KENWELL LTD v. LIU KIN KWAN GARY AND ANOTHER

CAMP 78/2025, [2026] HKCA 64

On Appeal from [2025] HKDC 528

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 78 OF 2025

(ON AN INTENDED APPEAL FROM DCCJ NO. 3616/2023)

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J U D G M E N T

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Hon Ng J (giving the Judgment of the Court):

A. Introduction

1.  There are before the Court two applications taken out by the Defendants by a summons filed on 14 April 2025 (“the Summons”):

(1)  Renew application for leave to appeal against the judgment of HH Judge Harold Leong (“the Judge”) made on 4 March 2024 (“the Judgment”)[1], whereby the Judge granted summary judgment in favour of the Plaintiff’s claims for possession and damages for trespass against the Defendants in respect of a premises (“the Premises”) being part of Lot 764RP in DD 99 (“the Lot”) (“Leave to Appeal Application”);

(2)  Leave to rely on additional documents for the purpose of their appeal (“New Evidence Application”).

2.  Having considered the papers and the submissions filed by the parties, we consider it appropriate to deal with both applications on paper without an oral hearing pursuant to Order 59, rule 2A(5)  of the Rules of the High Court (Cap. 4A)(“RHC”).

B.  Background

3.  The factual background of this case has been set out in detail at [7] to [23] of the Decision. For present purposes, we will highlight the material facts as taken from the Decision.

4.  At all material times, the Man Shui Tong Wui (文水塘會)  (“the Wui”) was the registered owner of the Lot.

5.  In 1986, the Wui granted a tenancy over the Lot to 4 tenants, including Man Ching Ip (“MCI”), who was the late father of Man Whi Chung (“MWC”), for a term of 10 years until 30^th day of the first month of the lunar calendar in 1996 (“the 1986 Tenancy”). This tenancy expired around February 1996.

6.  In 1994, MCI passed away. MWC (as the administrator of the estate of MCI) and/or Fortune Nine (Hong Kong) Limited (“Fortune”) apparently took over as the claimed tenants of the Lot. MWC was the director and shareholder of Fortune. It is not disputed that MWC and/or Fortune have been in occupation of the Lot since then.

7.  It was the Defendants’ case that they have been the “sub-tenants” of the Premises since 2004 under a sub-tenancy granted by Fortune. Since then, the Defendants claimed to have been paying rent to Fortune.

8.  In support of the Defendants’ case, MWC claimed that the 1986 Tenancy was later novated in 1988 to account for the change of use of the land from fish pond to container storage and this “novated” tenancy had been extended on the same terms (except rent) in March 1996. MWC claimed that the registered managers of the Wui (“the Managers”) orally agreed to renew the tenancy agreement in mid-January 1996 but later went back on their words and refused to grant the tenancy in March 1996. Due to the protest of members of the Wui, the Managers “acceded to the wishes of the majority of the members” and MWC continued to be the tenant of the Lot, paying an annual rent of HK$3 million. Instead of paying rent to the Wui, MWC paid rent to the members according to the share entitlements of each member. MWC claimed that this way of distribution was approved by the Managers.

9.  The Managers however denied that there had been any tenancy agreement between the Wui and MWC and/or Forture at all times. The Managers denied any oral agreement to extend the 1986 Tenancy in mid-January 1996 or any such “acceding to the wishes of the members” in March 1996. The Managers also denied that MWC and/or Fortune had paid any rent to the Wui.

10.  On 23 June 2023, by a written tenancy, the Wui granted a tenancy over the Lot to the Plaintiff, for a term of 3 years and 2 months with option to renew (“the 2023 Tenancy”). The 2023 Tenancy had been registered with the Land Registry.

11.  On 30 June 2023, the Wui gave notice to all occupiers of its land and asserted that their occupations were unauthorised. The Plaintiff thus commenced the present proceedings in August 2023 for recovery of the Premises and trespass against the Defendants. On 26 September 2023 and 23 November 2023 respectively, the Plaintiff took out two related applications under Order 14 of the RHC against the Defendants (“the Summary Judgment Applications”).

12.  On the other hand, on 26 September 2023, the Defendants applied for an injunction to restrain the Plaintiff from interfering with their reasonable and lawful enjoyment of the Premises etc (“Injunction Application”).

C.  The Judge’s Decisions

13.  The Judge heard the Summary Judgment Applications and the Injunction Application on 31 January 2024 (“the Order 14 Hearing”). By the Judgment, the Judge granted summary judgment to the Plaintiff and dismissed the Defendants’ application.

14.  In the Decision, the Judge identified the crux of the dispute concerned the so-called “head tenancy” i.e. whether MWC had renewed the 1986 Tenancy after it expired in 1996 and to what extent in law the tenancy might be renewed under the circumstances as claimed. Further, the Defendants’ defence was only based on the assertion they were sub-tenants by virtue of a tenancy agreement in 2004 with Fortune. Thus, the defence was based entirely upon the lawfulness of the head tenancy of MWC and/or Fortune with the Wui in 1996.

15.  After considering the evidence and submissions by the parties, the Judge found:

(1)  The evidence from contemporaneous documents contradicted with the Defendants’ case that MWC had renewed the 1986 Tenancy in March 1996 for another 10 years.[2]

(2)  Even if the Court were to ignore (1) and even if MWC’s evidence was accepted in its entirety, there was no dispute that this “renewed” or “extended” tenancy was for 10 years but not in writing. Indeed, as a matter of law, such a tenancy must be made by deed in order to create a legal estate. Thus, at best, this alleged renewed tenancy was only an “interest at will”.

(3)  Thus on the Defendants’ case, this “tenancy at will” would have ended upon the expiry of 1 year from its creation ie around March 1997.

(4)  Anyway, the “tenancy at will” would have ended on 23 June 2023 when the Wui granted the 2023 Tenancy to the Plaintiff.[3]

(5)  Any alleged renewed tenancy agreed in 1996 on the same term even if made in the form of a deed (which it was not) would have expired in 2006.[4]

(6)  There were no triable factual issues since in reaching his conclusion, the Judge had assumed all factual disputes were settled in favour of the Defendants.[5]

16.  Dissatisfied with the Judgment and the Decision, the Defendants then applied for leave to appeal against the Judgment as well as leave to adduce further documents on appeal. After consideration of the parties’ respective written and oral submissions[6], both applications were dismissed by the Judge on 31 March 2025. The reasons for the dismissal were set out in his written decision ([2025] HKDC 528) (“the Leave Decision”), which will not be repeated here.

D.  Discussion

D1.  Legal Principles

17.  Under section 63A(2) of the District Court Ordinance (Cap. 336), leave to appeal shall not be granted unless the Court hearing the application is satisfied that the intended appeal has a reasonable prospect of success, or that there is some other reason in the interests of justice that the matter should be heard.

18.  Leave to appeal is not lightly granted. To meet the threshold of reasonable prospect of success, it must be shown that the prospect of succeeding is more than fanciful, without having to be probable: SMSE v KL [2009] 4 HKLRD 125 at [17]. In other words, the applicant is required to show more than just an arguable case, although he does not have to demonstrate that the appeal will probably succeed: Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515 at [19].

19.  An application to adduce further evidence on appeal cannot be entertained until leave to appeal has been granted. What the court can do in an application for leave to appeal is to consider the new evidence proposed to be adduced on a de bene esse basis, if it can be shown it is reasonably arguable that leave to admit such evidence would be granted under the criteria in Ladd v Marshall [1954] 1 WLR 1489 at p.1491: Securities and Futures Commission v Leung Anita Fung Yee Maria & Others [2025] HKCA 444 at [29]. If these criteria are not satisfied, such new evidence should be disregarded for the purpose of the application for leave to appeal: Man Tin Fook v 梁根林 [2019] HKCA 846 at footnote 1 of para 2.

20.  The conditions under Ladd v Marshall for determining whether new evidence should be admitted for an appeal are:

(1)  The evidence could not have been obtained with reasonable diligence for use at the trial (“Condition 1”);

(2)  The evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive (“Condition 2”); and

(3)  The evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible (“Condition 3”).

21.  Even if the three conditions in Ladd v Marshall are not satisfied, the Court of Appeal retains a residual discretion to admit new evidence in exceptional circumstances where the “interests of justice” so require: Solicitor (529/2018) v Law Society of Hong Kong (No. 2) [2021] 5 HKLRD 445 at [19]. However, in practice, such discretion is unlikely to be exercised in private law matters: supra at [20].

22.  In Bank of New York Mellon v Sun Jiangrong [2016] 1 HKC 137 at [25] to [26], Poon JA (as he then was) rejected the contention that the requirement of reasonable diligence will automatically be relaxed merely because it is an appeal from a summary judgment or proceedings not amounting to a trial. The degree of reasonable diligence which the court expects the defendant to have exercised “must be assessed against the overall circumstances of the case” and “the court will take into account all relevant factors, such as the time available to the defendant to gather the evidence, the nature of the evidence, the difficulty encountered in obtaining the evidence, the effort the defendant had used in gathering the evidence”: Sky Joy Investment Ltd v Zheng Dunmu & Another [2018] HKCA 259 at [13].

23.  Bearing these principles in mind, we will now consider each application in turn.

D2.  The New Evidence Application

24.  Essentially, the Defendants sought leave to adduce the 1^st Category Documents as those considered by the Judge when he dismissed the application for fresh evidence in the Leave Decision (“the New Documents”). [7] There were 17 categories of them. As summarised by the Judge, they are:

i.  Payments of rent by MWC / Fortune to various alleged members of the Wui;

ii.  Payments by MWC / Fortune to various parties (e.g. Inland Revenue Department for Property Tax, surveyor’s fees, legal fees etc.) on behalf of the Wui up to March 2023;

iii.  Minutes of meetings with the IRD which showed that the managers of the Wui recognised MWC as a tenant (but also confirmed that there was no signed tenancy agreement at the relevant time).

25.  The Defendants submitted that these documents were not previously available to them and they did not know these documents existed. The documents were only disclosed by MWC on 28 June 2024, after judgment had been entered and the Defendants informed MWC that they would sue him for damages suffered. [8] The Defendants also claimed MWC told them these documents were separately stored in different parts of MWC/Fortune’s warehouses, which necessitated him to spend time to instruct his staff to locate all of them. The Defendants submitted that they directly contradicted the Plaintiff’s pleaded case and affirmations and showed repeated conduct consistent with an ongoing tenancy. [9] They were relevant, credible, and would likely have influenced the outcome had they been available at first instance before the Judge.

26.  We are not persuaded the Defendants can satisfy all the  Conditions in Ladd v Marshall.

27.  First, as shown in the 3^rd Affirmation of Liu Kin Kwan Gary at para 15 for the Defendants and in the Summons itself, there can be no dispute that these documents were in existence prior to the Order 14 Hearing. Indeed, most of them existed well before these proceedings were commenced in 2023, the earliest one being dated 2005. As noted by the Judge at [20] of the Leave Decision, whilst the Defendants, as alleged sub-tenants, might not know exactly what documents might exist between the head-tenant and landlord that supported such a relationship, it must be obvious to them or at least their legal advisers that the crux of this action was the existence and nature of such a relationship. Yet, the Defendants did not provide any evidence (in the 3^rd Affirmation of Liu Kin Kwan Gary) of any attempts to obtain such evidence before the Order 14 Hearing nor provide any reasons for their failure to make such attempts.

28.  Accordingly, we are of the view that the Defendants plainly fail to demonstrate how and why these documents could not have been obtained with reasonable diligence for us at the Order 14 Hearing. They plainly fail to satisfy Condition 1.

29.  Second, we agree with the Judge that these documents also fail to satisfy Condition 2.

30.  The documents cannot dispute the findings in the Decision that there was no tenancy agreement in writing or by deed when the 1986 Tenancy expired around February 1996 (in fact they affirmed this) so that in law there would only be a tenancy at will. They only show at most that the conduct of MWC, Fortune, the Wui and the members of the Wui and whatever arrangements they might have agreed to, in terms of payment of rent or other expenses etc, was pursuant to this tenancy at will, which would at the latest have ended on 23 June 2023 “when the landowner doing any act inconsistent with the continuation of his relation with the tenant-at-will,” i.e. when the Wui granted the 2023 Tenancy to the Plaintiff.

31.  Accordingly, given that the Plaintiff has only sought possession of the Premises and damages from 30 June 2023 in the Amended Statement of Claim, these documents do not have any important influence on the result of the case.

32.  As neither Condition 1 nor 2 is met, it is unnecessary to express our views on Condition 3.

33.  For the above reasons, we dismiss the New Evidence Application. We shall disregard the New Documents for the purpose of the Leave to Appeal Application and consider the merits of the intended grounds of appeal in this light.

D3.  Leave to Appeal Application

34.  In the Summons, the Defendants advanced the following intended grounds of appeal (respectively referred to as “Ground 1” to “Ground 4”):

(1)  The Judge erred in law and/or fact in concluding that the defence is based entirely upon the lawfulness of the head tenancy of MWC and/or Fortune but ignored the issues of acquiescence and estoppel which were also raised by the Defendants;[10]

(2)  The Judge wrongly treated the absence of a written tenancy as fatal to the Defendants’ case but failed to consider the doctrine of part performance or that the Head Tenancy had been held over;[11]

(3)  The Judge erred in refusing to stay the case pending the resolution of HCA 1207/2023 since lawfulness of the Head Tenancy is a central and contested issue in HCA 1207/2023 such that the present action should be transferred to the High Court and consolidated with it;[12] and

(4)  The Judge erred in refusing unconditional leave to defend.[13]

D3.1.  Ground 1

35.  Under this ground, the Defendants assert in their Written Statement that at the instructions of the Managers from 1996 to 2023, MWC paid rent directly to members of the Wui in accordance with their respective shares entitlement. MWC/Fortune also paid property tax, legal fees, and surveying costs for the land.[14] . They also handled the Wui’s affairs, including negotiations with the Inland Revenue Department over tax on the rental income paid by MWC/Fortune. These acts were done at the Managers’ request to ease their administrative burden, in return for continued renewal of the tenancy. The conduct of the Managers including directing MWC to pay rent through distribution to Wui’s members over two decades showed that a tenancy existed.[15]  The Defendants relied on that and acted to their detriment, by remaining in possession and incurring substantial expenditure on improvements to the Premises.[16]  The rental receipts and acknowledgment of payments by the Managers expressly confirmed MWC/Fortune as Wui’s tenant. In reliance on the representations of the Managers that the 1986 Tenancy would be regularly and continuously renewed, MWC/Fortune acted as tenant to their detriment.

36.  As a start, in light of our rejection of the New Evidence Application, the main evidential basis of this ground largely falls away.

37.  According to the Leave Decision at paragraphs 29 to 31, what the Defendants relied on (or not relied on) were these:

“29. The argument put forth by the defendants only goes so far as the arrangements of MWC paying rents to the members of the Wui including the two managers and also of various payments MWC made on behalf of the Wui (see paragraph 11 above[17]). Further, MWC and the defendants were ‘allowed’ to do various renovations and incurring expenses.

30. It is important to note that there is no dispute that there was no written tenancy agreement after the 1986 Tenancy. MWC’s evidence was that the 1986 Tenancy (which was for a term of 10 years) was extended on the same term except the rent upon the managers acceding to ‘the wish of the majority’ of the members, and the managers also approved of the arrangement of direct payment of rent to the members by MWC.

31. Thus, as stated in the Decision, taking the defendants’ case to the highest (relying on the concept of tenancy by estoppel, acquiescence or otherwise), this extension would be for another 10 years, i.e. until 2006. I cannot see how the argument of tenancy by estoppel is applicable for the period beyond this date:

a. It is not the case of MWC that there were any representations from the managers that the 1986 Tenancy was to be extended indefinitely (instead of being extended ‘on the same term’) in 1996.

b. MWC also did not give evidence there were further representations from the managers or the Wui regarding further extensions of the 1986 Tenancy beyond 2006 and thus any reliance by MWC upon such representations to his detriment beyond 2006.”

38.  We agree with the Judge’s analysis and are of the view that Ground 1 is wholly devoid of merits and has no reasonable prospect of success.

D3.2.  Ground 2

39.  Under this ground, the Defendants submit in their Written Statement that the Judge wrongly treated the absence of a written tenancy as conclusive. The Judge erred in failing to apply the doctrine of part performance and ignored the relevance of constructive trust. The Defendants submit there was strong evidence of part performance in that MWC/Fortune paid rent in the manner as directed by the Managers and also paid property tax and other expenses at the Wui’s request, which they were assured would be set off against rent in writing and that these acts were clearly referable to the tenancy.[18] The Defendants also argue that the Judge failed to consider sufficiently that the tenancy had been held over, and that it is arguable that the 1986 Tenancy was renewed every 10 years, and remained valid until 2026, as consistent with Covered Markets Ltd v Green [1947] 2 All ER 140.[19] 

40.  We disagree.

41.  At the outset, similar to Ground 1, in light of our rejection of the New Evidence Application, the main evidential basis of this ground largely falls away. Further, the defence of part performance, the existence of constructive trust and that the 1986 Tenancy had been renewed every 10 years and remained valid until 2026 should have been pleaded as they are not pure points of law but also raised issues of facts and those facts must be pleaded.

42.  Importantly, there is no suggestion in the Draft Notice of Appeal attached to the Summons that those issues under Ground 2 had ever been raised by the Defendants at the Order 14 Hearing. It is trite that the Court of Appeal will almost invariably expect an explanation to be given why new points raised on appeal (whether on facts or law) were not raised in the court below, as this is an important facet of the Court’s discretion: see Chan Chi Wai & Another v Chan Sau Wah & Others [2019] 3 HKLRD 330 at [33] and Cathay Pacific Airways Flight Attendants Union v Director-General of Civil Aviation [2007] 2 HKLRD 668 at [45]. Yet, no reason was given by the Defendants as to why those arguments are only now raised for the first time at this stage of the proceedings.

43.  Second, as to their arguments that the tenancy had been held over, the Judge fully dealt with those arguments at [32] to [36] of the Leave Decision:

“32. Ms. Lau also referred to Covered Markets Ltd. v Green [1947] 2 All E.R. 140 and argued that (paragraph 52 of the Skeleton Submission for the Defendants):

‘…it was held that the tenancy may held [sic] over for the same term, i.e. 10 years. It was at least an issue as to whether the head tenancy would only expire in 2026.’

33. In the Covered Market case, the term of tenancy had expired but the tenant had been allowed to remain in possession and to continue to pay the same rent. The landlord served a notice to quit some 4 to 5 years after the expiring of the lease. It was held that:

‘…the tenant for 7 years carried on his business under his lease and has been allowed to stay on for several years after the termination of that period…the proper inference from the circumstances is that there was a yearly tenancy on the termination of the 7 years…’

34. I cannot see how this case can help the defendants: it was not held that as long as the tenant was allowed to stay on and pay the same rent (and incur any expenses on the land), a renewal of lease for another 7 years would be inferred. Instead, it was held that this inferred only a yearly tenancy. The defendants’ case goes far beyond the ambit of this: their claim is that MWC, being allowed to stay on and to pay the same rent after the claimed renewed 1986 Tenancy ran out in 2006, could infer a second renewal of 10 years’ term until 2016, and after that yet a third renewal until 2026.

35. Of course, as a matter of law, any tenancy for a term exceeding 3 years (inclusive of renewal) would require the support of a deed to be enforceable. The defendants’ case was that the 1986 Tenancy was extended, without a deed, all the way to 2016. This claimed ‘renewed’ tenancy can only be, in law, an ‘interest at will’ (paragraphs 28 and 29 of the Decision). This legal position is not challenged in the appeal.

36. As such, I cannot see how the defendants has a ‘reasonable prospect of success’ of showing ‘a real or bona fides defence’ under this ground.’ (Emphasis added)

44.  We agree with the Judge’s observations.

45.  For the above reasons, we are of the view that Ground 2 has no reasonable prospect of success.

D3.3.  Ground 3

46.  The simple answer to Ground 3 is that the Judge’s decision is quintessentially a case management decision which the Court of Appeal rarely interferes with. Since the Judge was of the view that the Summary Judgment Applications could be resolved by him, which he did, there was no reason why he should postpone the resolution of the applications and transfer the present proceedings to the High Court.

47.  Ground 3 has no reasonable prospect of success.

D3.4.  Ground 4

48.  Given our analysis above, and given the Judge rightly found that the Defendants had failed to raise any meritorious defence, it must be open for the Judge to grant summary judgment in favour of the Plaintiff instead of giving the Defendants unconditional leave to defend. Ground 4 is dismissed.

E.  Disposition

49.  Since the Defendants’ intended appeal does not have any reasonable prospect of success and there are no other reason in the interests of justice why the appeal should be heard, we dismiss the Summons with costs to the Plaintiff, to be summarily assessed.

50.  The Plaintiff shall have leave to file and serve a statement of costs within 7 days of this Judgment. The Defendants shall have leave to file and serve a statement of objections to the Plaintiff’s costs statement within 7 days thereafter. Costs will be summarily assessed on paper.

51.  Lastly, since the applications in the Summons is totally without merits, we make an order that no party may request the present determination to be reconsidered at an oral hearing inter partes, pursuant to Order 59, rule 2A(8) of the RHC.