SO KEE TRANSPORTATION CO LTD v. THE SECRETARY FOR THE ENVIRONMENT, TRANSPORT AND WORKS

LDRW 36/2003

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

RAILWAYS ORDINANCE APPLICATION NO. 36 of 2003

_________________

________________

_________________

D E C I S I O N

_________________

Background

1. This is an application by the Applicant for compensation to be determined pursuant to section 34(7) of the Railways Ordinance, Cap. 519 (“the Ordinance”).  The Respondent denies that the Applicant has any right to claim compensation under the Ordinance and/or the Lands Resumption Ordinance, Cap. 124 (“the LRO”).  Alternatively, the Respondent denies that the amount claimed is properly assessed under the Ordinance and/or the LRO, and the amount claimed is excessive.

2. The parties have agreed at the trial that the Tribunal shall first decide the Applicant’s entitlement to claim as a preliminary issue and if the decision is against the Applicant, the Tribunal may dismiss the application forthwith.  Alternatively, if the decision is in favour of the Applicant, the case can be adjourned to some other dates to be fixed for the trial to be continued.

Preliminary issue

3. The Applicant’s claim consists of two items: item 1 and item 2(b) of Part II of the Schedule to the Ordinance.  The persons who may claim compensation for item 1 and item 2(b) are respectively defined by the Ordinance to mean “Any person who would be entitled to claim compensation for land resumed under the Lands Resumption Ordinance (Cap. 124) if the land had been resumed thereunder” and “Any person owning a compensatable interest in the land”.

4. There is no definition in the LRO as to who are the persons entitled to claim compensation thereunder, but the parties have no dispute that a person who may claim compensation under the LRO must be someone who has an estate or interest in the land concerned.  Thus, for item 1, the Applicant must establish that it has an estate or interest in the land resumed.

5. For item 2(b), the qualification is similar but not exactly the same.  The person claiming compensation must own a compensatable interest in the land.  Compensatable interest is defined by section 2 of the Ordinance to mean:-

      “the estate or interest of –

(a) a person having an unexpired lease of land (including any further term which could be obtained as of right) of not less than one month or a tenancy or sub-tenancy terminable (whether by virtue of an Ordinance or otherwise) by either party by not less than one month’s notice;

(b) a mortgagee in possession;

(c) the holder of a valid option to purchase an estate or interest referred to in paragraph (a) or (b);

(d) a purchaser under an agreement for sale and purchase to whom the benefit of an estate or interest referred to in paragraph (a) or (b) has already passed; or

(e) the executor, administrator and beneficiary of a person having an estate or interest set out in paragraph (a), (b), (c) or (d);”

6. So there are specific categories of people who can make a claim for item 2(b).  A licensee, for example, would not be qualified to make a claim for item 2(b), because such a person is not specified in section 2 of the Ordinance.  On the other hand, as discussed later, a licensee may in some circumstances have interest in land to qualify him for compensation under the LRO.  The Applicant is therefore required to establish that it owns a compensatable interest in the land resumed as aforesaid before it can have a claim for item 2(b).

7. Thus, the preliminary issue that the Tribunal is required to decide is whether the Applicant has any estate or interest, as well as any compensatable interest, in the land resumed, which entitles the Applicant to claim compensation under item 1 and item 2(b) of Part II of the Schedule to the Ordinance.

Facts of the case

8. The Applicant was in occupation of a portion of Sec. D R.P. of Lot No. 372 in Demarcation District No. 99 (“the Site”) on which it carried on the businesses of container yard and transportation from about December 1998/January 1999.  The Government resumed the Site on 19 October 2002 pursuant to G.N. 4335 dated 18 July 2002 and created rights of temporary occupation commencing from 19 March 2003 to 30 July 2006 pursuant to G.N. 4337 dated 18 July 2002.

9. The Applicant occupied the Site pursuant to two tenancy agreements: a 9-year tenancy agreement with Pacific Cargo Service (“Pacific Cargo”) commencing on 18 December 1988 and a 7-year tenancy agreement with Fulways International Limited (“Fulways”) commencing on 1 July 1999.  These two tenancy agreements were for two separate portions of the Site.  Neither Pacific Cargo nor Fulways were registered owners of the Site.  The registered owner of the Site was, until 14 September 1999, Man Shin Kang Tong (文善耕堂) (“the Tong”).  On 14 September 1999, the Tong assigned the Site to Mass Ocean International Limited (“Mass Ocean”).

10. The Respondent accepts that the Applicant’s chain of leaseholdtitle originated from a written 10-year lease agreement from 1 January 1994 to 31 December 2003 and made between the Tong and one Man Yiu Chuen together with 8 other individuals all surnamed “Man” (“the Head Lease”).  No issue is taken in respect of the chain of all the intermediary sub-leases.  However, the Tong had three managers: Man Ting Yiu (文丁堯), Man Ting Fong alias Man Tang Fong (文騰芳) and Man Cheuk Wai (文卓維).  The Head Lease was only signed by two of the managers, Man Cheuk Wai and Man Ting Fong alias Man Tang Fong, on behalf of the Tong.  The signature of the remaining manager, Man Ting Yiu, did not appear on the Head Lease.  Neither the Head Lease nor any of the sub-leases, including the sub-leases the Applicant signed with Pacific Cargo and Fulways, were registered in the Land Registry against the Site.

The Respondent’s Case

11. On the basis of the above facts, which are not in dispute, the Respondent contends that the Applicant has failed to establish that it was a person “having an estate or interest in the land” within the meaning of sections 6 and 8 of the LRO.  The Respondent only relies on two grounds to support its contention:-

(1)   The Head Lease is invalid because of the lack of Man Ting Yiu’s signature; and

(2)    The Head Lease is null and void against Mass Ocean for want of registration in the Land Registry.

12. On the first ground, the Respondent relies on the case of Tang Kam Wah & ors. v. Tang Ming Yat & anor., HCA 10141 of 1998, where Chu J held that the managers of a Tso, being trustees, are required to act unanimously: Lewin on Trusts (17^th ed.) p.737.  The Respondent submits that the principles are clearly stated in p.736-737 of Lewin on Trusts as follows:-

           Paragraph 29-24 on p.736:

“If any one refuses or is unfit to act, it is not competent for the others to proceed without him.”

Paragraph 29-27 on p.737:

“trustees are generally required to act unanimously in the exercise of their powers; a majority is not entitled to bind the trust against the opposition of a minority.”

13. The Respondent also submits that a legal estate in land may be created or disposed of only by deed signed by the person disposing of the same or his authorized agents, and since the Head Lease and the sub-leases were leases granting terms exceeding 3 years, they do not fall within the exception to the above rule: ss. 3 and 4 of the Conveyancing and Property Ordinance, Cap. 219 (“the CPO”).

14. The Respondent therefore contends that as one of the managers did not sign the Head Lease, it was not a deed signed by the Tong or its authorized agents, i.e. all three managers, and that the consent of one or some, but not all, of the managers is insufficient to make the Head Lease a valid and binding lease.

15. As to the second ground, the Respondent relies on section 3 of the Land Registration Ordinance, Cap. 128, which stipulates that:-

“(1) Subject to this Ordinance, all such deeds, conveyances, and other instruments in writing, and judgments, made, executed, or obtained, and registered in pursuance hereof, shall have priority one over the other according to the priority of their respective dates of registration, which dates shall be determined in accordance with regulations made under this Ordinance.

(2) All such deeds, conveyances, and other instruments in writing, and judgments, as last aforesaid, which are not registered shall, as against    any subsequent bona fide purchaser or mortgagee for valuable consideration of the same parcels of ground, tenements, or premises, be absolutely null and void to all intents and purposes:

Provided that nothing herein contained shall extend to bona fide leases at rack rent for any term not exceeding 3 years.”

16. The Respondent submits that as a result of the lack of registration, the Head Lease and the sub-leases became null and void against Mass Ocean, being a subsequent bona fide purchaser for valuable consideration.        

17. The Respondent further submits that any unregistered instrument became null and void against a bona-fide purchaser, with or without notice.   This is made clear by section 4 of the Lands Registration Ordinance, Cap. 128:

“No notice whatsoever, either actual or constructive, of any prior unregistered deed, conveyance, or other instrument in writing, or judgment, shall affect the priority of any such instrument as aforesaid as is duly registered.”

18. Thus, the Respondent argues that it does not matter whether Mass Ocean was aware of the Applicant’s existence or had all along recognized the Applicant’s sub-tenant status.

19. The Respondent also argues that the Applicant’s highest case would be that it might have a licence to occupy the land, but according to the case of Wing Hing Oil Co. Ltd. v. Director of Buildings and Lands [1988] HKDCLR 25, a licence does not create an estate or interest in land so as to entitle the Applicant to compensation.  The Applicant in fact did not claim as licensee but as tenant in the present proceedings.  So even if a licensee can have an estate or interest in land, the Applicant has to amend its status in making the claim.

The Applicant’s case

20. The Applicant insists that it is claiming as tenant in the present proceedings and will not amend its status to licensee.  The Applicant relies on HH Judge Scriven’s judgment in Wing Hing Oil Co. Ltd. v. Director of Buildings and Lands, supra., to submit that “a person interested in the land” had no technical meaning and was not to be considered in the strict conveyancing sense.  The Applicant’s occupation of the Site displayed all the essential characteristics of a tenant: pp. 266-269 of Sarah Nield: Hong Kong Land Law (2^nd ed.).  Even when the Head Lease was not signed by one of the managers and the Head Lease, as well as the sub-leases, was not registered in the Land Registry, the Applicant should still be considered to have an estate or interest in the Site.

21. Alternatively, the Applicant submits that inference can be drawn from the circumstances that the Tong, and later Mass Ocean, had continuously received rent and had therefore acknowledged the existence of the tenancy and sub-tenancies, and in such circumstances, the tenancy and sub-tenancies were accepted and granted by conduct: paragraphs 2-028 and 28-136 Chitty on Contracts (2004), Powell v. Smith LR 14 EQ 85, Parker v. Jones [1910] 2 KB 32, Pioneer time Investment Limited v. Union Force Investment Limited HCA 9165/1995.

22. Relying on s. 3(2) of the CPO, and paragraphs 4.052, 4.053, 4.071-4.074 and 5.004-5.005 of Woodfall’s Law of Landlord and Tenant, the Applicant submits that the sub-tenancies were not void by reason of lack of formalities.

23. As to the issue on non-registration of the Head Lease and the sub-leases, the Applicant submits that it only affects the priority of claims, not title of the Applicant.

Whether the Head Lease is invalid for want of signature of all managers

24. First of all, we fully accept the Respondent’s submission that the managers of a t’ong must act together, and when a lease is not signed by all the managers, it is not a valid lease binding on the t’ong.  The Respondent’s submission is well supported by the case of Tang Kam Wah, supra.  Although that case concerns a tso, there is no practical difference between a tso and a t’ong for our purposes.  The concept of trust is applicable to both a tso and a t’ong.  It is clear from the passages cited by the Respondent from Lewin on Trust that trustees must act unanimously in the exercise of their powers and a majority is not entitled to bind the trust.  Further, it is also stated in paragraph 29-33 of Lewin on Trust as follows:-

“Where trustees hold a leasehold interest any rights arising out of it can be exercised only by all of them jointly.”

25. It is not clear why Man Ting Yiu did not sign the Head Lease, but he did sign the assignment between the Tong and Mass Ocean (Exhibit “AR-6”) together with the other two managers.  So it is not a case that Man Ting Yiu had passed away or could not be made available to sign the Head Lease.  As stated in paragraph 29-24 of Lewin on Trust, even if Man Ting Yiu had refused or was unfit to act, the other two managers were incompetent to proceed with the Head Lease without him.

26. Thus, we have no doubt that the Respondent’s submission in this regard is a correct one.  When the Head Lease is not signed by all three managers of the Tong, it is not a valid lease binding on the Tong.

The Applicant’s interest

27. We accept the principle that “a person interested in the land” had no technical meaning and was not to be considered in the strict conveyancing sense: Wing Hing Oil Co. Ltd., supra., and Pennine Raceway v. Kirklees Council [1983] QB 382.  However, we do not accept the Applicant’s contention that the Applicant would become a tenant of the Tong by its occupation of the Site that had displayed all the characteristics of a tenant. 

28. Section 3 of the CPO stipulates that:-

“(1) Subject to section 6(2), no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose.

 (2)  This section applies to contracts or other dispositions whenever made and does not affect the law relating to part performance or sales by the court.”

29. Section 4(1) of the CPO states that:-

“A legal estate in land may be created, extinguished or disposed of only by deed.”

30. It is clear from the above provisions that the Applicant must possess a valid written lease before it can be regarded as a tenant and have legal estate in the Site.  As the Head Lease is an invalid lease against the Tong, all the sub-leases would also be invalid against the Tong.  The exception stipulated in section 6(2) of the CPO for leases not exceeding 3 years, as well as the exceptions in section 4(2) of the CPO, does not apply in the Applicant’s case.  So the Applicant simply does not have any legal estate in the Site.

31. Although “a person interested in the land” does not have any technical meaning, it would not turn a person not being a tenant into a tenant.  As submitted by the Respondent, many trespassers occupied land for long periods.  When they have occupied the land for the requisite limitation period, the owner’s right is extinguished.  Until then, the trespasser’s undisturbed occupation of the land gives rise to no right whatsoever in favour of the trespasser.  We are of the view that the principle enunciated in the case of Wing Hing Oil Co. Ltd. only suggests that a person, not being a tenant, might still have other interest in land, which does not fall within the technical meaning of “an estate or interest in land”.

32. An example of such an interest can be found in Tong Kwong Hong Co. Ltd. v. Director of Public Works [1981] HKDCLR 22, where the applicant was held to be entitled to compensation on the ground that its licence was irrevocable and carried with it an interest in the land.  However, as the Applicant is not claiming any interest as licensee, but only as a tenant, it is unnecessary for us to consider whether the Applicant has any interest in land other than being a tenant.          

Tenancy by estoppel or by conduct

33. The Applicant submits that there could be a tenancy by estoppel and refers to paragraph 52 of the judgment of Cheung JA in Tang Man Kit & anor. v. Hip Hing Timber Co. Ltd. CACV 137/2002, which reads as follows:-

“As pointed out by the editors of Hill and Redman’s Law of Landlord and Tenant (17^th Ed.) Para 88, this estoppel has two aspects –

(1)   A tenant is prevented or estopped from denying the right of his landlord to grant the lease and, conversely, a landlord is prevented or estopped from denying the title of his tenant under the lease.

(2)   A person who has no legal estate in the land may nevertheless purport to grant a lease of that land; in that event, there is created between him and his purported tenant a tenancy by estoppel which binds them and their respective successors in title just as if the landlord had a sufficient interest to grant the lease.”

34. This passage does not help the Applicant at all.  Tenancy by estoppel only binds the person creating it, not the real owner.  In our present case, if there were any tenancy by estoppel, it would only bind the two managers signing the Head Lease, not the Tong, since the two managers did not have the authority to act for the Tong without the third manager joining in.

35. The Applicant also alleges that there was a tenancy by conduct in that the Tong had received rent from the lessees of the Head Lease and neither Man Ting Yiu nor any other members of the Tong had ever disturbed the Applicant’s occupation of the Site.

36. The Applicant, however, could only produce a receipt (Exhibit “A-1”) signed by Man Cheuk Wai for receiving a sum of $66,000.00 from one of the lessees, Man Yiu Chuen.  This receipt does not show that Man Cheuk Wai received the money on behalf of the Tong and the amount does not tally with the rent stated in the Head Lease.  There is no other evidence to support the allegation that the Tong had received the rent.

37. There is also no evidence at all that Man Ting Yiu and the other members of the Tong were aware of the Head Lease and the sub-leases.  The Applicant, however, submits that since the area of the Site was so large, it would be inconceivable that the members of the Tong were unaware of the presence of trespassers.  As there was no interruption of the Applicant’s occupation of the Site by the members of the Tong, coupled with the fact that there was a receipt issued as aforesaid, the inference is that the Tong must have received rent and hence did not raise any complaint.

38. We do not accept the Applicant’s submission that these other members must have known the Applicant’s occupation of the Site, as it is always possible that Man Ting Yiu and the other members of the Tong might not be aware of the Head Lease and sub-leases or that the Site was occupied by the Applicant.  For example, Man Ting Yiu might have migrated to another country and had no knowledge about the Head Lease and the sub-leases at all.  Even when the other members of the Tong were still residing in the vicinity, it does not mean that they were in a position to know whether the Tong had properly permitted the Applicant to occupy the Site.  Although it is not for this Tribunal to speculate, the inference suggested by the Applicant is certainly not conclusive.

39. So when there is no evidence that Man Ting Yiu and the other members had knowledge about these leases or whether they were properly granted, the fact that the Applicant’s occupation was undisturbed is neither here nor there.  It cannot be used to substantiate the Applicant’s allegations that the Tong had received the rent or the other members had accepted the leases.

40. The Applicant relies on pp. 266-269 of Sarah Nield: Hong Kong Land Law (2^nd ed.) to suggest that all the essential characteristics of a tenant are present in the Applicant’s occupation of the Site.  In that book, the author states that “In order for occupation to qualify as a lease, the lessee or tenant must be given exclusive possession of the land.”  We are, however, of the view that the exclusive possession must have been given by the landlord or his authorized representative before the occupation can be qualified as a lease.  In our case, the two managers who signed the Head Lease could not represent the Tong on their own without the third manager.  So the evidence can only suggest that the two managers, rather than the Tong, gave possession of the Site to the Applicant.  As the two managers cannot represent the Tong, it cannot be said that this essential characteristic of a tenant was established.

41. The Applicant also relies on some other authorities such as Powell v. Smith, LR 14 EQ 85, Parker v. Jones [1910] 2 KB 32, Pioneer Time Investment Limited v. Union Force Investment Limited HCA 9165/1995, Man Ping Nam & anor. v. Man Mei Kwai & ors. HCA 9852/1998 and CACV 193/2000, paragraphs 2-028 and 28-136 of Chitty on Contracts (2004) and paragraphs 4.052, 4.053, 4.071-4.074 and 5.004-5.005 of Woodfall’s Law of Landlord and Tenant, to suggest that there could be tenancy by estoppel when there were part performance and some other acts done by the landlord.  Although section 3(2) of the CPO stipulates that section 3(1) does not affect the law relating to part performance, we do not find these authorities helpful at all.

42. As aforesaid, the Applicant simply fails to show that the Tong had accepted rent or done anything that could amount to estoppel by conduct.  There is also no part performance as the possession was not given by the Tong but by the two managers only.  We find nothing in the facts of this case that could give rise to estoppel by conduct at all.

43. Relying on the Court of Appeal judgment in Man Ping Nam, supra., the Applicant argues that non-compliance of section 15 of the new Territories Ordinance does not make the Head Lease null and void, but only voidable.  When there was no complaint made against the Head Lease, it would still be a valid lease.  This argument is wholly misconceived.  The Court of Appeal in that case was only dealing with the point on consent of the Secretary for Home Affairs.  It was in fact decided by Deputy Judge Cheung (as he then was) in the original court in that case that when not all members of the wui signed or consented to the purported tenancy agreement, it would be null and void and would not bind the wui.  This decision was not subject to appeal and was not overruled at all.

44. We agree with Deputy Judge Cheung and accept his ruling in this regard.  In fact, in our present case, there is no evidence that all members of the Tong consented to the granting of the Head Lease at all.  As aforesaid, there is even no evidence to show that Man Ting Yiu and the other members of the Tong were aware of the Head Lease and the sub-leases.  So it is not right to draw any inference that Man Ting Yiu and the other members of the Tong had consented to the granting of the Head Lease and the sub-leases.  Even assuming Man Ting Yiu was aware of the Head Lease, the fact that he did not sign the Head Lease suggests that he might not have consented to the granting of the Head Lease rather than the other way round.

45. The other contention of the Applicant that Mass Ocean had received rent and acknowledged the existence of the Head Lease and the sub-leases is also without merit.  Mass Ocean had in fact issued a writ in the High Court (HCA 1430/2002) to evict the Applicant in April 2002.  This action was subsequently compromised between Mass Ocean and the Applicant as well as two other parties (the intermediate landlords/tenants) and a Consent Agreement was executed on 27 April 2004 between the relevant parties.  The issuance of the writ is a clear indication that Mass Ocean had never acknowledged the existence of the Head Lease and the sub-leases.  The subsequent compromise would not be an admission or indication of any previous acknowledgement.  The Applicant is required to establish that it had an interest in the Site on the day of resumption, i.e. 19 October 2002, not subsequently.  The compromise would not give any retrospective effect.

46. The Applicant also relies on a Notice of Termination of Tenancy issued by Mass Ocean’s solicitors on 9 June 2003 to the 9 Tenants of the Head Lease purporting to give them 6 months’ notice of termination of the Head Lease.  The issuance of this Notice could not assist the Applicant either, as the Notice was issued in June 2003, well after the relevant date.  Also, the issuance of such a notice could be motivated by tactical consideration, and does not necessarily imply recognition of the validity of the Head Lease.

47. In the circumstances, we do not accept that the Applicant has established any tenancy by estoppel or by conduct vis-à-vis the Applicant and the Tong or Mass Ocean.

Failure to register the Head Lease and the sub-leases

48. The Applicant relies on paragraph 121 of Sihombing and Wilkinson: Hong Kong Conveyancing Law and Practice, as well as the case of Blamires v. Bradford Corporation [1964] 1 ChD 585, to support its contention that the system of registration is one of registration of deeds rather than of title, and non-registration will not affect title.  The Applicant submits that in the Blamires case, despite that the plaintiff’s interest was unregistered, his entitlement to compensation was not impaired.

49. We do not accept the Applicant’s contention in this regard.  Section 3(2) of the Land Registration Ordinance makes it very clear that non-registration will make the instrument “absolutely null and void to all intents and purposes” against any subsequent bona fide purchaser for valuable consideration.  The application of this principle is well illustrated by the cases of Hollington Brothers, Ltd. v. Rhodes [1951] 2 T.L.R. 691 and Markfaith Investment Ltd. v. Chiap Hua Flashlights Ltd. [1991] 2 A.C. 43.

50. There is absolutely no ground to suggest that the Applicant’s title, if any, will not be affected by non-registration of the Head Lease and the sub-leases.  It is not disputed that Mass Ocean was a bona fide purchaser for valuable consideration and Mass Ocean had registered its interest before the resumption date.  Section 3(2) would clearly make the Applicant’s interest, if any, absolutely null and void to all intents and purposes against Mass Ocean.

51. The Blamires case is decided on a different basis.  It was decided there that under the express term of the Housing Act, 1957, the local authority, having purchased the house, was bound to pay to the plaintiff compensation for his agreement for a lease as an interest distinct from that in the land itself.  Thus, that case is totally different from our present situation.

52. In the premises, as a result of non-registration, we find that the Applicant did not have any interest in the Site that would entitle it to claim compensation.

Conclusion

53. By reason of the matters aforesaid, we find the preliminary issue in favour of the Respondent, i.e. the Applicant has failed to establish that it had any estate or interest in the Site.  By the same token, the Applicant has also failed to establish that it had any compensatable interest that falls within the definition in section 2 of the Ordinance.  Thus, the Applicant is not entitled to make any claim under item 1 or item 2(b) of Part II of the Schedule to the Ordinance, and the application ought to be dismissed.

54. We therefore order as follows:-

(1)   The Applicant’s application herein be dismissed; and

(2)   Costs Order Nisi: The Applicant do pay the Respondent’s costs of the application, including any costs reserved and with certificate for counsel, to be taxed on High Court Scale if not agreed.  If there is no further application for costs within the next 14 days, the costs order nisi shall become absolute.