Wong Wan Leung and Others v. The Secretary of Transport

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Lands Tribunal Application No. LDMR 33 of 1998

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J U D G M E N T

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The Application

1. This is an application for compensation under Section 29(7) of the Roads (Works, Use and Compensation) Ordinance Cap. 370. (Cap.370)

2. The Applicants are the managers of the Wong Wai Tsak Tong. (The Tong)

3. The property in question is a portion of Lot Number 241 in Demarcation District Cheung Chau, New Territories. (The Lot)

4. The Tong was the Government lessee of the Lot under a Block Crown Lease dated 18th March 1905.

5. The portion of the Lot was resumed under Section 13(1) of the Cap.370, by a Gazette Notice Number 2608 dated 29th May 1997, effective on midnight of 26th June 1997.

6. Under Cap.370, compensation is payable to the persons who may make claims. These persons are specified in Column 3 of Part II of the Schedule to Cap.370 as follows:

"Any person who would be entitled to claim compensation for land resumed under the Lands Resumption Ordinance (Cap.124) as if the land had been resumed thereunder."

7. The quantum of compensation is not in dispute. The amount is agreed to be $3,470,865.

8. There are no competing claimants. Only the title of the Tong is in dispute.

The Opposition

9. The Secretary for Transport opposed the application, on the grounds that the Applicants are not persons entitled to compensation, under Column 1 of Part II of the Schedule to Cap.370. The Secretary for Transport relied on the fact that there was a sub-lease, which had not been forfeited prior to the Gazette Notice. The Secretary for Transport also relied on the effect of the Block Crown Lease (Cheung Chau) Ordinance Cap.488 (Cap.488), which granted a Government lease to the sub-lessee as from 8th September 1995, the commencement date of that Ordinance. It was the Secretary's case that by Cap.488, the Tong's title in the Lot was extinguished as from 8th September 1995.

10. On or about 9th April 1914, the Tong sublet the Lot to Cheung Chau Kai Fong(CCFK), an unincorporated association. The sub-lessee was to pay an annual rent of $49, for a term of 5 years, from 7th November 1919, renewable on the same terms, until the termination of the Government lease. The sub-lease was registered in the Land Registry on 18th June 1920, under Memorial Number 17898.

11. On 11th June 1993, the Tong received a letter from the District Lands Officer Islands, complaining about a tree that might become dangerous. The District Lands Officer demanded that the tree should be trimmed.

12. On 1st July 1993, the Tong was advised by the Buildings and Lands Department to repair the buildings on the Lot.

13. The Tong, under Section 58(1) of the Conveyancing and Property Ordinance Cap.219, notified the manager of CCKF, Mr. Chu Pak Sang, to rectify the defects. There was no response. The Tong trimmed the branches of the tree at its own expense.

14. On 20th September 1993, the Tong issued a writ under High Court Action Number A8401 of 1993(The High Court action), against the manager of the CCKF. The Tong sought to forfeit the sub-lease due to the breach of covenant to repair. The writ was registered in the New Territories Lands Registry under Memorial Number 222241. The Tong sought a declaration order in its action against CCKF, that the sub-lease had been forfeited since 11th August 1993, or from such date as the Court thought fit, or from that date that the writ was issued.

15. On 20th October 1993, the Buildings and Lands Department wrote to the Tong, stating that most of the defects had not been remedied.

16. On 20th November 1993, CCKF filed a defence based on adverse possession, perpetual lease and that there was no breach of the covenant to repair.

17. On 8th September 1995, the Block Crown Lease (Cheung Chau) Ordinance Cap.488 (Cap.488) commenced. As from that date, a sub-lessee of the Tong is deemed to hold land under a sub-lease directly from the Government, as Government lessee, under Section 4(1) of Cap.488.

18. In reply to the Tong's request on 27th December 1996, for further and better particulars, the solicitors acting for CCKF informed the Tong that the manager of CCKF had died. The solicitors ceased to act for CCKF on 17th April 1997. Thereafter, no one took up the defence for CCKF.

19. The Tong obtained an order for the action against CCKF to be continued in the name: "John Doe (on the demise of Chu Pak Sang) as a member of Cheung Chau Kai Fong". The application was made on 8th April 1997, and the order obtained on 17th July 1997. In the meantime, the Gazette Notice under Cap.370 was issued on 29th May 1997. At midnight on 26th June 1997, the Government resumed the Lot.

20. The Tong has not obtained the declaration order sought under the High Court action A8401 of 1993.

21. All of the foregoing are not in dispute and are found to be the facts of the case.

The Applicants' case

The argument on legal issues:

Section 28 of the New Territories Ordinance (1964 edition) implied covenants into leases under Form E in the Schedule. The sub-lease was under From E. The sub-lease was forfeited by acts equivalent to re-entry, that is, the issue and service of the High Court Action writ.

The Lot was resumed under Cap.370, before the High Court action was concluded. The Tong on ceasing to be the owner could not proceed further with the action.

The Tong relied on the strength of the Tong's claim for forfeiture, and the possibility that CCKF was no longer in existence to say that had the action proceeded, the Tong would have been granted the declaration of forfeiture sought.

The Tong contended that Cap.488 did not apply to the lot. Even if it did so apply, it should not prevent the Tong from claiming the compensation under Cap.370.

The Tong considered that all the grounds of CCKF defence could not be sustained. There could not be adverse possession, as CCKF had paid rent in 1983 and 1984. The Tong had records of such receipts for rent. The claim for perpetual lease was confused and not substantiated. CCKF had in fact, breached the implied covenant to repair.

It was conceded that the general legal principle was that one had to sue an action to judgment to determine a lease, and the date of determination would be dated back to the date of the issue of writ. Had the Tong obtained judgment, the date of the determination of the lease would have been before the resumption date on 26th June 1997, under Cap.370. The Tong was prevented from further proceeding in the High Court action by Cap.488, which extinguished its interest as the Crown lessee, from 8th September 1995.

It is the Tong's case that it was in the position to forfeit and terminate the sub-lease. The Court in the case of Suen Sun-yau v. Wong Wai-kwan and Another (sued as manager of Wong Wai Tsak Tong) [1988] 2HKLR 71 accepted that Section 28 of the New Territories Ordinance implied various covenants into the sub-leases between the Tong and its sub-lessees. It further accepted that, although the New Territories Ordinance was repealed by the Conveyancing and Property Ordinance Cap.219 in 1984, the same covenants would be implied in any renewal of the leases for a further five years, since the renewal was to be on the same terms as the last five year lease. The Applicant contended that there was an express obligation to repair on the sub-lessee's part. The sub-lessee should keep the property in good order and condition. It was a continuing obligation throughout the term of the lease. Where the buildings were in a state of disrepair, causing danger to passers-by, then a condition that the sub-lessee should keep the building safe must be implied.

There was a breach of the covenant or condition, under Section 28 of the New Territories Ordinance. The right to forfeit arose.

Forfeiture can be effected by physical re-entry or legal proceedings.

Physical re-entry would terminate the lease immediately.

The issue and service of a writ, with an unequivocal claim for possession, establish the intention to determine the lease. There had been authorities to say that the service of the writ determined a lease, though the present understanding of the law is that judgment should be obtained first. ( Billson and others v. Residential Apartments Ltd. [1992] 2 WLR 15; Meadows v. Clerical Medical and General Life Assurance Society [1981] 1 Ch 70 )

The reasoning behind the general proposition, as propounded in Ivory Gate Ltd. v. Spetale and others [1998] 2 EGLR 43, was that since there were statutory relief against forfeiture, there could be a new lease or a continuation of the existing lease if relief was successfully sought. The position would be settled once judgment was obtained. (Discroll v. Church Commissioners for England [1957] 1 QBD 330)

The High Court action had proceeded beyond the service of the writ. Pleadings had been filed and amended. Interlocutory orders were sought. The Tong was prevented from bringing the case to a conclusion by the death of the manager of CCKF, after which no one took up the defence for CCKF. The resumption of the Lot under Cap.370 and the operation of law under Cap.488 deprived the Tong of its interest in the Lot.

The Tong submits that, despite the general legal position, the Tong should be entitled to say that the sub-lease had been terminated.

CCFK did not plead that the notice required under Section 58 of the Conveyancing and Property Ordinance was defective. It did not ask for relief against forfeiture. It did nothing further after filing a defence to the High Court action. It did not apply for compensation under Cap.370.

CCKF, being an unincorporated association, was not a legal person able to hold property. It had to do so through trustees. Since the death of the manager, there was no evidence that anyone else was appointed to defend the High Court case. The Tong contended that CCKF is no longer in existence.

The Tong submitted that the breach of the covenant to repair was a breach of the sub-lease. That it was not specified in the High Court action whether the breach was express or implied was not important. The term was implied by operation of law. Because of the use of the leased area as a market place, the obligation to repair must be higher than the minimal requirement for residential premises, as propounded in the case of Warren v. Keen [1953] 2 All ER 1118.

Alternatively, the Tong said that the term was not just to keep the Lot in a tenant-like manner, but not to commit waste. This obligation was independent of the contract.

One of the defences put up by CCKF was adverse possession. This was a denial of the Tong's title, which entitled the Tong to forfeit the sub-lease. It could not be eradicated by subsequent amendment. If the Tong amended its pleadings, it would have been in a position to obtain forfeiture, dating back to the date of the service of the writ.

CCKF had no hope of reviving its case in the High Court action.

The chance of CCKF obtaining a restoration of the lease is almost non-existent.

That CCKF filed a defence in the High Court action should not preclude the Tong for being entitled to compensation under Cap.370. If CCKF existed, it could also compete with the Tong for compensation.

Under Section 9 of Cap.488, where there was a 5 year sub-lease renewed beyond 9th November 1994, with an agreed rent, the Tong is deemed to have granted a new sub-lease to the sub-lessee on the same terms for the residue of the terms. After the expiration of the current terms, the sub-lessee becomes a direct sub-lessee of the Government, until 30th June 2047: Section 5(2) Cap.488.

There was no evidence that there was any person capable of holding the sub-lease of the Lot from the Government.

The Lot does not fall within Sections 4(1) and 5(1), as there were no sub-lessee as defined in Section 2(1) of Cap.488 to receive the sub-lease.

There is no provision under Cap.488 for a situation where the sub-lessee is non-existent.

The title should revert to the Tong.

The Tong was entitled to hold the Lot under Section 6(1) of Cap.488. The benefit would revert to the Tong.

On this basis, the Tong would be the person entitled to be registered as "owner", under the Land Resumption Ordinance Cap.124.

The Tong's rights to claim under Cap.370 and Cap.488 would be preserved.

The Tong should be entitled to compensation under Cap.370.

The Respondent's case

The Tong was the grantee of a Block Crown Lease of Lot 241. The Lot was sub-let to CCKF in 1920, for a term of 5 years from 7th November 1919, renewable on the same terms until the termination of the Crown Lease. Although not mentioned by the Tong, the New Territories Leases (Extension) Ordinance Cap.150 extended the lease to 30th June 2047.

The Tong started an action in the High Court to terminate the sub-lease. (High Court Action A8401 of 1993) The proceedings had not been, and now could not be concluded, because of administrative and legislative intervention. (Resumption under Cap.370 and the commencement of Cap.488)

The argument on legal issues:

The basis of compensation and persons entitled to compensation under Cap.370, are the same as if the claim had been made under the Lands Resumption Ordinance Cap.124. (Section 27 and item 1 of Part II to the Schedule Cap.370)

Under Sections 2, 6 & 8 of Cap.124, former owners and persons with an estate or interest in the land can claim compensation.

The Respondent contended that the sub-lease had not been terminated by the commencement of the High Court action.

The Respondent agreed with the Tong's general legal proposition on forfeiture.

The Respondent contended that:

Breach of a covenant in the Block Crown Lease did not invoke a right of re-entry.

There was no evidence that an express term for keeping the Lot in good and tenantable repair and condition was incorporated into the sub-lease.

Such a term was not pleaded in the High Court action.

The Tong was proceeding under Section 58(1) of the Conveyancing and Property Ordinance Cap. 219. It is actually relying on Section 28 of the New Territories Ordinance (1964 edition).

It would be a matter of degree as to whether the defects would constitute a breach. (Warren v. Keen [1953] 2 All ER 1118)

The letters from the Government authorities did not constitute notices of re-entry.

The sub-lease would not be terminated until judgment was obtained for possession.

(Discroll v. Church Commissioners for England [1975] 1 QBD 330

Borzak v. Ahmed [1965] 2 QBD 320

City of Westminster Assurance Company v. Ainis (1975) 29 P. & C.R. 469)

In the High Court action, the Tong had left the forfeiture date to be decided by the Court, to be either: since 11th August 1993; as the Court thinks fit; or since the issuance of the writ.

Whether the sub-lease had been so terminated or not, Cap.488 would in effect disallow the Tong's claim.

On termination of the sub-lease, the Block Crown Lease would be the only interest remaining in the Lot.

However, the Block Crown Lease was terminated under Section 3 of Cap.488, on its operation date of 8th September 1995.

Under Section 4(1) and 5(1) all sub-leases, except special sub-leases under Section 9, were deemed to be Government sub-leases. All such sub-lessees became Government sub-lessees.

The Tong has no further interest in the Lot.

The Tong has no hope of resurrecting its High Court action against CCKF, as the Tong is no longer the Crown lessee.

Under Section 10(3) of Cap.488, the Tong is barred from claiming compensation under Cap.370.

Decision

22. Under Section 26 of Cap.370, the only right to claim compensation for loss caused by the Government exercising its rights under Cap.370 is contained in that Ordinance. There cannot be claims under any other Ordinance. There can be no action for damages.

23. The capacity of the person claiming compensation must be considered, as at the time of the resumption. A person without the legal capacity to do so could raise no claim.

24. This is an application under Section 13 of the Roads (Works, Use and Compensation) Ordinance Cap.370.

25. Section 27 provides for compensation. The resumption is under item 1 of the first column of Part II of the Schedule. A person described in the third column of Part II of the Schedule has the right to recover compensation to the extent suffered or incurred by him. This is a 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."

26. Under the Lands Resumption Ordinance section 2, the terms "former owner" and "owner" are defined.

"former owner" means, in relation to land resumed by the government, the person who was the owner of the land immediately before the land reverted to the Government under section 5.

"owner" means the person registered or entitled to be registered in the Land Registry in respect of any land sought to be resumed, or if such person is absent from Hong Kong, or cannot be found, or is bankrupt or dead, his agent or representative in Hong Kong.

27. Section 5 provided for the reversion of ownership to the Government on the expiration of one month from the date of a Gazette notice under Section 4.

28. Immediately before the Lot reverted to the Government, the Tong was no longer the owner of the land. It was not a person registered or entitled to be registered in the Land Registry in respect of the Lot.

29. By virtue of the Block Crown Lease (Cheung Chau) Ordinance Cap.488, which commenced on 8th September 1995, the Block Crown Lease of Cheung Chau granted to the Tong was terminated. Sub-lessees under the Block Crown Lease hold their sub-leases directly from the Government.

30. The Tong had taken out a High Court action A8401 of 1993 against its sub-lessee, it sought to forfeit the sub-lease for breach of a covenant to repair. If the action had been pursued to judgement in favour of the Tong, the forfeiture would date back to the date of issue of the writ, in 1993. As from that time, the title of the sub-lease would have reverted to the Tong. In that case, and without the intervention of Cap.488 in 1995, the Tong would be within the definition of persons entitled to claim compensation under Cap.370 in 1997.

31. The Tong contended that despite the general legal position, the Tribunal should find that the Tong had effectively forfeited the sub-lease under High Court action A8401 of 1993.

32. The Tribunal is not in a position to accept the Tong's proposition, which is contrary to the general legal position. The Tribunal cannot usurp the function of the High Court in that action. Until judgment is obtained, there is no effective forfeiture of the sub-lease. Furthermore, Cap.488 had extinguished the Tong's interest under the Block Crown Lease. As at the date of the resumption under Cap.370, the Tong is neither an owner nor a former owner of the Lot. The Tong has failed to prove its capacity to claim under Cap.370.

33. The application is dismissed with costs to the Respondent, with Certificate for Counsel.