KWAN CHUN INVESTMENTS LTD v. SIK TAK KWONG AND OTHERS

HCA 3102/2016

[2021] HKCFI 714

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3102 OF 2016

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J U D G M E N T

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1.  In this Action, the Plaintiff (“P”) claims against the 1^st and 2^nd Defendants (“D1” and “D2”, together “Ds”) in respect of a Deed of Licence dated 17 April 2008 (“Deed of Licence”) pursuant to which a traditional Chinese customary trust known as Chong Fung (or Fun) Wing T’ong (鍾寬永堂) (“T’ong”) granted P a right (“Right”) to use 892 niches (“Niches”) in a columbarium known as Kung Tak Tong (功德堂) (“Columbarium”) for the sum of HK$3,000,000.

2.  P seeks specific performance of the Deed of Licence and injunctive relief to protect the Right, and alternatively damages. 

A.  BACKGROUND

3.  P is a Hong Kong company which operates a property investment business.  Mr Lai Yuk Keung (“Mr Lai”) was at all material times and still is a director of P. 

4.  D1 are sued in their capacity as managers of the T’ong.

5.  Between 15 March 1999 and 28 February 2014, Mr Chow Yuen Leung (“Mr Chow”) was the sole registered manager of the T’ong.  On 28 February 2014, Mr Chow was removed as registered manager of the T’ong and D1 were appointed as registered managers in his place pursuant to s 15 of the New Territories Ordinance (Cap 97) (“NTO”). 

6.  Ms Ko Mei and Master Sik Tak Kwong passed away in April 2016 and June 2020 respectively.  Their appointments as managers of the T’ong terminated upon their demise (Chan Choy Fong v Secretary for Home Affairs [1998] 1 HKLRD 431, 435E per Nazareth VP).  Master Sik Chi Hang is the only surviving manager of the T’ong. 

7.  D2 is a company limited by guarantee and incorporated in Hong Kong on 6 June 2013.  Ms Sze Wai Chun (“Ms Sze”) and Mr Li Ka Cheung (“Mr Li”) were at all material times and still are directors of D2. 

8.  The Columbarium is situated in a Buddhist monastery in Tuen Mun known as Kok Chan Bip Yuan (覺塵別院) (“Monastery”).  It is not clear when exactly the Monastery and the Columbarium were established and built.  There is a suggestion in the evidence that ashes were first interred in the Monastery in 1932 and, in any event, there is no dispute that the Columbarium had been constructed by the time P and the T’ong entered into the Deed of Licence in 2008.[1]  There is also some uncertainty as to the precise number of niches in the Columbarium, but the records maintained by the Food and Environmental Hygiene Department indicate that the Columbarium contained at least 1164 niches for the interment of cremated ashes.  Other than the 892 Niches which form the subject matter of the Deed of Licence, there are 270-odd niches which the T’ong had sold to members of the public prior to 2008. 

9.  The land on which the Monastery is built, namely Lots No 706, 775, 776 and 777 in DD 131 (“Land Lots”), was held in the name of the T’ong until 27 November 2015.

10.  On or around 17 April 2008, the Deed of Licence was executed between P and Mr Chow on behalf of the T’ong.  The Deed of Licence (as translated) contained the following material terms:

(1)  Preamble: “Whereas … (D) a number of niches have been established in [the Columbarium] in [the Monastery] for the worship of ancestors.  [The T’ong] hereby grants the right to use [the Niches] (LICENSE) to [P] based on the terms below”.

(2)  Recital (a): “Upon [P’s] payment of [HK$3,000,000] to [the T’ong] (the receipt thereof is hereby acknowledged by the vendor), [the T’ong] must grant the right to use [the Niches] in the [Monastery] (LICENSE) to [P].  …”

(3)  Clause (1): “[P] and [the T’ong] agree that [the Niches] may only be used for the worship of ancestors but not otherwise.”

(4)  Clause (2): “[The T’ong] grants to [P] the right to assign the right to use [the Niches] (LICENSE) to third parties.”

(5)  Clause (3): “The term of [P’s] right to use [the Niches] (LICENSE) shall expire when [P] assigns its right to use the said niches (LICENSE) to third parties.  Thereafter, [the T’ong] shall have full power to deal with the said niches.”

(6)  Clause (5): “[The T’ong] agrees to be responsible for management of [the Niches] until the ancestors’ disinterment.”

(7)  Clause (6): “[P] and [the T’ong] agree that if due to the law or policy of the Government of the Hong Kong Special Administrative Region or other reason, [P] is unable to enjoy the right to use [the Niches] (LICENSE), or if [P] is unable to assign the right to [the Niches] (LICENSE) to third parties, [the T’ong] agrees to return [HK$3,000,000] to [P], and Party A and Party B shall not pursue the liability under this deed against each other.”

(8)  Clause (7): “[P] and [the T’ong] declare that this Deed shall not constitute the relationship of landlord and tenant.”

11.  D2 made no admission to the validity of the Deed of Licence in its Re-Amended Defence.[2]  Mr Chang SC, counsel for D2,[3] maintains the same stance in his written opening, referring in a footnote to “the evident lack of authority or consent from the T’ong’s beneficiaries, and  potential breaches of duties owed by [Mr Chow]; and/or … the lack of consent from the Secretary of Home Affairs in respect of the Deed of Licence under s. 15 of the NTO”.[4]  However, Mr Chang confirms in his oral closing that D2 does not take issue with Mr Chow’s authority to enter into the Deed of Licence on behalf of T’ong.  That being the case, I will proceed on the basis that the Deed of Licence is valid and binding as between P and the T’ong. 

12.  There is no dispute that after entering into the Deed, P arranged for refurbishment and repair of the Columbarium between April 2008 and November 2008 which involved setting up an office for P, installing some drawings and wall lamps at the Columbarium and replacing the memorial plaques on the Niches.  P incurred expenses of not less than HK$2,300,000 in so doing.  P also employed a caretaker for the Columbarium, whose duties included burning incense, receiving visitors to the Columbarium and assisting them with the worship of their ancestors. 

13.  Between 2008 and 2016, P sold its rights in a total of 275 niches to third parties for HK$9,599,550. 

14.  In late 2011, Mr Chow attempted to sell the Land Lots to a third party, Billion Fortune Limited, by way of a provisional Sale and Purchase Agreement (“PSPA”) dated 15 November 2011. However, the transaction did not go ahead after the Tuen Mun District Office refused its consent to the transaction under s 15 NTO, on the basis that there was insufficient evidence that the members of the T’ong agreed to the proposed sale.

15.  In around 2012, members of the T’ong including Ms Sze began making allegations of misconduct against Mr Chow in respect of, inter alia, the attempted sale of the Land Lots to Billion Fortune.  Ms Sze thus approached Mr Li, the honorary legal advisor to the Hong Kong Buddhist Association at the time, for assistance.  Mr Li proposed that the members of the T’ong apply for removal of Mr Chow as manager of the T’ong and appointment of new managers in his place.  In view of Sik Tak Kwong’s advanced age at the time, Mr Li also advised the members of the T’ong to set up a charitable institution to manage the T’ong’s affairs and properties to facilitate long-term planning. 

16.  Mr Li’s proposal was accepted and put into action by the beneficiaries of the T’ong.

17.  D2 was accordingly incorporated in June 2013.  As stated in its Memorandum of Association (“MOA”), the objects for which D2 was established were, inter alia:

(1)  To manage the [T’ong];

(2)  To dispose of or in any way deal with the land as managed by the T’ong as if the Company were the sole owner thereof;

(3)  To pay all rent and charges and for the observance of all covenants and conditions in respect of the land as managed by the T’ong;

(4)  To promote and support the faith of the Buddhist religion and to study the doctrines of Buddhism and its denominations; and

(5)  To provide relief to those in need. 

18.  As mentioned above, Mr Chow was removed as manager of the T’ong on 28 February 2014. 

19.  With the consent of the District Officer of Tuen Mun District Office, D1 in their capacity as the registered managers of the T’ong assigned the Land Lots to D2 by a Deed of Gift dated 27 November 2015 (“Deed of Gift”). 

20.  At around that time, the T’ong and later D2 received 2 warning letters (“Warning Letters”) from the Lands Department stating that the use of the Land Lots for columbarium purposes was in breach of General Condition No 15 (“GC 15”) published in GN 570 of 1924 (“GN 570”) which applied to the Government Lease in respect of the Land Lots. GC 15 provided that “without the consent of the District Officer no grave shall be made on, nor shall any human remains be interred in, or deposited on the lot sold either in earthenware jars or otherwise”.  In the Warning Letters, the Lands Department threatened to take enforcement action without further notice unless the breach was purged. 

21.  On 15 May 2016, D2 published a notice in the name of the Monastery stating inter alia that the Columbarium was an illegal building structure and might be demolished by the Government.  D2 locked the gates of the Monastery and affixed a notice stating that persons wishing to worship their ancestors could only do so if they book an appointment with the Monastery in advance (“New Worship Arrangement”). D2 also denied access to the Monastery to P’s customers who wished to inter ashes in the Niches.

22.  P commenced the present action on 28 November 2016.

23.  D1 filed their Defence on 19 April 2017 but failed to file and serve their List of Documents.  On 18 October 2018, Master Lui made an order that unless D1 filed and served their List of Documents within 14 days of service of the order, D1’s defence was to be struck out and P shall be at liberty to apply for judgment against D1 with costs (“Unless Order”). 

24.  The Unless Order was served on D1 on 5 November 2018. 

25.  D1 did not comply with the Unless Order.  No relief from sanction was sought or granted.  Pursuant to Order 2 rule 4 of the Rules of the High Court, the sanctions specified in the Unless Order took effect immediately upon default with the effect that D1 is now debarred from defending this action (Daimler AG v Leiduck [2012] 3 HKLRD 119, §47 per Fok JA). 

B.  WITNESSES

26.  P calls Mr Lai, Ms Ip Kit Lan (“Ms Ip”), Ms Chan Shuk Yee (“Ms Chan”), Ms Yim Shun Lan (“Ms Yim”), and Ms Ma Kwai Bo (“Ms Ma”) as its witnesses at the trial.  Only Mr Lai is cross-examined. 

27.  Mr Lai is not forthcoming in certain aspects of his testimony.  For example, under cross-examination, he reveals that he had a separate agreement with Billion Fortune for Billion Fortune to acquire the Right if the PSPA went ahead.  However, after Mr Chong objects to the relevance of this line of questioning (an objection which I dismiss), Mr Lai first parrots Mr Chong’s objection, then claims to have forgotten all matters relating to this agreement.  This casts doubt on the truthfulness of his evidence as a whole.  Accordingly, where Mr Lai’s evidence is disputed by and different from the evidence given by Mr Li and Ms Sze, I prefer the evidence of Mr Li and Ms Sze over that of Mr Lai.  That said, most of the discrepancies between their evidence, such as in relation to the contents of several meetings between the parties from 2013 to 2016, are not really relevant to the issues I have to decide and it is unnecessary to make any definitive finding on these matters. 

28.  Ms Ip is an employee, shareholder and director of P, and worked at the Columbarium between January 2010 and May 2016.  Ms Chan, Ms Yim and Ms Ma all purchased rights to use niches in the Columbarium from P.  They give evidence as to their experience in attempting to accessing the Monastery after D2 locked the gates on 15 May 2016. 

29.  P also filed a Witness Statement of a Mr Wan Lun (“Mr Wan”), who was employed by P as a caretaker of the Columbarium between June 2009 and May 2016.  Unfortunately, Mr Wan is by reason of his health condition unable to attend trial.  Mr Chong applies to admit his witness statement as hearsay evidence (under Order 38 rule 2A(17) of the Rules of the High Court and s 47 of the Evidence Ordinance (Cap 8)), to which Mr Chang SC has no objection.  I accede to Mr Chong’s application. His evidence is not in dispute. 

30.  D calls Mr Li and Ms Sze to give evidence at trial.  I find them to be truthful and meticulous witnesses who give evidence in a candid and straightforward manner, and I accept their evidence. 

C.  DISCUSSION

C1.  P’s claim against D1

31.  In his oral opening, Mr Chong, counsel for P,[5] submits that P is automatically entitled to judgment against D1 following their failure to comply with the Unless Order, and there is no need for the Court to examine the merits of P’s claims.  Mr Chong confirms in his written closing that P is applying for judgment against D1 in terms of the prayers set out in its Amended Statement of Claim (“ASOC”) pursuant to Order 19 rule 7 of the Rules of the High Court.[6]

32.  I am unable to agree with Mr Chong’s submissions.  Order 19 rule 7 provides:

“(1)  Where the plaintiff makes against a defendant or defendants a claim of a description not mentioned in rules 2 to 5, then, if the defendant or all the defendants (where there is more than one) fails or fail to serve a defence on the plaintiff, the plaintiff may, after the expiration of the period fixed by or under these rules for service of the defence, apply to the Court for judgment, and on the hearing of the application the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim.

(2)  Where the plaintiff makes such a claim as is mentioned in paragraph (1) against more than one defendant, then, if one of the defendants makes default as mentioned in that paragraph, the plaintiff may—

(a)  if his claim against the defendant in default is severable from his claim against the other defendants, apply under that paragraph for judgment against that defendant, and proceed with the action against the other defendants; or

(b)  set down the action for judgment against the defendant at the time when the action is set down for trial, or is set down for judgment, against the other defendants.

(3)  An application under paragraph (1) must be by summons.”

33.  P did not issue any summons for default judgment as required by Order 19 rule 7(3) and, as such, the Court’s jurisdiction under the rule is not engaged. 

34.  Even if a summons can be dispensed with, it is clear from the wording of the rule that the Court only has the power to grant judgment under this rule in 3 specified situations, namely where: (1) a plaintiff claims against a sole defendant and there is a default of defence by that defendant, (2) the plaintiff claims against multiple defendants and all defendants are in default of defence, or (3) the plaintiff claims against multiple defendants, one of those defendants is in default of defence and the claim against that defendant is severable from the claims against the other defendants. 

35.  The present case does not fall within any of the above situations.  P has brought a claim against 2 defendants, only one of which is in default of defence.  P’s claims against D1 cannot possibly be severed from its claim against D2 as P claims the same relief against both parties. 

36.  When this point is raised with Mr Chong during closing, he abandons his reliance on Order 19 rule 7(2) and submits instead that P is entitled to judgment on the basis of the Unless Order alone.  I disagree.  The sanctions specified in the Unless Order are: (1) D1’s Defence shall be struck out, and (2) P shall be at liberty to apply for judgment against D1 with costs.  The application contemplated by the second limb is an application for judgment on the basis that D1’s Defence has been struck out, i.e. an application for judgment in default of defence under Order 19.  The Unless Order does not create any route outside the Rules of the High Court by which P can apply for judgment, and Mr Chong has not been able to cite any authority in support of his contention. 

37.  My view is reinforced by the fact that, if Mr Chong were right, P would be able to bypass all the limitations on the Court’s power to grant default judgment in Order 19, including, relevantly, the rule that the Court will not grant default judgment against a defendant if the claim is not severable from that against the other defendants (rule 7(2)(a)).  This creates a real risk of inconsistent findings and relief. Such concern is particularly relevant in the present case given that the same relief is sought against D1 and D2, and the order for specific performance and injunction which P says it is entitled to against D1 as a matter of course under the Unless Order directly impinge upon D2’s position. 

38.  For these reasons, I consider that P must prove its case against D1 on the merits.  As there is some overlap in the issues applicable to the 2 defendants, I will deal with D1’s position after I deal with P’s claim against D2.

C2.  P’s claim against D2

39.  As a preliminary point, it will be noted that Mr Chong’s submission in his written opening that this case concerns a “claim against D1 and D2 for breach of contract” [7] (underline added) is misconceived as a matter of law.  The only contract pleaded is the Deed of Licence which was entered into between P and the T’ong.  Insofar as P contends that D2 is somehow bound by an interest in the Land Lots by reason of its ownership of the land, that is a matter of land law and not contract. 

40.  Mr Chong formulates P’s proprietary claim in the Niches in 4 alternative ways:

(1)  As a matter of construction, the Deed of Licence created a tenancy of the Niches;

(2)  The Deed of Licence created a “licence coupled with a grant of an interest”, as a right to inter ashes in a columbarium is a proprietary right capable of running with the land and binding on successors-in-title such as D2;

(3)  P’s improvement of the Land Lots at the T’ong’s request gave rise to an equitable interest in favour of P; and

(4)  P acquired an equitable interest upon the assignment of the Land Lots from the T’ong to D2 on the basis that D2 took the Land Lots with full knowledge of P’s rights and, as such, it would be inequitable for D2 to deny P’s interest. 

41.  Mr Chang SC submits that P has not pleaded any claim based on a tenancy or an equitable interest (whether this be a common intention constructive trust or a proprietary estoppel, and whether this is said to have arisen before or upon the assignment of the Land Lots from the T’ong to D2), and is thus barred from advancing a case on these bases.  Counsel then submits that each of the proprietary claims formulated is devoid of merit in any event in that:

(1)  The Deed of Licence plainly conferred only a licence and nothing more.  It did not confer any right of exclusive possession. 

(2)  The right to inter ashes in a columbarium is not a proprietary right.  The Australian and English authorities suggesting that the exclusive right of burial is proprietary in nature were decided on the basis of the relevant statutes and are in any event distinguishable from a right to inter ashes. 

(3)  There was no common intention between P and the T’ong that P would acquire a proprietary interest in the Land Lots as a result of P’s improvements to the Columbarium.  At its highest, P’s expectation was that of a mere personal licence (against D1) for the use of the Niches, and not a proprietary right in the Land Lots capable of binding D2.

(4)  There is no evidence that D2 undertook a new obligation to P when it took the assignment of the Land Lots.  Nor is there any alleged conduct on part of D2 which was sufficiently unconscionable so as to justify the imposition of a constructive trust.  D2 had no knowledge of the Deed of Licence prior to receiving P’s pre-action letter in October 2016. 

42.  Mr Chang SC further contends that P is not entitled to the relief sought even if it is able to show the existence of a proprietary interest in the Land Lots given that:

(1)  D2 is not a party to the Deed of Licence.  As such, P’s claim against D2 for specific performance cannot get off the ground. In any event, P has not identified what obligation it seeks to enforce under the Deed of Licence. 

(2)  The use of the Niches for the storage of cremated ashes would amount to a breach of GC 15 in the Government Lease.  Furthermore, pursuant to s 10(1) of the Private Columbaria Ordinance (Cap 630) (“PCO”), it is a criminal offence to operate, keep, manage or in any way have control of a columbarium otherwise than under a licence.  Neither P nor D2 has obtained a licence to operate the Columbarium.  The Court should not exercise its discretion to grant an order (whether for specific performance or an injunction) which would entail a breach of the Government Lease or the commission of a criminal offence. 

(3)  P has no claim for damages against D2.  The only purported ground identified by D2 is “breach of contract”, but this must fail, as there is no contract between P and D2.

(4)  P is unable to prove its case on damages.  Among other matters, P has not shown that it would have been able to sell the remaining 617 niches but for D2’s acts, when there is no evidence that a licence under the PCO could have been obtained.  P is also unable to explain how it calculates the expected profit of the 617 unsold niches nor has it accounted for the substantial potential expenses it will incur in selling the remaining niches, managing the Niches and the professional fees in applying for a licence under the PCO. 

C3.  Tenancy

43.  I agree with Mr Chang SC that P has not pleaded a case of tenancy.  The only paragraph in the ASOC relies on by Mr Chong as a plea of a tenancy is as follows:

“11. The right and interest of [P] created under the [Deed of Licence] constitutes interest in the Land Lots (sic), or alternatively a license couple (sic)  with an interest in land, in that :-

(a)  the rights conferred or granted under the [Deed of Licence] formed part of a permanent fixture on the Land Lots, namely the Columbarium;

(b)  the rights conferred or granted under the [Deed of Licence] were intended to endure until the expiry of the existing term of the Land Lots held from the Hong Kong SAR Government; and

(c)  the rights conferred or granted under the [Deed of Licence] were intended to be an exclusive right of possession conferred upon [P] with the privilege exclusive to [P] to transfer its exclusive right of possession to third parties.

And in the premises, the right under the [Deed of Licence] is irrevocable until the interest so conferred or granted thereunder would have come to an end upon expiry of the existing tenancy of the Land Lots i.e. 30 June 2047 or alternatively until the Plaintiff or its transferees would have abandoned their rights of possession thereof.”

44.  There is no plea that the Right amounted to a “lease” or “tenancy”, unlike the Government Lease in respect of the Land Lots which is expressly referred to as such.  Although there is a plea that the Deed of Licence created a (non-specific) “interest in land”, it is incumbent upon P to plead the precise interest in land which is said to have been created together with the necessary material facts.  As Mr Chong accepts in his written closing,[8] the purpose of pleadings is to fairly inform the other party of the case it has to meet and to avoid surprise.  As P had not pleaded a lease or tenancy, D2 was deprived of the opportunity to investigate and adduce factual evidence on the quality, nature and extent of P’s de facto control over the Land Lots (or the Columbarium, or the Niches), which is relevant to P’s contention that the parties’ agreement, as a matter of substance, was that P would enjoy exclusive possession.  For these reasons, I do not think that P should be permitted to run an unpleaded case of tenancy. 

45.  In trying to get around the fact that no tenancy has been pleaded in the ASOC, Mr Chong contends that there is no strict requirement in the Rules of the High Court that a party must plead the legal consequences of particular facts (citing Hong Kong Civil Procedure 2021 §§18/7/4, 18/11/1; Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd (2020) 23 HKCFAR 138, [2020] HKCFA 6, §§9-10 per Fok PJ). These authorities do not assist P.  The issue of whether an agreement gave rise to a tenancy or a mere licence is not merely a question of law (or legal consequence as Mr Chong suggests), but a mixed question of fact and law (Leung Wai Ip v Chan Ming Fai HCMP 2229/2016 (unrep, 2 December 2016), §24 per Chu JA).  This must be right as it is incumbent upon the party alleging that there was a tenancy to plead the material facts of such tenancy including whether it arose from an agreement and, if so, when and where such agreement was made and what were the terms of such agreement. 

46.  It is well established that the minimum terms (essential terms) which must be agreed before there can be a concluded agreement for any lease are the terms dealing with (1) the identity of the parties; (2) the premises to be leased; (3) the commencement and duration of the term; and (4) the rent or other consideration to be paid.  Additionally, for there to be a concluded contract for the grant of a particular lease, the parties must reach unconditional agreement on all the terms that they intend to have in the particular case (World Food Fair Ltd v Hong Kong Island Development Ltd (2006) 9 HKCFAR 735, §16 per Ribeiro PJ). 

47.  While one may contend that P has pleaded the identity of the parties,[9] the duration of the term,[10] and the consideration paid,[11] there is no plea on the territorial extent of the alleged tenancy, specifically the inter-relationship between the Right over the use of the Niches and the Land Lots.  The chapeau of §11 of the ASOC states that the Deed of Licence gave rise to an “interest in the Land Lots”, which Mr Chong accepts in his oral closing to be a reference to a tenancy of the entirety of the Land Lots.  However, §11(a) of the ASOC states that the rights conferred or granted under the Deed of Licence only pertained to a part of the Columbarium.  Further, as Mr Chang SC points out in his oral closing, the suggestion that a deed giving P the right to use a portion of the Columbarium gave rise to a tenancy over the whole of the Land Lots on which the Columbarium is built involves a quantum leap, and Mr Chong has no answer to the point.   

48.  Regardless of the above, I agree with Mr Chang SC that the Deed of Licence did not on its proper construction create a tenancy.

49.  The relevant principles are well-established and I do not understand there to be any dispute between the parties in this regard:

(1)  A tenancy is the grant of land for a term at a rent with exclusive possession.  It is essential to the creation of a tenancy that the tenant be granted the right to exclusive possession, viz. the right to “keep out strangers and keep out the landlord unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter and view and repair” (Street v Mountford [1985] AC 809, 816C, 818E per Lord Templeman).

(2)  Whether an agreement gives rise to a lease as opposed to a licence is determined as a matter of substance and not form.  If the circumstances and the conduct of the parties show that what was intended was that the occupier should be granted exclusive possession at a rent for a term, then the parties will be taken to have created a tenancy, and the parties cannot turn a tenancy into a licence merely by calling it one (Street v Mountford, 821C). 

(3)  However, it does not follow that the terms of the contract are wholly irrelevant and are to be disregarded.  Where a contract is negotiated between 2 substantial parties of equal bargaining power with the benefit of full legal advice, and the contract negotiated contains a clause that sets out in unequivocal terms the parties’ intention as to its legal effect, the Court must start from the premise that they were aware of the importance of the term and they intended to enter into such an agreement with an appreciation of its significance (National Car Parks Ltd v The Trinity Development Co (Banbury) Ltd [2001] EWCA Civ 1686, [2002] 2 P&CR 18, §§26, 29 per Arden LJ []; Clear Channel UK v Manchester City Council [2005] EWCA Civ 1304, [2006] L&TR 7, §§28-29 per Parker LJ)

(4)  The Court will be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy (Street v Mountford, 825).  As explained by the learned authors of Megarry and Wade, The Law of Real Property, 9^th ed, at §16-026–16-027, this means that the Court must ascertain whether the true bargain is that which appears on the face of the agreement, and disregard terms which are not genuine.  The subsequent conduct of the parties is admissible evidence as to whether the written agreement genuinely reflects their true intentions.  However, the onus of proving that a term is a sham rests on the party asserting that it is.  Furthermore, even if a particular term has never been invoked, it is open to the landlord to justify it, e.g. as a matter of commercial practice.

50.  I do not consider that the Deed of Licence conferred any exclusive right of possession on P.

51.  First, the Deed of Licence was a commercial transaction negotiated between parties of comparable bargaining power.  There is no suggestion that the terms of the Deed of Licence were imposed by one party on another (as may be the case with residential or office tenancies).  On Mr Lai’s own evidence, P operated a property investment business and also operates a business of managing and investing in columbarium niches.[12]  I must therefore approach the Deed of Licence from the starting point that the parties appreciated the significance of the words used and intended to create a relationship with that effect. 

52.  The words chosen by the parties clearly demonstrate that P and the T’ong only intended to create a licence in respect of the Niches.  The Right was described as a mere right to “use” the Niches (“892 個骨灰龕之使用權”).  As Mr Chang SC points out in his written opening submissions,[13] the parties did not create a right to “occupy” or “possess” the Niches.  More significantly, the parties expressly declared in clause 7 that no relationship of landlord and tenant had been created. 

53.  One will also note that the parties described the Right parenthetically as a “LICENSE”, a label which was repeated every time the parties referred to the Right.[14]  Furthermore, the parties did not refer to the HK$3,000,000 payment as a “premium”or stipulate the payment of any “rent”, and instead just referred to it as the “sum”.  I also place weight on these 2 factors in ascertaining the intentions of the parties. 

54.  Mr Chong relies on Facchini v Bryson [1952] 1 Times LR 1386 in submitting that clause 7 of the Deed of Licence does not itself preclude the existence of a lease.  In that case, the English Court of Appeal found that an agreement which contained a materially identical clause nonetheless created a tenancy. 

55.  I have no quarrel with Somervell LJ’s remarks in that case (at 1387 and 1389) that the Court must construe the document as a whole and focus on the rights created by the operative clauses of the agreement.  However, I do not think that the Court’s finding of a tenancy on the facts of Facchini assists P.  In that case, the terms of the agreement (with the exception of the deeming clause) pointed inexorably to a tenancy: pursuant to clause 2 of the agreement, the defendant was granted the right to “occupy” the dwelling house.  Under clause 3(a), the defendant agreed to, inter alia, yield up the premises in clean condition “at the end of the tenancy”, and under clause 3(d) he covenanted to “keep the premises in tenantable repair”. 

56.  Somervell LJ also placed weight on clause 3(b) of the agreement, which obliged the defendant to “permit the [plaintiff] or his agent at all reasonable times and where necessary with workmen and appliances to enter the premises to examine the condition thereof and to take inventories of the fixtures”.  As His Lordship observed, such a clause is only appropriate and relevant if the document gave the defendant exclusive possession in the first place. 

57.  The facts of the present case are far removed from those in Facchini.  There is nothing in the Deed of Licence which is inconsistent with the label chosen by the parties and their characterisation of their relationship in recital (a) and clauses 2, 3 and 7.  Furthermore, as Lord Denning noted in his concurring judgment, that case concerned a residential tenancy subject to the Rent Acts where the courts will be cautious to prevent a landlord from driving a coach and horses (or as His Lordship vividly put it, “an articulated vehicle”) through the statute.  There is no equivalent statutory regime in respect of the Columbarium in the present case. 

58.  Before leaving this point, I must echo Parker LJ’s observation in Clear Channel UK §29 that it is surprising, if not unedifying, that a commercial party who freely entered into an agreement should then seek to persuade the Court that its true effect was directly contrary to the parties’ intentions expressed in the agreement.  I would add that it is even more so where such a party seeks to disown the terms of his own agreement against a person (here D2) who was not a party to the Deed of Licence and who ex hypothesi had no influence over its terms. 

59.  Second, I am unable to agree with Mr Chong’s submission[15] that the irrevocability and transferability of the Right are inconsistent with it being only a personal right and as such a “strong indicator” of its proprietary effect.  Mr Chong cites Lord Wilberforce’s famous dictum in National Provincial Bank Ltd v Ainsworth [1965] AC 1175, 1247G-1248A that a right can only be classed as proprietary if it is “definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence and stability” in support of his proposition. 

60.  Mr Chong’s assertion is fallacious.  It does not follow from the fact that property rights are generally[16] irrevocable and assignable that a given right which is irrevocable and assignable is necessarily (or likely to be) proprietary in nature.[17]  Lord Wilberforce did not suggest that such characteristics were peculiar to proprietary rights.  On the contrary, it is well-established that a contractual licence to use land (as with any other contract) is irrevocable and assignable if and insofar as the contract so provides (Megarry and Wade §§33-008, 33-014). 

61.  In any event, I do not think Mr Chong is right when he says that P had “the sole and exclusive right to assign [the Right] to third parties”.[18]  Pursuant to clause 4 of the Deed of Licence, P agreed to be “solely responsible for matters relating to assignment of [the Right] to third parties”, but this is subject to the proviso that when P collects the fee from a third party for the assignment of the Right, the T’ong shall issue receipts in the name of the Monastery to signify its assent to the assignment of the Right.  In my view, this reflects the parties’ intention that the T’ong should retain a substantial degree of control over the Niches notwithstanding the Deed of Licence.

62.  Third, and independent of the above, the Right granted to P under the Deed of Licence was plainly limited in scope:

(1)  Clause 1 states that the Niches could only be used for the worship of ancestors but not otherwise.  Such a substantial restriction on user strongly militates against the finding of exclusive possession.  I consider that the present case is analogous to Hunts Refuse Disposals Ltd v Norfolk Environmental Waste Services Ltd [1997] 1 EGLR 16, where the appellants were granted an “exclusive licence and full liberty to use the Site for depositing waste for a period of 21 years”.  The English Court of Appeal held that the grantee only had a limited right falling short of exclusive possession.  Hutchison LJ reasoned that at 18H that:

“Does the deed evidence an intention on the part of the grantor to grant to the grantee exclusive possession of the entirety of the site for 21 years? It is plain from clause 1, [counsel] submits, that the answer must be that it is not. It is not by accident that the words of the grant in clause 1 are coupled with reference to user for the purpose of depositing waste—an activity which involves the use of the site in stages. The appellants’ only rights are to be on the site for the purpose of tipping or carrying out ancillary engineering or maintenance works. They have no right to go, for example, on to a part of the site not yet excavated or where quarrying is in progress. It is plain that the grantor was not … accepting exclusion from the entire site for the whole 21 years, whether or not tipping was taking place.”

(2)  Clause 5 provides that T’ong shall be responsible for the management of the Niches until the disinterment of the ashes.  This is not simply a general obligation to manage the Columbarium but an obligation to manage the Niches specifically.  Such an obligation necessarily requires that the T’ong have an unfettered right of access to the Niches for it to exercise its duties and powers, one which certainly goes beyond the rights usually reserved by a landlord to enter leased premises for inspection and repair.[19]

63.  Mr Chong raises several points in response.  He first submits that the Right granted to P was an exclusive right to use the Niches, which militates against any intention of the parties that the T’ong would nonetheless retain the right to use, control or dispose of any of the Niches.[20]  In his submission, the reference to the T’ong’s sole discretion to deal with the Niches after the expiry of the Deed of Licence in clause 3 also meant that P had sole control of the Niches during the subsistence of the Deed. 

64.  Mr Chong then suggests that “management” and “possession” are distinct concepts, such that the T’ong’s obligation to manage the Niches does not negate exclusive possession on part of P. 

65.  Finally, Mr Chong relies on Mr Lai and Ms Sze’s evidence that P and its employees were the only persons who had possession of, or control and power to deal with the niches in the Columbarium.[21]  This is presumably an argument that clause 5 of the Deed of Licence did not reflect the true intentions of the parties and ought to be disregarded as a sham (see §49(4) above).

66.  I do not agree with Mr Chong’s submissions. 

67.  First of all, I accept that by reason of the very nature of columbarium niches, the Right granted to P under the Deed of Licence was a right to use the Niches for purposes of ancestral worship to the exclusion of third parties.  However, a person only has exclusive possession if he has the right to exclude all others, including the legal owner, from the property (save where the legal owner exercises its right to enter the premises for purposes of inspections and repair). 

68.  In my view, the Deed of Licence did not grant P the exclusive right of possession of the Niches to the exclusion of the T’ong.  Under recital (a) of the Deed of Licence, P was simply granted a “right to use 892 niches in the [Columbarium]”.  The wording of this recital may be contrasted with clause 4 of the Deed of Licence which makes P “solely responsible” (全面負責) (underline added) vis-à-vis the T’ong for matters relating to the assignment of the Right to third parties.[22]  In any event, as explained above, the T’ong’s sweeping right and obligation to manage the Niches under clause 5 necessarily involves the grant of a right to the T’ong to access the Niches for such a purpose. 

69.  As far as clause 3 is concerned, I reject Mr Chong’s submission that it implies that P had the sole right to control the Niches during the subsistence of the Deed of Licence.  All that clause 3 suggests is that the T’ong did not have the exclusive right to control the Niches during the term of the Deed of Licence.  It does not say that the T’ong had no right at all to control the Niches during this period.

70.  I am also not persuaded by the distinction which Mr Chong seeks to draw between “management” and “possession”.  It is well-established that the provision of services by the owner, if this requires that the owner be granted unrestricted access to the property, is a factor which may negate exclusive possession (Megarry and Wade §16-019).  I consider that the T’ong’s obligation to manage the Niches under clause 5 is of such a nature. 

71.  Finally, Mr Chong’s reliance on Mr Lai and Ms Sze’s evidence is misplaced:

(1)  Mr Lai’s evidence is that P established an office in the Columbarium, and employed staff to, inter alia, regularly clean and maintain the Columbarium.[23]  His evidence is supported by that of Ms Yip and Mr Wan.[24]  However, his evidence does not go so far as to say that P was the only entity which controlled and managed the Niches between 2008 and 2016, let alone did so to the exclusion of the T’ong. 

(2)  Mr Chong then points to Ms Sze’s acknowledgement under cross-examination that the T’ong was not involved in controlling, managing and selling the Niches.  However, I do not think that this statement is capable of bearing the meaning which Mr Chong seeks to place on it.  As Ms Sze subsequently clarifies in cross-examination, she only went to the Monastery from time to time, and she does not have any personal knowledge of matters relating to the Columbarium, as Sik Tak Kwong told her at the time to stay away from making any inquiries and not to bother about it. 

(3)  In any event, this evidence of the parties’ subsequent conduct is only relevant insofar as it demonstrates the parties’ true intentions differed from that expressed in the Deed of Licence. The fact that a landlord has failed to comply with its obligations under the agreement does not convert a licence into a tenancy simply because the occupier chooses not to enforce its rights in respect thereof (Megarry and Wade §16-019, fn 95).  In the present case, Mr Lai says that his intention was to purchase the right to use the Niches (“892 個骨灰龕位之使用權”).[25]  He never suggests that the parties intended something other than that stated in clause 5 of the Deed of Licence at the time when the Deed of Licence was entered into.  As such, even if P did as a matter of fact control and manage the Niches to the exclusion of the T’ong on a day to day basis (which I do not accept), I do not think this is sufficient for a finding that clause 5 was a sham.   

72.  For the reasons above, I hold that the Deed of Licence did not create a tenancy over the Land Lots.

C4.  Licence coupled with interest

73.  Mr Chong contends that the Deed of Licence created a licence coupled with an interest in the Land Lots, which is binding on the T’ong’s successors-in-title.  The relevant “interest” is the right to inter cremated ashes in the Niches, which Mr Chong submits is proprietary in nature.  Mr Chong draws an analogy with the right of burial in land, which was considered to be a proprietary right in the Australian case of Smith v Tamworth City Council (1997) 41 NSWLR 680, and the English case of Reed v Madon [1989] 1 Ch 408.

74.  I am unable to accept Mr Chong’s submissions. 

75.  First, one must start from the fact that the Deed of Licence described the Right as a “license” [sic].  There is no suggestion, let alone evidence, that P and the T’ong did not appreciate the legal significance of the label they chose to attach to the Right.  Prima facie, therefore, it suggests that the parties only intended to create a licence and nothing more (see IDC Group Ltd v Clark (1993) 65 P&CR 179, 183 per Nourse LJ). 

76.  Second, Mr Chong is unable to explain what kind of property interest the Right supposedly entails.  It is not an easement, for there is no dominant tenement to which such a right relates.[26]  It is not a profit à prendre, as it is a right to store something on the land as opposed to a right to take something off the land.  Nor does it fall within any of the other established categories of incorporeal hereditaments.[27]  Insofar as Mr Chong suggests that the right to inter ashes on land is sui generis, this runs contrary to the longstanding policy of the law not to recognise any novel forms of property rights in land in view of the need for certainty in matters relating to title to land (London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1993] 1 WLR 31, 37F-H per Peter Gibson LJ).   

77.  Third, I agree with Mr Chang SC that the passages in Smith v Tamworth CC and Reed v Madon relied on by Mr Chong are decided on the basis of the relevant statutes, and are in any event materially distinguishable from the present case. 

78.  Smith v Tamworth CC concerned a dispute between the biological and adoptive parents of the deceased.  The adoptive parents obtained a grave space from the local council to bury the deceased and erected a headstone in his memory.  Subsequent to the burial, the biological parents paid for the expenses of burial including the cost of the burial plot, and then claimed to be entitled to the rights to the burial plot, including, inter alia, the right to install a gravestone in substitution to that erected by the adoptive parents. 

79.  Young J (as he then was) held at 694F-695A that since the adoptive parents had priority over the biological parents to determine the manner in which the deceased was buried, they were vested with the right to bury the deceased on council land. 

80.  His Lordship went on to consider the biological parents’ assertion that the right of burial had been transferred to them.  He rejected this assertion on the basis that (1) the conversations between the parties indicated that the adoptive parents never intended to transfer their rights in the grave and (2) the fact that the biological parents paid for the grave does not change the legal rights of the parties (695B-F).

81.  The relevance of this decision for present purposes is that His Lordship rejected the biological parents’ case of assignment on the additional basis that the right of burial was an interest in land and thus could only be made in writing.  The judge cited with approval his extrajudicial view that once a body was interred in a grave site with permission of the cemetery authority, there was an irrevocable licence for that body to remain at least until the natural process of dissolution (689C), and held as follows (695F):

“There is a nice question as to whether any assignment of the right of burial would be an assignment of an interest in land. I rather think it would be because the irrevocable licence brought about by the interment of [the deceased] in the ground makes the licence more than a contractual licence, it is really a licence coupled with a grant. As I said in 39 ALJ 50 at 52, although there is no profit à rendre (sic), the licence is not a naked one and may be protected as a right of property. The American cases all class the right as an interest in real property: see, eg, Re Brick Presbyterian Church and Jackson (at 368). As an interest in the land is involved, there would need to be some writing to deal with the assignment for it to be recognised pursuant to s 23C of the Conveyancing Act 1919.”

82.  As is clear from the above passage, Young J did not express a definitive view on the point and his view was not founded on common law principles in that:

(1)  This issue does not appear to have been raised or argued by the parties, who were only concerned with whether the adoptive parents’ conversations with the biological parents and the biological parents’ payment of the purchase price for the grave site gave rise to an assignment of the burial right.   

(2)  The local council did not participate in the proceedings despite being a defendant to the action and instead submitted to the decision of the court.  As His Lordship noted at 685A, “it does make the Court’s job more difficult and without the benefit of submissions from counsel for the Council, the possibility of error is greater”. 

(3)  His Lordship’s reasoning that the irrevocable nature of a licence for a body to remain in land meant that it was a licence coupled with a grant is difficult to follow.  As noted above, the revocability (or otherwise) of a contractual licence is simply a matter of construction of the relevant contract (Megarry and Wade §33-004, 33-008).  The existence of irrevocable contractual licences gives rise to no conceptual difficulty. 

(4)  Further, His Lordship was clearly influenced by American case law holding that a right of burial is an interest in land.  However, it has been noted that this is by no means generally accepted across all American jurisdictions, and that the American cases which recognise such a proprietary right treat it as an “easement or licence to make interments”.  This differs markedly from English and Hong Kong law which, as noted above, does not recognise easements in gross[28] (Nwabueze, Property interest in a burial plot [2007] Conv 517, 535, 538). 

83.  In Reed v Madon, the plaintiffs purchased the exclusive right of burial in a cemetery from the 3^rd defendant, who then conveyed the land to the 4^th defendant.  The 1^st defendant purchased an exclusive right of burial in one of the plots reserved for the plaintiffs and erected a memorial for his deceased wife.  The plaintiff sought various remedies including disinterment, injunction and damages against the 1^st defendant, claiming (1) a statutory right to the exclusive right of burial in the plot under section 48 of the Cemeteries Clauses Act 1847[29] and (2) alternatively, the exclusive right of burial conferred on them an interest in the burial plot. 

84.  Morritt J (as he then was) held that the plaintiffs were entitled to succeed under his first claim.  He first referred to section 44 of the 1847 Act, which provided that “the exclusive right of burial in any such place of burial shall, whether granted in perpetuity or for a limited time, be considered as the personal estate of the grantee, and may be assigned in his lifetime or bequeathed by his will”.  His Lordship reasoned as follows (at 419F-H):

“The first defendant suggested that such right would be sufficiently protected by a cause of action against the cemetery company alone. It was suggested that if the right was infringed by a third party the cemetery company could sue in trespass and thereby protect the exclusive right which it had granted.

I am unable to accept this submission.  The Act of 1847 contemplates that the exclusive right of burial may exist in perpetuity and by devolution and assignment pass through a number of hands.  It is equated with a right of property. In principle the owner of such a right can protect it by action against any infringer.  … Finally, section 48 is in general terms.  Had it been intended that the obligation should be cast on the cemetery company alone it could so easily have been stated.  Compare sections 41, 43, 46, 47, 50 and 51.  Accordingly, in my judgment section 48 of the Cemeteries Clauses Act 1847 confers on the plaintiffs a cause of action against the first defendant as well as against the third and fourth defendants.”

85.  The judge then declined to deal with the second claim having found in favour of the plaintiffs in respect of the first claim (at 419H-420A).

86.  It is clear that His Lordship’s decision that the plaintiffs’ exclusive right of burial in the plot was enforceable against the 1^st defendant turned entirely on the wording of the 1847 Act, in particular ss 44 and 48.  The passing observation that the exclusive right of burial is “equated with a right of property” was simply a comment as to the effect of s 44 of the Act which expressly provided that such a right forms part of the personal estate[30] of the grantee.  Given that His Lordship declined to express any view on whether an exclusive right of burial is an interest in land, it is surprising that Mr Chong relies on this case as authority for that very proposition. 

87.  In any event, I do not think one can draw an analogy between a right of burial in land and a right to inter ashes in a columbarium niche.  Following well-established principles of property law, a corpse which is buried in land becomes part and parcel of the land by reason of the degree of annexation and purpose for which it is annexed.[31]  On the other hand, the interment of ashes in a columbarium does not extinguish the separate corporeal nature of the ashes[32] and the urn in which the ashes are kept. 

88.  That being the case, even if the right to bury a corpse in land (thereby annexing it to the land) is recognised as an interest in land (which I do not think is the case), it does not follow that a right to inter ashes in a columbarium niche is similarly an interest in land.  As Mr Chang SC submits, a right to use columbarium niches is far less connected to the land than a right to bury a body in land.

89.  I therefore hold that the Deed of Licence did not give rise to any proprietary right to inter ashes in the Niches, still less an interest in the Land Lots.

C5.  Common intention constructive trust

90.  P’s case of common intention constructive trust is pleaded in §12 of ASOC:

“Further, the investment in money and money’s worth by [P] referred to in paragraph 9[33] above pursuant to the requests of the T’ong were made with the common intention of both [P] and the T’ong that in doing so, [P] would acquire an interest in the Land Lots having regard to, inter alia, the facts and matters referred to in paragraph 10 above.”

91.  This claim can be disposed of shortly. 

92.  There is no dispute that P expended some HK$2.3 million renovating the Niches and the Columbarium.  However, as Mr Chong concedes in his oral closing, there is no evidence of any common intention between P and the T’ong that P would acquire any interest in the Land Lots over and above what P was granted under the Deed of Licence by reason of such renovation works.  Mr Lai’s evidence shows that the renovation works were nothing more than a suggestion by Mr Chow to Mr Lai on how to improve the attractiveness of the Niches to potential purchasers:[34]

“[Mr Chow] told me that [the T’ong] had already sold 272 niches in [the Monastery] and asked if I had the interest to purchase [the Niches] in [the Columbarium]. [Mr Chow] also indicated that the roof of [the Columbarium] was just covered with corrugated asbestos cement sheets, and its interior was also very worn out, he suggested that I could renovate [the Columbarium] for better operation and to attract more people to come buy niches for interment of their ancestors to provide a quality home for them. After discussion with the shareholders of [P], I intended to purchase the licences to 892 niches in [the Columbarium] from [Mr Chow] in the name of [P].”

93.  In other words, the only “common intention” between the parties was that the Right granted by the Deed of Licence would become more valuable in P’s hands if P renovated the Columbarium. 

94.  The absence of any common intention for P to acquire any further proprietary interest by way of its investment in the Land Lots is consistent with the inherent probabilities. The suggestion to renovate the Columbarium was made against the background of ongoing negotiations for the sale of the Right, negotiations which culminated in the execution of a formal Deed of Licence.  If the parties did have the alleged common intention, they would undoubtedly have recorded this agreement in the Deed of Licence.  Their failure to do so (and indeed the absence of any reference to the contemplated renovation works in the Deed of Licence) is extremely telling. 

95.  It is also significant that the renovation works contemplated by Mr Chow and Mr Lai and ultimately undertaken by P were confined entirely to the Columbarium.  It is inherently improbable that the parties intended for P to acquire a beneficial interest in the whole of the Land Lots simply by performing works on one part of a structure built on the Land Lots. 

96.  For completeness, I record that the parties did not make any submissions on the applicability or otherwise of the doctrine of common intention constructive trust to commercial transactions.[35]  I do not intend to express, and should not be taken as expressing, any view on the matter. 

C6.  Proprietary estoppel

97.  Mr Chong refers to the doctrines of common intention constructive trusts and proprietary estoppel interchangeably in his submissions, all under the heading of a “licence coupled with an equity”.[36]  This is unhelpful, as the 2 doctrines are theoretically distinct, have different requirements and give rise to different remedial consequences (Stack v Dowden [2007] UKHL 17 [2007] 2 AC 432, §37 per Lord Walker, Megarry and Wade §10-034).

98.  The distinction between the 2 doctrines is relevant for present purposes, as P only pleaded a case of common intention constructive trust, and did not plead any case of proprietary estoppel.  It is well-established that estoppel must be specifically pleaded regardless of whether it is relied on as a defence or a cause of action (Hong Kong Civil Procedure 2021 §18/8/11).  In relation to proprietary estoppel, a plaintiff must plead the following material facts (Megarry and Wade §15-002):

(1)  A representation or assurance (whether by words or conduct) by the owner of land to the plaintiff that the plaintiff has or will enjoy some right in the property;

(2)  Reliance on the representation by the plaintiff; and

(3)  Detriment suffered by the plaintiff as a result of his reliance on the representation.

99.  Read in context, the ASOC (at its highest) only discloses a claim based on common intention constructive trust.  Indeed, Mr Chong is unable to identify any facts pleaded in the ASOC which support its case of proprietary estoppel in his written closing.[37]  The only matters referred to in the ASOC are that (1) the T’ong requested P to carry out renovation works to the Land Lots, and (2) P and the T’ong had a common intention that P would acquire an interest in the Land Lots by reason of its renovations.[38]  P has simply not pleaded any representation by the T’ong that P has or will enjoy a right in the Land Lots. 

100.  P is thus not entitled to run a case of proprietary estoppel. 

101.  In any event, P’s claim of proprietary estoppel fails for essentially the same reasons as its claim for common intention constructive trust.  As Mr Lai’s own evidence demonstrates, the T’ong’s “request” was nothing more than a suggestion that P could renovate the Columbarium to improve the value of the Right if it so wished.  There was simply no representation (let alone a clear and unequivocal representation)[39] that P would acquire a separate proprietary interest in the Land Lots by reason of its investment and expenditure. 

102.  P’s claim of proprietary estoppel faces a further hurdle in that it must show that it was unconscionable for the T’ong to act in such a way so as to defeat its expectation of a proprietary interest (Megarry and Wade §15-020).  Mr Chong is unable to articulate any basis for suggesting that it would be unconscionable for the T’ong to deny P a proprietary interest which it allegedly believed it was entitled to by reason of its investment in the Land Lots.[40]  

C7.  Constructive trust or upon acquisition of the Land Lots by D2

103.  This is again not part of P’s pleaded case.  In his oral opening, Mr Chong accepts that the only pleaded claims relate to proprietary interests which were created prior to the assignment of the Land Lots from the T’ong to D2.  He is unable to identify any paragraph in the ASOC which pleaded that P had acquired a proprietary interest in the Land Lots by reason of D2’s acquisition of the Land Lots. 

104.  The closest one gets to such a plea is in §§14-17 of the ASOC, which are in the following terms:

“14.  The dominant motive of [D1] incorporating, or causing the incorporation of [D2] was to take over the rights and liabilities of and in Land Lots from the T’ong and by Article 3(c) of its [MOA], [D1][41] was said to have incorporated for the express purpose of ‘… observance of all covenants and conditions in respect of the land as managed by the T’ong’.

15.  By [the Deed of Gift], the T’ong assigned, as gift [sic], the Land Lots to [D2], without consideration and, since then, [D2] has been exercising the right of ownership of and over the Land Lots and also maintaining, managing and operating the Monastery and the Columbarium.

16.  [D2] obtained assignment of the Land Lots from the T’ong with express or actual knowledge of the facts and matters pleaded in paragraphs 2 to 14 above. […]

17.  By reason of the facts and matters pleaded in paragraphs 12 to 15 above, the assignment of the Land Lots was subject to the covenants of the parties of and in the [Deed of Licence] and/or [P’s] rights and interest of and in the Land Lots.

PARTICULARS

(a)  Paragraphs 12 to 15 herein are repeated;

(b)  No consideration has been paid by [D2] to [D1] or the T’ong when [D2] obtained assignment of the Land Lots; and

(c)  By reason of the facts and matters referred to in sub-paragraphs (a) and (b) above, [D2] is not a bona fide purchaser of the Land Lots for valuable consideration and, hence, the interest acquired by it was, and still is, subject to prior equity i.e. [P’s] rights and interest in the Land Lots and/or rights and interest under the [Deed of Licence];”

105.  However, as Mr Chong himself notes in his written closing,[42] these averments only go to the issue of whether D2 is bound by P’s alleged prior interests in the Land Lots.  There is nothing in these paragraphs which suggests that these facts and circumstances themselves entitle P to a new proprietary interest in the Land Lots. 

106.  For this reason alone, P’s claim under this heading must fail. 

107.  In any event, P’s claim to a constructive trust is unsustainable. 

108.  The relevant principles are summarised by Yuen JA in Chen Tek Yee v Chan Moon Shing, CACV 136/2015, unreported, 29 February 2016 at §34:

“(1)  A mere contractual licence to occupy land … is a personal right only. It does not give the licensee a proprietary interest in the land which is binding on a purchaser from the licensor.

(2)  That is the case even if a purchaser had express notice of the licence prior to purchase. The mere fact that the land is expressed to be conveyed “subject to” a contractual licence does not imply that the purchaser would be obliged per se to give effect to it.

(3)  However the court may impose a constructive trust if it is satisfied, having regard to all the circumstances, that the conscience of the purchaser is affected such that it would be inequitable to allow him to deny the licensee the right she (the licensee)  claims in the land.

(4)  In this regard, it is crucial to see whether the purchaser has undertaken or come under a new obligation of his own, not otherwise existing, to give effect to the licensee’s right.

(5)  Proof that the purchase price has been reduced on the footing that the purchaser would give effect to the licensee’s right may be an indication that he has undertaken or come under a new obligation to give effect to it.

(6)   However, as certainty is of paramount importance in dealings with land, the court should be careful not to impose a constructive trust when the licensee’s case is based on slender materials only.”

109.  I also note that in IDC Group Ltd v Clark [1992] 1 EGLR 187, 190, Sir Browne-Wilkinson VC stated that “there will have to be very special circumstances showing that the transferee of the property undertook a new liability to give effect to provisions for the benefit of third parties”.[43] 

110.  Mr Chong relies on the following matters which it says renders it unconscionable for D2 to deny P’s rights under the Deed of Licence:[44]

(1)  D2 was incorporated with the express objects of taking over the management of the T’ong and observe all covenants and conditions in respect of the Land Lots (§§3(a) and (c) of D2’s MOA);

(2)  D2 was a donee who received the Land Lots without consideration;

(3)  D2’s directors had full knowledge of P’s rights to the Niches;

(4)  D2 shared common directors and managers with the T’ong; and

(5)  P had significantly renovated and improved the Land Lots at the T’ong’s request.

111.  I am unable to agree. 

112.  First, the Deed of Licence was not a “covenant” which D2 had promised in its objects to observe.  §3(c) of D2’s MOA provided that it would “pay all rent and charges and for the observance of all covenants and conditions in respect of the land as managed by the T’ong”.  As Mr Chong suggests in his oral opening, the word “covenant” is prima facie wide enough to cover purely contractual obligations assumed by the T’ong.  However, one must read the term “covenant” alongside the references to “rent”, “charges” and “conditions”.  This makes clear that §3(c) was primarily concerned with the terms of the Government Lease under which the T’ong held the Land Lots, as opposed to any other obligations (proprietary or personal) which pertained to the Land Lots. 

113.  Furthermore, the word “covenant” is a legal term of art in land law denoting obligations which are proprietary in nature and run with the land.  The draftsman of the MOA, who was evidently a professional, was certainly aware of, and must have intended to adopt, this specialised meaning.  From this it follows that the Deed of Licence, which only created personal rights in respect of the Land Lots, was not a “covenant” for purposes of §3(c) of the MOA. 

114.  Mr Chong then points to Ms Sze’s acceptance in cross-examination that §3(c) embraced P’s rights under the Deed of Licence.[45]  But this does not assist P, since the terms of the MOA must be construed objectively. 

115.  Even if Mr Chong were right on the construction of §3(c), I do not think that its terms were sufficiently clear so to disclose any intention on D2’s part to undertake a new obligation to P.  It was simply a non-specific reference to “covenants”.  It seems to me that to impose a constructive trust on the basis of this word alone would be to do so on “slender materials”. 

116.  Second, while I accept that Ms Sze knew that P and Mr Chow had entered into some arrangement or agreement whereby Mr Chow permitted P to sell the Niches to third parties, it is Ms Sze’s unchallenged evidence that she and other directors of D2 did not know of the existence of the Deed of Licence until they received a pre-action letter from P in October 2016.[46]  There is thus no evidence before the Court which suggests that D2 knew of any contractual relationship between P and the T’ong (as opposed to any formal or informal arrangement between P and Mr Chow) at the time of the Deed of Assignment, A fortiori, there can be no suggestion of bad faith or sharp practice on part of D2’s directors, viz that they engineered the assignment of the Land Lots for the purpose of defeating P’s Right to the Niches. 

117.  Third, while D2 did share common management and members with the T’ong (after Mr Chow’s removal in 2013), one must not lose sight of the fact that the T’ong and D2 are separate entities with each having its own rights and obligations.  The starting point must be that D2 is not required to perform any of obligations of the T’ong.  I do not think that there is anything unconscionable on the facts of the case which justify a contrary conclusion, particularly when there is no suggestion of bad faith on part of D2.

118.  Fourth, I do not think the fact that D2 was a donee without consideration advances things much further.  There is no suggestion, for example, that the T’ong and D2 agreed to waive any purchase price because D2 undertook to respect P’s contractual rights to the Niches (cf Chen Tek Yee §34(4)).  More pertinently, I consider that this fact only assists P if and insofar as it is able to show that it had an existing interest in the Land Lots, such that D2 is now bound by it.  If (as I have found) P has no pre-existing proprietary interest, that seems to me to be the end of the matter as far as D2’s status as a volunteer is concerned. 

119.  Fifth, P’s renovation and improvement works are similarly irrelevant.  I have found above that P did not perform the works with any intention or expectation of acquiring an interest in the Land Lots over and above its rights in the Deed of Licence.  If it is not unconscionable for the T’ong to deny P an interest in the Land Lots resulting from these works, I do not see why it would be unconscionable for D2 to do so as well.  In any event, there is no suggestion that D2 knew of the renovation and improvement works at the time of the Deed of Assignment.

120.  Sixth, it is to my mind relevant that the Deed of Licence was a commercial transaction which P entered into with another entity of comparable bargaining power as part of its property investment and columbaria management business.  That being the case, it was open to P to protect its position by bargaining for a proprietary right binding against the T’ong’s successors-in-title.  Having decided to enter into a Deed of Licence which only created personal rights vis-à-vis the T’ong (and which expressly negated the existence of any landlord and tenant relationship), I do not think it is unconscionable that P is held to the consequences of its bargain. 

121.  Finally, I have not lost sight of the fact that (1) the assignment of the Land Lots by way of the Deed of Gift was expressed as “subject to [the PSPA] so far as the same may still relate to or affect the property” and (2) the sale and purchase of the Land Lots was arguably subject to P’s rights under the Deed of Licence by virtue of clause 4, which provided that the T’ong shall, inter alia hand over an original copy of the Deed of Licence at completion.  Curiously, this point is not relied on by Mr Chong as a matter which rendered it inequitable for D2 to deny P an interest in the property.  However, I am satisfied that this does not affect my analysis above.  First of all, the assignment of the Land Lots to D2 was only subject to the PSPA so far as it continued to affect the property.  Given that the PSPA was not proceeded with, there was simply no right to which the Deed of Gift was subject.  It is also noteworthy that the Deed of Gift was only expressed as subject to the PSPA and not the Deed of Licence.  It seems to me that the parties would have explicitly referred to the Deed of Licence in the Deed of Gift if they did in fact intend for the assignment to be subject to D2’s rights.  Lastly, the mere fact that land is expressed to be conveyed “subject to” a contract does not by itself mean that the grantee has undertaken a new obligation to give effect to that contract (Chen Tek Yee §34(2)). As Dillon J explained in Lyus v Prowsa Ltd [1982] 1 WLR 1044, 1051H-1052A:

“… there are many cases in which land is expressly conveyed subject to possible incumbrances when there is no thought at all of conferring any fresh rights on third parties who may be entitled to the benefit of the incumbrances. The land is expressed to be sold subject to incumbrances to satisfy the vendor’s duty to disclose all possible incumbrances known to him, and to protect the vendor against any possible claim by the purchaser if a third party establishes an overriding right to the benefit of the incumbrances against the purchaser. So, for instance, land may be contracted to be sold and may be expressed to be conveyed subject to the restrictive covenants contained in a conveyance some 60 or 90 years old. No one would suggest that by accepting such a form of contract or conveyance a purchaser is assuming a new liability in favour of third parties to observe the covenants if there was for any reason before the contract or conveyance no one who could make out a title as against the purchaser to the benefit of the covenants.”

122.  His Lordship’s remarks are entirely apposite to the present case.  The reference to the PSPA in the Deed of Gift is entirely explicable as part of T’ong’s duty to disclose all possible incumbrances over the Land Lots.  After all, the PSPA, if it were still valid, would have given rise to an equitable interest in the Land Lots binding on D2 as a volunteer.  There was simply no need for D2 to undertake a separate obligation to respect Billion Fortune’s rights under the PSPA.

123.  I therefore hold that the assignment of the Land Lots from the T’ong to D2 did not give rise to a constructive trust in favour of P. 

D.  RELIEF

124.  P’s claim against D2 fails. However, in case I am wrong, I will go on to discuss the various heads of relief sought by P. 

D1.  Specific performance

125.  P’s claim for specific performance of the Deed of Licence against D2 is a non-starter.  Mr Chong has not addressed the obvious question of how P can claim to be entitled to a contractual remedy against D2 when it was never a party to the Deed of Licence.

126.  In any event, I agree with Mr Chang SC that there is nothing in the Deed of Licence left to be performed.  It is not P’s case that the T’ong has failed to grant the Right to P; after all, P is seeking to assert the Right against D2 in this very action. P’s real complaint is that it has been prevented from exercising the Right by D2, and the proper remedy in respect thereof is an injunction restraining D2 from interfering with the Right, to which I now turn. 

D2.  Injunction

127.  I would have declined to exercise my discretion to grant an injunction restraining D2 from interfering with P’s access to the Columbarium even if I had found that P had a proprietary interest in the Niches.  While I am not persuaded by Mr Chang SC’s submission that such an injunction would necessarily entail the commission of a criminal offence under the PCO, I am satisfied that injunctive relief ought to be refused on the basis that it would likely give rise to a breach of the Government Lease.

128.  The relevant provisions of the PCO are as follows.

(1)  s 10(1) of the PCO provides that a person may not operate, keep, manage or in any other way have control of a columbarium, otherwise than under a licence.  s 11(1) of the PCO then provides that if a person contravenes s 10(1) in respect of a columbarium, the person, and each person who is the owner, tenant, lessee or person in charge of the columbarium premises commits an offence. 

(2)  s 18(1)(b) provides that an applicant for a licence in respect of a columbarium must prove that he holds the premises directly from the Government under a Government lease.  However, s 19(3) provides that where the columbarium is a pre-cut-off columbarium[47] (such as the Columbarium in the present case), an applicant need only show that it has the right to continue using the premises for at least 5 years beginning on the date on which the licence, if issued, is to take effect.

(3)  Finally, s 2(1) of Schedule 3 provides that an application for a licence may be made by a person who (a) operates, keeps, manages or in any other way has control of a columbarium, or (b) intends to operate, keep, manage or in any other way have control of a columbarium.

129.  2 points flow from the statutory scheme set out above:

(1)  If the Court grants an injunction in the terms sought by P, both P and D2 would prima facie commit an offence under ss 10 and 11 of the PCO in that (1) P is operating, keeping, managing or controlling the Niches, and (2) D2 is the owner of the Columbarium. 

(2)  Contrary to Mr Chong’s suggestion made in his opening, it is possible for P to apply for a licence in respect of the Niches.  P is a person who (1) intends to operate, keep, manage or otherwise have control of the Niches, and (2) has the right to continue using the Niches for at least 5 years from the date of the licence taking effect. 

130.  Given the above, I do not think Mr Chang SC is right when he says that the injunction would necessarily amount to the commission of a criminal offence.  Had this Court found in favour of P on the issue of liability, subject to the matters discussed in §§131-146 below, it could have granted an injunction:

(1)  Permitting P and its agents to enter the Columbarium for all purposes connected with its application for a licence under the PCO; and

(2)  Permitting P and its transferees to enter the Columbarium for all purposes connected with the sale and disposal of the niches by P and ancestral worship by the transferees, provided that P has obtained a licence from the Private Columbaria Licensing Board under the PCO. 

131.  However, the PCO is not the only obstacle to the grant of an injunction in the present case.  It is also necessary to consider the possibility of the injunction amounting to a breach of the Government Lease.

132.  Mr Chong does not dispute the proposition that the storage of cremated ashes amounts to a breach of GC 15 in GN 570 (Regal Shining v Secretary for Justice [2014] 5 HKLRD 832, §§48-89 per Anthony Chan J).  Instead, he submits that, according to information supplied by the Land Registry, the copy of the relevant New Grant is “lost and untraceable”.  As such, there is no proof that GN 570 was incorporated in the Government Lease in respect of the Land Lots, and the GC 15 issue simply does not arise. 

133.  Mr Chang SC first raises a pleading point in response, saying that on a closer reading of P’s Reply, it only pleaded a non-admission as to whether GC 15 in GN 570 “prevented P from exercising its rights under the [Deed of Licence]”.  In other words, it was a non-admission as to the legal effect of GC 15, not a non-admission as to whether GN 570 was incorporated into the New Grant.  I agree.

134.  This, however, is not the only flaw in Mr Chong’s submission.  I agree with Mr Chang SC that there is sufficient evidence for the Court to find on a balance of probabilities that GN 570 applies to the Land Lots.

135.  GN 570 was dated 10 October 1924 and provided as follows:

“It is hereby notified that … (2) until further notice there shall be deemed to be incorporated in the published Particulars and Conditions of all sales of Crown Land in the New Territories … (a) the following General Conditions of Sale (unless otherwise stated) …” (underline added)

136.  The passage quoted above makes clear that its terms were deemed to be incorporated into all Government leases in the New Territories granted from 1924 onwards[48] unless otherwise stated.[49]

137.  The Land Registry’s copy of the New Grant Register indicates that the Land Lots were sold to the T’ong predecessor-in-title by public auction on 25 September 1930.  GN 570 is thus prima facie incorporated into the New Grant.  There is nothing in the “Remarks” column which suggests otherwise. 

138.  There is no basis to doubt the accuracy of this copy of the New Grant Register.  As such, I do not think there is any basis for Mr Chong to challenge the applicability of GN 570 to the Land Lots. 

139.  In any event, the Lands Department has issued multiple Warning Letters complaining about the breach of GC 15 and threatening to take lease enforcement action if the breach is not rectified.  As a consequence, there is at the very least a real risk that the Government would exercise its right to re-enter the Land Lots if P were to continue managing and selling the Niches relying on an injunction granted by this Court.

140.  This risk of re-entry action is certainly a factor which strongly points against the injunction sought by P, not least because it would prevent P from continuing to use the Niches, rendering the injunction nugatory.

141.  Unlike the position in relation to the PCO, there does not appear to be any way for P to regularise the situation itself by seeking (1) the District Land Officer’s consent pursuant to the terms of GC 15 or (2) a modification of the Government Lease in respect of the Land Lots.  It seems to me that this is entirely a matter between the lessor (the Government) and the lessee (D2).  There is certainly no suggestion by Mr Chong to the contrary. 

142.  Mr Chong complains that this unsatisfactory state of affairs is entirely of D2’s own making, and that P should not be deprived of a remedy simply because D2 has refused to make the necessary applications.  He submits that the Court should grant an order compelling D2 to do so, on the basis such an order (1) would protect D2 from liability in respect of the 272 niches which the T’ong sold to third parties prior to 2008, and (2) is in the best interests of the general public by increasing the supply of columbarium niches for the interment of cremated ashes. 

143.  I am unable to accept Mr Chong’s submission.  Not only would such an order be mandatory in nature, it is also highly onerous in terms of the time and effort which it is likely to require.  I also harbour significant doubts about the workability and enforceability of such an order.[50]  More fundamentally, however, I think Mr Chang SC is right when he says that D2 is simply under no duty (contractual or otherwise) to P to make these applications.  It is notable that even under the Deed of Licence between the original contracting parties, the T’ong was under no obligation to apply for the modification of the Government Lease.  Instead, Clause 6 of the Deed of Licence provided that the parties would simply not proceed with performance if there were any issues which rendered it unlawful to perform the Deed of Licence.  It is plain that any alleged interest capable of binding D2 now cannot exceed the scope of the original obligations imposed on the T’ong under the Deed of Licence.

144.  In light of the above, D2’s potential liability to the purchasers of the 272 niches from the T’ong and the wider public interest in the supply of columbarium niches (even assuming that there is evidence before the Court in support of such concerns, of which there is none) simply pale into insignificance. 

145.  I am of course mindful that, in addition to the 892 Niches which form the subject matter of the Deed of Licence, there are a further 270-odd niches in the Columbarium which the T’ong had previously sold to members of the public, and that ashes have been interred in at least some of these niches.  There is thus a risk of the Government exercising its right of re-entry regardless of whether the Court grants the injunction sought.  However:

(1)  If the Government exercises its right of re-entry in respect of the ashes which are currently interred in the Columbarium, that is not a matter in which the Court has played a role.  On the other hand, if the Court grants the injunction sought and P arranges for further ashes to be interred in the Columbarium in reliance on the injunction, then any re-entry action taken would have been caused at least in part by the injunction. I do not think it is just or convenient for the Court to make an order which would place individuals in breach of their contractual obligations. 

(2)  Separately, it is Ms Sze’s unchallenged evidence that D2 has been making arrangements to relocate ashes interred in the Columbarium to other (presumably lawful) columbaria.  The injunction sought would deprive D2 of the opportunity to rectify the breach of the Government Lease. 

(3)  In any event, it is not so much the fact that the order would give rise to a breach of the Government Lease that is relevant, but rather the risk that the injunction may prove self-defeating, which I certainly cannot ignore.  Here, there can be little dispute that (1) any acts done by P pursuant to the injunction sought would increase the risk of the Government taking re-entry action, and (2) re-entry action, if taken, would defeat the very purpose of the injunction.  Whether there is an existing risk of re-entry action being taken is, strictly speaking, neither here nor there. 

146.  Finally, I note Mr Chong’s submission that the withholding of injunctive relief would similarly procure a breach of contract between P and its purchasers.  There is, however, no evidence to this effect before the Court.  Furthermore, I do not think the objection to the Court making an order positively compelling a breach of contract applies equally to the situation where the Court’s refusal of relief places a party in breach of their contractual obligations.  More importantly, P’s concern for its contracts with its purchasers does not really assist it in the present case, given that (1) on its case, it would similarly be in breach of contract if the Government exercises its right of re-entry after an injunction is granted; and (2) following the introduction of the statutory regime regulating the operation of columbaria in PCO in 2017, any breach by P of its contracts with its purchasers was arguably in part of its own making, given that there is no evidence whatsoever that P has taken any step to obtain the requisite licence for operating the Columbarium.   

D3.  Damages

147.  P claims damages for “loss of bargain”.[51]  I agree with Mr Chang SC that such a claim is unsustainable insofar as it is a claim for damages for breach of contract, as there is no contract between P and D2.

148.  That said, it does not follow (as Mr Chang SC submits) that P is not entitled to any damages against D2 at all.  The Court has the power under s 17 of the High Court Ordinance (Cap 4) to award damages in substitution for an injunction.  One way of quantifying these damages is by reference to the value of the right which the court has declined to enforce (One Step (Support) Ltd v Morris-Garner [2018] UKSC 20 [2019] AC 649, §95(3) per Lord Reed).  Given that P has pleaded a claim for an injunction and damages in the alternative,[52] I consider that P would have been entitled to damages in lieu of an injunction had it been able to make out a proprietary interest in the Niches.  This interest may in turn be valued by reference to the profits which P would have made had it been able to continue to enjoy this interest, i.e. P’s “loss of bargain”.

149.  P quantifies its claim in its ASOC as follows:[53]

“Revenue obtained and capable of being obtained by [P] from the transfer of the 892 niches minus investments made by [P] and costs incurred, and to be incurred, for performance of the [Deed of Licence], i.e.

(a)  $9,599,550.00 being actual revenue received from transfer of 275 niches;

(b)  $34,383,220.00 being prospective revenue capable of being obtained from transfer of the remaining 617 niches based upon the average revenue per niche referred to in sub-paragraph (a) above;

(c)  $3 million, being the consideration paid by [P] under the [Deed of Licence];

(d)  $2,354,589.00, being investment made by [P] in the Land Lots, the Monastery and the Columbarium; and

(e)  $3,695,967.60, being the costs incurred by [P] in maintaining an office at the Land lots inclusive of costs of the same being manned by staff.”

150.  Upon this Court’s enquiries as to how P can claim a sum which it has already received (i.e. item (a)) as damages at his oral opening, Mr Chong withdraws the claim for item (a) and says instead that P’s claim is one for item (b) minus items (c), (d) and (e).  However, Mr Chong performs a volte-face in his written closing, and contends that P’s loss is in truth the total of items (a) and (b), without any deduction for items (c), (d) and (e).  He submits, firstly, that the revenue P received from the sale of the rights to 275 niches forms part of its loss as it would be obliged to make refunds to its customers if no decree of specific performance was granted, and secondly, P’s costs and expenses should not be deducted as they have already been incurred.[54]

151.  It is highly unsatisfactory for Mr Chong to change P’s case on quantum after the parties have closed their evidence and, were it necessary, I would have refused to allow Mr Chong to do so.  The Court should not be required to pick through convoluted pleadings to work out for the amount which a plaintiff is claiming.  D2 is also entitled to know precisely the amount which P is claiming so as to decide whether to challenge P’s evidence and what submissions should be made in response.

152.  Mr Chang SC criticises P’s case on quantum in 5 respects:

(1)  P only made refunds to purchasers of 5 niches totalling HK$262,080.00.[55]  Mr Lai confirms in cross-examination that these were the only refunds which had been made. 

(2)  P is unable to explain how the figure of $34,383,220.00 for item (b) came about: the average sale price of the 275 niches in item (a) is $34,907.45 per niche, which when multiplied by the 617 unsold niches only amounts to $21,537,896.65.

(3)  In any event, P is unable to prove causation in relation to item (b).  But for D2’s acts, P would still have been unable to sell any of the remaining niches unless it obtained a licence from the Private Columbaria Licensing Board pursuant to the PCO and modification of the Government Lease conditions.  There is no evidence that such a licence and modification would have been granted.  Nor is there any evidence that P would be able to find buyers for all 617 niches. 

(4)  P failed to deduct from the 617 unsold niches: (i) 6 niches which Mr Lai reserved for his family members (for which he did not make any payment), (ii) 6 niches used to hold the cremated ashes of deceased members of the Monastery, and (iii) an unknown number of niches which P resolved would be sold at a low price to the poor and needy. 

(5)  P fails to account for substantial potential expenses which it would have to incur if it wished to continue using the Niches, including (i) professional fees in applying for a licence under the PCO which Mr Lai asserts under cross-examination to be in the range of HK$3 million, (ii) the land premium required to be paid for modification of the Government lease, and (iii) the costs (including staffing costs) of maintaining an office in the Columbarium to attend to prospective purchasers and worshippers. 

153.  There is considerable force in Mr Chang SC’s submissions, and Mr Chong has not really been able to answer any of the points. 

154.  In relation to item (a), P has simply not adduced any evidence that it is liable to refund to all 275 purchasers.  This evidently depends on the terms of the contracts it made with the respective purchasers.  Mr Chong does not explain how P is allegedly in breach of its contracts with those purchasers.  Furthermore, even assuming that P is under such a liability, it is by no means certain that all 275 purchasers would enforce their rights against P.  The fact that P has so far only made refunds in respect of 5 niches suggests that this prospect is unlikely.  As matters now stand, to allow P to recover the sale price of all 275 niches would give it a substantial windfall. 

155.  I note that one of the purchasers, a Mr Chu Yun Chung (“Mr Chu”), has filed a claim for HK$45,800 against P in the Small Claims Tribunal.[56]  I see no reason for treating Mr Chu’s position differently to those of the other purchasers who have not been refunded by P.  The fact remains that there is no evidence before the Court as to whether P is in fact liable to Mr Chu.  For this reason, I do not think P should be entitled to recover the HK$45,800 claimed by Mr Chu as damages.

156.  That said, I consider that there is no obstacle to P recovering the amounts which it has already refunded to third parties.  I therefore assess damages in respect of the previously sold niches at HK$262,080.00. 

157.  As for item (b), I agree with Mr Chang SC that P must demonstrate that it could have obtained (or had a reasonable prospect of obtaining) the requisite licence under the PCO and relaxation of the conditions of the Government Lease if it is to make out a claim for loss of profits in respect of the 617 niches which remain unsold.  As P has failed to adduce any evidence as to feasibility of obtaining such a licence and modification, it fails to prove on the balance of probabilities that any losses arising from its inability to sell the remaining 617 niches was caused by D2. 

158.  I also agree with Mr Chang SC that P has in any event failed to prove that it suffered any loss as a result of its inability to sell the 617 niches.  There are just too many uncertainties in the expected income and expenses in selling these niches:

(1)  There is no evidence to suggest, let alone prove, that P would not have been able to sell all the remaining niches at an average price of HK$34,907.45 per niche, bearing in mind that (i) P only managed to sell 275 niches between 2008 and 2016, and (ii) an unknown proportion of the unsold niches were to be sold to the poor and needy at a low price.  In this regard, I do not accept Mr Chong’s submission that P’s charitable intention ought to be disregarded in assessing its loss of profit since it is entirely a matter of P’s discretion as to whether to honour this moral obligation.  Given that the aim of compensatory damages is to restore the victim in the position he would have been in but for the wrong, the Court must necessarily ascertain what the victim would himself have done and tailor the amount of damages accordingly.  It matters not whether the act was something the victim was legally obliged to do or something he chose to do out of sheer goodwill. 

(2)  It is also plain that P would have incurred substantial expenditure if it went ahead with selling the remaining Niches.  In the absence of any evidence adduced by P, there is simply no way for the Court to ascertain how much such expenditure would be.  Mr Lai suggests that the cost of applying for PCO licence was in the ballpark of HK$3 to HK$5 million, but he is unable to offer any basis for this figure which appears to have been plucked out of the air.  More significantly, there is no estimate at all of the recurrent costs of staffing the Columbarium until the expiry of the purchasers’ rights in the Niches. 

159.  Given the above, it is impossible for the Court to assess whether the expected revenue from selling the remaining Niches is likely to exceed the expected costs, and consequently whether P has suffered a loss as a result of its inability to now do so.  As such, P is not entitled to any damages in respect of item (b). 

160.  In relation to items (c), (d) and (e), these expenses had already been incurred by P and need not be deducted from the future revenue.  To do otherwise would effectively be to require P to pay these expenses twice over. 

161.  Summarising the above, had I found that P had a proprietary interest in the Niches, I would have awarded damages against D2 in the sum of HK$262,080.00.

D4.  P’s claim against D1

162.  P’s claim against D1 is one for breach of contract.  However, Mr Chong does not clearly articulate how the Deed of Licence is alleged to have been breached in his submissions.  I am able to identify 3 possibilities:

(1)  Breach of an implied term not to assign or otherwise hand over control of the Land Lots to third parties;

(2)  Breach of an implied term to ensure that P and its transferees are allowed entry to the Land Lots for purposes of interring cremated ashes in the Niches; and

(3)  Breach of an implied term to ensure that P and its transferees are allowed entry to the Land Lots for purposes of ancestral worship by P and its transferees.

163.  The first implied term is not pleaded and can be rejected on this basis.  In any event, I am not satisfied that such a term ought to be implied in the Deed of Licence.  The assignment of or transfer of control over the Land Lots to a third party does not necessarily frustrate P’s (contractual) rights under the Deed of Licence.  After all, the Land Lots could be assigned or transferred on condition that the third party do undertake an equivalent obligation to P.  There is only an interference with P’s rights insofar as the assignee or transferee refuses to give effect to P’s rights under the Deed of Licence. 

164.  The second and third implied terms are pleaded.[57]  I am satisfied that the second term was necessary to give business efficacy to the contract and that it was breached by D2.  There is no dispute that P and several purchasers were blocked from entering the Monastery to inter ashes of their ancestors on 15 May 2016, and that they have been prevented from entering the Monastery to do so ever since.[58]

165.  I am satisfied that the third term was implied in the Deed of Licence, but I do not think it was breached on the facts.  The evidence shows that P and its purchasers were still able to enter the Monastery to worship their ancestors after D2 instituted the New Worship Arrangement:

(1)  Ms Yim’s evidence is that it has become “troublesome” and “very inconvenient” for her to worship her ancestors since May 2016.[59]  However, I do not think her subjective opinion as to the convenience of the New Worship Arrangement matters much, especially given her evidence that since 2016, she has still managed to visit the Monastery for worship twice a year.[60]  

(2)  I note that Ms Yim separately complains that there were several instances where D2’s staff spoke to her in an unpleasant manner when Ms Yim was booking an appointment and during her visits to the Monastery.  However, I do not think that this is relevant to the question of whether she and other purchasers have been denied access to the Monastery. 

(3)  Ms Ma gives evidence that she first discovered the New Worship Arrangement when she visited the Monastery in December 2016 and found that the gates were locked.  However, she was then able to arrange 3 visits to the Monastery to worship her mother-in-law between December 2016 and December 2017.  It is therefore surprising that she complains that “I do not understand at all [the New Worship Arrangement, in which later generations that cherish filial piety would have to make appointments to the worship their ancestors [sic].  Such arrangement is unheard of.  I am furious with this New Worship Arrangement and have therefore not visited [the Monastery] to worship.”[61]

(4)  Reading Ms Ma’s evidence in context, it is clear that her anger at D2 stems from her inability to inter her father-in-law next to her mother-in-law after he passed away in January 2018.  It is plain that her decision to stop visiting the Monastery is unrelated to the New Worship Arrangement.  After all, she visited the Monastery on multiple occasions after D2 instituted the New Worship Arrangement. 

(5)  In any event, I do not think one can infer that the New Worship Arrangement was impracticable from her refusal to return.  It is not the case, for example, that Ms Ma gave up visiting the Monastery after she tried and failed on multiple occasions to secure an appointment.

(6)  I note that D2 first locked the gates to the Monastery on 15 May 2016 and that it only instituted the New Worship Arrangement in June 2016.[62]  There was accordingly a short period in which no one was permitted to enter the Monastery for purposes of worship.  However, I am satisfied that this period was immaterial.  After all, there is no evidence before the Court that there were any purchasers who desired to enter the Monastery to worship their ancestors during this period but were turned away. 

166.  In these circumstances, I do not consider that D1 has breached its contractual obligation to ensure that P and its purchasers are able to access to the Monastery.  In my view, Ms Yim and Ms Ma’s evidence demonstrates that the New Worship Arrangement has been workable and not so unduly restrictive so to amount to an effective denial of access. 

167.  Finally, there is a suggestion in Mr Chong’s written closing submissions that there was a breach of the Deed of Licence in that under the New Worship Arrangement, only the purchasers of the Niches are able to visit the Columbarium to worship their ancestors, whereas other persons including friends and descendants of the deceased are unable to do so.[63]  Not only is this not pleaded as a term of the ASOC, such an allegation is flatly contradicted by the evidence.  It is Ms Ma’s evidence that her daughters were able to make appointments to worship their grandmother-in-law.[64] 

D5.  Relief against D1

168.  In his oral closing submissions, Mr Chong abandons the claims for an order for specific performance and an injunction against D1, accepting, realistically, that such an order would be futile.  Only P’s claim for damages for loss of bargain remains.  This I assess at HK$36,600:

(1)  The only breach of the Deed of Licence which P is able to establish concerns D2’s refusal to permit P and its transferees from interring any further ashes in the Niches. 

(2)  The consequences of this breach are that (1) P has had to refund purchasers who were unable to inter their ancestors’ cremated ashes in the Niches, and (2) it is no longer possible for P to sell the remaining Niches.

(3)  For the reasons explained in §§1577-159 above, I hold that P is unable to prove that it suffered any loss in respect of item (b). 

(4)  As for item (a), the refund agreements exhibited at trial show that only 2 niches (purchased by a Mr Yeung Kam Ming at a total price of HK$36,600) were refunded on the basis that the purchaser had been prevented from interring ashes in the Niches.  The refunds in respect of the other 3 niches (totalling HK$225,480) were made on the basis that the purchasers “had concerns with regards to the prospects of [the Columbarium]” and “had concerns that [the purchaser] will not be able to worship her ancestors” respectively.  As such, these refunds were clearly not caused by D2’s refusal to permit P and its transferees to inter any further ashes in the Columbarium.  Rather, they were precipitated by D2’s New Worship Arrangement, but as I explain above, I do not think that gave rise to a breach of the Deed of Licence on D1’s part.

E.  DISPOSITION AND COSTS

169.  For the reasons above, I find that D1 was in breach of the Deed of Licence and award damages of HK$36,600. I dismiss P’s claim against D2. 

170.  As for costs, I make orders nisi that:

(1)  there be no order as to costs as between P and D1, given that P only succeeds in recovering an amount within the jurisdictional limit of the Small Claims Tribunal, and P fails in all the other claims against D1; and

(2)  P do pay D2’s costs of the action, to be taxed if not agreed, with certificate for 2 counsel.