CHAN KA FOOK v. CHAN CHOI KWONG

DCCJ 6022/2020

[2025] HKDC 1362

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 6022 OF 2020

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BETWEEN

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JUDGMENT

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A. INTRODUCTION

1.  The Plaintiff and the Defendant are brothers. They are indigenous villagers. Their disputes in this case concern Lot No 726 in DD No 111 (“Lot 726”) together with the messuages erections and building thereon now known as No 81A Ha Che, Pat Heung, Yuen Long, New Territories (“the Property”), on which a 3-storey small house was built (“the Building”).

B. THE PARTIES’ CASE

B1. The Plaintiff’s Case

2.  There is no dispute that the Defendant is and was at all material times the sole registered owner of the Property. Pursuant to Building Licence No 6826 dated 2 April 2001 (Memorial No: YL968257) (“the Building Licence”) granted by the District Lands Officer, Yuen Long (“the DLO”), to the Defendant, the Building was built on Lot 726.

3.  On the Plaintiff’s case, the Building was built pursuant to a Chinese Agreement for Construction of Small House (興建村屋協議書) dated 16 May 2008 (“the Agreement”) entered into between himself, the Defendant and their other brother Mr Chan Choi Yau (陳才有) (“CY Chan”). The Agreement contained the following terms:

(1) “我們叁人 (陳才有，陳家福及陳才光) 將會合資於新界元朗八鄉下輋村第111約第726地段興建壹幢三層高之村屋，每人將會預付港幣五十萬元，即合共港幣壹百五十萬元用作興[建]村屋之用。” (“the First Paragraph”)

(2) “該村屋之地下 (G/F) 一層及花園將會歸於陳家福先生擁有；二樓 (1/F) 將會由陳才有先生擁有；三樓 (2/F) 及天台 (R/F) 將會由陳財光先生擁有。我們叁人現立此協議書為證。” (“the Second Paragraph”)

4.  The Agreement was signed by the Plaintiff, the Defendant and CY Chan. The Agreement was further signed by Mr Ha Chun Ping Ben (夏振平) (“Ben Ha”) as the witness. Ben Ha is the nephew of the Plaintiff, the Defendant and CY Chan.

5.  The Plaintiff said that while the Defendant obtained the Building Licence from the DLO in 2001, he was unable to build any house on the Property as he was short of funds. The Defendant had to ask the Plaintiff and CY Chan to build the house with him, which led to the Agreement.

6.  Pursuant to the Agreement and upon the authorisation of the Defendant and CY Chan, the Plaintiff entered into a construction agreement with a contractor 有華建築 (拓展) 公司 (“the Contractor”) to build the 3-storey small house. The Contractor sub-contracted the building works to Glister Engineering Consultants Co (光輝工程顧問公司). The Plaintiff paid the construction fees to the sub-Contractor pursuant to the Contractor’s instructions on behalf of himself, the Defendant and CY Chan. In addition, the Plaintiff engaged Winner Surveying Consultants Co to monitor the construction works.

7.  In the end, the total cost of the construction was around HK$1.38 million. Each of the Plaintiff and CY Chan contributed around HK$460,000 to the above costs. As for the Defendant, he only contributed HK$260,000 in cash, as the parties agreed that his “Ding” right (丁權) would count towards HK$200,000 of the costs.

8.  On 8 February 2010, the District Lands Office, Yuen Long issued the Standard Certificate of Compliance (“the Certificate of Compliance”) and the construction works on the Property was formally completed.

9.  The Plaintiff and his family moved into the Property and have occupied the ground floor of the Building and the garden of the Property exclusively since then (“Ground Floor” and “Garden”). The Defendant and his family moved into the Property and has been occupying the second floor and the rooftop of the Building since then (“Second Floor” and “Rooftop”). As CY Chan resides in the Netherlands, he only stayed in the first floor of the Building (“the First Floor”) occasionally when he returns to Hong Kong.

10.  Since the Plaintiff and his family moved into the Ground Floor and the Garden, all the utilities have been paid by the Plaintiff alone.

11.  For the above reasons, the Plaintiff says that he is and was at all material times the beneficial owner of the Ground Floor and the Garden.

12.  In about January 2011, the Plaintiff arranged for fences and entrance gates to be installed in the Property. In about 2013, the above entrance gates were removed to facilitate a construction project conduct by Mr 楊達明’s wife (“Mrs Yeung”) on No 82A Ha Che, Pat Heung, Yuen Long.

13.  Although the construction of the Building was completed in February 2010, the Defendant still fails/refuses to transfer the legal title of the Ground Floor and the Garden to the Plaintiff as required under the Agreement.

14.  On about 3 November 2020, without the Plaintiff’s permission, the Defendant and/or his servants or agents trespassed on the Garden by placing various articles, including iron cans, bicycles and wooden board or shelves in various areas in the Property as identified in Annexure 2 of the Amended Statement of Claim dated 25 September 2023 (“SOC”, “the Articles”).

15.  The Plaintiff contends that the Defendant has been in breach of the Agreement in failing to transferring the legal title of the Ground Floor and the Garden to him, and that the Defendant has been guilty of trespass.

16.  The Plaintiff seeks, inter alia[1]:

(1) A declaration that the Plaintiff is and was at all material times the sole legal and beneficial owner of the Ground Floor and the Garden;

(2) Specific performance of the Agreement, such that the Defendant shall transfer the legal title of the Ground Floor and the Garden to the Plaintiff free from any encumbrances;

(3) An order that the Defendant shall execute an Assignment in respect of the Ground Foor and the Garden to the Plaintiff and Deed of Mutual Covenant in respect of the Property;

(4) An injunction requiring the Defendant to remove the Articles; and

(5) Nominal damages for trespass.

B2. The Defendant’s Case

17.  The Defendant denies the Plaintiff claims.

18.  The Defendant alleges that he has sufficient financial means to build a small house on the Property without financial assistant from others. The Defendant was not keen to build any small house at the time. He only agreed to build a small house upon the incessant requests from the Plaintiff and CY Chan.

19.  The Defendant says that he has contributed around HK$500,000 to the construction works.

20.  The Defendant admits that the Plaintiff and his family have been occupying the Ground Floor and the Garden since February 2010, but says that they have been doing so free of rent and/or payment of licence fee to him. As for the utility bills, they have been paid by the Defendant as the legal and beneficial owner of the Property.

21.  The Defendant contends that the Agreement was void for mistake. He says that at the time when the Agreement was signed, it did not contain any term to the effect that there would be a formal transfer of ownership of the corresponding parts of the Building by the Defendant to the Plaintiff and CY Chan (ie the Second Paragraph was not there). The Defendant only discovered in or around 2015 that the Second Paragraph has been unilaterally added to the Agreement.

22.  Alternatively, if the Agreement is not void for mistake, it is illegal and unenforceable as it is contrary to the conditions under the Building Licence. In particular:

(1) Condition 4 (a) provides that:

“Except as provided in sub-clauses (b), (c), (d) and (e) of this Condition, [the Defendant]…have obtained the Building Licence on concessionary terms under the Small House Policy of the Government for indigenous villagers in the New Territories, shall not assign, partition, mortgage, charge, demise, underlet, part with possession of or otherwise dispose of [Lot 726] or any part thereof or any interest or undivided share therein or any building or part of any building thereon or enter into any agreement so to do, whether directly or indirectly, or whether by way of direct or indirect reservation, grant of any right of first refusal, option, power of attorney, building agreement or through a solicitor, agent, contractor, trustee or otherwise howsoever.”;

(2) Condition 4 (b) provides that:

“After a period of five years has lapsed from the date of a letter issued by the DLO confirming that these Conditions have been complied with to his satisfaction, [the Defendant] without the consent of the DLO shall be at liberty subject to sub-clauses (e) and (f) of this Condition and Condition No. 6 hereof to assign… part with possession of or otherwise dispose of [Lot 726] or any part thereof or any interest or undivided share therein or any building or part of any building thereon or enter into any agreement so to do”;

(3) Condition 4 (e) (i) provides that:

“Upon certification by the District Lands Officer that these Conditions have been complied with to his satisfaction [the Defendant] may, with the prior written consent of the District Lands Officer and on such conditions as may be imposed on him (including the payment of such fee as may be required by him), assign (but not partition), mortgage or charge the lot (as a whole only and not a part thereof) or, subject to sub-clause (f) of this Condition, any interest or undivided share therein or part with possession with the lot and the building thereon or part with possession of part of the building on the lot, or enter into any agreement so to do but only to:

(i) a male person at least 18 years of age who has satisfied the District Lands Officer that at the date of the application for such consent he is descended through the male line from a person who was in 1898 a resident of an established village in Hong Kong;”

23.  In the Re-Amended Defence dated 17 January 2024, the Defendant raises the following 2 other defences, but he is no longer pursuing them now:

(1) The defence that the Agreement is inadmissible as being contrary to Section 15 of the Stamp Duty Ordinance (Cap 117), on the Plaintiff’s solicitors’ personal undertaking to cause the Agreement to be stamped and pay any penalty under Section 9 of the said Ordinance;

(2) The defence that the Agreement has been superseded and/or varied by a subsequent oral agreement/understanding between the Plaintiff, the Defendant and CY Chan that notwithstanding the Agreement, there will be no formal transfer of ownership. Under this oral agreement, all parties knew and agreed that the Plaintiff and CY Chan would only be entitled to use their respective parts of the property as bare licensees for their lifetimes, and that the Defendant would not have to transfer any legal title to them.

24.  The Defendant says that the fences and the gates were installed by the Plaintiff without his consent. The gates were removed to facilitate the construction project conducted by Mrs Yeung. Mrs Yeung directly informed the Defendant’s wife, Ms Wong Kam Lan that the gates were expected to be restored after the said construction project was completed. Any restoration of the gates requires the Defendant’s consent as the legal and beneficial owner of the Property. In any event, the gates were not restored to their original position at the suggestion of Mrs Yeung for certain convenience reasons.

25.  The Defendant admits that he has placed various articles in the northwest part of the Garden. He had to do so as the Plaintiff, his servant/agent parked cars or motorbikes in the Garden without the Defendant’s consent. The Defendant was entitled to place the articles as he is the legal and beneficial owner of the Property.

C. THE AGREED LIST OF ISSUES

26.  The following are the agreed list of issues which the Court needs to determine in this Trial.

(1) In respect of the Agreement:

(a) Whether the Agreement is void by reason of mistake;

(b) Whether the Agreement is unenforceable due to illegality;

(2) Whether the Defendant is in breach of the Agreement for not transferring the legal title of the Ground Floor and the Garden to the Plaintiff;

(3) If Issue (2) is positive, what remedy or remedies is/are available to the Plaintiff;

(4) Whether the Defendant’s placing of the Articles in the Garden amounts to trespass to the Plaintiff’s land; and

(5) If Issue (4) is positive, what remedy or remedies is/are available to the Plaintiff.

D．ANALYSIS

D1. Whether the Agreement is void for mistake

27.  The Defendant relies on unilateral mistake to suggest that the Agreement is void. The law in this respect is not controversial:

(1) If a party has made a mistake as to the terms of the contract and that mistake is known to the other party, then the contract is not binding and void ab initio: see Statoil ASA v Louis Dreyfus Energy Services LP [2008] EWHC 2257 (Comm), adopted in Eshed Diam (HK) Ltd v Siam Color Gems & Jewelry Ltd [2017] 3 HKLRD 308 at §87;

(2) The party seeking to rely on his own unilateral mistake has the burden of proving not only his own mistake, but also that the other party knew about his mistake, and the other party’s unconscionable conduct or other evidence showing why it would be inequitable for him to resist rectification of the agreement: see Misrepresentation, Mistake and Non-Disclosure (6^th Edn) §13-52.

28.  On a plain reading, the terms of the Agreement are clear:

(1) In the First Paragraph, it is stated that the Plaintiff, the Defendant and CY Chan agreed that they would put their funds together to build a 3-storey small house and each of them will contribute an estimate amount of HK$500,000;

(2) In the Second Paragraph, the parties agreed on the ownership of the Building: (a) the Ground Floor and the Garden shall belong to the Plaintiff; (b) the First Floor shall belong to CY Chan; and (c) the Second Floor and the Rooftop shall belong to the Defendant. In saying the Ground Floor and the Garden “…將會歸於陳家福先生擁有”, no distinction is made as to the legal and beneficial ownership. It simply means that the full legal and beneficial ownership of the Ground Floor and the Garden shall be assigned to the Plaintiff;

(3) The overall effect of the Agreement is that pursuant to the First Paragraph, the Plaintiff, the Defendant and CY Chan shall contribute to the funds for the construction of the small house. In consideration of that, pursuant to the Second Paragraph, once the construction is completed, both the legal and beneficial ownership of the Ground Floor and the Garden shall belong to the Plaintiff, whereas the legal and beneficial ownership of the First Floor shall belong to CY Chan.

29.  The Defendant’s defence of unilateral mistake hinges upon his factual allegations that the version of the Agreement which he signed only contains the First Paragraph, and that any versions of the Agreement with the Second Paragraph was not signed by him and the signature therein was forged.

30.  During the Defendant’s cross-examination, he was adamant that the versions of the Agreement shown to him with the Second Paragraph and his signature were false (假的), and that the signature next to his name in these agreements do not belong to him and were forged (假的).

31.  However, apart from his bare assertion, there is no evidence to support the Defendant’s serious allegation of forgery. All the versions of the Agreement before this Court contain the Second Paragraph and appear to bear a signature of the Defendant. The Defendant has not adduced any handwriting expert evidence to challenge the authenticity of his signatures on these versions of the Agreement. The Defendant has also failed to produce the alleged version of the Agreement which only contains the First Paragraph.

32.  The Defendant claims that he found out that the Second Paragraph was added to the Agreement in 2015, when the Plaintiff handed a copy of the Agreement with the additional paragraph and the forged signature on it. If that were indeed the case, it is difficult to believe that the Defendant would not have made any inquiry with CY Chan or Ben Ha, or report the forgery to the police.

33.  CY Chan and Ben Ha were present when the Agreement was discussed and signed, but both did not attend the trial to give evidence. Notwithstanding the Defendant’s submissions, I am not minded to draw adverse inference against any party due to CY Chan and Ben Ha’s absence from the trial. This is because CY Chan and Ben Ha’s evidence would be important to both parties on the issue of what was agreed under the Agreement and whether the Agreement contained the Second Paragraph when it was signed. CY Chan and Ben Ha are respectively the sibling and nephew of the Plaintiff and the Defendant. Both the Plaintiff and the Defendant would be in a position to call them to given evidence. The fact that neither party has called these witnesses should not be taken against the Plaintiff or the Defendant: see Chan Sze Wing v Congruence Chinese Medicine & Jing Luo Health Ltd [2020] HKCFI 2596 at §§32-34.

34.  For the reasons above, I am not able to accept the Defendant’s claim that the Agreement with the Second Paragraph was forged and that he was mistaken that the Agreement did not contain the Second Paragraph when he signed it.

35.  Having considered the documents and heard the parties’ oral evidence, I find that it was the Defendant who asked the Plaintiff and CY Chan to build the Building together back in 2008 as he was short of funds.

36.  There is no dispute that the Building Licence was granted to the Defendant in February 2001. The Building Licence was repeatedly extended and the construction of the Building only commenced in 2008 after the Agreement was entered into.

37.  Even taking the Defendant’s case to the highest and assuming that he had contributed around HK$500,000 to the construction, that would only be around one-third of the total costs of the construction. While the Defendant claimed that he had sufficient financial means to construct the Building, he did not produce any evidence to prove his financial ability at that time.

38.  On the other hand, I accept the Plaintiff’s evidence that there was no immediate need in 2008 for him to build any house to live in:

(1) Since 2006, the Plaintiff has been holding Ha Tsa Lot No 43 in DD 111 (“Lot 43”) in joint tenancy with his other brother, Chan Tung Hei (陳東喜) (“TH Chan”);

(2) Before the Plaintiff and his family move into the Building, they stayed in Chan Choi’s House (see §39 below). In any event, the Plaintiff could stay in the ancestral house of the Chan’s family (祖屋) located on Lot 43 and its adjacent land Ha Tsa Lot No 44 in DD 111.

39.  In an attempt to explain why the Plaintiff and CY Chan would have agreed to contribute to the construction of the Building without getting ownership of any part of the Building, but content with a being given a licence to stay in the Building, the Defendant alleges that this has a been the practice of the Chan’s family. He says that back in around 1993, he and TH Chan contributed to the building of a 3-storey small house at 79B, Ha Che, Pat Heung, New Territories together with their other brother Chan Choi (陳才) (“Chan Choi’s House”). The ownership of Chan Choi’s House was only vested in Chan Choi, while the Defendant and TH Chan were granted a right to stay in the House.

40.  The above suggestion is not supported by any documentary evidence. The Defendant was unable to produce any documents to show that he had contributed to the costs of building Chan Choi’s House. In any event, the arrangement between the Defendant and other brothers with regard to Chan Choi’s House does not necessarily have to be the same as that agreed to between him and the Plaintiff and CY Chan for another premises, ie the Property and the Building.

41.  Taking into account the above circumstances, it is more likely than not that in return for the financial contributions to be made by the Plaintiff and CY Chan, the Defendant had agreed to transfer ownership of the Ground Floor and Garden, and the First Floor to the Plaintiff and CY Chan respectively.

42.  In his Closing Submissions, the Defendant contends that the Plaintiff was seeking to put forward a “separate agreement” between himself and the Defendant that the latter would assign title to the Plaintiff after 5 years from the date of completion of the Building and was trying to rely on that “separate agreement” as the basis of his present claim. I do not agree with the Defendant’s understanding of the evidence:

(1) During cross-examination of the Plaintiff, the Plaintiff confirmed that before the Agreement was entered into, there was discussions between the Plaintiff, the Defendant and CY Chan about the ownership of the respective parts of the Building. This is in line with what was eventually agreed in the Second Paragraph;

(2) As to the Plaintiff’s oral evidence that the Defendant told him that the Defendant would transfer the title of the Ground Floor and the Garden to him 5 years after the completion of the construction, which I accept, it only concerns the means and the time by which the Defendant would perform the Second Paragraph of the Agreement. The above does not alter the fact that there has already been an agreement by the Defendant to transfer ownership of the Ground Floor and the Garden to the Plaintiff as contained in the Agreement.

43.  The Defendant points to the unsigned and undated Deed of Trust (信託聲明契約) (“the Deed of Trust”) and suggests that the fact that the Plaintiff had to ask the Plaintiff to sign the Deed of Trust in around 2014 or 2015 shows that the Agreement was not good enough as the Agreement did not mention the issue of assigning title. I do not agree with the Defendant’s argument.

44.  First, the Court will not generally consider subsequent conducts in interpretating an agreement. As I have explained above, I consider the terms of the Agreement to be clear - (a) each of the Plaintiff, the Defendant and CY Chan would contribute to the costs of the construction on the Property; and (b) each of them would own designated parts of the Property and the Building (for the Plaintiff, he would own the Ground Floor and the Garden).

45.  Second, the fact that there was no express mention of the assignment of title of the Ground Floor and the Garden by the Defendant to the Plaintiff would not detract the parties’ express agreement as to the ownership in the Agreement. The assignment of title is only the means to give effect to the parties’ agreement as to the ownership.

46.  Third, the terms of the Deed of Trust are largely consistent with that of the Agreement. In the Deed of Trust, it was recorded that while the Building is registered under the Defendant’s name, the Ground Floor belongs to the Plaintiff (although the ownership of the Garden was left out) whereas the First Floor belongs to the CY Chan.

47.  Fourth, as the Plaintiff explained, and I accept, he prepared the Deed of Trust only because the Defendant persistently failed to transfer the Ground Floor and the Garden to him, and he wanted to give some comfort to his wife who asked him regularly why the Defendant still has not performed the Agreement.

48.  To conclude, I find that the Agreement contained the Second Paragraph when it was signed by the Plaintiff, the Defendant and CY Chan. The Defendant was well aware of the Second Paragraph and he agreed to it. He agreed to transfer ownership of the respective parts of the Building and the Property to the Plaintiff and CY Chan as stated in the Second Paragraph in consideration for the latter to contribute to the funding for the construction of the Building and the Property.

D2. Whether the Agreement is unenforceable due to illegality

49.  As an alternative defence, the Defendant contends that the Agreement is unenforceable due to illegality, as it amounts to a breach of the non-alienation clause under Condition 4, which restricts the Defendant from assigning or otherwise disposing of the Property or any part of any building thereon or enter into any agreement to do so prior to the expiry of a 5-year period from the date of issuance of the Certificate of Compliance (ie 9 February 2015) unless the requirements under Conditions 4 (b) to (e) are complied with.

50.  The Court of Appeal cases of Li Pui Wan v Wong Mei Yin [1998] HKLRD 84 and Lau Kwai Kiu v Bian Xintian [2012] 2 HKLRD 854 are instructive on the issue of illegality relating to the Small House Policy.

51.  In Li Pui Wan, the Court of Appeal explained at 89G to 90H that:

“According to the law of contract, if a contract upon its formation or performance contains elements of illegality and is in certain circumstances against public policy the court would not enforce it. What public policy in fact means is that there are certain principles which in the opinion of the court must persist in a civilized society. The question as to whether the court would refuse to enforce a contract depends on the seriousness and turpitude of the illegality. Generally, the court will consider whether the contract is in breach of common law or statute by its formation or performance; or injurious to good government either in the field of domestic or foreign affairs; or interferes with the proper working of the machinery of justice; or injurious to marriage or morality or economically against the public interest. (See Chitty on Contracts, Vol. 1, paragraphs 16-001, 16-003 and 16-005, and Euro-Diam Ltd v. Bathurst [1990] QB 1 and Edler v. Auerbach [1950] 1 KB 359).

The purpose of granting of land by the government in accordance with Chinese customary law with additional terms and conditions to New Territories male indigenous villagers is to provide some of the New Territories residents with special care. This situation differs greatly from the principles in the law of contract where the court refuses to make orders to enforce certain contracts because they are against public policy upon formation or performance. The granting of land by the government to indigenous villagers who are male descendants is a measure made under special circumstances. It has nothing to do with the principle under which by virtue of public policy, certain contracts are found illegal by the court. In our view, such measure adopted by the government in the granting of land should not be regarded as a public policy, and is quite different from the principle in common law which requires the court of law to uphold public policy.

…

Even if it was illegal for the parties to agree to proceed with a sale and purchase or completion at a later date without government approval or before paying the premium, this, in our view, does not constitute a breach of public policy. In fact, the sale and purchase or assignment of title and development entitlement of small houses similar to that in this case is also good for the public as the payment of premium brings revenue to the government. It also helps to solve the housing problem because people other than male indigenous villagers can also live in this sort of houses. However, if a male indigenous villager cannot afford to build a small house due to financial constraints but is not allowed to assign his title to somebody else, he will not be able to benefit from the policy and consequently it will not do any good to the general public. Over the years, the government has been considerably indulgent towards this sort of sale and purchase and in effect has amended the formerly so-called land grant policy. From the practical point of view, this measure has done more good than harm to the public.

As can be seen from the contract and agreement produced, the parties did not intend to breach the conditions of grant. It can only be regarded as technically ‘jumping the gun’. In the agreement between Ming Fai and the respondent and Hui Fu Kwok, Clause 3 set out clearly that Ming Fai should be responsible for assisting the individual male descendants to complete the necessary procedures in relation to the construction sites, such as application for a occupation permit, assignment, payment of premium and to liaise in matters relating to the village's local conditions and customs, etc. Further, in the Provisional Agreement for Sale and Purchase between the appellant and respondent, Clause 4 also set out clearly that the transaction should be completed within 14 days from the time payment of premium was approved by the government. The agreement also mentioned the application to the government for assignment, and stipulated that the purchaser should pay the premium. Obviously, the contractual parties agreed that the sale and purchase would not be completed until formalities of application to the government for assignment were complete and the premium paid. The parties had no intention of completing the transaction prior to obtaining approval for assignment or payment of premium from the government. In our view, even if government approval had not been given and the amount of premium not settled at the time of formation of the contract, the parties did have the intention to complete the sale and purchase in accordance with the terms and conditions set down by the government. In the circumstances, this transaction of sale and purchase is not against public policy.” (Emphasis added)

52.  Lau Kwai Kiu was another “jumping the gun” case, the Court accepted that no false declaration or misrepresentation was made to the Government, see §62 of the judgment. Further, the Court of Appeal held that even assuming there was illegality, the plaintiff in that case can nevertheless establish equitable proprietary interests (under a resulting trust or common intention constructive trust) by reason of her payment of the premium for the grant and the construction costs, even though the interests were acquired in the course of carrying through an illegal transaction. The plaintiff does not need to establish a cause of action by reference to the illegal transaction, see §61 of the judgment.

53.  Applying the above principles to the present case, I take the view that the Agreement is enforceable as it does not involve any illegality/breach of public policy. Even if there were any illegality, the Plaintiff can establish his beneficial interest in the Ground Floor and the Garden by reason of his payment of the construction costs without relying on the illegality.

D2.1 No illegality/breach of public policy

54.  I find that the Agreement does not involve any illegality or breach of public policy for the following reasons.

55.  A significant feature here is that the Defendant did not obtain the Building Licence by making any misrepresentation to the Government:

(1) Under cross-examination, the Defendant confirmed that he did not supply any false information or make any misrepresentation to the Government (whether concerning the ownership of the small house to be built or otherwise) when he obtained the Building Licence;

(2) At the time when the Building Licence was issued in 2001, the Defendant had yet to have any intention to build the Building with the Plaintiff and CY Chan. It was only after repeated extensions of the Building Licence and the Defendant’s lack of financial resources that he eventually invited the Plaintiff and CY Chan to build the Building together and reached the Agreement in 2008.

56.  Hence, the present case is distinguishable from Chung Mui Teck & Ors v Hang Tak Buddhist Hall Association Ltd and Goodmatch Ltd CACV 20/2001 (unrep, 22/5/2001), in which the Court of Appeal held that the subject deed in that case was unenforceable on public policy as the performance of the deed necessarily involved, inter alia, (a) the indigenous villager swearing of false declarations to the Government that “he [has] never made and [has] no intention at present to make any private arrangements for [his] rights under the Small House Policy to be sold to other individual/a developer”; and (b) certain security documents being executed to ensure that the small house erected would belong not to the indigenous villager, but to parties under the deed who were not indigenous villagers.

57.  Further, the Agreement is a “jump the gun” situation akin to that in the Li Pui Wan and Lau Kwai Kiu case. There is no evidence that the parties intended to cheat the Government by the Agreement.

58.  As mentioned above, I accept the Plaintiff’s evidence that before the Agreement was entered into, the Defendant orally informed him that the title of the Ground Floor and the Garden would be transferred to him 5 years after the construction of the Building was completed. As a matter of fact, the Defendant did not transfer the title in the Building or the Property to the Plaintiff or CY Chan within the 5-year non-alienation period. This shows that the Defendant did not intend to breach Condition 4 (a) of the Building Licence. On the Plaintiff’s part, I accept his evidence that he was not aware of the terms of the conditions in the Building Licence or its legal effect, and he proceeded on the assurance from the Defendant that title to the Ground Floor and the Garden would be transferred to him 5 years after completion of the Building.

D2.2. The Plaintiff does not need to establish his beneficial interest by reference to the illegality (if any)

59.  Even if I were wrong in my above holding, and the Agreement does involve element of illegality/breach of public policy, it would not affect the Plaintiff’s beneficial interest in the Ground Floor and the Garden, as the Plaintiff can establish such interest without relying on the illegality.

60.  I accept the Plaintiff’s case that by reason of his payment of the construction costs, he has acquired beneficial interest in the Ground Floor and the Garden ever since the construction of the Building and the construction works on the Property have completed. The Defendant has been, and is still holding the Ground Floor and the Garden for the Plaintiff as bare trustee.

D3. Whether the Defendant is in breach of the Agreement and the appropriate remedy

61.  There is no serious dispute that the Plaintiff has performed his part of the Agreement by paying part of the costs of the construction of the Building and the construction works on the Property.

62.  The Defendant is in breach of the Agreement in failing to transfer the legal title of Ground Floor and the Garden to the Plaintiff.

63.  In order to give effect to the Agreement, in particular the Second Paragraph, and given the unique nature of the Ground Floor and the Garden (being landed properties), I am of the view that specific performance would be an appropriate remedy and I will so order, see Section E below.

64.  For completeness, as I am ordering specific performance of the Agreement, Section 4 (1) of the Limitation Ordinance (Cap 347) does not apply and the Plaintiff’s claim in this regard is not time-barred, see Section 4 (7).

D4. Whether the Defendant has trespassed on the Plaintiff’s land and the appropriate remedy

65.  I have found that the Agreement is valid and enforceable, and that the Plaintiff is entitled to specific performance of the Agreement. I have also found that by reason of the Plaintiff’s payment of the construction costs, the Plaintiff has acquired beneficial interest in the Ground Floor and the Garden since the construction works have completed. It is well established that “equity regards as done that which ought to be done”, the Plaintiff is entitled to exclusive possession of the Ground Floor and the Garden since he moved into the Property: see Brake & Anor v Swift & Anor [2020] 4 WLR 113 at §§142, 149.

66.  The Defendant has trespassed on the Plaintiff’s land in placing the Articles. The Defendant should remove the Articles from the Garden as soon as possible. I will grant an injunction compelling him to do so, see Section E below.

67.  In the Plaintiff’s Amended Statement of Claim dated 25 September 2023 (“the SOC”), the Plaintiff also seeks damages for the trespass. While the Plaintiff pleaded in the SOC that he has suffered loss and damage as a result of being hindered/prevented from parking his car into the Garden, and his and his family’s enjoyment of the Garden of the Property has been deprived/disrupted by the Defendant, his servant(s) and/or his agents, the Plaintiff has not adduced any evidence on the quantum of the alleged loss and damage. As indicated in §131 (5) of the Plaintiff’s Closing Submissions, the Plaintiff is content with nominal damages. In such circumstances, I will award HK$10 as nominal damages for the trespass.

E. DISPOSITION

68.  On the findings set out above, the Plaintiff prevails in his claim.

69.  I will make the following orders:

(1) A declaration that the Plaintiff was and is still the sole beneficial owner of the Ground Floor and the Garden;

(2) By way of specific performance of the Agreement, the Defendant do transfer the legal title of the Ground Floor and the Garden to the Plaintiff free from encumbrances;

(3) Pursuant to sub-paragraph (2) above, the Defendant do pay all the costs in relation to:

(a) The execution of the Assignment for the transfer of the Ground Floor and the Garden to the Plaintiff;

(b) The execution of a Deed of Mutual Covenant in respect of the Property;

(4) An injunction requiring the Defendant forthwith to remove the barriers and articles placed on the northwestern part and the eastern part of the Garden as shown in Annexure 2 of the SOC;

(5) Nominal damage of HK$10 for the trespass; and

(6) Interest on the above nominal damages at judgment rate from the date of this Judgment until full payment of the same.

70.  Cost should follow the event. I grant a costs order nisi that the Defendant shall pay the costs of the Action (including all costs reserved) to the Plaintiff with Certificate for 1 Counsel. Any party who wishes to vary the costs order nisi should take out an application within 14 days from the date of this Judgment.

71.  Lastly, I thank Counsel for their able assistance.