CHAN CHI WAI also known as CHAN SAU PING AND ANOTHER v. CHAN SAU WAH AND OTHERS

DCCJ 1503/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1503 OF 2014

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DECISION

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1.  This is the application of the 1^st to 4^th defendants (by original action) and the 1^st and 2^nd plaintiffs (by counterclaim) (“the defendants”) to transfer the action to the Court of First Instance on the ground that the counterclaim exceeds the jurisdiction of the District Court pursuant to section 41(3) of the District Court Ordinance, Cap 336 (“DCO”).

Factual Background

2.  The 1^st and 2^nd plaintiffs (by original action) and the 1^st and 2^nd defendants (by counterclaim) (“the plaintiffs”) and the 1^st and 3^rd defendants are natural bothers.  There are five natural brothers in the Chan family but only four are named as parties in the present action.

3.  The 2^nd defendant is the wife of the 1^st defendant. The 4^th defendant is the wife of the 3^rd defendant.

4.  The dispute concerns a three storey building known as No 13 Sam Tung Uk Resite Village Tsuen Wan (“the Building”) erected on a piece of land known as Lot No 1380 in DD 451 (“the Land”).

5.  The plaintiffs are the registered legal owners and grantees of the Land under the Agreement and Condition of Exchange known as New Grant No 5824 as tenants in common in equal shares.

6.  The 1^st and 2^nd defendants resided on the second floor with another sibling of the plaintiffs.  The 3^rd and 4^th defendants resided on the first floor.  

7.  In the original action, it is the plaintiffs’ case that they have granted bare licenses to the 1^st to 4^th defendants to occupy the first and second floors of the Building.  Subsequently, by letters dated 6 March 2014 and 4 April 2014 respectively, the plaintiffs terminated the bare licenses with respect to the first and second floors of the Building and requested the defendants to move out.  However, the defendants refused to leave.

8.  The plaintiffs seek: (i) a possession order against the 1^st and 2^nd defendants for the second floor of the Building; (ii) a possession order against the 3^rd and 4^th defendants for the first floor of the Building; and (iii) mesne profits against all defendants.

9.  The 1^st and 3^rd defendants claim that the plaintiffs are holding the Building on express or constructive trust for five brothers in equal shares as tenants in common.  The 1^st and 3^rd defendants (as two of the brothers) claim that they are each entitled to 1/5 interest in the Building.  The 1^st and 3^rd defendants counterclaim for: (i) an order that 1/5 of the interest in the Building be vested in each of the defendants (i.e. a total of 2/5 of the Building) pursuant to section 45(f) of the Trustee Ordinance (Cap 29) or (ii) alternatively, a declaration that they are each entitled to 1/5 interest in the Building both as tenants in common.

10.  The plaintiffs deny that the defendants are entitled to any interest in the Building.  The plaintiffs also deny that the Building is held on express or constructive trust for the five brothers.

11.  Both parties agree that the Building is exempt from rates and there is no rateable value.  This is evidenced by a letter from the Rating and Valuation Department dated 1 September 2015 confirming that pursuant to section 36(1)(j) of the Rating Ordinance (Cap 116), the Building is exempted from assessment to rates and there are no ratable values in respect thereof. 

12.  The parties do not dispute the following:-

(a)  the total monthly rental of the entire Building is HK$26,250 (HK$8,750 per floor x 3 floors); and

(b)  the total annual value of the entire Building is HK$315,000 (HK$26,250 x 12 months).

The defendants’ submission

13.  The defendants submit that the annual value which should be taken into account when determining jurisdiction is the annual value of the entire Building although the claim is for 2/5 interest therein.  Accordingly, the defendants contend that the counterclaim falls outside the jurisdiction of the District Court as the monetary limit prescribed in section 36 DCO is HK$240,000.  As such, the proceedings ought to be transferred to the Court of First Instance.

The plaintiffs’ submission

14.  The plaintiffs submitted that the total rent of 2/5 of the Building should be considered when determining jurisdiction because the disputed part is only 2/5 of the Building.  Hence, the total annual rent of the 2/5 of the Building is HK$126,000 (HK$315,000 x 2/5) which is below the limit of HK$240,000 prescribed in section 36 DCO and no transfer is required.

15.  The issue is therefore one of interpretation of the relevant sections of the DCO.

The law

16.  Both parties referred to and relied upon sections 36(b) and 37(4) of the DCO.  Section 36 provides:-

“Jurisdiction where title in question

“36. The Court has jurisdiction to hear and determine any action which would otherwise be within the jurisdiction of the Court and in which the title to an interest in land comes into question if–

(a)  .........

(b)  for any other case, the rateable value, determined in accordance with the Rating Ordinance (Cap. 116) or the annual value, whichever is the less, of the land, does not exceed $240,000.”

17.  Section 37 confers equity jurisdiction on the District Court by defining various types of equity cases and prescribing a monetary limit for each type.

18.  By alleging a trust over the beneficial ownership of the Building, the defendants seek to invoke the equity jurisdiction of the District Court and section 37(1)(b) is applicable to the present case.

19.  Section 37(4) DCO provides:-

“Nothing in this section gives jurisdiction to the Court in proceedings for the recovery of land or relating to the title to the land, where the annual rent or rateable value of the land, determined in accordance with the Rating Ordinance (Cap. 116) or the annual value, whichever is the least, exceeds $240,000.”

20.  Section 2 of the DCO provides the definition of land which stipulates:-

““land” means land of whatever description, any part or section thereof, and tenements and buildings or parts of buildings (whether the division is horizontal, vertical or made in any other way)”

Analysis

21.  The dispute turns on the construction of the word “the land” in section 36(b) and 37(4) DCO – whether it refers to the value of the entire Building as contended by the defendants or the 2/5 value of the Building as argued by the plaintiffs?

22.  At the hearing, I referred the parties to a recent decision of Deputy District Judge Winnie Tsui in Ng Cho Chu Judy v Chan Wing Hung[2016] 1 HKLRD 1073.  It was held that a liberal approach should be adopted to the construction of section 36 so that it was a jurisdiction-conferring provision which gave the District Court the power to hear “pure” title cases.  The judgment also sets out a comprehensive background on the jurisdiction and legislative history of the District Court.  Neither Ms Ho (counsel for the plaintiffs) nor Mr Co (counsel for the defendants) demurred to the above authority.  The present case is not a “pure” title case as this action also derives jurisdiction from section 37 DCO.

23.  The plaintiffs cited Rutherford v Wilkie (1879) 41 LT 435, Stolworthy v Powell (1885) 55 LJQB 228 and Bassano v Bradley [1896] 1 QB 645 in support of its argument.  Both Rutherford and Stolworthy were cases relating to trespass and the dispute centered on a wall which was a specific identifiable part of the property.  In the present case, the defendants counterclaim 2/5 equitable interest in the Building rather than a specific part of the Building.  The dispute in Bassano was in relation to a rent charge.  Hence, I am of the view that the various English authorities cited by the plaintiffs are not relevant and do not advance their case.

24.  I reject the plaintiffs’ submission that the annual rent of 2/5 of the Building should be taken into account for the purposes of section 37(4) DCO.  The language of section 37(4) DCO is quite plain and the test it intended to apply was whether the annual rent or annual value of the land in dispute exceeds HK$240,000.

25.  I agree with the defendants’ interpretation that “land” in the context of the present case should mean the entire Building because a 2/5 equitable interest in the Building cannot form “part of a building” for the purpose of section 2 DCO.

26.  In HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568, Li CJ stated that:-

11.  In interpreting a statute, the court’s task is to ascertain the intention of the legislature as expressed in the language of the statute.  This is of course an objective exercise.  The court is not engaged in an exercise of ascertaining the legislative intent on its own.  As Lord Reid pointed out in Black-Clawson International Ltd v Papierwerke Waldhof – Aschaffenburg AG [1975] AC 591 at 613G:  “We often say that we are looking for the intention of Parliament, but that is not quite accurate.  We are seeking the meaning of the words which Parliament used.”

12.  The modern approach is to adopt a purposive interpretation.  The statutory language is construed, having regard to its context and purpose.  Words are given their natural and ordinary meaning unless the context or purpose points to a different meaning.  Context and purpose are considered when interpreting the words used and not only when an ambiguity may be thought to arise. In HKSAR v Lam Kwong Wai (2006) 9 HKCFAR 574 at 606E, Sir Anthony Mason NPJ stated: “The modern approach to statutory interpretation insists that context and purpose be considered in the first instance, especially in the case of general words, and not merely at some later stage when ambiguity may be thought to arise.”

27.  The court should be slow to read words into a statute which may bring about a result which is inconsistent with the legislative intent of the ordinance.

28.  The DCO confers jurisdiction on the District Court by reference to types of cases and monetary limits within the prescribed types of cases.  As pointed out by Deputy District Judge Winnie Tsui in paragraphs 96 and 97 of Ng Cho Chu Judy:-

“96. ...... the Ordinance has adopted two means to control what cases can be diverted to the District Court. This is readily apparent upon a review of the Ordinance itself. It first confers jurisdiction by reference to the types of cases that will come within the District Court. They include actions in contract, quasi-contract and tort (section 32), actions for money recoverable under enactment (section 33), actions relating to land (sections 35 and 36), actions raised in equity (section 37) and actions under the Married Persons Status Ordinance, Cap 182 (section 38).....

97. And, secondly, within the prescribed types of actions, the Ordinance specifies monetary limits which ensure that the “low value” cases are heard by the District Court and the “high value” ones stay in the Court of First Instance.”

29.  Adopting a purposive approach, the ordinary meaning of “land” must be in line with the definition provided in section 2 DCO.  Accordingly, I reject the plaintiff’s argument that the meaning of “the land” in section 36(b) also includes an interest in the land expressed as a fraction.  Acceptance of the plaintiff’s argument would mean that the monetary limits prescribed in the DCO could be flouted.  In my view, this is contrary to the underlying legislative intent of the DCO.

30.  The defendants’ counterclaim involves equitable interests in the Building as tenants in common.  It is well established that a tenancy in common is a state of concurrent ownership by two or more persons, each having a distinct but undivided share in the property.  As stated by MP Thompson in Co-Ownership(Sweet & Maxwell, 1988 at pgs. 12–13), “Each tenant in common has a definite interest in the property.  It is not, however, physically demarcated .......  Various consequences flow from the nature of a tenancy in common.  First, although the tenants in common have specific shares in the property, they are undivided.  Thus no tenant in common can point to one part of the land as being his own.  Unless the land is partitioned, each tenant in common has an equal right to possession of it.”

31.  The above is also supported by the learned authors of Megarry & Wade, The Law of Real Property 8^th Edition (2012) para 13-010 at pg. 501, “The only fact which brings them into co-ownership is that they both have shares in a single property which has not yet been divided among them.  While the tenancy in common lasts, no one can say which of them owns any particular parcel of land”.

32.  In the present case, the Building is registered as one property in the Land Registry.  Accordingly, it is not possible to identify any particular part or section of it as belonging exclusively to any particular tenant in common, each being able to occupy the whole with the others.

33.  In the event that the defendants’ counterclaim succeeds, the legal owner would have to share the Building with other tenants in common and lose exclusive enjoyment of the same.  Therefore, when one considers the annual value of “the land” for the purposes of  sections 36(b) and 37(4) DCO, it is logical that the reference therein is in relation to the Building as a whole rather than the 2/5 interest in the Building as submitted by the plaintiffs.

34.  In my view, the contention of the defendants that the annual value of “the land” refers to the Building as a whole is correct.  That construction accords well with the plain meaning of the wording in the statute and the circumstances of the present case.

35.  Both parties do not dispute that the annual value of the Building is HK$315,000.  For the purposes of both section 36(b) and section 37(4) DCO, I find that the annual value of the Building has exceeded the jurisdictional limit of the District Court.

Transfer to the Court of First Instance

36.  As I have found that the value of the counterclaim has exceeded the jurisdiction of the District Court, the next issue to consider is whether the whole proceedings should be transferred to the Court of First Instance pursuant to section 41(3) DCO as sought by the defendants.

37.  Before dealing with this issue, it is necessary to consider whether the original action is within the jurisdiction of the District Court for the sake of completeness.  I invited the parties to submit written submissions on the following questions which were not addressed at the hearing:-

(1)  Whether the relief claimed in the original action (possession & mesne profits) is beyond the jurisdiction of the District Court with reference to Sections 32 and 35 District Court Ordinance?

(2)  If so, should the original action be transferred to the Court of First Instance?

38.  The plaintiffs submitted that the possession of the first and second floors of the Building would not exceed the jurisdiction of the District Court as the total annual rent of the same is equivalent to HK$210,000 (HK$8,750 x 12 months x 2 floors).  Hence, the District Court has jurisdiction to deal with the plaintiff’s original action pursuant to section 35 DCO.  The defendants also agreed that the original action fell within the jurisdiction of the District Court.

39.  The plaintiffs submissions were silent on the issue of mesne profits.  The defendants submitted that based on the rental value agreed by the parties, the amount claimed as mesne profits does not exceed HK$1 million and therefore falls within the limit prescribed in section 32 DCO.

40.  The plaintiffs additionally cited Modern Market Management Ltd v Ma Wai Piu [2007] 3 HKLRD 899 in support of its contention that the “land” for the purpose of section 35 DCO is the first and second floors of the Building.  In that case, the plaintiff and defendant entered into a license agreement whereby the plaintiff licensed a stall in a shopping centre to the defendant for a monthly license fee.  After the license expired, the defendant brought proceedings in the District Court to recover the stall. Deputy District Judge Anthony Yuen rejected the plaintiff’s contention that the dispute was purely contractual which falls within section 32 DCO.  It was held that the plaintiff’s claim was an action for recovery of land, the land being the stall which the license covered. Therefore, section 35 DCO was applicable.  The claim fell outside the District Court’s jurisdiction as the rateable value and the annual rent both exceeded HK$240,000.  The annual value of the stall in that case was HK$360,000.

41.  The plaintiffs relied on the above case to further submit that the interpretation of “land” should be the 2/5 part of the Building in dispute rather than the entire Building for the purposes of section 36 DCO.  For the reasons discussed above, I reject the Plaintiff’s submission.  Modern Market Management Ltd is distinguishable from the present case as the disputed land in that case was a stall in a shopping centre.  The stall is clearly physically demarcated and identifiable.

42.  Notwithstanding that the original claim falls within the jurisdiction of the District Court, both parties submitted that they do not object to transferring the whole proceedings to the Court of First Instance in the event that the court finds that the defendants’ counterclaim exceeds the jurisdiction of the District Court.

Conclusion

43.  I find that the defendants’ counterclaim has exceeded the jurisdiction of the District Court by a material 31%. In the circumstances, I order that the whole proceedings be transferred to the Court of First Instance.

44.  Costs should follow the event. I make an order nisi that the costs of the application be to the defendants with certificate for counsel, to be taxed if not agreed.