LAU TIM FAT AND OTHERS v. LI BANG YUEN AND OTHERS

HCMP 1117/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1117 OF 2004

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J U D G M E N T

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1.  The plaintiffs bring this action to recover various lots situated within Lots 19 to 28 of DD455 in Kwai Chung (“the Land”).  Each of the 1st to 14th plaintiffs is the registered owner of one of the lots.  The 15th plaintiff is the registered owner of the remaining lots.  These lots together constitute the Land.  The particulars of these lots have been pleaded in the Amended Statement of Claim.

Pleadings

2.  The plaintiffs pleaded that the defendants were trespassers.  Judgment has been given against the 1st and 2nd defendants.  Only the 3rd defendant is resisting the claim.

3.  The 3rd defendant’s defence pleaded that the 1st to 14th plaintiffs are nominee owners holding their respective lots on trust for the 15th plaintiff.  The lots were assigned by the 15th plaintiff to the 1st to 14th plaintiffs for the purpose of a development of small houses for indigenous villagers.  The beneficial owner of all these lots is the 15th plaintiff.

4.  The 3rd defendant further pleaded that he had a tenancy over the Land from the 15th plaintiff which was granted by one Winker Development Limited (“WDL”) owned by one Max Chan as the agent of the 15th plaintiff.  The tenancy was dated 1 November 2001 and had a term of 5 years expiring on 31 October 2006.  Furthermore, he had an option to renew the tenancy for another 3 years.  That was also granted by WDL on behalf of the 15th plaintiff on 10 November 2001.  The option had been exercised on 28 August 2006.  He therefore would be entitled to remain on the Land until 31 October 2009.

5.  He further pleaded that he had in fact been in occupation of the Land since 1998 by virtue of an oral tenancy granted by Max Chan of WDL on behalf of the 15th plaintiff, but a formal tenancy was only signed on 1 November 2001. 

6.  The plaintiffs in their reply denied any letting of the Land to the 3rd defendant.  They also denied that WDL was their agent in the alleged letting.  They further denied that the chop mark of the 15th plaintiff and the two signatures of its two directors, Pong Che Yue and Chan Lau Fong, as appearing on the tenancy dated 1 November 2001 were genuine.  They also denied the option as alleged by the 3rd defendant.

Issues

7.  Before the trial commenced, the parties agreed the issues as follows:

(1)     whether the 1st to 14th plaintiffs were holding their lots on trust for the 15th plaintiff;

(2)     whether the 15th plaintiff had the authority to let out the Land comprising all the lots owned by it and by the 1st to 14th plaintiffs and to grant an option to renew the letting;

(3)     whether Max Chan of WDL ever had the authority to enter into the tenancy of 1st November 2001 and to grant the alleged option to renew on behalf of the 15th plaintiff to the 3rd defendant, or whether the chop mark of the 15th plaintiff and the signatures of its two directors as found on the said tenancy were forged.

The 3rd Defendant’s Evidence

8.  The 3rd defendant said in his witness statement that in 1998 he approached some villagers in the vicinity of the Land including some of the plaintiffs.  He enquired from them about the letting of the land.  He was told that the 15th plaintiff was the actual owner.  The lots were registered in the names of the villagers to hold on trust for the 15th plaintiff for the development into small houses of indigenous villagers.

9.  The 3rd defendant then rented the Land since 1998.  He did so through Max Chan, also known as Chan Sai Kit, as the agent for the 15th plaintiff.  He produced a copy of a Chinese tenancy dated 1 November 2001 which was entered into between him and WDL as agent of the 15th plaintiff.  WDL was represented by Max Chan.  In addition, there were at the top left-hand corner of the second page of the tenancy the copy chop mark of the 15th plaintiff and signatures of two of its directors. 

10.  The 3rd defendant also produced a copy English letter signed by Max Chan for WDL as agent of the 15th plaintiff and dated 10 November 2001 which purportedly granted the 3rd defendant an option to renew the tenancy for another 3 years by entering into a new Chinese tenancy agreement.  The 3rd defendant also said that the tenancy had indeed been renewed on 20 August 2006 for 3 years until 31 October 2009.

11.  In his oral evidence, he elaborated that it was the 14th plaintiff who told him that the lots were held by the villagers on trust for the 15th plaintiff for the development and he could approach Max Chan for letting the Land for use as a car park.  However, when the 14th plaintiff gave evidence as PW1, this was not put to him by counsel for the 3rd defendant.

12.  The 3^rd defendant further said that he then approached Max Chan in his office.  Max told him that the Land was rugged and broken up.  He had to level it off and surround it with wire mesh before it could be used as a car park.  Max further told him to obtain a quotation for the works.  He then obtained a quotation which required more than $100,000.  Max then said that the money he had to incur for the works would be treated as rental as the works would benefit the Land.  Max therefore charged him $1 per month as rental until he could make money out of the business.

13.  In cross-examination he confirmed that he had procured the works in 1998 which were completed in that year and he commenced the business of a car park there in 1999.  He further referred to a copy quotation in the bundle of documents which was for $121,380 for some land levelling and construction works.  However, this quotation was dated 15 November 2001 and did not refer to any wire mesh work to surround the Land.  When asked why the quotation was so dated when the works had been done in 1998 and no wire mesh work was mentioned in it, he was unable to give any explanation.

14.  This quotation was in fact first produced by him in his 3rd Chinese affirmation filed on 22 December 2004.  That was in support of his application to set aside a default judgment.  He said in that affirmation that he had on 15 November 2001 spent $121,380 as the decoration costs for the Land and he would not have spent so much money if he had not been let the Land from the 15th plaintiff.  He then exhibited the quotation in support of what he said in the affirmation. 

15.  At the trial, he further referred to the tenancy of 1 November 2001 and said that after it was signed by Max and him, Max took it back for countersigning by the 15th plaintiff.  A few days later, Max returned a copy of it to him.  By then, the copy chop mark of the 15th plaintiff and signatures of the two directors were there.  However, he had previously said in his 3rd Chinese affirmation that Max, after taking the tenancy back for countersigning, did not return it to him.  It was only after the institution of these proceedings and his repeated requests that Max gave a copy of it to him.

16.  He also said at the trial that he did not know PW2, Chan Lau Fong, and he had never met him.  He knew that Max is the son of Chan Lau Fong and the 15th plaintiff was in the control of Chan Lau Fong.  However, when the plaintiffs sued him and denied that Max was the agent of the 15th plaintiff, he never thought of approaching Chan Lau Fong to sort out whether his son Max had or had no authority from the 15th plaintiff.  He also said that after exercising the option to renew, he had entered into a new tenancy agreement with the 15th plaintiff.  But he was unable to produce even a copy of it.

The Plaintiffs’ Evidence

17.  The plaintiffs called the 14th plaintiff as PW1 and Chan Lau Fong as PW2.  The 14th plaintiff said in his witness statement that the 1st to 14th plaintiffs are indigenous villagers.  The 1st to 15th plaintiffs have the right to possess the Land.  The 1st to 14th plaintiffs had purchased their lots from the 15th plaintiff.  When negotiating for the purchase of the lots, Chan Lau Fong of the 15th plaintiff told the 14th plaintiff that Max of Winker Development Holdings Limited was the consultant of the 15th plaintiff.

18.  In cross-examination, the 14th plaintiff basically agreed that the 1st to 14th plaintiffs had paid nothing for their lots.  They had in fact agreed to exercise their rights as indigenous villagers to build a three-storey small house for the benefit of the 15th plaintiff.  The 15th plaintiff would provide the funds for the construction and development.  In the end, the 1st to 14th plaintiffs would obtain parts of the buildings and/or some money as the reward for taking part in the project.

19.  He also referred to a licence agreement given by the 15th plaintiff to one Wong Chow Yun to occupying the Land from 15 May 1997 to 14 May 1998.  He said the licence was granted with the knowledge and consent of the 1st to 14th plaintiffs.  The Land was however illegally occupied by some people since April 1999.  It was used by those people for parking and illegal sale of marked diesel for use in motor vehicles.   The occupants said they had the licence of WDL to occupy the Land.  They also threatened the villagers with triad connections.  The 14th plaintiff and his fellow villagers then tried to contact Max but failed.  They then contacted Chan Lau Fong who said he knew nothing about the matter. 

20.  On 2 October 2002, the 14th plaintiff and his fellow villagers made a report to the police against the occupiers.  But the police did not intervene as the Land was privately owned.  On 1 August 2003, they learned from the newspapers of a police raid on the Land for illegal activities.  The 14th plaintiff reiterated that the 1st to 14th plaintiffs had never granted any tenancy or option to renew to the 3rd defendant. 

21.  PW2, Chan Lau Fong, repeated the evidence of the 14th plaintiff.  He also said that the 15th plaintiff was aware of and had approved of the granting of the licence agreement by WDL on its behalf to Wong Chow Yun.  The 15th plaintiff had approved the licence before it was granted.  That licence expired on 14 May 1998 and Wong surrendered vacant possession of the Land to the 15th plaintiff.  Chan also admitted the scheme of development of small houses with the 1st to 14th plaintiffs and that the 1st to 14th plaintiffs had not paid any money to the 15th plaintiff for the assignment to them of the various lots.

22.  He said that his son Max had been appointed the consultant of the 15th plaintiff to buy the various lots which constituted the Land.  The purchases were done in 1993 to 1996.  It was in 1996 when all the lots had been acquired.  Max was then authorized to liaise with the villagers who took part in the development scheme.  He was also authorized to liaise with the District Office, the architect and the surveyor in relation to the development scheme.  However, he was not authorized to let out the Land.  The Land had to be surrendered to the government for exchange so that the development could go ahead.

23.  In about 1999, Max had troubles with the villagers and PW2 found that Max was dishonest and not trustworthy.  By the year 2000, Max was not allowed to sign any document on behalf of the 15th plaintiff although he was still paid some consultant fees in 2001.

24.  Regarding the tenancy dated 1 November 2001, he said the chop mark of the 15th plaintiff and the signatures of the two directors as found on the second page of the document were forged.  They were affixed onto the tenancy by photocopying.  The original of the mark and signatures were on a cheque dated 22 August 2001 drawn by the 15th plaintiff in favour of Max and on its account with the Bank of Communications.  He produced the cheque which he obtained from the bank.

25.  He had also experimented the chop mark and signatures with a photocopier and found that the copy affixed on the tenancy was an 85 per cent contracted copy of the original.  He clearly said that the affixing of a chop mark and signatures on the tenancy by photocopying was an act of forgery by his son Max.  He denied the granting of the tenancy or the option by the 15th plaintiff to the 3rd defendant.

Analysis and decision

26.  I have checked and compared the chop mark and signatures on the cheque with the copy mark and signatures on the tenancy and found that those on the tenancy are the same as those on the cheque.  Those on the tenancy are just a contracted copy version of the mark and signatures on the cheque.  I accept that there is the forgery as claimed by Chan Lau Fong although I cannot tell who was the forger.  If Max indeed had the authority of the 15th plaintiff to grant a tenancy of the Land to the 3rd defendant, I do not think the chop mark of the 15th plaintiff and the signatures of its directors on the tenancy would be forged ones as the 15th plaintiff and its directors would have been willing to affix the chop mark and sign on the tenancy to approve it.

27.  Furthermore, there is no dispute that the Land was for development into small houses.  The 15th plaintiff and the 1st to 14th plaintiffs wanted the development to go ahead so as to reap the profit at the end.  To let out the Land for 5 years and to give an option to the tenant for renewal for another 3 years are incompatible with the scheme of development. 

28.  I therefore find that the 15th plaintiff had not granted any authority to Max to let out the Land to the 3rd defendant or to grant him the option to renew as alleged.  The inconsistent evidence of the 3rd defendant as pointed out above defeats his credibility and gives me further support for my finding.  I make it clear that I accept the evidence of Mr Chan Lau Fong as he was speaking against his son.  His evidence was also clear and straightforward.  The same also applied to the evidence of the 14th plaintiff.  Both witnesses of the plaintiff frankly admitted to the scheme of development of small houses of indigenous villagers and that none of the 1st to 14th plaintiffs had paid anything for the lots which were transferred to them by the 15th plaintiff. 

29.  I therefore find that there was no actual authority for Max to let out the Land or to grant the option to renew as the agent of the 15th plaintiff.  However, the 3rd defendant is not relying on actual authority.  He has through counsel confirmed that he is relying on apparent authority.  On the creation of apparent authority, I refer to Freeman & Lockyer ( a firm) v Buckhurst Park Properties (Mangal) Limited  [1964] 2 QB 480 at 503:

“An ‘apparent’ or ‘ostensible’ authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the ‘apparent’ authority, so as to render the principal liable to perform any obligations imposed upon him by such contract.  To the relationship so created, the agent is a stranger.  He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract.  It is irrelevant whether the agent had actual authority to enter into the contract.  …

The representation which creates ‘apparent’ authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal’s business with other persons.”

30.  The only representation relied on by the 3rd defendant was that made by Max.  He never had any contact with Chan Lau Fong or any other director of the 15th plaintiff.  But to give rise to the doctrine of apparent authority, it is not sufficient to show that the agent had represented himself to have authority to enter into a contract on behalf of the principal, such representation must come from the principal (see Essfood Eksportlag v Crown Shipping [1991] ILRM 97).  The 3rd defendant therefore fails in his claim of apparent authority of Max Chan to represent the 15th plaintiff.

31.  There is also an issue of whether the 1st to 14th plaintiffs had the right to sue.  I do not think the 1st to 14th plaintiffs are mere trustees holding the lots for the benefit of the 15th plaintiff.  They will also benefit from the scheme.  However, even if they were mere trustees, they are still entitled to sue the 3rd defendant for recovery of possession as they are the registered owners of their respective lots.  On this, I note that the 3rd defendant has not alleged that the 1st to 14th plaintiffs had agreed to let their respective lots to him.  Nevertheless, even if the 15th plaintiff were the only party entitled to sue, it still does not make any difference in this case as the 15th plaintiff is before the court and has been driving the action forward.

32.  I therefore find that the 3rd defendant has failed to prove his tenancy since 1 November 2001 or the renewal for another 3 years in August 2006.

Judgment

33.  In the premises, I order the 3rd defendant to deliver vacant possession of all the lots that comprised the Land to the plaintiffs immediately.  I further grant an injunction against the 3rd defendant, whether by himself, his agents, servants, or otherwise, howsoever from entering or remaining on the Land or any part thereof.

34.  I also order the 3rd defendant to pay the plaintiffs damages at the rate of $5,000 per month from the date of issue of the originating summons on 3 May 2004 to the date of delivery up of vacant possession of the Land by the 3rd defendant.  I also order the 3rd defendant to pay the plaintiffs interests on the damages at the judgment rate.

35.  Finally, I make an order nisi that the 3rd defendant do pay the plaintiffs the costs of this action.