KENWELL LTD v. LIU KIN KWAN GARY AND LAM TAT CHOW (BOTH TRADING UNDER THE NAME OR STYLE OF 昌盛公司, A FIRM)

DCCJ 3616/2023

[2024] HKDC 352

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3616 OF 2023

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DECISION

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1.  There are three Summons before the court: two related applications under Order 14 taken out by the plaintiff on 26 September 2023 (P’s 1^st Summons”) and 23 November 2023 (“P’s 2^nd Summons”) and an interlocutory injunction application taken out by the defendants on 26 September 2023 (Ds’ Summons).

2.  The plaintiff discovered a clerical error in the Statement of Claim (regarding the lot number, the correct number being D.D. 99 Lot 764RP, “the Lot”)) subsequent to P’s 1^st Summons, so P’s 2^nd Summons was taken out after the Amended Statement of Claim to reflect the amendment. The substance of the application has not changed so the court is essentially dealing with the same application by the plaintiff seeking judgment be entered for possession of that part of the Lot occupied by the defendants as identified in the Amended Statement of Claim (“the Premises”).

3.  D’s Summons is essentially for an injunction to restrain the plaintiff from interfering with reasonable and lawful enjoyment of the Premises etc.

4.  The plaintiff is the tenant of the Lot granted by the registered owner of the Lot on 23 June 2023 (the “2023 Tenancy”) and sought exclusive possession of the Premises which it alleged had been unlawfully occupied by the defendants.

5.  The defendants ran a workshop on the Premises and claimed that they were the sub-tenant of another claimed tenant of the Lot, namely a Mr. Man Whi Chung (“MWC”) and / or a company called Fortune Nine (Hong Kong) Limited (“Fortune”). MWC is the director and shareholder of Fortune.

6.  The parties’ summons are related and if the court accedes to P’s 2^nd Summons, there would be no need to deal with D’s Summons. Therefore, the court shall deal with the former first.

Background

7.  There is no dispute that the Lot was registered in the name of the “Man Shui Tong Wui”, a business t’ong (“the Wui”) since the date of of the Block Crown Lease.

8.  In 1986, the Wui granted a tenancy to 4 tenants (the “1986 Tenancy”), one of whom was a Mr. Man Ching Ip (“MCI”), the father of MWC. As above, MWC is the director and shareholder of Fortune.

9.  According to Clause (1) of the 1986 Tenancy (Hearing Bundle page 216), the term of lease was for 10 years until the 30^th day of the first month of the lunar calendar in 1996.

10.  Clause (7) of the 1986 Tenancy provided (as I translate):

“…at the end of the lease period if party A (i.e. the Wui) still does not require the lot for development, then party B (i.e. the 4 tenants) will have priority to extend the lease but the rental sum will be subject to separate negotiation…”

11.  The 1986 Tenancy expired by effluxion of time around February 1996.

12.  However, MCI passed away in 1994 before the expiry of the 1986 Tenancy. MWC (as the administrator of the estate of) and / or Fortune had apparently taken over as the claimed tenant. There is no dispute that MWC and / or Fortune have been in occupation of the Lot since then.

13.  The crux of the dispute concerns this “head tenancy”: i.e. whether MWC had exercised the rights of renewal of the 1986 Tenancy after it expired in 1996 and to what extent in law the tenancy might be renewed under the circumstances as claimed.

14.  MWC, in his affirmation, claimed that the 1986 Tenancy was novated in 1988 to account for the change of use from fish pond to container storage and this “novated” tenancy had been extended on the same terms (except rent) in March 1996.

15.  The events surrounding the claimed renewal of such tenancy, according to the Affirmation of MWC (paragraphs 17 - 19, Hearing Bundle page 92-93), were as follows:

a.  the registered managers of the Wui, Mr. Man Ping Nam and Mr. Man Tai Shan (collectively, “the Managers”) orally agreed to renew the tenancy agreement in mid-January 1996;

b.  the Managers then went back on their words and refused to grant the tenancy in March 1996. But due to the “protest of the members of the Wui”, the Managers “acceded to the wishes of the majority of the members” so that MWC continued to be the tenant of the Lot paying an annual rent of HK$3M.

c.  MWC paid this rent to the members of the Wui according to the share of entitlements of each member instead of paying directly to the Wui. MWC claimed that this way of distribution was approved by the Managers.

16.  The Managers (paragraph 3(a) of their Affirmation, Hearing Bundle page 41) denied that there has been any tenancy agreement between the Wui and MWC and / or Fortune at all times. They also denied any “oral agreement” to extend the 1986 Tenancy in mid-January 1996 nor any such “acceding to the wishes of the members” in March 1996 (paragraph 21 of their 2^nd Affirmation, Hearing Bundle page 105).

17.  It is of note that a contemporaneous document in form of a letter from MWC’s solicitors to the Wui’s solicitors dated 19 June 1996 (which MWC himself produced as exhibit “MWC-3” in his affirmation, Hearing bundle page 320) stated:

“Our clients were quite disappointed that we have not received any reply from your client regarding our clients’ proposal to renew the tenancy…

We have been instructed by our clients that they have great concerns regarding the following…

…The tenancy was expired on March 18, 1996, please advise us as to how the tenancy can be renew…”

18.  As such, this letter, written in June 1996, directly contradicts MWC’s own evidence that there was an agreement to renew or extend the 1986 Tenancy in January or March 1996.

19.  The Managers also denied that MWC and / or Fortune had paid any rent to the Wui. It would seem that the evidence from MWC did not dispute this because he claimed to have paid the annual rent directly to the members (as stated in his affirmation as above). However, the defendants’ counsel, Mr. Cheng stated in his submission that MWC has paid rent to the Wui (paragraph 11(6), P.4 of his skeleton submission).

20.  This slight confusion is perhaps not very relevant to the current case. What is not in dispute is that there was no further written tenancy agreement entered by the parties (paragraph 11(5), Page 4 of Mr. Cheng’s skeleton submission) and that MWC and / or Fortune had been in occupation of the Lots since 1996.

21.  As stated above, the defendants’ case was that they have been the “sub-tenants” of the Premises since 2004 under a sub-tenancy granted by Fortune. Since then, the defendants have been paying rent to Fortune.

22.  On 23 June 2023, the Wui granted the 2023 Tenancy to the plaintiff for a term of 3 years and 2 months with option to renew. The 2023 Tenancy has been registered with the Land Registry.

23.  On 30 June 2023, the Wui gave notice to all occupiers of all its lands and asserted that the occupations were unauthorised, thus the plaintiff commenced the present proceedings to recover the Lot.

Legal Principle

24.  The legal principle for granting a summary judgment is trite: the defendant must show that there are triable issues and that there is “fair probability or reasonable grounds” that “a real or bona fides defence” existed with “credible assertions” in the defence and not “a mere sham”, “frivolous and practically moonshine”. However, whilst the court may assess the credibility of assertions against contemporaneous documents, the court must not embark on a mini trial on affidavits.

Considerations

25.  The defendants’ defence is only based upon that the assertion they were sub-tenants by virtue of a tenancy agreement with Fortune and, as such, they were lawful sub-tenants of Fortune’s predecessor. Thus, the defence is based entirely upon the lawfulness of the head tenancy of MWC and/or Fortune.

26.  Firstly, as stated above, the evidence from contemporaneous document clearly contradicts the defendants’ case that MWC has renewed the 1986 Tenancy (as novated in 1988) in March 1996

27.  Secondly, even if the court ignores this contradiction and accepts MWC’s evidence in its entirely, there is no dispute that this “renewed” or “extended” tenancy is a 10 year lease not in writing.

28.  As a matter of law, all lease of land for a term exceeding 3 years must be made by deed otherwise they are void for the purpose of creating interest in land (para. 235.073, Halsbury‘s Law of Hong Kong, 2^nd ed, Vol.36)

29.  As such, this claimed “renewed” tenancy was only an “interest at will” determinable at any time despite consideration having been given. (Chan Yeuk Mui v. Ng Shu Chi [1999] 3 HKC 702, CA, the judgment of Rogers JA at 708A-G)

30.  Therefore, even on the defendants’ case, this tenancy at will would have ended:

a.  upon expiry of 1 year from its creation, i.e. around March 1997 (para. 6.09, Butterworths Hong Kong Conveyancing and Property Law Handbook, 2020 ed.); and / or

b.  the landowner doing any act inconsistent with continuation of his relation with the tenant-at-will, i.e. when the Wui granted the 2023 Tenancy to the plaintiff on 23 June 2023 (Jarman v. Hale [1899] 1 QB 994. Granting tenancy to another party was, of course, a clear act of discontinuation of relation with any claimed tenancy at will.

31.  Indeed, any claimed “renewed” tenancy in 1996 on the same term (i.e. on a 10 year lease) as the 1986 Tenancy even if it was made in form of a deed (which it was not) would have expired in 2006.

32.  Nemo dat quod non habet is a well-established land law: “no person gives what he or she does not possess. A person cannot assign a greater interest than the interest he possesses” (Farquharson Bros & Co v. C King & Co. [1902] AC 325)

33.  As such, even taking the defendants’ case to the highest, they cannot be lawful sub-tenants of the Wui on 22 August 2023 (the date of commencement of this action) because any tenancy relationship between MWC (and / or Fortune) and the Wui has been determined before that date in all circumstances.

34.  Mr. Cheng did not raise any dispute in law but argued that there were triable issues regarding factual disputes, for example, whether the running of the Wui have followed proper customs regarding the granting of the “renewed” tenancy, whether the rents were paid to the members or the Wui etc.

35.  I think these arguments in facts are irrelevant because, as stated above, I have made the assumption that all factual disputes are settled in favour of the defendants.

36.  Mr. Cheng also challenged the validity of the 2023 Tenancy. He suggested that the Managers could not properly grant a tenancy without some custom procedures e.g. holding a meeting of the members of the Wui etc.

37.  I note that the 2023 Tenancy was signed by the Managers (Hearing Bundle page 219). There is no dispute that the Managers were the registered managers of the Wui or that the document was forged. It is trite that only the registered managers have power to grant a tenancy and the decision of members is irrelevant:

“Under the NTO regime, the power to deal with Tso property is conferred solely on the managers and no one else, and that they shall act unanimously…” (Ng Chung Ying, Dayas v. Tang Man Kit & Anr. HCMP 1439/2021)

38.  Mr. Cheng also mentioned a possibility of an adverse possession action but I cannot see any basis for that: even on MWC‘s evidence, he has been paying rents to the members of the Hui all these years which is prima facie against any assertion that he has any intention to possess.

39.  Finally, Mr. Cheng also submit that there were other on-going actions related to the head tenancy in the High Court and thus this court should not make any decision but perhaps wait for this action to be consolidated.

40.  Whilst I agree that procedural efficiency is a consideration for case management, this should not override the underlying policy of a summary judgment: that a defendant should not delay the plaintiff obtaining judgment by raising a non-meritorious defence.

41.  The court must therefore consider what is raised in this action: the fact that various actions have been commenced in other courts on similar matters does not mean that the defendants in this action have a meritorious defence.

Conclusion

42.  In conclusion, I am not satisfied that there are triable issues in the action. I would therefore grant summary judgment to the plaintiff.

43.  Given this finding, I also see “no serious question to trial” to support the defendants’ application for an interlocutory injunction. I will accordingly dismiss Ds’ Summons.

Order

44.  I will give the following orders:

a.  Ds’ Summons be dismissed;

b.  The plaintiff be granted an Order for Possession for the Premises against the defendants;

c.  The plaintiff be granted interlocutory judgment for trespass against the defendants for damages to be assessed by a Master in Chambers; and

d.  The cost of the action, inclusive of Ds’ Summons and P’s 2^nd Summons, be to the plaintiff to be taxed if not agreed, with certificate for counsel.