萬士盛有限公司 v. 鄧子禎 AND OTHERS

LDPE 426/2013

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO. LDPE 426 OF 2013

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DECISION

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1.  This is the application by summons of Mr Fong and Madam Tjio (collectively called “the Interveners”) for the following orders:

(1)   “[they] be joined as the 2^nd and 3^rd respondents to the proceedings respectively”;

(2)   “the writ of possession / order for possession in relation to [the suit premises] be set aside”;

(3)   “until further order of the Court, any person except [the Interveners] and/or their authorized person(s) be restrained from entering into [the suit premises] and/or interfering with and/or in any way dispose of the chattels in [the suit premises] without the consent of [the Interveners]”; and

(4)   “[the Interveners] be at liberty to change the lock installed at the entrance of [the suit premises] by the bailiff on 10 July 2013”.

2.  The respondent (鄧子禎) has not entered an appearance in these proceedings, but the applicant (“Mega Grade”) is opposing the application.

Background

3.  Mega Grade is the owner of the suit premises at Unit B on 14/F with lavatory, Kingpower Commercial Building, Nos 409-413 Jaffe Road, Hong Kong which is a commercial premises.

4.  On 2 May 2013, Mega Grade (as landlord) commenced these proceedings against the respondent (as tenant) for possession of the suit premises, arrears of rent and mesne profits on the ground that the respondent had failed to pay rent since 20 January 2013.  The Notice of Application was signed by one 溫麗娟 (“WLK”) said to be a director of the company.

5.  The applicant filed an affirmation of service in which WLK deposed to the fact that she had sent a copy of the Notice of Application to the respondent at the suit premises by ordinary post.  She also confirmed that a copy of the Notice of Application together with a Notice to Occupant had been posted up at the entrance of the suit premises for 3 consecutive days on 6, 7 and 8 May 2013.

6.  No Notice of Opposition had been filed and Mega Grade obtained judgment against the respondent on 24 May 2013.  Thereafter, Mega Grade applied for and was granted a writ of possession in aid of execution of the judgment.

7.  On 10 July 2013, the bailiff executed the writ of possession and delivered vacant possession of the suit premises to Mega Grade.  The bailiff set out in an inventory list the inventory and appraisement of the goods and chattels found inside the suit premises.

8.  On 12 July 2013, the Interveners filed the summons referred to in paragraph 1 above which was supported by an affirmation of Madam Tjio.

9.  In gist, Madam Tjio alleged in her affirmation that:

(a) She and Mr Fong had been using the suit premises to operate their businesses since the 90’s. 

(b) Initially, the suit premises were owned by Sinotronix Investments Limited (“Sinotronix”).  Sinotronix later transferred the premises to Mega Grade on 18 March 2000.  Mega Grade was used as a corporate vehicle holding the suit premises and did not carry on any business.  Both Sinotronix and Mega Grade were “beneficially owned” by Mr Fong and one Lee Chun-Kwok (“Mr Lee”). 

(c) The shareholders and directors of Sinotronix and Mega Grade used to be nominees of Mr Fong and Mr Lee.  However, Mega Grade had not hold any general meeting since about 2003 and the two current directors WLK and a Chen Chun-Guang (“CCG”) were not validly appointed.

(d) In December 2012, Wan Tak-Choi (“WTC”) claimed to be authorized by Mega Grade to try to evict the Interveners from the suit premises.  An argument ensued and police were summoned.  This led to Mr Fong’s then solicitors sending a letter dated 2 January 2013 to WTC putting on record of Mr Fong’s position.  Eventually,

“[the Interveners] recovered possession of the Premises since or about 15 January 2013 by replacing a lock and entering into possession of the Premises in front of [WTC] and some police officers”.

(e) In April 2013, a Mr Wan (presumably not WTC) alleged to be a tenant and tried to gain entry into the suit premises but access was denied by the Interveners.  A report was made to the police.

(f) The Interveners had no notice of these proceedings until 10 July 2013 when the bailiff came to execute the writ of possession and evicted them from the suit premises.  They confirmed with the management office of the building housing the suit premises that the notices that had been posted up at the suit premises had been removed.

(g) The Interveners had never heard of the respondent and considered him to be fictitious and these proceedings a ploy to evict them.

10.  On 17 July 2013 when the summons first came up for a hearing, Mega Grade was unrepresented and attended by WTC.  He requested an adjournment as he had only just received the summons and Madam Tjio’s affirmation the day before.  On the other hand, the Interveners’ counsel (Mr Patrick Chong) pressed for an interlocutory injunction in terms of paragraph 1(3) above.  I refused to entertain his request and adjourned the summons as the Interveners had already been dispossessed and there was no urgency.  Full reasons were given orally at the hearing.  On that occasion, I prompted Mr Chong to consider if the Interveners’ complaints should be more appropriately dealt with in some other forum.  By consent, one of the items listed in the bailiff’s inventory list was released to the Interveners.

11.  At the adjourned hearing on 1 August 2013, I set down the summons for argument and gave directions for the filing of affidavit/affirmations.  Arrangement was also made for the Interveners to reclaim the other goods and chattels enumerated in the inventory list.

12.  WTC then filed an affirmation for Mega Grade to oppose the summons.  He deposed to the fact that:

(a) All began in 2003 when his friend William Fong asked for a loan and offered the suit premises as security.  He was then given to understand that the premises belonged to Mega Grade which was beneficially owned by Mr Fong as the head of Fong’s family.  Eventually, WTC, Mr Fong and William Fong came to an agreement that WTC would lend $500,000 and, in return, he and his nominee would become directors of the company for the duration of the loan.  Mr Fong personally showed WTC the shareholders’ resolution confirming his appointment and retained the loan agreement.  A legal charge was created in favour of WTC and registered against the suit premises, and the loan was reported in the audited financial statements of the company. 

(b) But the loan was not repaid on time, and WTC voiced his concern repeatedly to Mr Fong in 2006, 2009 and 2011.  In 2011, William Fong suggested selling the suit premises to repay the loan.  With a view to secure a good selling price, WTC, Mr Fong and William Fong agreed to appoint CCG (an estate agent in China with substantial connections) as a director of Mega Grade to facilitate the intended sale.  That explained how CCG and WLK (being WTC’s sister and nominee) became the directors of the company.

(c) Later when a buyer could not be found, Mega Grade entered into the tenancy agreement the subject matter of these proceedings for rental income.  The respondent paid a deposit of 2 months’ rent and one month’s rent in advance, but,

“Following this, the Applicant has never received any further rental payments from the Respondent and the Respondent has never showed up at the Property.”

(d) Later, the relationship between WTC and the Fongs turned sour when William Fong came back for more money.  WTC began to doubt whether Mega Grade was really beneficially owned by Mr Fong, and he only learnt about the existence of Mr Lee from Madam Tjio’s affirmation.

13.  In reply, the Interveners’ solicitor complained that Mega Grade had registered a second mortgage dated 26 July 2013 against the suit premises without the knowledge and consent of the Interveners.  She further reported on the proceedings in HCA 1390/2013 and exhibited a set of the papers filed therein.

14.  HCA 1390/2013 was commenced by Mr Fong on 29 July 2013 against Shahaan Sakalin, Mr Lee, WLK, CCG and Mega Grade as defendants.  According to his indorsement of claim:

(a) Mr Fong is asking the Court of First Instance to declare that WLK and CCG’s appointment as directors of Mega Grade was invalid and to restrain them (and WTC acting through them) from acting or representing as Mega Grade’s directors.

(b) Mr Fong is also claiming for a declaration that Mega Grade be estopped from evicting him from the suit premises on the ground that there was an agreement between them that he be allowed to occupy the premises so long as he or his successor remains a beneficial owner of the company and continues to upkeep the premises,and he has acted upon the agreement to his detriment.

15.  When he learned about the second mortgage, Mr Fong took out a summons in HCA 1390/2013 on 26 August 2013 (“High Court Summons”) for an interlocutory injunction to restrain WLK and CCG (and WTC acting through them) from acting or representing as Mega Grade’s directors, and for specific discovery on some documents and information pertaining to the second mortgage.

16.  The High Court Summons was argued before Deputy High Court Judge B Chu on 5 September 2013.  The learned judge has reserved judgment upon the undertaking of WLK and CCG not to enter into any lease in respect of the suit premises, not to draw down any money relating to the second mortgage, and not to incur further liabilities for Mega Grade.

The submissions

17.  Mr Chong (the Interveners’ counsel) has submitted that the judgment in this case (and consequently the writ of possession) cannot stand because:

(a) the judgment was obtained by fraud; and

(b) Mega Grade had no authority to commence these proceedings, as the appointment of its current directors (WLK and CCG) was invalid.

18.  On the other hand, Mr Goh (solicitor representing Mega Grade) has submitted that the Interveners was a stranger to the tenancy agreement and had no standing in these proceedings which is concerned with the tenancy between Mega Grade and the respondent.  He said that:

“It is not unusual that tenants put down deposits and a month rental and then decide not to occupy the properties, perhaps because of personal or financial circumstances that they have changed their minds and decide not to take up occupation of the properties or the fact that they have found better properties somewhere else. Purely because a tenant has failed to turn up to occupy the property does not automatically mean that that tenant is a ‘fake’.”

Discussion

19.  One of the issues argued before Deputy High Court Judge B Chu was the validity of WLK and CCG’sappointment as Mega Grade’s directors.  As judgment on that issue is still pending, Mr Chong (sensible in my view) does not seek to re-run the argument before this tribunal and focuses on fraud.

20.  Based on the evidence presently available, I tend to agree with him that Mega Grade case is dubious.

21.  As pointed out by Mr Chong, Mega Grade should know, by reason of the December 2012 and April 2013 incidents, that Mr Fong (and his associates) had been using the suit premises. In any event, Mr Fong’s position was made clear in the letter to WTC dated 2 January 2013 which contained the following:

“In the circumstances, since you are not a lawful representative of the Company, you have no right in seeking to evict our client from the Premises. As you well knew, our client and his companies have been occupying the Premises for over 20 years. He is the lawful occupant. Accordingly, our client will take all necessary legal steps in regaining the Premises, including but not limited to installing his new locks in place of the old ones. You are hereby demanded not to further interfere with our client’s lawful occupation and enjoyment of the Premises or in any way harassing our client.”

22.  Given the fact that Mr Fong had been in possession, it was absurd (to say the least) for Mega Grade to attempt to recover possession of the suit premises through these proceedings without regard to Mr Fong’s position.  Mr Goh tries to explain away by suggesting that Mega Grade did not retain the keys to the premises and did not know whether the occupants therein were associated with the respondent. However, his submission does not sit comfortably with WTC’s evidence that “the Respondent has never showed up at the Property”.  That fact also negates the necessity to obtain possession against the respondent through legal process.

23.  Having said all these, the Interveners cannot point to any direct evidence proving either that the respondent is fictitious or that the tenancy agreement is a sham.  Mega Grade exhibited a copy of the tenancy agreement when it applied for default judgment, long before the Interveners’ summons.  The exhibit bore the imprint of a stamp for the payment of stamp duty.  The date of the stamp (November 2012) preceded the disputes deposed to in the affirmations.  There is no suggestion that the stamp is a forgery.  Madam Tjio has also said that someone claiming to be a tenant did try to gain entry into the suit premises in April 2013.  All these tend to confirm the existence of the tenancy with the respondent.

24.  It would be unrealistic to expect this tribunal to make a finding of fraud on the paper without cross-examination.  This being a joinder application, the Interveners do not in fact need to establish fraud at this interlocutory stage.  However, what would the Interveners achieve by disputing the tenancy at trial?  Assuming they succeed at trial, Mega Grade’s claim herein will be dismissed but the Interveners will still be dispossessed of the suit premises.  Whether the Interveners may re-enter depends on whether they can establish some rights to occupy the premises.  That is the claim in HCA 1390/2013.  Mr Chong seems to be able to comprehend all these when he eventually elects not to proceed with paragraphs 1(1), (3) and (4) above.

25.  Be that as it may, the admission by Mega Grade that the respondent has never showed up at the suit premises after signing the tenancy agreement has, in my view, cast doubt on the validity of the purported service.  Mr Goh again tries to salvage the situation by suggesting that the suit premises is nonetheless the last known address of the respondent and Mega Grade was entitled to rely on it for service.

26.  Mr Goh is apparently referring to rule 7(1)(b)(iii) of the Lands Tribunal Rules.  That rule provides that service on any person not acting by solicitors may be effected:

“by sending the document by ordinary post addressed to him at the address for service or, if no address for service is given, at his last known or usual place of abode or business in Hong Kong.”

27.  It is noted in Hong Kong Civil Procedure 2013 (at §13/7/2) that:

“‘usual’ address means an address where the defendant can usually be reached and a defendant can have a number of usual addresses; ‘last known’ address means the address last known to the plaintiff from whatever source and a defendant may have a number of addresses last known to the plaintiff…”

28.  The fact that the respondent has never turned up at the suit premises runs contrary to the suggestion that he might usually be reached at that address.  And Mega Grade could not have regarded that as a valid address for service last known to them either, as they knew it had never been used by the respondent.  Given this latest revelation, I am not satisfied that the purported service was sufficient to bring these proceedings to the attention of the respondent.  On that basis, the judgment is irregular and should be set aside. 

Conclusion

29.  For the above reasons, I set aside the judgment herein dated 24 May 2013 on the ground of irregular service.  The writ of possession dated 17 June 2013 should consequentially be set aside.  The rest of the summons is dismissed.  It will be up to Mega Grade to decide how to proceed with its claim herein if at all.

30.  On costs, Mr Chong has asked for costs whereas Mr Goh suggests each side to bear its own costs.  In my view, the Interveners’ summons was taken out without due regard to the nature of the proceedings herein and the jurisdiction of the Lands Tribunal.  I have set aside the judgment (and the writ of possession) not upon any ground put forward by the Interveners.  Furthermore, the voluminous materials put before me (including the papers filed in HCA 1390/2013) are unnecessarily prolific.  In those circumstances, I shall make no order as to the costs of the summons.

(Justin Ko) Presiding Officer Lands Tribunal