WONG CHUN CHOI also known as WONG CHEUN CHOI AND OTHERS v. MAK TAK SUM, also known as MAN SUM

DCCJ 3902/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO.3902 OF 2013

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REASONS FOR DECISION

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1.  On 1 Dec 2016, 2 summonses were heard before me.

2.  In order of time, the 1^st is defendant’s summons filed 2 June 2016 (“the summons”) pursuant to consent order dated 24 June 2014(“the Tomlin order”) entered into by the 1^st to 4^th plaintiffs (“the plaintiffs”) and the defendant for carrying out into effect the terms set out in the schedule to the Tomlin order (“the schedule”).

3.  The 2^nd is defendant’s summons filed 25 Nov 2016 for leave to amend the summons (“the amendment summons”) as per draft amended summons annexed thereto (“the amended summons”).

4.  After hearing Mr Wong for the defendant and Mr Yeung for the plaintiffs, once Mr Yeung changed his stance and consented to the proposed amendments, I gave leave to amend the summons as per para 1 and 2 of the amendment summons.

5.  After hearing further from the two of them on the amended summons, I made no order as per para 1 thereof but made orders on para 2  to 4 thereof as follows:

2) an Order that the plaintiffs do on or before 20 Jan 2017 execute and procure Wong Pui Yin, the executrix of the estate of the 5^th plaintiff, to execute a Deed Poll in terms of the draft Deed Poll with Land Boundary Plan annexed as shown in Attachment I hereto and register the said Deed Poll in the Land Registry;

3) an Order that the plaintiffs, do on or before 20 Jan 2017 execute and procure the executrix of the estate of the 5^th plaintiff to execute a lease in terms of the revised draft lease as shown in Attachment II hereto, except for new addresses to be inserted for the lessors and the lessee; and

4) an Order that the plaintiffs do on or before 20 Jan 2017 deliver the lease duly executed by the plaintiffs and the said executrix as aforesaid to the defendant through his solicitors Messrs. Wong, Hui & Co,, Solicitors.

6.  After hearing both parties, I then made no order as to the costs of and incidental to the amended summons.

7.  Finally, I ordered defendant to pay plaintiff such costs of and occasioned by the amendment summons. And I ordered plaintiff to pay defendant’s costs of the hearing before me in respect of the amendment summons, whose hearing time lasted about 1 hour.

8.  I ordered for the above 2 sets of costs awarded by me to be summarily assessed on papers and gave directions for filing of skeleton bills and written objection, if any, by the parties.

9.  Below are my reasons for making my decisions aforesaid.

Background

10.  The 5 plaintiffs sued the defendant to recover outstanding rent and possession of a piece of land. Defendant counterclaimed for adverse possession of a portion he occupied (“the occupied portion”).

11.  Through mediation, the plaintiffs and the defendant came to execute a settlement agreement dated 12 Jun 2014 (“the settlement agreement”), whereby they agreed, among others, that:

1)  the plaintiffs for themselves and estate of 5^th plaintiff (“the estate”) shall demise the occupied portion to defendant for 10 years from 1 Jul 2014, with the right to renew for 5 successive terms;

2)  the plaintiffs shall procure personal representative (“PR”) of the estate to be appointed as soon as practicable;

3)  the plaintiffs shall procure that they and PR of the estate shall execute a formal lease with defendant in accordance with the agreed terms within one month after grant of probate for the estate;

4)  they shall jointly appoint land surveyor to prepare a division plan for carving out the occupied portion; and

5)  they shall enter into consent order to stay the action pending implementation of the terms of the agreement in full.

12.  By clause 3 thereof, the formal lease shall contain provisions for landlord’s right of forfeiture for non-payment of rent, payment of stamp duty, rate and rental deposit, giving notice of assignment and renewal of terms, and non-user of the occupied portion for unlawful purpose.

13.  Clause 3.2 thereof further provides for: “the tenant shall not commit any breach of the lease conditions under which the occupied portion is held from the government (other than maintaining and repairing the existing structures thereon)”.

14.  On 24 Jun 2014, the Tomlin order was made, staying the action between the plaintiffs and the defendant, save for the purpose of carrying the terms in the schedule (which terms mirrored the aforesaid provisions of the settlement agreement) into effect.

15.  On 23 Jul 2014, probate of the estate was granted by the Court of First Instance.

16.  On 14 Aug 2014, a land surveyor jointly appointed by the plaintiffs and the defendant completed a land boundary plan setting out the occupied portion.

17.  Since the Tomlin order, correspondences ensured between plaintiffs’ solicitors and defendant’s solicitors with each side offering different proposals about the terms of the lease to be executed under the settlement agreement.

18.  Disagreement between them centered on clause 5.2 of a draft lease prepared for the occupied portion (“the draft lease”), which reads “Not to cause suffer or permit any contravention of the provisions of the government lease or conditions under which the landlord holds the land, and to indemnify the landlord against such breach”.

19.  The defendant’s solicitors’ proposal to add the words “and which contravention is not tolerated by the government” after the words “the land” in clause 5.2 (“the amendment proposal”) was found unacceptable by the plaintiffs.

20.  On 2 Jun 2016, the summons was taken out whereby defendant asked for an order for the plaintiffs and the estate do execute the draft lease attached thereto, inclusive of the amendment proposal, or in such other terms as may be settled by the court.

Evidence

21.  By his affirmation filed 2 Jun 2016, defendant repeated that he found clause 5.2 of the draft lease unacceptable. He stressed that, as the plaintiffs well know, structures have been erected on the land concerned without government approval. They are in breach of the government lease but have been tolerated under government land policy. If the formal lease be executed with clause 5.2 without the amendment proposal, he will be immediately in breach of the lease.

22.  Defendant therefore considered the amendment proposal necessary and reasonable as a condition for accepting clause 5.2 of the draft lease. The spirit of the settlement agreement being the preservation of the status quo, he said he failed to see why the plaintiffs should be entitled to forfeit his lease for breach of government lease when the same is tolerated by the government.

23.  By his affirmations filed 28 Jul 2016, 1^st plaintiff made it clear that any discussion in the correspondence is not binding unless and until a formal lease has been duly signed by the parties, and any further amendment to the draft lease must be reasonably made and in accordance with the settlement agreement.

24.  The 1^st plaintiff countered that as the spirit of the settlement agreement was to preserve the status quo as of 24 Jun 2014, the existing structures to be maintained and repaired under clause 3.2 of the schedule (i.e. clause 3.2 of the settlement agreement) must refer to those existing at the time of the Tomlin order.  

25.  The defendant, the 1^st plaintiff pointed out and produced photos and other documents as proof, had turned existing wooden huts and pigsties into residential cubicle after the Tomlin order. Such change was, it was said, substantial alteration and not mere repair nor renovation, not to mention the cubicles are no longer the same structures. They are in breach of government lease and could not be tolerated by the government.

26.  The 1^st plaintiff prayed for the dismissal of the summons on the ground that the amendment proposal goes outside the exclusion in clause 3.2 of the schedule and unreasonably forces the plaintiffs to accept defendant’s breaches of government lease committed after the entry of the Tomlin order or the settlement agreement.

27.  By his reply affirmation dated 18 Aug 2016, the defendant withdrew concessions he previously made regarding terms that plaintiffs intended to impose but outside the terms of the settlement agreement. For example, the agreement reserves no right of forfeiture for breaches other than non-payment of rent.

28.  Defendant denied that he had so modified structures on the occupied portion that they were no longer the same structures existing at the time of the settlement agreement. He left it to the court to settle the terms of the lease to be executed by the parties.

The amendment summons

29.  By the draft amended summons annexed thereto, the draft amendments first seek a declaration at para 1 that the plaintiffs are not entitled to include in the lease to be executed pursuant to the settlement agreement any provisions not expressly included in the schedule and, secondly, execution of a revised draft lease of the occupied portion attached thereto which contain the terms of the settlement agreement and no more (“the revised draft lease”) or in such other terms as may be settled by the court.

30.  In the course of Mr Yeung making submissions against the amendments summons, I indicated to him that the amended summons if allowed to proceed is no obstacle to him arguing for clauses in the lease in addition to those found in the settlement agreement (i.e. he could argue against declaration sought in para 1 and for inclusion of such terms other than those in the revised draft lease). He sought time to take instructions and I so gave.

31.  After taking instructions, Mr Yeung consented to the draft amendments. In view of that and in line with usual principles governing amendment applications adverted to by Mr Wong, I gave leave to amend the summons as per the amendments summons. Despite its lateness,there is, as I see it, no prejudice to the plaintiffs which cannot be compensated by costs or otherwise if the amendments are allowed.

The amended summons

32.  Mr Wong submitted that the settlement agreement contained comprehensively all the terms to be included in the lease to be executed by the parties. He stressed that the settlement agreement was drafted by mediator after lengthy negotiation between the parties and all the parties entered into it with full legal advice.

33.  The settlement agreement, he stressed, provided for more than minimum clauses for a lease, such as right of forfeiture for non-payment of rent and covenant not to breach government lease.It nowhere says the parties are to agree on other terms in due course.

34.  A lease was, he emphasized, not entered at the same time to the settlement agreement because probate of the estate and division plan of the occupied portion remained to be sorted out.

35.  He made it clear, and referred to correspondences as proof, that defendant embarked on negotiating with plaintiffs other terms not included in the settlement agreement to be included in the draft lease solely to accommodate plaintiffs and not otherwise.

36.  Nonetheless, he does not rule out scope for this court to intervene to include other terms into the revised draft lease than those appearing in the settlement agreement, though this court should be slow to do so without agreement of the parties.

37.  Mr Yeung submitted that the settlement agreement contained only the basic terms to be included in the revised draft lease. There is no entire agreement clause in the settlement agreement. Additional terms are to be agreed by the parties and they must be reasonably made and in line with the settlement agreement.

38.  According to Mr Yeung, “existing structures” in the settlement agreement, properly construed, must mean such structures existing as at the date of the Tomlin order.

39.  In view of this submission, I asked Mr Yeung what additional terms, if any, he would like this court to include in the revised draft lease should this court rule in his favour that the settlement agreement provided only for the basic terms of the lease. Mr Yeung sought adjournment to take instructions again and I granted it.

40.  Having taking instructions, Mr Yeung handed in copy of the revised draft lease with handwritten amendments at 2 places. First, new addresses are to be inserted for the landlords and the tenant. Second, he amended clause 2.2 to read “The lessee shall not commit any breach of the lease conditions under which the land is held from the government (other than maintaining and repairing the existing structures as existed in the land as at the date of the settlement agreement on 12 Jun 2014 (italics added by handwriting)”.

41.  For reasons explained in details by 1^st plaintiff in his affirmation, Mr Yeung asked me to make an order for execution of a lease in terms of the revised draft lease as handwritten amended by him aforesaid. For para 1of amended summons, he opposed any order made on it.

42.  Mr Wong in reply did not object in principle to the 2 handwritten amendments sought by Mr Yeung, save to suggest to change the last few words of clause 2.2 of the revised draft lease to read “the existing structures as they have existed on the land since 12 Jun 2014 (italics suggested)”. And he no longer insisted on getting an order per para 1 of the amended summons.

43.  The orders I made on the amended summons are at para 5 above and I do not repeat them herein. In gist, I declined the declaration sought and I kept the wordings of clause 2.2 of the revised draft lease to be the same to those of clause 3.2 of the settlement agreement.

44.  I declined the declaration sought as Mr Wong no longer required it. His concession made it no longer necessary for me to resolve the respective contentions.

45.  In any event, I doubt if such dispute between parties had any practical meaning. Had the settlement agreement contained all the terms of the lease to be executed as defendant contended, there was nothing in my view to prevent the parties from agreeing to vary it and to agree on additional terms to be included, as defendant had allegedly accommodated the plaintiffs in the past by way of solicitors’ correspondences.

46.  I kept the original wordings of clause 3.2 of the settlement agreement as I think it best reflected the parties’ intention at the time of the agreement. I do not think it appropriate or proper on this occasion for me to improve on the parties’ own wordings in the settlement agreement, be it on the ground of interpretation or otherwise.

47.  Should dispute, if any, really arise in future between the government, the defendant and/or the 5 plaintiffs over the structures on the occupied portion (and the hearing before me is, I think, no good forum for resolving such dispute), the defendant and the 5 plaintiffs could, I think, seek the interpretation of the court to resolve their dispute over the terms of the lease executed by them.

Costs of the amended summons

48.  Mr Wong asked for his costs to be taxed if not agreed. He submitted that costs should follow the event.

49.  Mr Yeung opposed to Mr Wong’s application. He submitted that there should be no order as to costs. Declaration was, he said, not granted as per para 1 of the amended summons. And defendant changed his stance at the 11^th hour of the summons.

50.  The starting point must be that the costs of these interlocutory proceedings before me are at my discretions: O.62 r.3(2A), Rules of the District Court. I may order them to follow the event or make such other orders as I see fit. Of course, my discretion must be exercised judicially.

51.  I agree with Mr Yeung, and I note, that defendant did not obtain the declaration he sought in para 1 of the amended summons. But that was because of concession by Mr Wong that I did not find it necessary to rule on that.

52.  More importantly, defendant avoided, I think, much difficulties, if not defeat, by making a 180 degree turn of his direction at the 11^th hour of the summons. He changed from seeking in the summons execution of the draft lease which contains more terms than those in the settlement agreement and also the amendment proposal to clause 3.2 thereof to seeking in the amended summons execution of the revised draft lease which contains no more than all the clauses of the settlement agreement.

53.  In this respect, one must not forget Mr Wong’s submissions at the hearing before me is that the settlement agreement is comprehensive and it contained all the terms to be included in the lease to be executed.

54.  Had defendant held such stance after the settlement agreement,   he should not, I think, embark on negotiation of lease terms with plaintiffs which ultimately caused these proceedings before me. Once probate of the estate and division plan were ready, execution of the revised draft lease now before me should have proceeded soon after.

55.  Had defendant not held such stance after the settlement  agreement but accommodated plaintiffs in negotiating with them over lease terms, such election by him, I regret to say, also caused these proceedings before me.

56.  Granted that defendant took out the amendment summons at such late stage, one doubts very much if he did hold the said view throughout and accommodate plaintiffs as he claimed but, for reasons aforesaid, I do not find it necessary to decide.

57.  Had defendant not taken out the summons but the amended summons in the first place (or suggested the same proposal of the revised draft lease as solution earlier), considering the course of hearing before me, these proceedings before me would, I think, most likely be disposed of by consent (or rendered unnecessary).

58.  And, looking at what happened on the ground of the occupied portion considering the photos over time and other documents produced by 1^st plaintiff, the plaintiffs cannot but, I think, have legitimate concern as they did as said by 1^st plaintiff.

59.  The amendment proposal by the defendant using such controversial words of “contravention not tolerated by the government” can only, I think, be a recipe for further dispute in future and no solution to the parties’ dispute over the terms of the lease.

60.  All things considered, I think the defendant is also to blame for causing these proceedings before me and I made the costs order for the amended summons as I did.

Costs of the amendment summons

61.  Mr Yeung asked that such costs of the plaintiffs being thrown away by the amendments be paid by defendant to be summarily assessed on papers.

62.  Mr Wong reminded this court that there are 2 set of costs here, one for the hearing before me and the other being the application.

63.  For the hearing before me, Mr Wong asked that such costs be taxed and be paid by plaintiffs to the defendant in any event. Opposition to the amendments summons was, he submitted, misconceived.

64.  As for the amendment summons, Mr Wong submitted that the proper order should be in the cause of the amended summons.

65.  Despite Mr Wong’s submissions, I see no reason to tie the costs of the amendment summons to the result of the amended summons. The considerations for the two are not entirely the same. I see nothing to depart from the general rule that the party applying to amend should pay the costs of the other party and I so ordered in respect of the costs of the application.

66.  Regarding the costs of argument before me lasting about 1 hour over the amendment summons, I agreed with Mr Wong that Mr Yeung’s opposition was misconceived. That was borne out by Mr Yeung’s consent after I explained the options open to him. Plaintiffs should therefore pay costs of defendant for that.

67.  Finally, I thank Mr Wong and Mr Yeung for their assistance.