MAN’S (ASIA) DEVELOPMENT LTD v. FUNG CHI KIN

HCA 1279/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1279 OF 2013

________________________

________________

J U D G M E N T

________________

1.  The Plaintiff is the owner of a piece of land in Yuen Long (Lot 87). There is a plant (Plant) erected by the Defendant on Lot 87 and 4 other pieces of private land as well as government land adjoining Lot 87. Lot 87 situates in roughly the middle of the footprint of the Plant. This action concerns the tenancy dispute between the Plaintiff and the Defendant over Lot 87.

2.  The Plaintiff purchased Lot 87 in August 2012. Soon thereafter, it had also acquired or rented the other 4 pieces of private land on which the Plant sits.  It is not in dispute that Lot 87 had been rented by the Defendant since 16 February 1980, the Chinese New Year day (CNYD) of 1980, under an oral agreement.  When the Plaintiff purchased Lot 87, it became the landlord of the Defendant. 

3.  It is the Plaintiff’s case that Lot 87 was let to the Defendant at HK$30,000 per month on a monthly periodic tenancy.  The Defendant had failed to pay any rent since August 2012.  Consequently, a Final Notice to Quit (FNQ) was given to the Defendant on 22 April 2013 demanding the return of Lot 87 by 30 May 2013.  However, the Defendant has so far failed to deliver vacant possession of Lot 87 to the Plaintiff by reason of the existence of the Plant and materials left therein by the Defendant.  The Plaintiff says that the Defendant’s tenancy was forfeited by the issuance of the writ herein on 12 July 2013.  In this action, the Plaintiff claims for (1) vacant possession of Lot 87; (2) arrears of rent and/or (3) mesne profits since the termination of the tenancy.

4.  The Defendant says that he had all along been renting Lot 87 on an annual tenancy calculated by reference to the lunar calendar at HK$3,200 per annum.  Since he had already paid the rent in advance from CNYD 2012 (23 January 2012) to the end of that lunar year (9 February 2013), he was not in arrears as alleged by the Plaintiff.  However, he and his family, who resided at the Plant with him, were driven out from their home by the Plaintiff by blocking the access to the Plant.  In this action, the Defendant counterclaims for the delivery up, or damages in lieu of, the properties which he had left behind in the Plant, as well as damages for the loss of use of those properties.

Issues

5.  The issues in this action are largely factual. Mr Kam, appearing for the Plaintiff, has formulated the issues as follows (with modifications by the court) :

(1) What were the terms of the Defendant’s tenancy (Tenancy)?

(2) Whether the Defendant had paid the rent according to those terms and if so, for which period?

(3) Whether the Plaintiff had validly terminated the Tenancy by the FNQ.  Alternatively, whether there was a Vacation Agreement as alleged by the Plaintiff (see paras 14 and 15 below)?

(4) Whether the Defendant had delivered vacant possession of Lot 87 to the Plaintiff and if not, the amount of mesne profits which the latter is entitled to?

(5) Whether the Plaintiff had committed conversion and/or detinue vis-à-vis the properties left behind by the Defendant in the Plant (Properties) and if so, the amount of damages which the Defendant is entitled to?

6.  Three witnesses gave evidence in this trial.  Mr Chan Wai Leung (Chan), a director of the Plaintiff and the beneficial owner of all its shares, gave evidence on its behalf.  In addition to giving evidence himself, the Defendant had called his son, Mr Fung Yiu Chung (YC) as a witness.

Terms of the Tenancy

7.  The resolution of this issue depends on the credibility of Chan and the Defendant.  I have been referred by Mr Kam to Hui Cheung Fai v Daiwa Development Ltd, unrep, HCA 1734/2009, 8 April 2014 at §§77-83, and I bear in mind those dicta in assessing the factual issues.

8.  I do not find Chan to be a credible witness. First of all, there is undisputed evidence that the Plaintiff had caused a 20 ft container and 4 large concrete blocks to be placed outside the entrance to the Plant in early May 2013.  Despite the involvement of the police at the instigation of the Defendant’s family, those items were only removed on 20 May 2013.  It should be noted that these actions were taken by the Plaintiff before the deadline imposed in the FNQ.

9.  Shortly after the removal of the container and concrete blocks, the Plaintiff caused to be built a metal wall (Wall) around the Plant made up of metal panels.  There are arguments on whether the Wall had the effect of completely blocking the access to the Plant.  I shall deal with them below.  However, these actions by the Plaintiff were inconsistent with a landlord who had a lawful entitlement and acting to protect the same. 

10.  Chan had no proper answer to the question why the Plaintiff took the matters into its own hands instead of relying on the due process of the law.  He tried to defend the Plaintiff’s actions by saying that neither the container and concrete blocks nor the Wall had hindered the entry to the Plant.  Such evidence is contrary to Chan’s own witness statement that the container and concrete blocks were to prevent anyone going in and out of the Plant[1], and that after the installation of the Wall the Defendant’s family members had to climb over it to gain entry to the Plant (see further below). 

11.  Secondly, it is the Plaintiff’s case that Lot 87 and the adjoining private land were acquired by it for purpose of redevelopment.  Chan’s evidence is that the land occupied by the Plant (I assume that the Government land was excluded) could be let for open storage at the rent of HK$200,000 per month.  It was plainly way above what the Defendant was able to afford.  There was thus an incentive for the Plaintiff to get rid of the Defendant and then re-let the land or redevelop it.  This is consistent with what actually happened when the Plaintiff took the matters into its own hands. 

12.  Thirdly, Chan said that in the middle of August 2012 when he spoke to the Defendant for the first time, he had the terms of the Tenancy confirmed with the latter because they were not in writing.  When he was asked why he did not have the confirmed terms recorded in writing, Chan said that he did think about doing so, but he was unable to offer any explanation why it was not done.  At one stage, Chan said that there was no paper available.  With respect, such an answer cannot be taken seriously.  Further, the evidence is that there was an office inside the Plant. 

13.  Fourthly, Chan’s allegation that the Defendant was in arrears with the rent was recorded in neither the FNQ nor an earlier Notice to Quit dated 3 August 2012 (which was given to the Defendant in March 2013)[2]. Such omission militates against the allegation of rental arrears. 

14.  Fifthly, Chan said that there was an oral agreement reached between the Defendant and Mr Man Kam Leung (Man) of the Plaintiff whereby the former had agreed to deliver vacant possession of Lot 87 to the Plaintiff after the CNY of 2013, because he was unable to pay the rent of HK$30,000 per month (the Vacation Agreement alleged by the Plaintiff).  Chan said that Man was willing to be a witness for the Plaintiff in this action. However, he was unable to provide any satisfactory explanation why no witness statement was obtained from Man or why he was not called to give evidence.  The suggestion that Man had moved to England is, if true, not a real inhibition to a willing witness in this day and age. 

15.  It must also follow that I reject the Plaintiff’s allegation of the Vacation Agreement.

16.  On the other hand, I find the Defendant to be a truthful witness.  He is in his 70s and an unsophisticated person (I take into account Mr Kam’s submission that the Defendant had managed to run a business for many years).  He was forthcoming, spontaneous (despite his hearing difficulties) and firm in his answers.  I see nothing inherently improbable, nor have I detected any exaggeration, in the Defendant’s evidence.  There is no material inconsistency between his viva voce evidence and his witness statements. 

17.  There is a valid criticism that his evidence in respect of the enforcement action by the Government over its land was not set out in his witness statements.  However, on analysis (see below) I believe this part of the Defendant’s evidence also, and this omission does not damage his credibility.

18.  Mr Kam suggested that the yearly rent of HK$3,200 was well below the market rate.  Assuming that to be so, one has to bear in mind that the Tenancy started in 1980 at an annual rent, according to the uncontradicted evidence of Defendant, of HK$100.  The rent was increased over the years to HK$3,200 in 2007 and had remained unchanged until 2012/2013. I do not believe that it is strange to find that the rent under a very old lease is significantly behind the market.  One should also bear in mind that the previous landlords were apparently villagers of Yuen Long, and not commercial entities.

19.  The Plaintiff endeavoured to attack the general credibility of the Defendant by suggesting that his legal aid was revoked because he had under declared his assets.  I am not satisfied that such allegation has been properly made out.  In any case, as Mr Kam has accepted, it is a general credibility point.  Even if it were true, it does not mean that the court should disbelieve the Defendant’s evidence in this case.

20.  Mr Kam suggested that the Defendant was untruthful when he said that he first met Chan in May 2013.  I disagree.  Man was a director of the Plaintiff at the material times.  Based on Chan’s evidence, Man appears to have been involved with the acquisition of land in Yuen Long.  Such evidence is consistent with the Defendant’s case that he was dealing with Man before he met Chan. 

21.  The Plaintiff says that the Defendant was a “deadbeat tenant”.  I am unable to see any evidence of that.  Instead, the evidence shows that the Plaintiff was an unscrupulous landowner who acted with ruthlessness in driving out an unwanted tenant. 

22.  For these reasons, I accept the Defendant’s evidence and find that Lot 87 was let to him under a yearly periodic tenancy at the annual rent of HK$3,200. 

Continuation of the Tenancy

23.  The Defendant’s evidence that he had paid the rent for the lunar year 2012 to 2013 is not in dispute.

24.  As a matter of law, a periodic lease runs for successive periods.  The term is automatically extended for another period upon the end of the previous one until either party serves a notice to bring the tenancy to an end: see Tam Yuk Ha v Chiu Chuk Fun [2010] 2 HKLRD 1168 (CA) at 1170, §6. 

25.  In this case, at the end of the 2012/2013 period (9 February 2013), the Tenancy was automatically extended given the absence of any notice to quit.  The Defendant’s evidence, which I accept, is that he tried to pay the rent for the new term to Man in about late January 2013 and it was declined.

Validity of the FNQ

26.  Mr Kam accepted that a valid notice to terminate a yearly periodic tenancy must have a minimum notice period of 6 months: see Best Origin Ltd v Commissioner of Rating and Valuation (2012) 15 HKCFAR 816 at §49 (Lord Walker).  The FNQ did not meet this requirement and is therefore invalid.

Breach of the Tenancy by the Plaintiff

27.  The Plant has an area of about 10,000 sq ft.  It was used by the Defendant to run a wood cutting and metal engineering business.  His family resided on the 2^nd floor of the Plant at which 7 to 8 rooms had been built.  One of the rooms was used by the Defendant as his office.  Upon the persuasion of his son, who feared for the safety of his father, the Defendant and his family moved out of the Plant on about the 12 June 2013. 

28.  The actions by the Plaintiff to drive out the Defendant in total disregard of his rights under the Tenancy cannot be defended.  Mr Kam conceded that if the Defendant’s evidence is accepted by the court, the Plaintiff had breached the implied condition of quiet enjoyment. 

Conversion and detinue

29.  I reject Chan’s evidence that the Defendant and his son(s) were able to access the Plant freely despite the obstacles created by the Plaintiff.  Such evidence is contrary to the purpose of creating the obstacles on the first place, and Chan’s own evidence that the Defendant’s family members had gained entry to the Plant by climbing over the Wall.  At best, there might have been occasions when the door at the Wall, which provided for access by people according to Chan, was left unlocked. 

30.  I should mention that although there are some photographs of the Plant, they do not assist in resolving this particular issue. It can be seen from 1 of the photographs that Gates 1 and 2 as indicated in Exhibit P2 were not boarded up with panels.  However, there is no reliable evidence as to when and the circumstances under which it was taken.  Even if those gates were not boarded up, given the evidence before the court (including that of Chan), it makes no sense for them to be left unlocked. 

31.  For completeness, I should mention that although there is no dispute that the Plant was not entirely surrounded by the Wall, I accept the evidence of the Defendant and YC, who I also accept to be a credible witness, that one could not access the Plant from the part where there was no Wall due to the presence of adjoining structure.  Such evidence sits with common sense.  One would not build a wall and leave part of the building readily accessible.  The Defendant’s evidence is also consistent with Chan’s evidence that the Plaintiff had to lock up the door at the Wall to prevent theft. 

32.  The evidence of the Defendant and YC is that they only managed to retrieve their valuables and light belongings.  Clearly, they were unable to retrieve, eg, the machinery and the wood that were left in the Plant.

33.  The fact that the Plaintiff was obstructive to the recovery of the Properties by the Defendant is demonstrated by the fact that the Plaintiff had failed to respond to the request by the Defendant to compile a list of the Properties.  Chan had no proper explanation for such failure, and could only say that he intended to negotiate a settlement with the Defendant.

34.  Conversion is an act of wilful interference, without lawful justification, with any chattel in a manner inconsistent with the right of another, whereby that other is deprived of the use and possession of it.  Two elements are combined in such interference: (1) a dealing with the chattel in a manner inconsistent with the right of the person entitled to it and (2) an intention in so doing to deny that person’s right or to assert a right which is in fact inconsistent with such right: Moorgate Mercantile Co Ltd v Finch [1962] 1 QB 701 at 706 (Danckwerts LJ). 

35.  An action for detinue lies where there is wrongful detention of a chattel.  To establish detinue, it is usual to prove demand for return and an unqualified and unjustified refusal after reasonable time to comply with the demand.  The mere keeping of another’s goods does not amount to detinue: Advance Equipment Services (HK) Ltd v Tonge (HK) Ltd, unrep, HCCT 56/2003, 21 January 2009, at §22 (Burrell J).

36.  Given the evidence in this case, I have no hesitation in finding that the Plaintiff is liable to the Defendant in respect of the Properties for both conversion and detinue.  At the latest, the Defendant had made a demand for the Properties by filing his Defence and Counterclaim on 3 January 2014. 

37.  Mr Kam conceded that if this court finds in favour of the Defendant that the Plaintiff had wrongfully blocked the access to the Plant and that the Defendant was unable to retrieve all his belongings, there are only 2 arguments left against these causes of action: (1) whether there was any Properties left in the Plant, especially after the enforcement action by the Government; and (2) whether the Properties had been abandoned by the Defendant.  I shall deal with these points under the next heading.

Damages

38.  The Properties include, the Defendant says, a quantity of wood, various items of machinery, various items of furniture as well as the iron ceiling of the Plant and the private dwellings therein. 

39.  The available photographs show that the Plant was in a dilapidated state, and the machineries and various items seen in photographs were in a poor condition and, as the Defendant accepted in cross-examination, worthless.  However, the Defendant was adamant that the Plant and the properties he left behind were not in that state when he looked inside the Plant on 22 October 2014.  I accept the Defendant’s evidence bearing in mind that he and his family were living there before they left in June 2013 and it is unlikely that the place was in the poor state depicted in the photographs.   

40.  On 22 October 2014, the Defendant witnessed the removal of some wood from the Plant by 8 to 10 men with the use of a lorry. The only challenge to this part of his evidence was that he was unable to see the condition of the wood which was removed.  Despite the absence of direct evidence linking this incident with the Plaintiff, Mr Kam accepted that the removal was carried out by his lay client.  The concession was rightly made because, more likely than not, the removal of the wood was done by or with the consent of the Plaintiff who had control over the access to the Plant. 

41.  However, Chan’s evidence is that some of the wood kept at the Plant was removed by the Plaintiff because they were rotten. It is unnecessary to resolve whether the wood seen removed was rotten because I accept the Defendant’s evidence that the wood left behind in the Plant was not in that condition.  It is unlikely for rotten wood to have been kept in a place where the Defendant and his family lived.  If the wood became rotten after the Defendant had been driven away, the Plaintiff must be held responsible. 

42.  I turn to the issue concerning the enforcement by the Government.  It is uncontroversial that the Government had taken certain step to try to recover possession of its land that was occupied by the Plant. The difference between Chan and the Defendant concerns the extent of the enforcement action.  On balance, I accept the Defendant’s evidence as the more probable.  According to him, the Government had only removed some metal mesh but not, contrary to Chan’s evidence, demolished a substantial part of the Plant. He said that he told the Government official that he should not remove any of the pillar(s) supporting the Plant lest it would collapse.  Such evidence accords with common sense.  I do not believe that the Government would simply demolish part of the Plant without exercise all the necessary precautions to prevent a collapse. 

43.  The Defendant also said that the Government had confirmed with him that it had not taken away any of his properties.  There is a ring of truth to the evidence.  One can expect the Government to have acted with care, and would have compiled a list of the properties taken if that were the case.  I do not believe that the Defendant simply made up this evidence in the witness box. 

44.  Further, as Mr Kam has accepted, the burden of proof on this issue is on the Plaintiff.  It could easily have produced photographs of the Plant after the demolition by the Government.  There is none. 

45.  My finding that the Government had not taken away any of the Properties does not relieve the Defendant from proving what was left behind in the Plant.  He had provided a list of the same in his evidence. From the photographic evidence, one can see some wood, items of furniture, appliances like air-conditioners, 2 gantry travelling cranes, 1 machine which looks like a metal cutter and all sorts of tools and miscellaneous items.  The photographs also show the iron ceiling. 

46.  In light of the Defendant’s evidence and Plaintiff’s refusal to cooperate with him on the compilation of a list of the Properties, I shall accept the items pleaded in para 16A of the Defence and Counterclaim (para 16A), as well as the iron ceiling, as properties left behind by the Defendant in the Plant.

47.  For the reasons given above, the Plaintiff must either return the Properties or pay for them in damages.  There is no point in the former due to the deterioration of their condition (the Defendant did not ask for their return at the trial). 

48.  As for the quantum of damages, I accept Mr Kam’s submission that there is no independent valuation of the Properties.  I am reluctant to simply accept the Defendant’s own valuation of the same. Partiality aside, there is no way of knowing how reliable is the Defendant’s own valuation. 

49.  This court is entitled to taken a broad brush approach where it is proved that an innocent party has suffered substantial loss, but the assessment of the loss is hampered by unsatisfactory evidence: see Chun Wo Building Construction Ltd v Metta Resources Ltd, unrep, HCCT 29/2013, 19 August 2016, §255.

50.  Adopting such an approach, I discount the assessment at para 16A by 40%, and the damages would be reduced to HK$471,600. For the iron ceiling, I make a 50% downward adjustment to the sum pleaded in para 17 of the Defence and Counterclaim because it involves an estimate of both the quantity of iron and its value.  I award damages in the sum of HK$150,000 in this regard.  The total amount of damages is HK$621,600.

51.  I accept Mr Kam’s submission that the Plaintiff is entitled to be paid the rent for the occupation by the Defendant of Lot 87 between 10 February to 12 June 2013.  I therefore deduct HK$1,067 from HK$621,600.  The amount of damages becomes HK$620,533.

52.  As regards the claim for loss of use of the Properties, I accept the Defendant’s evidence that he continued to operate his business in 2013.  This is consistent with the fact that a quantity of wood was kept at the Plant.  However, his evidence is that there was little business going on, and there is no evidence on what profit, if any, may result from the operation.  I therefore reject this claim.  I should say that interest shall be awarded on the damages, and to some extent the loss of this claim is mitigated by the award of interest. 

Conclusions

53.  I dismiss the Plaintiff’s action.  I give judgment on the counterclaim against the Plaintiff and award damages to the Defendant in the sum of HK$620,533, with interest at prime rate(s) to run from 12 June 2013 to the date of judgment, and thereafter at judgment rate(s) until payment. 

54.  I make an order nisi that the costs of this action, including the counterclaim, be to the Defendant to be taxed if not agreed.  The Defendant’s own costs be taxed in accordance with Legal Aid Regulations where applicable.

55.  I thank Mr Kam for his assistance.