ONG AI MOI AND ANOTHER v. CHAN CHI SHING AND OTHERS

DCCJ 6584/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6584 OF 2002

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BETWEEN

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JUDGMENT

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1.  This is an application by the Plaintiffs (by original action) for summary judgment against the 1^st to 3^rd Defendants. The Plaintiffs sought an order of possession in respect of Ground Floor and Cockloft, No. 274 Temple Street, Kowloon, Hong Kong with damages for trespass to be assessed.

I.    BANKGROUND

2.  Madam Khan Tat Yin (“Madam Khan”) was the Abbess of Tse Tho Aun Buddhist Temple (“Temple”) in Singapore before she passed away in 1994.  The Plaintiffs were adopted by Madam Khan at very young age and were brought up at the Temple.  Madam Ong (the first named plaintiff) is now the Abbess of the Temple.

3.  Madam Khan and the Plaintiffs travelled regularly to Hong Kong in the 1980s to visit monks and nuns at various Buddhist Temples.  In 1981, a Mr. Fung Ling Yin (“Mr. Fung”), who was a friend of Madam Khan, raised the idea that a property should be purchased in Hong Kong to allow Madam Khan and others from the Temple to reside in when they visit Hong Kong.  The property would also provide a venue for them to install an altar and other religious items and to carry out their religious activities.

4.  Through the introduction of Mr. Fung, a property known as Flat No. 9, 7^th Floor, Man Wai Building, Nos. 1-23 Man Cheong Street & Nos. 2-24 Man Wai Street, Kowloon (“1^st Property”) was purchased in 1981.  The Plaintiffs became the registered owners of the 1^st Property.

5.  In August 1985, another property known as No. 274 Temple Street, Kowloon, Hong Kong (“2^nd Property”) was acquired in the Plaintiffs’ names.  The premises that is the subject matter of these proceedings is the Ground Floor and Cockloft of the 2^nd Property (“the Premises”). 

6.  The Plaintiffs’ case is that the funds for the purchase of the 1^st and 2^nd Properties came from a pooling of funds from various sisters of the Temple.  They purchased the 2 properties as a group and the Plaintiffs were put forward to hold the properties on their behalf.

7.  Mr. Kan Kit (“Mr. Kan”), who was a relative of Madam Khan, came to Hong Kong from the Mainland in 1981.  He was by then 64 years old and came to Hong Kong after his retirement.  On 19 August 1985, the Plaintiffs executed a power of attorney (“1^st Power of Attorney”) in favour of Mr. Kan.  Under the 1^st Power of Attorney, the Plaintiffs were described as “being entitled at law and in equity to the [2^nd Property]”.  Mr. Kan was appointed to be the Plaintiffs’ attorney to manage the 2^nd Property on the Plaintiffs’ behalf and was given, inter alia, the following powers and authorities:

“4. To grant leases and tenancies of the said property or any part thereof to such person firm or corporation at such rents and upon such terms as the Attorney shall think fit …”

“12. For all or any of the purposes of this Deed to engage Counsel, Solicitors Architects Contractors or other persons on such terms and conditions and at such remunerations as the Attorney shall think fit.”

“16. To appoint and remove at pleasure any substitute for or agent under the Attorney in respect of all or any of the matters aforesaid upon such term as the Attorney think fit.”

8.  For the next 17 years, the 2^nd Property was managed by Mr. Kan.  Records of the income and expenditure were kept by him and the Plaintiffs exhibited those from 1994 to part of 1996.

9.  In April 2002, the Plaintiffs were approached by the 1^st Defendant who is the grandson of Mr. Kan.  The Plaintiffs subsequently met the 1^st Defendant at the Temple.  The Plaintiffs said the 1^st Defendant requested them to allow him to assist his grandfather to manage the 2^nd Property and he wanted to let the Premises to a charitable institution at a nominal rent in exchange for maintaining the Premises.  The Plaintiffs claimed that the request was rejected.

10.  The Plaintiffs also claimed that shortly after the 1^st Defendant returned to Hong Kong, they got a call from him and were told that the 3^rd Defendant wanted to rent the Premises.  The 1^st Defendant said that it was for charity and that he was trying to help the Plaintiffs do their charity work.  The Plaintiffs said they rejected the request.  At the hearing before me, the 1^st Defendant confirmed that there was indeed such a conversation but denied that his suggestion was rejected.  He said the Plaintiffs simply said they would decide later but never got back to him.

11.  Unbeknown to the Plaintiffs, by a document entitled “Power of Attorney” dated 31 January 2002, Mr. Kan authorised the 1^st Defendant to manage the 2^nd Property.  The document was referred to as the “2^nd Power of Attorney” by the parties.  It provides as follows:

“I, Kan Kit, manager of the above property, have the right to lease the aforesaid property and receive the rent thereof. Owing to my old age and also the old age of the aforesaid property, I am worried that its lack of maintenance for a long period of time will result in objects falling off the building which may hurt the passersby, thus incurring criminal and civil liabilities. I hereby entrust and authorise my grandson Mr. Chan Chi Shing to seek tenants, to improve the long-term lack of maintenance of the aforesaid property, and to enter into new tenancy agreements with new tenants on my behalf.”

12.  By a Chinese tenancy agreement dated 11 May 2002, entered into between the 1^st Defendant as a representative of the landlord and the 2^nd Defendant as tenant, it was agreed that the Premises be let to the 2^nd Defendant for a fixed term of 3 years at a monthly rent of HK$2,000 (“Tenancy Agreement”).  It was also provided in the Tenancy Agreement that the 2^nd Defendant be responsible for maintenance of the Premises and that the Tenancy Agreement is renewable for 15 years with no increase in rent.

13.  On 8 October 2002, the 1^st Power of Attorney was revoked by a Deed of Revocation.  Mr. Kan acknowledged receipt of the said Deed.

14.  The Plaintiffs claim that the occupation of the Premises by the 1^st to 3^rd Defendants were without their consent and were unlawful.  Further, the 1^st Defendant was never authorised to enter into the Tenancy Agreement and to let the Premises to the 2^nd Defendant.  The Plaintiffs therefore claim an order for possession of the Premises together with damages for trespass.

15.  The 1^st Defendant’s case is that the money used to acquire the 2^nd Property (including the Premises) came from Madam Khan.  The purpose of the purchase was to let Mr. Kan let out the 2^nd Property and to collect the rental income for his own living expenses as well as for the expenses for maintaining the building. Mr. Kan is said to be the “the person who is entitled to the immediate possession of” the Premises.  What the 1^st Defendant appears to be saying is that the 2^nd Property was held on trust by the Plaintiffs for Mr. Kan.

16.  The 3^rd Defendant is a company limited by guarantee and was authorised by the 2^nd Defendant to occupy the Premises.  The 2^nd and 3^rd Defendants admitted that the Plaintiffs are the registered owners of the 2^nd Property but argued that they are entitled to occupy the Premises by reason of the Tenancy Agreement entered into with the 1^st Defendant as an agent of “the landlord of the Property”.  They claimed that prior to entering into the Tenancy Agreement, the 2^nd Defendant was orally assured by the 1^st Defendant that: (i) Mr. Kan was the beneficial owner of the Premises; and (ii) he had proper authority from Mr. Kan to negotiate and sign the Tenancy Agreement.

II.    DISCUSSION

(a)    1^st Defendant’s Case

HCA 1120 of 2004

17.  The Plaintiffs argued that there is no defence to their claim.  Insofar as the 1^st Defendant is concerned, it is argued that his case was already rejected by Deputy High Court Judge Gill a Determination dated 23 May 2008 in HCA 1120 of 2004 (the “Determination”). In that action, the Plaintiffs herein sought an injunction to restrain the 1^st Defendant herein from trespassing, interfering with or intermeddling in the management of the 1^st and 2^nd Properties. 

18.  In that action, the 1^st Defendant placed heavy reliance on a document known as the “Beneficiary Agreement” purportedly signed by the Plaintiffs which he claims to be a proper authorisation giving him rights to manage the 2^nd Property (referred to as the 1^st Property in the Determination).  The document also provides that the Plaintiffs “agree Mr. Kan Kit (holder of Hong Kong Identity Card No. H471194) as beneficial owner of the said premises No. 274 Temple Street, Kowloon with all rights to use and enjoy the property at all times hereafter.”

19.  In the Determination, the learned deputy judge refused to set aside the default judgment entered against the 1^st Defendant.  After having examined the Beneficiary Agreement, he observed that the Beneficiary Agreement “have the appearance of not having been spontaneously recorded.  Rather that they have been slowly and carefully written, consistent with someone copying genuine versions.”  He also commented that the document was “quite ungrammatic [sic] and sparse in detail”. He went on to conclude that “… the Beneficial Agreement not only is not one, it has all the hallmark of a sham document, unprofessionally drawn, intended to mislead the causal observer.” Although the learned deputy judge was not prepared to find as a fact that the document is a counterfeit, he went on to conclude that there was overwhelming evidence to counter the authenticity of the Beneficiary Agreement and that the 1^st Defendant’s case was bound to fail.

20.  Although the issues involved in HCA 1120 of 2004 may not be identical to the issues in this action, the 1^st Defendant’s case is the same, i.e. that Mr. Kan was the beneficial owner of the 2^nd Property and that the 1^st Defendant was properly authorised by Mr. Kan to let out the same. 

21.  As pointed out by Ms. Leung (counsel for the Plaintiffs), the Beneficiary Agreement contradicts with contemporaneous documents and various matters that are not in dispute including: (i) the 1^st Power of Attorney where the Plaintiffs were described as “being entitled at law and in equity to the [2^nd Property]”; (ii) the fact that accounts of the 2^nd Property were kept by Mr. Kan and provided to the Plaintiffs; and (iii) the 2^nd Power of Attorney describing Mr. Kan as the “manager”. These factors are highly material and relevant.

22.  Having considered the background that are not in dispute, I also fail to see why Madam Khan, who was in the early 1980s still the abbess of the Temple, should purchase the 2^nd Property in the names of the Plaintiffs if her intention was to provide for her cousin Mr. Kan.

23.  Having considered the evidence before me, I find it difficult to accept the 1^st Plaintiff’s case.  I also agree with the conclusion reached by the learned deputy judge.

24.  In the Defence of the 1^st Defendant in this action, he also relied on the 2^nd Power of Attorney allegedly provided to him by Mr. Kan authorising him to enter into the Tenancy Agreement.  As I have rejected the assertion that Mr. Kan is the beneficial owner or somehow entitled to the immediate possession of the 2^nd Property, I also reject the argument that 1^st Defendant is entitled to rely on the 2^nd Power of Attorney to let the 2^nd Property to the 2^nd and/or 3^rd Defendants on the basis that Mr. Kan was the beneficial owner of the 2^nd Property.  As stated above, it is clearly stated in the 2^nd Power of Attorney that Mr. Kan was the “manager”.  The 1^st Defendant’s case is clearly inconsistent with the document. 

(b)  2^nd and 3^rd Defendants’ Case

Validity of the Tenancy Agreement

25.  Mr. Tsui (counsel for the 2^nd and 3^rd Defendants) argued that the Tenancy Agreement was entered into by the 2^nd Defendant with the 1^st Defendant as agent for “the landlord”.  He submitted that reference to “the landlord” in the Defence of the 2^nd and 3^rd Defendants was to Mr. Kan and/or the Plaintiffs and that the triable issue in this matter is the 1^st Defendant’s capacity when he entered into the Tenancy Agreement.

26.  In paragraph 9(b) of the Defence of the 2^nd and 3^rd Defendants, it was clearly stated that the 1^st Defendant had orally assured the 2^nd Defendant that Mr. Kan was the beneficial owner of the 2^nd Property and that he had the authority from the beneficial owner to negotiate and sign the Tenancy Agreement.  The reference to the “landlord” in paragraph 9(a) must be to Mr. Kan rather than the Plaintiffs.     

27.  However, Mr. Tsui argued that even if Mr. Kan was not the beneficial owner but merely a caretaker or manager of the 2^nd Property, he was entitled under the 1^st Power of Attorney to authorise the 1^st Defendant to enter into the Tenancy Agreement.  As the 1^st Power of Attorney (dated 19 August 1985) was not revoked until 8 October 2002, the Tenancy Agreement (dated 11 May 2002) was therefore entered into when the 1^st Defendant had authority to do so under the “chain of authority from the Plaintiffs”.  This is supported by the fact that Mr. Kan described himself as the manager in the 2^nd Power of Attorney.

28.  In reply, Ms. Leung argued that: (i) the pleaded case of the 2^nd and 3^rd Defendants was that the 1^st Defendant was authorised by Mr. Kan (as opposed to the Plaintiffs) to let out the 2^nd Property.  They should not be permitted to shift their position to rely on the 1^st Power of Attorney; and (ii) the Plaintiffs had already informed the 1^st Defendant that he was not entitled to let the 2^nd Property to the 3^rd Defendant during their telephone conversation that took place after the 1^st Defendant visited the Plaintiff in Singapore in April 2004.  He was therefore not entitled to rely on the 2^nd Power of Attorney when he entered into the Tenancy Agreement.

29.  The issue that I have to determine is whether the 1^st Defendant was authorised to enter into the Tenancy Agreement as an agent for the Plaintiffs.  As accepted by Ms. Leung, on the face of 2 power of attorneys, the 1^st Defendant appeared to have authority from Mr. Kan, who was in turn authorised by the Plaintiffs, to enter into the Tenancy Agreement.  I am not prepared to reject Mr. Tsui’s argument at this stage.

30.  As to the alleged telephone conversation, whilst there is no dispute that there was such a conversation between the Plaintiffs and the 1^st Defendant, what was actually said during the telephone conversation is not something that I can resolve at this stage. 

31.  The fact that the validity of the Tenancy Agreement is in issue is not the end of the matter.  It does not follow that the 2^nd and 3^rd Defendants are entitled to rely on the Tenancy Agreement to oppose the order for possession.  The term of the Tenancy Agreement was for 3 years commencing 11 May 2002.  Although the 2^nd Defendant had the option to renew the same for another term of 15 years, the 2^nd Defendant was required under clause 2 of the Tenancy Agreement to give notice to the 1^st Defendant one month prior to the expiry of the first term, i.e. on or before 12 April 2005.  In the circumstances, leaving aside the question of authority, the purported notice dated 20 May 2005 from the 2^nd Defendant’s solicitors to the 1^st Defendant (as agent for Mr. Kan) was clearly out of time.  It follows that the Tenancy Agreement had already come to an end and the validity of the Tenancy Agreement is not something that should prevent the Plaintiffs from recovering possession of the Premises.

32.  Mr. Tsui then argued that the Plaintiff is not entitled to rely on the fact that the Tenancy Agreement had expired because it is an event which took place subsequent to the commencement of these proceedings.  He argued that determination of the merit of the case should be based on the circumstances giving rise to the claim and not subsequent developments.

33.  I disagree with Mr. Tsui’s submissions. It is well established that a cause of action accruing after the date of issue of the writ cannot be included in a pleading without the consent of the other party.  However, the Court is entitled to take into account the circumstances that has arisen since the commencement of proceedings.  Order 18 r. 9 of the RDC provides that “… a party may in any pleading plead any matter which has arisen at any time, whether before or since the issue of the writ”. 

34.  Mr. Tsui then argued that as the 1^st Power of Attorney was revoked in October 2002, the 1^st Defendant no longer had the requisite authority to represent the Plaintiffs and/or Mr. Kan.  The option to renew should therefore be extended with the appropriate party after the beneficial ownership of the Premises is determined after trial. 

35.  What Mr. Tsui had submitted is that the 2^nd and 3^rd Defendants can somehow benefit from the dispute between the Plaintiffs and the 1^st Defendant to extend the term of the Tenancy Agreement.  I have no hesitation in rejecting this submission.  The 2^nd and 3^rd Defendants were already party to these proceedings prior to April 2005 and were aware of the respective positions of the Plaintiffs and the 1^st Defendant.  There was nothing that prevented the 2^nd and 3^rd Defendants from attempting to exercise the option to renew by giving notice to the Plaintiffs and Mr. Kan directly.  They have obviously failed to do so.

Estoppel Argument

36.  As his fallback position, Mr. Tsui argued that the Plaintiffs are estopped from claiming beneficial ownership of the Premises as they have confirmed or acknowledged that Mr. Kan was the beneficial owner of the Premises prior to the commencement of this action.  The alleged confirmation or acknowledgement is contained in a Notice of Increase in Rent (Form TR 11) dated 2 September 1997 issued under the Landlord and Tenant (Consolidated) Ordinance (“Notice”).  The Notice was signed by Messrs. Yu, Tsang & Loong (“YTL”) for and on behalf of Mr. Kan who was described as the landlord.  Although the Notice was not signed by the Plaintiffs, Mr. Tsui urged the Court to infer that YTL were representing the Plaintiffs and the representations contained therein were made on their behalf as YTL were solicitors representing the Plaintiffs at the commencement of these proceedings.

37.  The estoppel argument is a bad one for a number of reasons.  In particular, it has been pointed out that the Notice was in respect of 1^st Floor of the 2^nd Property and not the Premises in question.  No reliance can be placed on a representation in respect of a different property.

(c)   2^nd & 3^rd Defendants’ Counterclaim against the Plaintiffs

38.  There is a counterclaim by the 2^nd and 3^rd Defendants against the Plaintiffs.  It is alleged that by taking out this action against them with the full knowledge that Mr. Kan is the beneficial owner of the Premises, the Plaintiffs have caused damages to the 2^nd and 3^rd Defendants.  Leaving aside the ambiguity in the cause of action, it follows from my conclusion on the Plaintiffs’ claim that they have a legitimate and meritorious claim against the Defendants.  The counterclaim is bound to fail.

III.   CONCLUSION

39.  I therefore allow the Plaintiffs’ application and give an order of possession in respect of the Premises against the 1^st, 2^nd and 3^rd Defendants. 

40.  There shall be a costs order nisi that costs of the application be to the Plaintiffs with certificate for counsel, to be taxed if not agreed.

41.  For the avoidance of doubt, I have explained that in giving the aforesaid order, I have not been able to determine the validity of the Tenancy Agreement.  The Plaintiffs' claim for trespass for the period covered by the Tenancy Agreement will have to be determined at trial.  However, as I have decided that there is no basis for the 2^nd and 3^rd Defendants to occupy the Premises after the expiry of the Tenancy Agreement, the Plaintiffs should be entitled to damages for trespass for that period to be assessed.