CHEUNG WAH NIN AND OTHERS v. THE LAND REGISTRY AND ANOTHER

HCMP 3337/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3337 OF 2015

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D E C I S I O N

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1.  The principal issue in this case is the legal effect and registrability of two “Deeds of Licence” relating to two small pieces of land in Demarcation District (“DD”) 116 and DD 129 respectively, Yuen Long, the New Territories under the Land Registration Ordinance (Cap 128) (“the Ordinance”).

Background of the Deed of Licence in relation to DD 116

2.  In the area in question in Lot No 2687 in DD 116, there are three contiguous parcels of land, namely, (i) the Remaining Portion of Lot No 2687 (“Lot 2687 RP”); (ii) Section F of Lot No 2687 (“Lot 2687 s.F”); and (iii) the Remaining Portion of Section E of Lot No 2687 (“Lot 2687 s.E RP”).

3.  The 1^st to 3^rd plaintiffs were the joint owners of Lot 2687 RP.  One Mr Chan Man Hei was the owner of Lot 2687 s.F.  One Mr Chan Siu Kwan was the owner of one-third share of and in Lot 2687 s.E RP with the right to exclusive possession of the Ground Floor and Garden of the 3-storey house built on that land.  I use the word “owner” here to refer to the holder of the Government lease in respect of the land.

4.  On 13 December 2013, three instruments were executed as follows:

(1) a “Deed of Licence” between the 1^st to 3^rd plaintiffs (as 1^st Grantors) and Chan Man Hei (as 2^nd Grantor) and Chan Siu Kwan (as Grantee), by which

(a) the 1^st to 3^rd plaintiffs granted the Grantee certain rights over a small part of Lot 2687 RP adjoining Lot 2687 s.E RP (referred to in the deed as “Garden No 2 Area”) to be used by the Grantee as part of his garden;

(b) Chan Man Hei granted the Grantee certain rights over a small part of Lot 2687 s.F adjoining Lot 2687 s.E RP (referred to in the deed as “Garden No 3 Area”) also to be used by the Grantee as part of his garden;

(2) an Assignment by Chan Man Hei to a third party purchaser of two-thirds share of and in Lot 2687 s.F (excluding Garden No. 3 Area) together with the right to exclusive possession of the Ground and First Floors of the house erected on that land; and

(3) a Deed of Mutual Covenant relating to Lot 2687 s.F (excluding Garden No 3 Area) between Chan Man Hei and the purchaser referred to above.

5.  The Deed of Licence was prepared by Messrs George Y C Mok & Co and provides as follows:

“THIS LICENCE is made the 13th day of December Two Thousand and Thirteen BETWEEN CHEUNG WAH NIN (張華年), CHAN YIU FAI (陳耀輝) and SUI WEI LING (蕭偉林) all care of No.83 Tong Tau Po Tsuen, Yuen Long, New Territories, Hong Kong (hereinafter called “the 1st Grantors”) of the first part, CHAN MAN HEI (陳萬喜) of No.97 Tai Kiu Tsuen, Yuen Long, New Territories, Hong Kong … (hereinafter called “the 2nd Grantor”) of the second part and CHAN SIU KWAN (陳少君) of the Ground Floor, Block 6, Oak Hill II, No.160 Nga Yiu Tau, Shap Pat Heung, Yuen Long, New Territories, Hong Kong (hereinafter called ”the Grantee”) of the third part.

WHEREAS:-

......

(3) The 1st Grantors have agreed to grant a licence to the Grantee to use a portion of the 1st Lot and as shown and coloured Green on the Garden Plan of Lot No.2687 RP in D.D.116 hereto annexed (hereinafter called “Garden No.2 area”) in manner hereinafter appearing.

(4) The 2nd Grantor has agreed to grant a licence to the Grantee to use a portion of the 2nd Lot and as shown and coloured Green on the Garden Plan of Lot No.2687 s.F in D.D.116 hereto annexed (hereinafter called “Garden No.3 area”) in manner hereinafter appearing.

NOW THIS DEED WITNESSETH as follows:-

1. In pursuance of the premises and in consideration of the covenants hereinafter made by the Grantee, the 1st and 2nd Grantors hereby grant to the Grantee being the Owner of the Grantee’s premises, a licence to use the Garden No.2 area and Garden No.3 area as a Garden from the date hereof up to the 30th day of June 2047 or till the resumption of the relevant portion(s) of the said Lot(s) by the Government, whichever the earlier (hereinafter called “the licence period”) free of payment of licence fee BUT SUBJECT to the following terms and conditions:-

(a) The Grantee shall only use the Garden No.2 area and Garden No.3 area as Garden only and shall not erect any structure or fence thereon;

(b) The Grantee will vacate and deliver up vacant possession of the Garden No.2 area and Garden No.3 area in their present condition to the 1st and 2nd Grantors respectively not later than the expiration or sooner determination of the licence period;

……

(d) The Grantee will pay and discharge during the period from the date hereof up to the date when vacant possession of the Garden No.2 area and Garden No.3 area are delivered to the 1st and 2nd Grantors respectively, all rates, Government rents and all taxes maintenance fees general service charges and other outgoings of a recurring nature now or at any time hereafter chargeable in respect of the Garden No.2 area and Garden No.3 area. …

(e) Neither this Licence nor the Grantee’s occupation of the Garden No.2 area and Garden No.3 area or any part thereof shall be construed as creating a tenancy or tenancies and the Grantee shall occupy the Garden No.2 area and Garden No.3 area as licensee only and the Garden No.2 area and Garden No.3 area can be used by the Grantee and her successors in title and assigns in respect of the Grantee’s premises and her tenants, licensees or any persons duly authorised by her;

(f) If the Garden No.2 area and Garden No.3 area or any part or parts thereof is/are resumed by the Government at any time after the execution of this Deed of Licence, the Grantee shall forthwith, upon request by the 1st and/or 2nd Grantors, vacate and deliver up vacant possession of the Garden No.2 area and Garden No.3 area to the 1st and 2nd Grantors and shall not claim against the 1st and/or 2nd Grantors for any loss, damages or compensation. All compensation or benefit payable or given by the Government in relation to the Garden No.2 area and Garden No.3 area or any part or parts thereof so resumed shall belong to and be property of the 1st and 2nd Grantors respectively;

(g) The Grantee shall keep maintain and repair the Garden No.2 area and Garden No.3 area in good and safe condition at the Grantee’s own costs and expenses; and

……

2. For the avoidance of doubt, it is hereby expressly declared and agreed by the parties hereto that the grant of the aforesaid licence over the Garden No.2 area and Garden No.3 area shall give the Grantee exclusive right to use the Garden No.2 area and Garden No.3 area only as a Garden.

3. In this Deed, unless the context otherwise requires:-

……

(b) The expressions “the Grantors” and/or “the Grantee” wherever used shall in the case of an individual include the person specifically named and his executors administrators and assigns and in the case of a company or corporation include the company or corporation specifically name and its successors and assigns and in the case of persons holding as tenants in common include the persons specifically named and any of them and their respective executors administrators and assigns and in the case of persons holding as joint tenants include the persons specifically named and the survivors or survivor of them and the executors and administrators of such survivor his or their assigns.”

6.  On 30 December 2013, the 1^st to 3^rd plaintiffs’ solicitors, Messrs George Y C Mok & Co, lodged the Deed of Licence with the Land Registry for registration against Lot 2687 RP, Lot 2687 s.F and Lot 2687 s.E RP.  In the memorial delivered for registration, the nature and object of the instrument was stated as “Deed of Licence (as per plans)”.

Background of the Deed of Licence in relation to DD 129

7.  In the area in question in Lot No 2657 in DD 129, there are also three contiguous parcels of land that are relevant, namely, (i) Section A of Lot No 2657 (“Lot 2657 s.A”); (ii) Section B of Lot No 2657 (“Lot 2657 s.B”); and (iii) the Remaining Portion of Lot No 2657 (“Lot 2657 RP”).

8.  The 4^th plaintiff was the owner of Lot 2687 s.A.  One Mr Kwong Ching Man was the owner of two-thirds share of and in Lot 2657 s.B and Lot 2657 RP with the right to exclusive possession of the Ground and First Floors and Garden of the 3-storey house built on those two parcels.  Again, by “owner”, I mean the holder of the Government lease in respect of the land.

9.  On 30 July 2014, a “Deed of Licence” was entered into between the 4^th plaintiff and Kwong Ching Man, whereby the former granted certain rights to the latter to use a small area in Lot 2687 s.A adjoining Lot 2657 RP as part of his garden.  This Deed of Licence was also prepared by Messrs George Y C Mok & Co and its terms are mutatis mutandis the same as those of the Deed of Licence in the case of DD 116 referred to above.

10.  On 14 August 2014, Messrs George Y C Mok & Co, as the 4^th plaintiff’s solicitors, lodged the Deed of Licence with the Land Registry for registration against Lot 2657 s.A, Lot 2657 s.B and Lot 2657 RP.  A similar memorial was delivered as in the case of the Deed of Licence relating to DD 116.

Correspondence

11.  The Land Registry declined to register both Deeds of Licence against any of the premises said to be affected.  It is unnecessary to repeat here everything said in the voluminous correspondence between the parties thereafter, for the numerous letters exchanged basically reiterated the same points.  Broadly speaking, the Land Registry took the view that the Deeds give the Grantees no more than a licence to use or enter upon the relevant part of the Grantors’ land.  A licence to use or enter land creates only a personal interest, not an interest in land.  Reference was made to Land Registry Circular Memorandum (“LRCM”) No 1/13 issued on 8 February 2013, which states:

“2. A licence, which only amounts to a creation of personal rights between the parties concerned and does not create any interest in land, is not an instrument affecting land under the Land Registration Ordinance (Cap 128). The Land Registry will not accept such licences (including sub-licences) for registration. Examples of such licences include: [examples are then given]

3. However, there are some cases in which a licence creates interest in land.  For example, a licence that removes or varies the offensive trade clause in a land grant effectively modifies the terms of the grant.  In such exceptional cases, the Land Registry will accept these licences for registration.”

The Land Registry maintained that the Deeds of Licence do not affect land or create any interests in land and are therefore “not registrable” under the Ordinance.

12.  In contrast, the plaintiffs took the position that each of the Deeds gives the Grantee exclusive possession over the land in question and creates an interest in land.

The plaintiffs’ claim

13.  On 16 December 2015, the plaintiffs began these proceedings by originating summons, seeking determination by the court of the following question:

“Whether the subject Deeds of Licence are registrable instruments in writing under Land Registration Ordinance, Cap. 128”

14.  In addition, in the originating summons the plaintiffs seek a declaration

“that the subject Deeds of Licence are registrable and the plaintiff [sic] are entitled, under Sections 2 and 23 of Land Registration Ordinance, Cap. 128, to have the subject Deeds registered in the Land Registry”.

15.  In his oral submissions Mr Tony Ko who appeared for the plaintiffs reformulated the declaration to the following:

“that the subject Deeds of Licence may be registered according to the requirements under Sections 2 and 23 of Land Registration Ordinance, Cap. 128”.

16.  There was a claim for damages against the Land Registrar in the originating summons pursuant to s 23A of the Ordinance but this was abandoned at the commencement of the hearing. 

Discussion

17.  S 2 of the Ordinance provides:

“The Land Registry shall be a public office for the registration of deeds, conveyances, and other instruments in writing, and judgments; and all deeds, conveyances, and other instruments in writing, and all judgments, by which deeds, conveyances, and other instruments in writing, and judgments, any parcels of ground, tenements, or premises in Hong Kong may be affected, may be entered and registered in the said office in the prescribed manner.”

18.  S 23 of the Ordinance provides:

“(1) Subject to subsection (2), the Land Registrar shall register, in the manner prescribed by or under this Ordinance, any deed, conveyance or other instrument in writing, or judgment, if, but only if, he is satisfied that-

(a) the deed, conveyance or other instrument in writing, or judgment, may be, or is under any other Ordinance required to be, registered under this Ordinance;

(b) the provisions of this Ordinance and of any regulations made thereunder, and of any other Ordinance relating to the registration of an instrument under this Ordinance have been complied with; and

(c) the prescribed fees have been paid.

(2) Subject to subsection (3), the Land Registrar shall not register a deed, conveyance or other instrument in writing, executed after the commencement of section 30 of the Land Survey Ordinance (Cap 473) and effecting a division of land if the deed, conveyance or instrument is not accompanied by a land boundary plan-

(a) showing and delineating the parcels of land resulting from the division; and

(b) subject to subsection (4), signed and certified by an authorized land surveyor in accordance with the Land Survey Ordinance (Cap 473).”

19.  On behalf of the defendants Mr Johnny Mok SC (leading Mr Jenkin Suen) criticised the question posed in the originating summons for determination as vague.  He submitted that the word “registrable” is not used in the Ordinance and that to be registered, an instrument must not only be an instrument that “may be registered” within the meaning of s 2 and s 23(1)(a), but must also satisfy all the provisions and regulations referred to in s 23(1)(b).  He further submitted that those requirements have not been complied with, a point that I shall return to below.

20.  I do not think there is much ambiguity in the question posed for determination, particularly if one approached it in the context of the position taken by the parties in the correspondence preceding the originating summons.  It is true that the word “registrable” is not found in the Ordinance, but it is a word used by the Land Registry itself repeatedly in its letters to the plaintiffs’ solicitors, to signify instruments that create interests in land and affect land.  Thus in the first letter from the Land Registry in the bundle, dated 5 December 2014, it was stated that LRCM No 1/13 had set out that licences to use land, which create personal interests, are “not registrable” and that unless the plaintiffs could substantiate their contention that the Deeds are “registrable” with legal authorities, the Registry maintained that they are “not registrable” under the Ordinance.  In the last letter from the Registry in the bundle, dated 2 September 2015, it was stated that the Deeds of Licence only involve personal rights, which are not interests affecting land, and thus are “not registrable” under s 2 of the Ordinance.

21.  Quite plainly the parties have been using the word “registrable” to refer to the question arising under s 2 of the Ordinance as to whether an instrument is one by which “any parcels of ground, tenements, or premises in Hong Kong may be affected”, so that it “may be entered and registered in the said office in the prescribed manner”.  It seems to me the same question arises under s 23(1)(a).  The term has also often been used in judicial decisions as a shorthand for the concept of an instrument affecting land; see eg Anstalt Nybro v Hong Kong Resort Co Ltd [1980] HKLR 76 at 81 per Lord Lane.  The defendants’ first affirmation filed in these proceedings also asserted that the Deeds of Licence are “not registrable” because they created mere personal rights.  For the avoidance of doubt Mr Ko has confirmed that is the sense in which the term “registrable” is used in the originating summons.

22.  So the first issue that I have to decide is whether the Deeds of Licence affect land or create interests in land.  On this question there is now little difference between the parties.  Despite the position taken in the correspondence, Mr Mok SC submitted that the defendants’ primary case now is that each of the Deeds of Licence purported to create a tenancy by the Grantor in favour of the Grantee.  However, because the tenancy purported to be an underlease of the entire remainder of the term vested in the Grantor, the deed did not effect a demise and create a sub‑lease, but instead operated as an assignment of the term vested in the Grantor to the Grantee.

23.  I shall come to the second part of this argument later but subject to that, the submission that the Deeds of Licence purported to create a tenancy rather than a licence coincides with the submission of Mr Ko for the plaintiffs and seems to me to be plainly right.

24.  The problem with the position previously taken by the Land Registry is that they had focussed on the labels put by the parties on the transaction and on their professed intention about the classification or characterisation of the transaction.  The law focusses instead on the substance.  The crucial matter in substance is the intention to grant exclusive possession.  If exclusive possession is granted for a term of years, then save in exceptional circumstances the grantee is a tenant; see Street v Mountford [1985] 1 AC 809, 823D, 824E, 825C, 826E-H.

25.  The principle is stated in the judgment of Windeyer J in Radaich v Smith (1959) 101 CLR 209, at 222, in the following passage adopted by the House of Lords in Street v Mountford, surpa, at p 827:

“What then is the fundamental right which a tenant has that distinguishes his position from that of a licensee? It is an interest in land as distinct from a personal permission to enter the land and use it for some stipulated purpose or purposes. And how is it to be ascertained whether such an interest in land has been given? By seeing whether the grantee was given a legal right of exclusive possession of the land for a term or from year to year or for a life or lives. If he was, he is a tenant. And he cannot be other than a tenant, because a legal right of exclusive possession is a tenancy and the creation of such a right is a demise. To say that a man who has by agreement with a landlord, a right to exclusive possession of land for a term is not a tenant is simply to contradict the first proposition by the second. A right of exclusive possession is secured by the right of a lessee to maintain ejectment and, after his entry, trespass. A reservation to the landlord, either by contract or statute, of a limited right of entry, as for example to view or repair, is, of course, not inconsistent with the grant of exclusive possession. Subject to such reservations, a tenant for a term or from year to year or for a life or lives can exclude his landlord as well as strangers from the demised premises. All this is long established law: see Cole on Ejectment (1857) pp 72, 73, 287, 458.”

26.  Disregarding the clauses that simply seek to put a label on the transaction, it seems to me clear that by the Deeds of Licence it was intended that the Grantee should have exclusive possession of the land in question to be used as part of his garden.  Thus clause 2 of the Deed states that the Grantee is given “exclusive right” to use the land in question. Clause 1(d) makes the Grantee responsible for all outgoings in respect of the areas in question which suggests that henceforth he has the exclusive benefit of such areas.  Clauses 1(b) requires the Grantee to “deliver up vacant possession” in future, which suggests he has been given possession in the first place.  Clause 1 gives the Grantee the right to use the land in question as a garden; in fact the practical effect of the transaction is to expand the garden. Since the Grantee’s garden consists also of land that he holds outright, it does not make sense to suppose that part of the garden (which he owns) will be within his exclusive possession and part of it (which he uses pursuant to the Deed of Licence) will not be within his exclusive possession.  As stated in clause 1 of the Deed, the right is given from the date of the Deed up to 30 June 2047.  The restriction against building on the land imposes a limitation on the user of the land during the term granted, but does not detract from the exclusive possession given to the Grantee.  It follows from established principles that, subject to the point to be discussed, the Deeds of Licence created a tenancy in favour of the Grantees and therefore clearly affect land.

27.  The provision that the right granted lasts up to 30 June 2047, which is also the date of expiry of the term in the Government leases of the land in question[1], has, however, given rise to the question whether or not each of the Deeds of Licence became by operation of law an assignment to the Grantees of the remainder of the term of years held by the Grantors.  The rule of law was stated in Milmo v Carreras [1946] KB 306 at 310 by Lord Greene MR as follows:

“For the purpose of this case, I think it is sufficient to say that, in accordance with a very ancient and established rule, where a lessee, by a document in the form of a sub-lease, divests himself of everything that he has got (which he must necessarily do if he is transferring to his so-called sub-lessee an estate as great as or purporting to be greater than, his own) he from that moment is a stranger to the land, in the sense that the relationship of landlord and tenant, in respect of tenure, cannot any longer exist between him and the so-called sub-lessee. That relationship must depend on privity of estate. I myself find it impossible to conceive of a relationship of landlord and tenant which has not got the essential element of tenure in it, and that implies that the tenant holds of his landlord, and he can only do that if the landlord has a reversion.”

28.  This decision was applied by Au-Yeung J in Yim Tin Fook v Yu Chor Lai, Kong Wai Hung and Sou Ka Lun trading as Wang Cheung Industrial Chemicals Co (unrep, HCA 2613/2006, 10 June 2015) at §20.  See also Woodfall’s Law of Landlord and Tenant (2016), vol 1, §1.005; Megarry and Wade, The Law of Real Property (8^th ed), §17-142.

29.  Mr Ko argued that the rule does not apply here because the Grantors have not exhausted their estate by granting the rights under the Deeds of Licence to the Grantees.  They retained the “potential right” to an extension of the Government lease beyond 30 June 2047, as well as the right to any compensation paid by the Government for any resumption of the land in question.  It seems to me, however, that Mr Mok is right in saying that the former is a mere hope, not a right; and the latter is a right reserved to the Grantor which simply became a covenant in the resultant assignment.  It did not alter the fact that the Deed of Licence, in effecting a sub-lease, disposed of the entire residue of the Grantor’s estate. There is no tenure left in the reversion.  The Deeds of Licence had therefore, by operation of law, effected an assignment of the Government leases in respect of the land in question in favour of the Grantees.

30.  On this basis, Mr Mok SC argued that the Deeds of Licence are instruments effecting a division of land, which means that under s 23(2) of the Ordinance they cannot be registered without being accompanied by the requisite land boundary plan.  It is common ground that no such plan had been submitted with the Deeds of Licence for registration.

31.  Alternatively, Mr Mok SC submitted that, even if the Deeds of Licence take effect not as assignments but as tenancies (as the plaintiffs contended), the memorials lodged for registration are still defective because they do not state the true “nature and object” of the instruments as required by reg 6(1)(b) and 13 of the Land Registration Regulations (Cap 128A) (“the Regulations”).  So long as the Registrar is not satisfied of compliance with these regulations, she is required by reg 15(1) to withhold an instrument from registration.

32.  While these points arising from s 23(1)(b), s 23(2) and the Regulations might be relevant for explaining why the Land Registrar could not be said to have failed to comply with s 23 and therefore to be liable in damages under s 23A (although these were not points raised by the Registrar in correspondence or the initial affirmation), it seems to me they are no longer relevant given that the plaintiffs have abandoned their claim for damages.  Nor have the plaintiffs sought a mandatory injunction requiring the defendants to register the memorials previously delivered.  Mr Ko has also clarified that the declaration sought in the originating summons is simply that the Deeds of Licence may be registered upon compliance with the requirements in the statute.  It seems to me accordingly unnecessary to deal with these points any further.

33.  In the result, I determine the question raised in the originating summons in favour of the plaintiffs, that is to say, the Deeds of Licence are registrable instruments in writing under the Ordinance.  I decline to grant any further declaration given that it would simply duplicate the determination of the question above and may give rise to confusion if not read in its proper context.

34.  I give leave for the late affirmations from the defendants and an affirmation from the plaintiffs in response, which were read de bene esse, to be filed.

35.  I shall deal with costs after receiving written arguments from the parties.  The plaintiffs are to lodge their written submissions on costs within 14 days hereof, to be followed by the defendants within 14 days thereafter.  The plaintiffs may lodge a brief reply (no more than 3 pages), if any, within 7 days thereafter.