KENWELL LTD v. LIU KIN KWAN GARY AND LAM TAT CHOW (BOTH TRADING UNDER THE NAME OR STYLE OF 昌盛公司, A FIRM)

DCCJ 3616/2023

[2025] HKDC 528

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3616 OF 2023

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DECISION

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1.  On 4 March 2024, this court handed down a Decision (“the Decision”) which, inter alia, granted plaintiff’s possession of Lot 746RP in D.D. 99 (“the Lot”) after hearing, inter alia, an application made by the plaintiff under Order 14.

2.  The defendants subsequently took out two applications:

a.  Summons dated 28 March 2024 for leave to appeal against the Decision (“the Summons for leave to appeal”); and

b.  Summons dated 5 July 2024 for leave to adduce further evidence (“the Summons to adduce further evidence”).

3.  The two Summons were heard together on 20 January 2025 and the following is the decision.

Background

4.  The background of the case was stated in the Decision (see paragraphs 7-23 of the Decision) and needed not be repeated here.

The Summons to adduce further evidence

5.  As the defendants are applying to adduce new evidence in support of the application for leave for appeal, the court will deal with this application first.

6.  The defendants invited this court to assess the new evidence on a de bene esse basis, which the court agreed. Indeed, much time in the hearing was spent by Ms. Lorinda Lau (“Ms. Lau”), counsel for the defendants, taking the court through the new evidence.

7.  The legal principles concerning granting leave to adduce new evidence at the appeal stage is trite: Ladd v Marshall [1954] 1 WLR 1489. Three conditions needed to be satisfied:

a.  It must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial (“Condition 1”);

b.  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

c.  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”).

8.  Even if the three conditions are not satisfied, the court would still have a residual discretion and flexibility to admit fresh evidence in exceptional circumstances (Solicitor (529/2018) v Law Society of Hong Kong (No. 2) [2021] 5 HKLRD 445)

9.  For this application, the defendants have disclose two categories of documents:

a.  Documents exhibited as “LKKG-17” to “LKKG-32” in the 3^rd Affirmation of Liu Kin Kwan Gary (Hearing Bundle B, p.439 -659, “the 1^st Category Documents”)

b.  Documents exhibited as “LKKG-33” to “LKKG-36” in the 3^rd Affirmation of Liu Kin Kwan Gary (Hearing Bundle B, p.660-700, “the 2^nd Category Documents”)

The 1^st Category Documents

10.  Subsequent to the Order 14 summary judgment, the defendants has obtained the 1^st Category Documents from Man Whi Chung (“MWC”) and / or Fortune Nine (Hong Kong) Limited (“Fortune”). It was, of course, the defendants’ claim that they were the sub-tenants of another claimed tenant of the Lot, namely MWC and Fortune. MWC is the director and shareholder of Fortune.

11.  In summary, these are documents which are or relate to:

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

b.  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;

c.  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).

12.  Regarding condition 1 of Ladd and Marshall, the defendants submitted that, as sub-tenants, these documents (which related to the alleged “head tenancy arrangements” between MWC / Fortune and the Wui) were entirely outside their knowledge and control. Many documents dated back to 2005 and were stored in various warehouses under control of MWC and Fortune, who only disclosed such on 28 June 2024.

13.  Regarding condition 2, the defendants submitted that these evidence contradicted the evidence of the two Wui managers that “since 1996…the Wui has never grant any tenancy of its land to anyone and no question would arise that” MWC or Fortune “be a tenant of the Wui...” and “that at no time has” MWC or Fortune “paid any rent to the Wui for the use or occupation of…the Lot…” (paragraphs 3(a) and (d) of the Affirmation of Man Ping Nam and Man Tai Sang, Hearing Bundle A p.384-385).

14.  In my view, such documents only shows the arrangements between MWC / Fortune and the Wui and its alleged members. They may support that :

a.  MWC / Fortune has been paying rent to each alleged individual members of the Wui including the managers (who received their respective rents as members of the Wui);

b.  There has been arrangements that MWC / Fortune would pay upfront various outgoings of the Wui (Property Tax, various fees etc.) and such would be deducted from the rents due to the members before distribution; and

c.  The managers were aware of such arrangements.

15.  Clearly, such evidence does not dispute the findings in the Decision that there was no tenancy agreement in writing since 1986 (in fact the new evidence affirmed this) and in law, these arrangements would be a tenancy at will (see paragraphs 25-33 of the Decision).

16.  I find no contradictions to the allegations in the Amended Statement of Claim that the Wui at no time granted any tenancy to MWC and / or Fortune: the Wui granted the 1986 tenancy to Man Ching Ip, the father of MWC. There was no evidence of any written tenancy since.

17.  In the Decision, the court has already considered the defendants’ case by taking it to the highest. The 1^st Category Documents simply lend more support to the defendants’ case.

18.  Such new evidence would not alter the findings of the court that the conduct of MWC / Fortune / the Wui / the members of the Wui showed that the arrangements was a tenancy at will, which would have ended on 23 June 2023 (some 3 months after the last distribution of rent to the members of the Wui). This was the date “when the landowner doing any act inconsistent with continuation of his relation with the tenant-at-will, i.e. when the Wui granted the 2023 Tenancy to the plaintiff…” (see paragraph 30(b) of the Decision).

19.  As far as condition 3 is concerned, I have no problem in finding that the 1^st Category Documents are apparently credible.

20.  In my view, the defendants already have problems satisfying Condition 1: whilst the defendants, as alleged sub-tenants, may not know exactly what documents might exist between the apparent head-tenant and apparent landlord that support such relationship, it must be obvious to anyone that the crux of this action was the nature of such a relationship. Yet, the defendants did not provide evidence (under the 3^rd Affirmation of Liu Kin Kwan Gary, hearing bundle B, p. 419-437) of any attempts to obtain such evidence before the Order 14 hearing nor any reasons for the failure in such attempts to show that they have, indeed, exercised due diligence.

21.  More importantly, the 1^st Category Documents clearly do not satisfied Condition 2. None of these documents showed that there any further extension of the 1986 Tenancy (or the alleged 1988 Novated Tenancy Agreement) in the terms as alleged in writing. In fact, as stated above, the new evidence actually confirmed that there was no further written tenancy agreement. The new evidence is therefore irrelevant to the finding in law that there was only a tenancy-at-will in the relevant time.

22.  The defendants’ claim clearly rests upon being able to show that they were the sub-tenant of the Wui since the determination of the tenancy-at-will on 23 June 2023. The new evidence are also not relevant to such an issue.

The 2^nd Category Documents

23.  These documents concerned land resumption of the Lot (amongst others) which may show that the defendants would be depraved of compensation under the land resumption scheme if the plaintiff succeeds in this action.

24.  As such, these are evidence that may show the motive of the defendants to defend this action and perhaps may concern matters of damages (assuming that the defendants have any chance to succeed). They are clearly not relevant in influencing the Decision.

25.  In conclusion, none of these new evidence are of a determinative character for the court to give a decision materially different from the Decision. As such, this Summons should be dismissed.

The Summons for leave to appeal

26.  The legal principles are trite: the applicant must satisfy the court that the appeal has a “reasonable prospect of success” which means that he is “required to show more than just an arguable case” although “he does not have to demonstrate that the appeal will probably succeed”. (s. 63A(2), District Court Ordinance, Cap. 336, SMSE v KL [2009] 4 HKLRD 125, Wynn Resorts (Macau) SA v Mong Henry (孟享利) [2009] 5 HKC 515)

27.  The grounds for appeal, as stated in the Notice of Appeal is as follows.

Acquiescence and estoppel

28.  The first ground is that the Judge erred in law and / or in 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.

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). 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.

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 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.

Adverse possession

37.  This was put forward as a “further or alternative” ground of appeal. The vague possibility of an adverse possession claim was raised during the hearing.

38.  This claim was not pleaded in the Defence. Instead, it was pleaded that the defendants were “lawful subtenants” of the Wui via the tenancy of MWC (paragraph 15 of the Defence and Counterclaim).

39.  Further , it was never the case of MWC that he was in adverse possession of the Lot: he stated (paragraphs 17-19 of the Affirmation of MWC) that:

“the managers…acceded to the wishes of the majority of the Wui’s members that I should continue to be the tenant of the Land Lots with an annual rent of HK$3 million.”

40.  I cannot see how there is an “alternative” case of adverse possession: one cannot claimed to be a lawful tenant and then argued that if that claim failed, he was in adverse possession. Claiming to be a lawful tenant must at once dispel any notion of having an animus possidendi. This is the basis of paragraph 38 of the Decision.

41.  The defendants also sought to argue that the defence of adverse possession would require expert evidence in Chinese Customary law or discovery of the operation of the Wui regarding members’ introductions and rights etc.. Given the above findings, I cannot see how any of such would be relevant.

The Action should be consolidated with the High Court case and be transferred

42.  This ground stated that the court has only considered “procedural efficiency” in the Order 14 application without considering other factors like: (a) avoiding inconsistent finding of the core issue (i.e. the lawfulness of the Head Tenancy); (b) proceeding to a full trial for core issues to be determined by witness evidence; (c) avoiding irreparable damages caused to the defendants.

43.  However, the alleged Head Tenant, MWC, the plaintiff in the High Court case, has ample opportunity to put in his Affirmation. Indeed, the court has taken his evidence to the highest and the application of law was based upon this exercise. As such, I cannot see how the fact that there is another on-going action should, by itself, be a ground to be considered under an Order 14 application here.

Plaintiff’s lease unable to be registered in the Land Registry

44.  This ground does not appear in the Notice of Appeal nor canvassed in the Defendants’ submissions. It was only raised in the 3^rd Affirmation of Liu Kin Kwan Gary which submitted that, according to the Land Search Record on 2 July 2024, “registration withheld” was shown against the plaintiff’s lease and “it is highly possible that the lease is invalid and/or illegal” and thus “one of the reasons why the case should go to trial”.

45.  I agree with Mr. Chong, counsel of the plaintiff, that the validity of an instrument depends on the law and not the registration at the Land Registry. Registration may only affect its priority.

46.  In any case, I am satisfied that this withholding of registration has now been resolved in favour of the plaintiff and that the plaintiff’s lease is now registered according to the latest Land Search.

47.  In conclusion, this summons should also be dismissed.

Order

48.  I would therefore order that the Summons to adduce further evidence and the Summons for leave to appeal should both be dismissed with costs to the plaintiff to be taxed if not agreed with certificate granted for one counsel.

49.  The plaintiff shall lodge and serve a summary bill of costs with 21 days of this order and the defendants shall lodge and serve a summary list of objections 21 days thereafter. Costs will be assessed summarily by way of paper disposal.