TSANG SHU WO AND ANOTHER v. PERSON UNKNOWN IN OCCUPATION OF LOT NO. 2643RP IN D.D. 120, YUEN LONG, NEW TERRITORIES, HONG KONG AND ANOTHER

CACV 98/2020, [2023] HKCA 644

On Appeal From [2020] HKCFI 293

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 98 OF 2020

(ON APPEAL FROM HCMP NO 3279 OF 2013)

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REASONS
FOR JUDGMENT

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Hon Yuen JA (giving the Judgment of the Court):

1.1.  This is the 2^nd plaintiff’s appeal[1] from the Judgment of Anthony Chan J (“the judge”) given on 5 March 2020 (“the Judgment”)[2] after a 3-day trial in January 2020. The judge dismissed the action with costs to the 2^nd defendant.

1.2.  At the conclusion of the appeal, we dismissed the appeal with costs.  Our reasons appear below.

Background

The Tso

2.1.  The Tang Siu Yu[3] Tso (“the Tso”) is a tso whose members consist of the male descendants of a common ancestor[4].  It comprises three “sub-tsos”[5], viz. Chik Son tso[6], Man Son tso and Min Son tso.  

2.2.  The Tso was registered under the New Territories Ordinance, Cap. 97 (“NTO”). Section 15 of NTO in force at the material times stated:

“Whenever any land is held from the Government under lease or other grant, agreement or licence in the name of a clan, family or t’ong, such clan, family or t’ong shall appoint a manager to represent it. Every such appointment shall be reported at the appropriate New Territories District Office of the Home Affairs Department, and the Secretary for Home Affairs [“the Secretary”] on receiving such proof as he may require of such appointment shall, if he approves thereof, register the name of the said manager who shall, after giving such notices as may be prescribed, have full power to dispose of or in any way deal with the said land as if he were sole owner thereof, subject to the consent of the Secretary, and shall be personally liable for the payment of all rents and charges and for the observance of all covenants and conditions in respect of the said land. Every instrument relating to land held by a clan, family or t’ong, which is executed or signed by the registered manager thereof in the presence of the Secretary and is attested by him, shall be as effectual for all purposes as if it had been executed or signed by all the members of the clan, family or t’ong. The Secretary may on good cause shown cancel the appointment of any manager and select and register a new manager in his place. If the members of any clan, family or t’ong holding land do not within 3 months after the acquisition of the land make and prove the appointment of a manager, or within 3 months after any change of manager prove the appointment of a new manager, it shall be lawful for the Government to re-enter upon the land held by such clan, family or t’ong, which shall thereupon become forfeited. Such re-entry shall be effected by the registration of a memorial thereof in the Land Registry”.

2.3.  The principles that registered managers of a tso are trustees of the property held by a tso, and that unanimity is required for trustees’ decisions, will be discussed later in this Judgment.

2.4.  On 27 June 1979, the following persons were registered in the Land Registry as managers of the Tso: Tang Kin Kwok (“TKK” or “Kwok” in the judge’s Judgment), Tang Shing and Tang Fuk Loi.  Tang Shing died in 2002 and Tang Fuk Loi died in 2005.  The Secretary’s approval of the appointment of Tang Tong and Tang Kau was registered on 29 May 2008. 

2.5.  Thus,

-  from 2005 - 29 May 2008, TKK was the sole registered manager, and

-  from 29 May 2008 onwards, TKK was one of the registered managers. 

The Plot

3.  The Tso is the registered owner of a large piece of land[7] in Ping Shan, Yuen Long (“the Plot”).

House 41

4.  A house known as House 41, Lam Hau Tsuen (“House 41”) occupies a small portion of the Plot.  The 2^nd defendant is the occupant of House 41.  His family had been residing there since the 1920’s[8].  

The Action 

5.1.  On 5 December 2013, the 1^st plaintiff issued proceedings in HCMP3279/2013 against the 2^nd defendant for delivery up of vacant possession of House 41 and mesne profits. 

5.2.  The 1^st plaintiff is not a member of the Tso.  His claim to possession of the 2^nd defendant’s house was based on a purported sub-lease of the Plot to him from Tang Chi Yung (“TCY” or “Yung” in the judge’s Judgment), who claimed that he was himself a lessee of the Tso.  The validity of the purported sub-lease vis-a-vis a third party to it (as the 2^nd defendant was) will be discussed later in this Judgment.

5.3.  Although the 1^st plaintiff remained a party in the proceedings below, it was accepted at trial by the plaintiffs’ then counsel[9] that as his purported sub-lease had expired in 2017, his claim was “of little relevance now” and the court was informed that he was no longer seeking any relief in the proceedings[10]. 

6.  The 2^nd plaintiff, also not a member of the Tso, was added as a party in 2019.  His claim to possession of the 2^nd defendant’s house was also based on a purported sub-lease from TCY, entered into after TCY’s purported sub-lease to the 1^st plaintiff had expired.

7.  Neither the Tso nor TCY were parties to the proceedings.  

8.  The main issue before the judge was whether the 2^nd plaintiff was entitled to sue the 2^nd defendant for possession of the defendant’s house.  To understand the arguments, it is necessary to set out the factual background in some detail. 

2007 Lease(Tso to TCY and others)4.7.2007 - 3.7.2013

9.1.  On 4 July 2007, the Tso leased the Plot to TCY, Tang Wing Shing and Tang Tung Chiu (“the 2007 lessees” or “Yung, Chiu and Shing” in the judge’s Judgment) for a term of 6 years from 4 July 2007 to 3 July 2013 at $1,300 pa (“the 2007 Lease”).  The validity of this lease is not disputed.  

9.2.  The terms were set out in a book (“the book”)[11] signed on behalf of the Tso by the Tso’s “elders”, being TKK (as elder of Chik Son tso, at that time also the sole registered manager), Tang Tong (as elder of Man Son tso) and Tang Kau (as elder of Min Son tso), the latter two at that time not yet registered as managers.

9.3.  Clause 7 prohibited the lessees from sub-letting the Plot.

2012 purported Sub-lease (TCY to 1^st plaintiff)21.7.2012 - 20.7.2017

10.  Notwithstanding Clause 7, on 21 July 2012 (i.e. during the term of the 2007 Lease), TCY sub-let the Plot to the 1^st plaintiff for a term of 5 years from 21 July 2012 to 20 July 2017 (i.e. extending beyond the term of the 2007 Lease) at $60,000 pa (“2012 purported Sub-lease”)[12].  Tang Tong (one of the registered managers) signed as a witness but there is no evidence that the other two registered managers had agreed to this sub-lease which was in breach of the 2007 Lease. 

2013 purported Lease (Tso to the 2007 lessees)4.7.2013 - 3.7.2019

11.1.  On 7 July 2013, there were written in the book (referred to above) the terms of a purported renewed lease to the 2007 lessees for a term of 6 years from 4 July 2013 to 3 July 2019 at $1,450 pa (“the 2013 purported Lease”)[13].

11.2.  The judge found that by this time, there were two registered managers of the Tso, viz. TKK and Tang Tong, Tang Kau having died[14].  However, under the heading “Tang Siu Yu Tso elders”, Tang Tong signed under Man Son tso, and Tang Ching Lin signed under Min Son tso.  The space under Chik Son tso was blank.

11.3.  It was not disputed that TKK, the other surviving registered manager and the elder of Chik Son tso, had refused to agree to, and did not sign, the 2013 purported Lease, as he considered that the 2012 purported Sub-lease was in breach of the 2007 Lease, and that in any event it should be the Tso, and not the 2007 lessees, who should benefit from payments for occupation of the Plot.

12.  We will discuss later in this Judgment the issue whether the 2013 purported Lease was valid when it had not been agreed to unanimously by the Tso’s surviving registered managers.

13.1.  Pausing here, it is notable that the judge said this in the Judgment:

“16. Like the 2007 Lease, all the rent had been paid as recorded in a book kept by the Tso. However, the 3 pages of record (‘Payment Records’) concerning the rental payments under the 2013 Lease were only adduced at the trial with the leave of the court, and they are the subjects of challenge as to authenticity by the 2^nd defendant” (emphasis added).

“62. The plaintiffs rely on the payment and acceptance of rent under both the head leases and sub-leases for their argument on tenancy by estoppel” (emphasis added).

13.2.  However at the hearing of the appeal, this court noted that the extracts of the book[15] in the appeal bundles did not contain any record of rental payments for the 2013 purported Lease, nor were there any separate documents in the appeal bundles which were the “Payment Records” which the judge referred to.  A search of the court file also did not disclose any “Payment Records”. 

13.3.  When the court drew this to the attention of counsel for the 2^nd plaintiff[16], he was not able to point the court to the Payment Records either, so we were not able to see their contents. 

TKK’s 2016 Declaration

14.1.  On 8 February 2016 (i.e. during the term of the 2013 purported Lease and after these proceedings had commenced), TKK, one of the surviving registered managers of the Tso, caused a declaration to be registered in the DLO (“TKK’s 2016 Declaration”).

14.2.  In the declaration, he stated that the grant of leases of Tso lands had, for many decades, been jointly undertaken by the managers[17] who represented the three sub-tsos, and even if a registered manager had died, a person chosen as representative would need to be approved at a meeting of the Tso and approved by the DLO before he could lawfully become a manager.  After referring to certain arrangements for utilizing funds in bank accounts, he stated that all other Tso affairs were the responsibility of the current managers. 

January 2017 Meeting

15.1.  Following TKK’s 2016 Declaration, a meeting was held on 14 January 2017 for members of the Tso to “express their views” about it.

15.2.  It can be seen from the minutes[18] that no signature appears in the place allocated for “elder of Chik Son tso”, viz. TKK.  His unchallenged evidence[19] was that he had never been informed of that meeting[20] and no members of his sub-tso had attended[21].  There was no evidence showing the total number of members of all three sub-tsos of the Tso, or when, or how, notice of meeting was given to them all.

15.3.  According to the minutes, the chairman mentioned two points for consideration, including at paragraph (3)(A)[22]:

“[TKK] tendered his resignation at the meeting on 8th July 2007 and again tendered his resignation at the meeting on 8th February 2012 ... (he) recommended his natural younger brother Mr Tang Kin Leung ... to succeed. His two proposed resignations were not dealt with, and (he) in his declaration on 8^th February 2016 emphasized that ‘according to existing records, [TKK] (La [Chik] Sun tso), Tang Ching Lin (Min Sun tso) and Tang Tong (Man Sun tso) act as manager’ which could show that he still wanted to remain in his office as manager” (emphasis added).

15.4.  However, after deletion of paragraphs (4) to (6), the following passage numbered as paragraph 3(C) appears:

“[TKK] had tendered his resignation from the office of manager of La [Chik] Sun tso at the meetings of this Tso in 2007 and 2012 and this was approved unanimously at the meeting and became effective immediately; in 2013, Mr Tang Ching Lin as the elder of Min Son tso and Mr Tang Tong as the elder of Man Sun tso [and manager[23]] both agreed, and signed to renew the lease of the Tso’s property DD120 Lot 2643 RP etc to [TCY] etc; and the abovementioned procedure for renewal of lease was done according to this Tso’s usual practice and was unanimously approved and recognized by all the persons who attended this meeting to confirm, because [TKK’s] stance in his declaration dated 8^th February 2016 about the procedure for renewal of lease of DD120 Lot 2643 RP etc was just his own personal view, and could not be regarded as the stance of this Tso”.

16.  Notwithstanding the above, it was not disputed that no application had ever been made to the Secretary for Home Affairs, and TKK’s name remained on the register as manager of the Tso at all material times up to and including the time of trial.

2017 purported Sub-lease (TCY to 2^nd plaintiff)21.7.2017 - 20.7.2022

17.  The 2^nd plaintiff claimed that on 1 August 2017 (i.e. during the term of the 2013 purported Lease), TCY sub-let the Plot to him for a term of 5 years from 21 July 2017 to 20 July 2022 (i.e. extending beyond the term of the 2013 purported Lease) at $60,000 pa (“2017 purported Sub-lease”)[24].

“Sub-lease Agreement” dated 4 September 2017 (TCY to 2^nd plaintiff)21.7.2017 - 3.7.2019

18.1.  However, about a month later, on 4 September 2017, TCY and Tang Tong entered into a purported “sub-lease agreement”[25] with the 2^nd plaintiff, which stated the following.

18.2.  First, it was recited (among other things) that TCY’s right to sub-let the Plot to the 2^nd plaintiff was on the bases that:

-  there was no strict requirement that only manager(s) could sign leases to let Tso land to its members;

-  TKK disputed the validity of the 2013 purported Lease;

-  on 14 January 2017, the Tso had a meeting at which it confirmed afresh the 2013 purported Lease and the validity of the renewal of the lease to TCY, and had resolved to relieve TKK of his managership, so no one representing the Tso could object to the validity of the renewed lease to TCY, which was the basis for TCY’s right to sub-let the Plot to the 2^nd plaintiff.

18.3.  It was agreed that:

(1)  Tang Tong, as a manager and an elder, confirmed on behalf of the Tso, and TCY sub-let the Plot to the 2^nd plaintiff for a term from 21 July 2017 to 3July 2019[26] (i.e. the expiry of the 2013 purported Lease), subject to the 2^nd plaintiff’s right to continue to rent the Plot should the Tso continue to let the Plot to TCY beyond that date;

(2)  if anyone questioned the validity of the renewed lease from the Tso to TCY, or his sub-lease to the 2^nd plaintiff, TCY guaranteed that he would obtain the Secretary’s consent in writing that the 2013 purported lease to TCY and others was valid, and therefore that his sub-lease of the Plot to the 2^nd plaintiff was also valid;

(3)  to avoid TKK continuing to dispute the validity of the lease to TCY and others and in order to clarify that TKK was no longer a manager of the Tso, TCY and Tang Tong would as soon as possible arrange for the managers and members of the Tso to inform the Secretary that TKK had been terminated as a manager, and so TKK had no right to perform the functions of a manager. 

19.  Notwithstanding (2) and (3) however, as noted above, TKK remained a registered manager at all material times up to and including the time of trial.  

2019 purported Lease(Tso to 2007 lessees) 20.7.2019 - 30.9.2022, and purported Sub-lease (TCY to 2^nd plaintiff) 21.7.2019 - 20.7.2022

20.1.  Finally, a “Confirmation of record of a meeting of the Tso”[27] signed by TCY as “Party A”[28] and Tang Tong as manager stated that on 26 August 2019, TCY confirmed as a member of the Tso that the Tso had held a members’ meeting (the date of which was not stated) resolving that the Plot be leased to the 2007 lessees for a term from 20 July 2019 to 30 September 2022 (“the 2019 purported Lease”), and that he had sub-let it to the 2^nd plaintiff from 21 July 2019 to 20 July 2022 (“the 2019 purported Sub-lease”) on terms set out in the “Sub-lease Agreement” dated 4 September 2017.  TCY also stated that he and the 2^nd plaintiff had signed another tenancy book to confirm this sub-lease.

20.2.  There was no written 2019 purported Lease or 2019 purported Sub-lease in the appeal bundles.  There was also no evidence of receipt of rent by the Tso.

21.  It is notable that:

-  in §16D of the Re-Amended Defence, it was pleaded that there was no meeting of the Tso and no resolution passed by the Tso for the 2019 purported Lease, as alleged;

-  in §13 of the Re-Amended Reply, §§16A and 16B of the Re-Amended Defence were denied, but there was no traverse of §16D.

The judge’s Judgment

22.1.  After a 3-day trial, the judge gave his Judgment in which he held:

-  it is necessary for all the managers to agree to a lease and this requirement cannot be overridden by the decision of the members (§§43, 45-6, 49-51);

-  TKK (who remained a registered manager up to and including the time of trial, as the Secretary had not approved any replacement: §§52-3) had refused to agree to the 2013 purported Lease (§§44, 47) and he had not been informed of the 2019 purported Lease and did not agree to continue to let the Plot to the 2007 lessees (§58);

-  due to the lack of unanimous agreement of the managers, the 2013 purported Lease and the 2019 purported Lease to the 2007 lessees were void (§§59-60);

-  TCY could not give a better title than he had; therefore, subject to the plaintiffs’ argument on tenancy by estoppel, the 2^nd plaintiff was not entitled to an order for possession as sub-lessee of the Plot (§60);

-  in respect of the plaintiffs’ reliance of tenancy by estoppel (by acceptance of rent under the 2013 purported Lease and the purported Sub-leases: §62 and §64), it was accepted by their counsel that such an estoppel operates only between the lessor and the lessee, and is not binding on strangers such as the 2^nd defendant (§65).

22.2.  Accordingly, the judge dismissed the action.

Appeal

23.  The Notice of Appeal focused on one point, being the judge’s holding that there was no tenancy by estoppel.  

Discussion

24.  First, as noted earlier, the 2^nd plaintiff’s counsel accepts that notwithstanding §16 of the Judgment, there is no evidence before this court of the “Payment Records” which the judge referred to.  This is most unsatisfactory.  But assuming that the judge was right in finding 3 pages of documents adduced at the trial were “Payment Records” and that they were authentic, that does not assist the 2^nd plaintiff in his claim against the 2^nd defendant. 

25.1.  The principle of “tenancy by estoppel”, and the reason why it does not bind third parties, was clearly explained by Lord Hoffmann in Bruton v London & Quadrant Housing Trust[29], where he held:

“First, the term ‘lease’ or ‘tenancy’ describes a relationship between two parties who are designated landlord and tenant. It is not concerned with the question of whether the agreement creates an estate or other proprietary interest which may be binding upon third parties. ...

Secondly, I think that Millett LJ may have been misled by the ancient phrase ‘tenancy by estoppel’ into thinking that it described an agreement which would not otherwise be a lease or tenancy but which was treated as being one by virtue of an estoppel. In fact, as the authorities show, it is not the estoppel which creates the tenancy, but the tenancy which creates the estoppel. The estoppel arises when one or other of the parties wants to deny one of the ordinary incidents or obligations of the tenancy on the ground that the landlord had no legal estate. The basis of the estoppel is that having entered into an agreement which constitutes a lease or tenancy, he cannot repudiate that incident or obligation. ...” (Emphasis added)

25.2.  The 2^nd defendant was a third party.  He was not let into possession by and did not purport to derive[30] his rights from any of the parties to the leases or sub-leases.  And even if it were to be said that his family had been impliedly permitted by the Tso to continue to stay on the land[31], as will be seen below, the Tso was not bound by any leases with the 2007 lessees after the 2007 Lease expired in July 2013 because TKK, who was throughout a registered manager, never consented to them.

26.  There can be no doubt that TKK was a registered manager at all material times up to and including the time of trial.  Irrespective of whether TKK had ever offered to resign as manager (whether conditionally on his brother replacing him or not), or whether the Tso had accepted his resignation, or had even “terminated” his appointment at the 2017 meeting (the validity of which was not proven), the fact was (as accepted by the parties) that no application was ever made to the Secretary for his removal as registered manager, and he remained throughout a registered manager.

27.  TKK’s opposition to the purported leases after the expiry of the 2007 Lease was significant.  It is well-established that property held by a tso is in the nature of trust property, and upon registration of his appointment under s.15 NTO, a registered manager is in the position of a trustee in relation to tso property.  As the power of dealing with tso property, including the granting of a lease, is vested in the registered manager, in exercising the power to let, the registered managers as trustees are required to act unanimously[32].  It mattered not whether every manager actually signed the leases, but it was imperative that they all consented to it[33]. Absent TKK’s consent, there could be no valid lease.  Even if TCY (or the 2007 lessees) did pay rent to someone in the Tso, that would not create a valid 2013 Lease binding on the Tso by reason of TKK’s opposition as a registered manager.  Nor can it be argued that the 2017 meeting had overridden the need for TKK’s consent when TKK’s unchallenged evidence was that he had never received notice of the meeting, and so the validity of the meeting was not proven.  

Order

28.  For the reasons above, the appeal was dismissed with costs to be paid by the 2^nd plaintiff to the 2^nd defendant, the latter’s costs to be taxed in accordance with Legal Aid Regulations.  We also record that, having regard to the fact that the appeal bundles contained many pages with handwritten comments and obliterations, the 2^nd plaintiff’s solicitors undertook at the hearing not to charge their client for photocopying the bundles which had been prepared in such an unacceptable manner.