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

CACV 98/2017

[2018] HKCA 239

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 98 OF 2017

(ON APPEAL FROM HIGH COURT ACTION NO 1279 OF 2013)

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REASONS FOR JUDGMENT

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Hon Cheung JA:

1.  I agree with the reasons for judgment of Yuen JA

Hon Yuen JA:

2.  This is an appeal by the plaintiff (“the Landlord”) from a Judgment of Anthony Chan J given on 24 March 2017 (“the Judgment”) dismissing its claim for vacant possession, rent and mesne profits, and giving judgment for the defendant (“the Tenant”) on part of his counterclaim in the sum of $620,533 with interest and costs.  At the end of the hearing, we dismissed the appeal with costs to the defendant, and ordered that his own costs be taxed in accordance with Legal Aid Regulations.  My reasons appear below.

Background

3.1.   The property in question is a piece of land in Yuen Long called Lot 87.  In 1980, the Tenant rented the land from the then landlord under an oral agreement.  He erected a plant (“the Plant”) which occupied Lot 87 and surrounding pieces of land.  He ran a wood-cutting and metal engineering business at the Plant, and resided there with his family. 

3.2.   The tenancy was a yearly one, commencing on the first day of each Chinese calendar year.  Rent was increased from time to time.  According to the Tenant, whose evidence the learned judge accepted, he paid the current yearly rent in advance in January 2012 (for the Chinese calendar year spanning 2012-2013).   

4.1.   In August 2012 the Landlord acquired Lot 87.  Its case was that the rental agreed by its predecessor was substantially higher than that asserted by the Tenant, and that the Tenant was in arrears. 

4.2.   The judge accepted the Tenant’s evidence on the amount of rent and his payment thereof for the Chinese calendar year spanning 2012-2013.  There is no appeal from this finding of fact.

5.  Just before the 2012-2013 tenancy expired in January 2013, the Tenant proffered rent to the Landlord for renewal of the term, but the Landlord did not accept it. However the Landlord did not give a valid notice to quit either. 

6.1.   The judge found that the result of the Landlord’s failure to give a valid notice to quit was that the yearly tenancy was automatically extended (i.e. for the Chinese calendar year spanning 2013-2014, expiring at the end of January 2014).  There is no appeal from this finding. 

6.2.   The consequence is that the Tenant was entitled to occupy the property until January 2014.  However from May 2013, the Landlord took various measures to put pressure on the Tenant to leave the property. 

7.1.   On 1 May 2013, the Landlord placed a 20-foot container outside the entrance to the Plant.  On 3 May 2013, the Landlord placed four large concrete blocks outside the entrance.  The following day, 4 May 2013, a metal gate erected by the Tenant was pulled down within hours of its erection. 

7.2.   As a result of the Tenant’s complaints to the police, the Landlord removed the container and the concrete blocks on 20 May 2013. 

8.  However a few days later, the Landlord started to erect an enclosure¹ comprised of metal panels which surrounded the Plant.  Although the Plant was not entirely surrounded, the judge found that one could not access it from the part which was not enclosed, because of the presence of an adjoining structure².  The height of the enclosure was more than double the height of the private car in a photograph in the Appeal Bundle³.  There was a gate in the enclosure but the key for the lock in the gate was not provided to the Tenant.

9.  When the enclosure was completed on 12 June 2013, the Tenant was persuaded by his family to move out of the Plant into a hotel due to concerns about physical safety.  They took their valuables with them, but a stock of wood, together with furniture, machines and equipment remained in the Plant (collectively referred to as “the Remaining Items”).

10.1.   Two days later, on 14 June 2013, the Tenant found the gate locked.  On that day and on 20 June 2013, the Tenant’s son Fung Yiu Chung (“FYC”) reported the matter to the police.  At the police’s request, a representative of the Landlord unlocked the gate to permit FYC to enter the Plant to retrieve some personal items. 

10.2.   Thereafter however, on five occasions until 19 July 2013, FYC had to climb over the enclosure into the Plant to retrieve personal items for his family, as he did not wish to trouble the police any further.  

Proceedings

11.  Meanwhile on 12 July 2013, the Landlord issued proceedings in HCA1279/2013.  It claimed that the Tenant was in arrears and that the tenancy had been forfeited, and demanded vacant possession, rent in arrears and mesne profits.  

12.1.   On 3 January 2014, the Tenant filed a Defence and Counterclaim.  He asserted that he had proffered the correct rent and denied the validity of the notice to quit.  He pleaded that the Landlord was in breach of the implied covenant for quiet enjoyment, and counter-claimed damages for:

(1)   loss due to inability to carry on his business (§16);

(2)   loss of the Remaining Items, viz. the market value of the wood, and the secondhand value of the furniture, machinery and equipment kept in the Plant for which he claimed, in total, $786,000 (§16A); and

(3)   loss of 150 tons of iron he had used to construct the ceiling of the Plant, at a second hand value of $300,000 (§17).

12.2.   In the particulars of §16A, the market value of the wood was set out, and the second hand value of the furniture, and each category of machinery and equipment was particularized.

13.1.   It is notable that in the Tenant’s List of Documents, there were photographs of the machinery and equipment kept in the Plant, as well as its iron ceiling.  As for the wood, the Tenant’s case was that he had looked inside the Plant on 19 July 2013 and had noticed some wood missing.  Subsequently on 22 October 2014, he had seen people removing wood from the Plant, and had reported the matter to the police. 

13.2.   In the Tenant’s 1^st Witness Statement⁴, he set out in §18 the respective values of the Remaining Items save for the furniture.  In his 2^nd Witness Statement⁵, he set out in § 5 the items of furniture and the value of the iron used for the ceiling.

14.  It is notable that the Tenant’s solicitors had in November and December 2014 requested the Landlord’s solicitors for an appointment to make an inventory of the Remaining Items, which requests did not meet with a response from the Landlord’s solicitors.   

The judge’s Judgment

15.1.   The trial took place over 3 days, in the course of which a representative of the Landlord (Mr Chan), the Tenant and his son FYC gave evidence.  The Tenant was not legally represented, legal aid having been discharged prior to the trial.

15.2.   For reasons set out in the Judgment, the judge dismissed the Landlord’s claim.  In respect of the Counterclaim, the judge

(1)   rejected the Tenant’s claim for damages for loss of business (§16 of the Counterclaim) as the Tenant’s evidence was that there was little business going on, and there was no evidence⁶ on what profit, if any, might have resulted from the business operation⁷;

(2)   allowed part of the Tenant’s counterclaim in the sum of $620,533.  This was made up of:

(a) the claimed second hand value of the Remaining Items (§16A of the Counterclaim) discounted at 40%,

plus

(b) the claimed second hand value of the iron (§17 of the Counterclaim) discounted at 50%,

less

(c) rent payable by the Tenant when he was able to occupy the property (ie the period from the start of the Chinese calendar year in 2013 up to 12 June 2013).  

16.  The Landlord appealed.  There was no Respondent’s Notice. 

Appeal

17.  On appeal, Mr Tony Ko⁸ submitted the following points:

(1)   the judge failed to take into consideration evidence that the Tenant was able to access the Plant at all times, either through Gate 1 or Gate 3 (as indicated on exhibit P2), and so he could have collected the Remaining Items and the iron; as the Tenant did not do so, he had abandoned them and the Landlord should not be liable in conversion or detinue;

(2)   the judge had erred in applying a broad brush approach in his assessment of damages as there was “no satisfactory evidence” on quantum; and

(3)   costs of the action should have been apportioned as the Tenant had not been entirely successful.

Discussion

Point (1)

18.1.   Dealing first with Gate 1, Mr Ko submitted that the judge failed to take into account that this gate had, “at least up until 12 June 2013”⁹, been available to the Tenant to collect the Remaining Items and iron.

18.2.   With respect, this submission is meaningless.  The Tenant was in occupation of the Plant up until 12 June 2013, and (as the judge found) he was entitled to remain in occupation until the beginning of 2014.  The Tenant was only persuaded by his family to move out of the Plant due to safety concerns on 12 June 2013. There was no reason why he should have removed the Remaining Items and iron from the Plant, a place he was entitled to occupy, and was actually occupying, before 12 June 2013.

19.  As for Gate 3, this gate itself was not new, but the judge found that the gate was locked (according to Mr Chan, to prevent theft¹⁰).  Hence, the evidence of both FYC and Mr Chan was that FYC had to climb over the enclosure to retrieve personal items. It cannot possibly be argued that the Tenant could move the Remaining Items and iron (which are sizeable, heavy items) out of the Plant that way.   

20.1.   Further some metal panels had at some stage been placed inside the Plant and behind the gate, blocking access to the interior of the Plant (“the blockage”). The panels were higher than the container in a photograph in the Appeal Bundle¹¹.

20.2.   Mr Ko relied on the evidence of Mr Chan who said that this blockage took place only sometime in 2014 at the earliest.  However the judge had found, for reasons set out extensively in the Judgment, that Mr Chan not a credible witness¹². 

20.3.   As for the witnesses for the Defence, the Tenant gave evidence before his son FYC.  In cross-examination it was not put to him that the blockage occurred only in 2014.  In the absence of knowing what the Tenant’s answer would have been, it is unfair for the Landlord to run this point on appeal.

20.4.   As for FYC, his evidence was as follows:

“問： 你接唔接受，你剛才所指第3號閘後面嗰啲鐵塊，其實係陳生2014年嘅時候，先至安置响嗰度？

答：唔接受。

問：有冇咁嘅可能？

答：有可能。”

Mr Ko now seeks to rely on FYC’s answer that it was “possible” that the blockage was erected in 2014. 

21.1.   However it is important to note that this answer immediately followed FYC’s rejection of Mr Chan’s allegation that the blockage was erected only in 2014.  Moreover the judge, who saw and heard the witness, was entitled to discount FYC’s answer of “possible” when viewed against the rest of the evidence.  At § 29, the judge said:

“I reject Chan’s evidence that the [Tenant] and his son(s) were able to access the Plant freely despite the obstacles erected by the [Landlord]. Such evidence is contrary to the purpose of creating the obstacles in the first place, and Chan’s own evidence that the [Tenant’s] family members had gained entry to the Plant by climbing over the Wall¹³. 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”.

21.2.   The judge was entitled on the evidence to arrive at that finding.  In order to put pressure on the Tenant to vacate the land, the Landlord had expended money and manpower to first install the container, and then install the concrete blocks, and then erect the enclosure of metal panels surrounding the Plant.  As the judge observed at §31, “one would not build a wall and leave part of the building readily accessible”.  If the Tenant could have accessed the Plant, there was nothing to stop him accessing it to continue his business there for the remainder of his term of tenancy, which was contrary to the Landlord’s intention for the use of the land.

21.3.   Moreover the Landlord’s hostile attitude towards the Tenant was reflected in its refusal even to facilitate an inventory to be made through solicitors after proceedings had begun.  The judge noted that “Mr Chan had no proper explanation for such failure, and could only say that he intended to negotiate a settlement with the [Tenant]”¹⁴. One would have thought that if the Landlord were in truth amenable to a negotiated settlement, an innocuous act such as providing access to the Plant for the making of an inventory would have been easily done.  The fact that the Landlord rejected even such a simple act shows clearly its hostile attitude to the Tenant.

22.  There is therefore nothing in Mr Ko’s submission that the Tenant could have gained access through Gates 1 and/or 3 to collect the Remaining Items and iron after 12 June 2013.

23.1.   Mr Ko’s further submission was that the Tenant had abandoned the Remaining Items and iron because he accepted in cross-examination that he had taken away “valuables”.  He referred to a passage in the Transcript where the following exchange took place:

“COURT： Mr Fung, Mr Fung…

法庭傳譯主任： 馮生，馮生。

COURT： …the proposition counsel is putting to you is that you have, when you left the plant, taken all the valuables with you. Do you agree with the proposition?

法庭傳譯主任： 咁嘅，大律師向你指出嗰個講法係，睇下你同意仰或唔同意，聽住先，大律師又話喇，你嗰陣離開搬走嘅時候，你攞埋你啲貴重物件，帶埋走，啱唔啱？

答： 咁就啲貴重嘅物件，當然係帶埋走喇。”

23.2.   I regret to say that the submission is quite frankly, disingenuous.  Quite apart from the fact that one would not commonly refer to wood, furniture, machinery and equipment as “valuables”, on the following page there was the following exchange between the judge and Mr Kam:

“COURT: He accepted that he has taken away all the valuable.

MR KAM: Valuable, yes.

COURT: But if you say that, ‘Oh, there was no impediment of any sort. He could have taken anything as and when he liked’ …

MR KAM: Yes.

COURT: … then you’d better put it to him.

MR KAM:   Yes.”

It is notable that Mr Kam did not proceed to put it to the Tenant that there was no impediment to his removal of the Remaining Items and iron, or that, in the words of the judge, “he [the Tenant] could have taken anything as and when he liked”.  It is therefore simply not open to Mr Ko now to argue that the Tenant could have taken away the Remaining Items and iron and that he had abandoned them, merely on the basis of the Tenant’s evidence that he had not included them in the “valuables” he had taken with him when his family persuaded him, for safety reasons, to leave the Plant.  

24.  In light of all the evidence, the judge was entitled to find that “the evidence of the [Tenant] and [FYC] is that they only managed to retrieve their valuables and their light belongings.  Clearly, they were unable to retrieve eg the machinery and the wood that were left in the Plant”¹⁵.

25.  Finally on this ground, as a matter of completeness, I would indicate that I agree with Mr Lin, counsel for the Tenant, that abandonment should have been specifically pleaded¹⁶.  A person who has kept goods belonging to another person without consent must invoke some defence, or else he would be liable to the owner.  The owner is not required to prove that every day during the period of alleged conversion and detinue, he has remained the owner and has not abandoned the goods.  It is for the person who has kept the goods to plead abandonment as a defence, with particulars such as the date from which the owner allegedly abandoned the goods, and by what conduct he has allegedly abandoned them.  The attention of the parties and the court would then be properly focused on the particular date and conduct pleaded. 

26.  For the reasons above, it is clear that Point (1) should be rejected.

Point (2)

27.  Mr Ko submitted that the judge erred in applying a broad brush approach in his assessment of damages as there was “no satisfactory evidence” on quantum.

28.  As I understand it, Mr Ko is not appealing the judge’s finding of fact that the Remaining Items and iron had in fact been lost to the Tenant.  The only issue is what sum the judge should award to the Tenant for their loss.

29.1.   Both counsel have referred the court to a number of cases on the approach that the court should take when it is faced with a situation where the evidence on damages is less than complete.  At the outset, I should point out that there is a vital difference between (1) a situation where there is no evidence and (2) a situation where there is some evidence, but it has not been corroborated as well as it could be. 

29.2.   Where no evidence has been called¹⁷ to prove the quantum of loss suffered, the claimant cannot recover anything other than nominal damages.  Where however the court accepts that loss has been suffered due to the wrongdoer’s act and some evidence of the loss has been adduced, but corroboration (e.g. by way of documentary evidence such as financial statements, tax returns, quotations for supply of replacement goods, etc) of such evidence is not presented, or e.g. due to the nature of the loss, there is difficulty assessing the loss, then it is for the court, taking into account all the circumstances, to estimate the damages “as best it can”.  (I would prefer not to adopt the phrase “broad brush approach”¹⁸ because that gives an impression of inattention to detail, which is not appropriate when the difficulty is due to the fact that corroborative evidence is inadequate).

29.3.   In the present case, the circumstances that the court considered included the fact that the claimant is a blue-collar worker in his 70’s, whom the judge has described as unsophisticated.  It is true that he has not provided any documentary evidence to support his estimates of the second hand value of the Remaining Items and iron, but he had been in the wood-cutting and metal engineering industry for more than 30 years, and the judge was entitled to take his knowledge of the industry and his lengthy experience into account.  It is notable that the judge said the following¹⁹:

“He [the Tenant] is in his 70’s and an unsophisticated person ... he was forthcoming, spontaneous ... and firm in his answers. ... nor have I detected any exaggeration ... in the [Tenant’s] evidence”.

29.4.   Apart from questions asking the Tenant if he had attempted to ask a third party to confirm market value and confirming that the quantum was his own estimate²⁰, there was no cross-examination challenging the quantum he asserted.  This was despite the fact that the Remaining Items and iron had been claimed right from the start in the Counterclaim, their value had been set out in the Tenant’s Witness Statements, and they had been in the possession of the Landlord, so that it could procure an assessment of their value with which it could challenge the Tenant if so advised.

30.  Finally I do not see how the judge’s discounts of the claimed values assist the Landlord.  Given the judge’s view of the Tenant’s honesty and absence of exaggeration, the judge could hardly be criticized if he did not apply a discount at all.

31.  For the above reasons, there was no merit in Point (2) either.

Point (3)

32.  Mr Ko did not elaborate on this ground in his oral submissions.  That was sensible.  Apart from the well-established principle that costs are at the discretion of the judge, it should be noted that the judge had made only a costs order nisi in his Judgment.  No application was made by the Landlord for a variation of that nisi order, even though the Tenant made an application for variation on the ground of the Landlord’s failure to accept a sanctioned payment.  Absent such an application by the Landlord (at which the arguments on the grounds it has now advanced would have been heard and decided by the judge), it would only be in the clearest of cases where an appellate court would interfere with the judge’s costs order.  This is not one of those cases.

Order

33.  For the reasons set out above, I dismissed the appeal and made the orders set out in §2 above.

Hon Kwan JA:

34.  I agree with the reasons for judgment of Yuen JA