship vacancy upon LKT’s death.  However the Company ceased business in the same year when LHC had to leave Hong Kong for emigration.

11.  The Company was formally wound up in 2001.  By then, LHC and LTC’s estate remained the only shareholders of the Company in the same respective shares as before.

12.  Prior to the cessation of the Company’s business, LHC allegedly funded several former employees of the Company, including the Defendant, to establish a partnership business in the name of Kwan Kee Engineering群記工程.  The partnership business started operating at the Property.  The partnership was dissolved upon the withdrawal of the partners in late 2002.  Since 12 December 2003, the Defendant has been operating the business as a sole proprietorship.

13.  The above background of the Company and the Defendant’s business are evidenced by the company and business registration documents.

14.  The Plaintiffs did not seek to traverse the other parts of the above factual background save and except this - the Defendant’s allegation of an oral agreement between LHC and the Defendant in December 2003 whereby:

(1)        LHC was a dormant partner of the business; and

(2)        the Defendant had a non-exclusive licence to use the Property for the operation of the business.

15.  The Defendant framed the following question of law for determination:

“whether a licensee granted with a non-exclusive licence to occupy and use a property is liable to pay the other tenant-in-common, not being the licensor, any mesne profit for the occupation.”

O.14A

16.  The rule may be invoked if the question of law is suitable for determination without a full trial and that such determination will finally determine the entire cause of action or matter or any claim or issue therein.  The exercise of the power under O.14A is the court’s discretion.

17.  On these requirements, the Court of Final Appeal in Shell Hong Kong Ltd. v Yeung Wai Man Kiu Yip Co. Ltd. [2003] 3 HKLRD 62 sent out the following reminder (at 69G):

“It must also be noted that it is inappropriate to use this procedure if the issues of facts are interwoven with the legal issues to be determined.  For obvious reasons, the question of law……cannot be dealt with on assumed or hypothetical facts.  And if it is necessary for the court to hear evidence to resolve a factual dispute in order to come to a determination on the question of law……, it would not normally be suitable to invoke O.14A.

Hence, even if the conditions are satisfied, the court still has a discretion under r.1 to decide whether to entertain an application under this Order.  He has to decide on the suitability of adopting the procedure in the case in hand before adjudicating on the merits……”

18.  The same was reiterated by the Court of Appeal in Netwell Properties Ltd v JCG Finance Co. Ltd. [2003] 4 HKC 566 (at 568I):

“……If there is a dispute as to the facts, it is difficult to see how judgment can be entered in favour of a claimant.  Where a claimant seeks judgment under O.14A the facts would have to be based on either established facts or agreed facts.  As set out in Hong Kong Civil Procedure 2002 at para.14A/2/4, there should be no hypothetical facts and where the issues of fact are interwoven with the legal issues raised, it will be undesirable for the court to split the legal and factual determination, for to do so would in effect be to give legal rulings in vacuo or on a hypothetical ruling, which the court will not do.”

19.  The Plaintiffs opposed the current application exactly on the basis that the legal issues in this case are interwoven with factual dispute.

THE DISPUTE

20.  In respect of the alleged partnership between LHC and the Defendant, the really material part is the alleged non-exclusive licence whereby the Defendant came to occupy the Property.  This was the basis on which the question of law was framed.

21.  The Defendant contended that LHC, being a tenant-in-common, was entitled to grant a non-exclusive licence to the Defendant to occupy the Property.  Indeed, a tenant in common is entitled to deal, in whatever way he desires, with his own undivided share: he may lease it or dispose of his right to possession to a stranger as he likes without the concurrence of the other tenants in common: see Chin Lan Hong v Cheung Poh Choo [2005] 3 HKLRD 811 at 823G-H (applying the New Zealand case of U-Needa Laundry Ltd v Hill [2000] 2 NZLR 308 and the Hong Kong case of Incorporated Owners of Chungking Mansions v Shamdasani Murlie Pessumal & Others [1991] 2 HKC 342 at p.352G-H).

22.  Snell’s Equity (31^st ed) at paras.18-28 has this to say:

“Where land is held by several co-tenants they are all, as between themselves, entitled to possession of the whole.  Hence there is no remedy in trespass against an occupying co-owner unless he has ousted or excluded the other or others.  There is no exclusion if one merely stays away, allowing the other to occupy a house or take all the profits whether by way of rent, crops or minerals.  Where one ousts the other or others, he will be liable for an occupation rent.  Where there is no ouster there is no such liability in the absence of any contract to pay rent or other assumption of liability.  If a co-tenant was dissatisfied with the situation, his remedy was to apply to the court for an order compelling partition……”

23.  I see no real difference between counsel for the parties in their understanding of the above legal principles.  The major point made by Mr. Cheung for the Plaintiffs was that the alleged non-exclusive licence by LHC to the Defendant should not be taken as established fact.  Therefore the court should not proceed to determine the question of law on hypothetical fact.

24.  Specifically, the Plaintiffs raised 2 aspects of the alleged licence which they disputed:

(1)        Whether the Defendant was a licensee with non-exclusive possession or a tenant with exclusive possession of the Property.

(2)        Whether the estate of LTC has been excluded or ousted from the Property so that the Defendant has trespassed its share of the Property.

Licence to the Defendant?

25.  The Defendant and LHC in their affirmations verified the background for the licence and how the Defendant, and formerly his partnership, came to operate the business at the Property since 2000.  In the notification of change of directors to the Company Registry filed in September 2000, LHC actually reported the address of the Property as both his address and that of the Defendant upon the latter’s appointment as a director of the Company.  With the confirmation of LHC now, that the Defendant had the consent of LHC, whether in the form of a formal licence, to use the Property could hardly be contradicted.  I do not believe the Plaintiffs will be able to contradict that even if this issue goes to trial.  I therefore do not find the existence of a licence by LHC to the Defendant to use the Property to be a real factual dispute.

26.  As to whether the Defendant could be a tenant with exclusive possession of the Property, I see absolutely no clue from CKC’s affirmation how such proposition could be based.  I find this to be nothing more than mere speculation.

Exclusive possession?

27.  The fact that I rule out the suggestion that the Defendant might be a tenant does not necessarily mean the possession of the Property by him was in fact non-exclusive.

28.  Both LHC and the Defendant emphasized in their affirmation that the licence was non-exclusive.  Miss Ng for the Defendant therefore asked me to take the non-exclusive licence as an established fact.  I wonder if I should do so at this stage.  Unlike the existence of a licence (as explained above), the allegedly agreed non-exclusive nature of the licence is an assertion unsupported by any contemporaneous documentary evidence.  The Plaintiffs are quite entitled to require the Defendant to prove at trial that it was actually agreed between him and LHC at the time of the licence that the same was non-exclusive.

29.  But more importantly, rather than accepting what LHC and the Defendant might choose to label the licence, if at all, at the time of their agreement, I am concerned with whether in fact possession of the Property by the Defendant was exclusive.  If it was, this effectively amounted to ouster of the estate of LTC from its ½ share of the Property.

30.  Miss Ng for the Defendant submitted that exclusive possession or ouster was not the Plaintiffs’ pleaded case.  She was right.  However, as mentioned above, I am not here to scrutinise the Plaintiffs’ claim on any other basis such as whether the claim, currently without pleading of ouster, is liable to be struck out for want of a valid cause of action.  The non-exclusive licence was in fact raised by the defence which was deemed to be in issue.

31.  Miss Ng then queried whether ouster was shown in the absence of evidence of LTC’s estate having ever been denied access to the Property.  LHC and the Defendant referred to the instance where they facilitated the viewing of the Property by the estate agent arranged by CKC a few years ago.  She submitted that the Plaintiffs’ case was no more than CKC’s belief that it would be unreasonable to expect her and her children to share the use of the Property with the Defendant.  The estate of LTC, she said, has simply chosen not to exercise its rights over the Property.  Can I take this as an established fact?

32.  In my view, the belief of CKC may well be founded on the fact that the Defendant’s occupation of the Property in fact left no realistic room for the CKC and her children to exercise their rights.  In this regard, the permitted user of the Property under the occupation permit is not as irrelevant as Miss Ng suggested.  According to the occupation permit, the tenants in common were supposed to use the Property for domestic purpose.  According to the Plaintiffs and the photographs of the Property, the Property is fully occupied by the Defendant for his business including his office and storage.  Such manner in which the Defendant is occupying the Property is in direct conflict with the domestic use which the other tenant in common, and now its estate, expected.  One may then ask whether the Defendant’s maintaining that the licence and his user were agreed or intended to be non-exclusive was a reality or a mere purport in the circumstances.

33.  I have to say this: I am not making any conclusion on this question of fact, not to mention one which may be against the Defendant.  This is so as I also have doubt about the Plaintiffs’ case as per CKC’s affirmation.  For instance, they complained about the Defendant’s wrongful occupation since December 2003.  However it was not mentioned whether they have asserted their rights to the Property since LTC passed away in 1992 and if they have not, why not.  There was also no mention of whether they have done so since 2000 when the Defendant was already using the Property openly and if they have not, why not.  But I find this to be exactly the factual dispute which is central to the question of law which I am asked to determine.

Liability of the Defendant for mesne profit

34.  The authorities cited above speak of the rights of the co-owner in the case of actual ouster including that to sue the other co-owner in trespass.  The Plaintiffs are now suing the occupier instead.

35.  Mr. Cheung for the Plaintiffs submitted that the Defendant was a trespasser vis-à-vis the Plaintiffs as they had given no consent to his occupation of the Property.  In support, Mr. Cheung referred to Incorporated Owners of Chungking Mansions v Shamdasani [1991] 2 HKC 342 at 353I where the court cited Ferguson v Walsh [1987] 1 WLR 1553 at 1563A-D, per Lord Goff of Chieveley.  Mr. Cheung described this as a difficult point of law, apparently deriving such view from Gray & Gray, Elements of Land Law (4^th ed.) at para. 4.10.  The authors commented that the law in this area is not entirely satisfactory.  On this basis, Mr. Cheung submitted that this is not an appropriate case to seek determination pursuant to O.14A.  He relied on the following passage from the Hong Kong Civil Procedure 2007 (Vol.1) at 14A/2/4:

“……It was said that where the law is not settled but is in a state of development, it is normally inappropriate to decide novel questions on hypothetical facts……”

36.  As I understand Mr. Cheung’s argument, the difficulty or novelty of the point of law exists because the scenario in the present case, being a claim by a non-consenting co-owner (or his estate) against the occupying licensee for mesne profit, did not occur in Chin Lan Hong.  Therefore the court has yet to consider whether the occupier is liable for mesne profit to the non-consenting co-owner.

37.  In Chin Lan Hong, the court applied what was said in Incorporated Owners of Chungking Mansions case as well as the New Zealand case of U-Needa Laundary Ltd (referred to above).  Clearly a tenant in common is entitled to grant a licence, or even tenancy, to a stranger to occupy the property so long as possession under such licence or tenancy is non-exclusive.  When describing an occupier as a trespasser vis-à-vis the non-consenting owner, the court in Incorporated Owners of Chungking Mansions was speaking of a case where the stranger was granted exclusive possession of the land.  In line with such reasoning, in a case where the licence is proved to be non-exclusive, I would be surprised if the occupier should still be classified as a trespasser even vis-à-vis the non-consenting co-owner.  As such, I also wonder what remedy the non-consenting co-owner would have against the occupier in such circumstances.

38.  Therefore, the question of whether the occupier is liable to the non-consenting co-owner for trespass may not transpire to be as difficult as Mr. Cheung suggested if the occupier is not in exclusive possession of the Property.

39.  The question of law framed by the Defendant was premised on a non-exclusive licence.  I am not inclined (nor was I asked) to scrutinise whether the Plaintiffs’ claim is sustainable against the Defendant (instead of LHC, the licensing co-owner), even assuming that the licence was an exclusive one.

CONCLUSION

40.  For the above reasons, I am of the view that the question of law framed by the Defendant should not be determined without resolving first the factual dispute of whether the licence granted by LHC to the Defendant was agreed to be or was in fact exclusive.

41.  It follows that the application should be dismissed in the circumstances.  Costs should follow the event and therefore the Plaintiffs should have costs of and occasioned by this application, such costs to be taxed if not agreed, with certificate for counsel.  This costs order is nisi and will become absolute in the absence of application in 14 days.