CENTURY ASIA DEVELOPMENT INVESTMENT LTD v. CHAN HAU MAN AND OTHERS

DCMP 2516/2022

[2024] HKDC 1453

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO.2516 OF 2022

________________

________________

BETWEEN

________________

_________________________

DECISION

__________________________

1.  There are 3 Summons before the court:

a) the plaintiff’s summons for summary judgment on the Statement of Claim (and striking out the first defendant’s Defence and Counterclaim) dated 9 January 2024;

b) the plaintiff’s summons for leave to file the 9^th Affirmation of Chan Chun Kai (with supporting affirmation being the 10 Affirmation of Chan Chun Kai) dated 17 April 2024; and

c) the 1^st defendant’s summons for leave to file the 7^th Affirmation of Chan Hau Man dated 17 June 2024.

2.  For the sake of saving time, both the plaintiff and 1^st defendant have proposed to the court that the affirmations in question, namely the 9^th Affirmation of Chan Chun Kai and the 7^th Affirmation of Chan Hau Man, should be considered by the court on a de bene esse basis so that the court can proceed to heat the summary judgment application.

3.  The court agrees to this proposal.

Background

4.  There is no dispute that by two assignments both dated 15 February 2022, the plaintiff became the sole registered owner of Lot No. 599 (“Lot 599”) and Section A of Lot No. 600 (“Lot 600 SA”) in DD No. 125, Yuen Long (collectively as “the Lots”). The two lots are adjacent to each other.

5.  On 15 July 2022, the plaintiff commenced this action by way of Originating Summons under O.113 of RDC (“OS”) seeking an order for possession of the Lots against each of the 4 defendants.

6.  Only the 1^st defendant contested these proceedings.

7.  On 9 August 2023, this court ordered that the OS be continued as if begun by Writ.

8.  Since then, the plaintiff has filed a Statement of Claim (“SOC”) and the 1^st defendant has filed his Defence and Counterclaim (“D&C”). The plaintiff subsequently took out the current summons for Summary Judgment.

9.  The parties’ cases, as pleaded, are relatively straightforward.

10.  The plaintiff claims in the SOC that there was unlawful occupation of and/or trespass to the Lots by the 4 defendants by way of chattels (container, motor vehicles, other miscellaneous items and rubbish).

11.  The 1^st defendant, in the D&C, denies that the plaintiff is entitled to possession of Lot 599 because it was and is subject to a series of 4 sub-tenancy agreements from 2014 to 2021 entered into by the 1^st defendant with a tenant, Tang Yuk Kuen (“Kuen”) (respectively “1^st TA”, “2^nd TA”, “3^rd TA” and “4^th TA”), and that Kuen has a tenancy agreement with the previous owners of Lot 599. As for Lot 600 SA, the plaintiff is also not entitled to possession because Lot 600 SA is subject to the on-going adverse possession proceedings by a third party, namely HCA 1931 of 2020 (paragraphs 2 to 4 of the D&C, hearing bundle A, page 41-42).

12.  The 1^st defendant averred that:

“the plaintiff had knowledge, whether actual or constructive, that Lot 599 had long been lawfully occupied by the 1^st defendant…under the respective sub-tenancy…through the visits and inspection of Lot 599 by the plaintiff’s sole director…and its other agents…way before the plaintiff’s executed the alleged…Assignments on 15 February 2022.” (Paragraph 9 of the D&C, hearing bundle A p.43)

13.  Further, the 1^st defendant raise a defence of proprietary estoppel due to the following alleged agreement (“Clearance Agreement”):

“…subsequently in or about late April 2022, the 1^st defendant had performed and completed construction and development works on Lot 600 SA at its own costs and expense at the request of the plaintiff in return for and in reliance of the plaintiff’s promise to affirm the 4^th TA (the 4^th and last alleged sub-tenancy agreement dated 1 August 2021) until its expiration on 31 July 2026...” (Paragraph 16 of the D&C, hearing bundle A page 45).

The 1^st defendant’s legal ground of objection to summary judgment

14.  The 1^st defendant also raised a legal ground of objection.

15.  Mr. Sunny Chan, counsel for the 1^st defendant (“Mr. Chan”) argued that given that the court has already ordered to convert the OS into Writ (and that the plaintiff did not appeal against that decision), an application for summary judgment is therefore the plaintiff’s attempt at “a 2^nd bite at the cherry”.

16.  Mr. Chan relies on the Court of Appeal case of Industrial & Commercial Bank of China (Asia) Ltd v Tse Ching [2022] 5 HKLRD 284 where it was held that it was not a good or sound reason for converting an originating summons to writ because “it would not prevent the plaintiff from applying for summary judgment”. Instead, the relevant principles for converting should be the question:

“whether there were substantial dispute of fact (without having to reach a firm view on merits), or other good reasons which would make the originating summons procedure inappropriate or unsuitable to resolve the plaintiff’s claim.”

17.  Mr. Chan argues that if a court orders a conversion from an originating summons to writ, it must have found that “there are triable disputes on facts which require trial” (paragraph 4 of the Skeleton Submission of D1). As such, the case must bound to proceed to trial and any application for summary judgment would be akin to an abuse of process and therefore should not be allowed.

18.  I disagree.

19.  The legal test for conversion of originating summons, as stated above, is very different from the legal test for summary judgment.

20.  The legal test for the former is that the court will only need to consider whether there were substantial dispute of fact without having to reach a firm view on merit (or other good reasons) for the conversion.

21.  On the other hand, the legal test for the latter, simply put, is “whether the defendant’s assertions are believable” (Re Safe Rich Industries Ltd, unrep. CACV 81/1994 per Bokhary JA (as he then was)). In other words, the defendant needs to satisfy the court that he has a fair or reasonable probability of showing a real or bona fides defence, i.e. that his evidence is reasonably capable of belief. (White Book 2024, Vol 1, paragraph 14/4/9A)

22.  As such, the legal test for summary judgment is predicated on the presence of a defence. It does not matter whether there is substantial dispute of facts: the court needs to find whether the evidence supporting the defendant’s defence is reasonably capable of belief or not. The court would require the benefit of the parties’ pleadings so their respective cases are clear in order to assess the credibility of the evidence in support of such pleadings.

23.  The circumstances of each application and their respective legal test are different. Nevertheless, the threshold for conversion of originating summons must essentially be lower than that for allowing a summary judgment.

24.  Indeed, under many circumstances, the credibility of the evidence can only be properly assessed after the pleadings (that the evidence purported to support) have been made. In my view, this applies in the current case.

25.  I do not think that the Court of Appeal decision in the Industrial & Commercial Bank case run contrary to my analysis above.

26.  That case was so decided because the Court of Appeal considered that the judge applied the wrong consideration, i.e. the conversion was ordered because “it would not prevent the plaintiff from applying for summary judgment” instead of the consideration that “there were substantial dispute of fact” etc.

27.  The Court of Appeal certainly did not lay down the principle that the test for conversion of originating summons must be essentially the same as the test for summary judgment and therefore no summary judgment application should be allowed after a conversion, and that the case must then bound to proceed to trial.

The 1^st defendant’s defence regarding Lot 600 SA

28.  No pleadings was made that the 1^st defendant has any possessory right to Lot 600 SA. Instead, as stated above, the 1^st defendant “denied that the plaintiff is entitled to possession” on the basis that Lot 600 SA is subject to an on-going adverse possession legal proceedings at the High Court by a third party unrelated to the current action

29.  The existence of an on-going adverse possession claim by a third party clearly does not affect the right of the plaintiff, as the registered owner of Lot 600 SA, to seek possession against the 1^st defendant.

30.  As such, I find that the 1^st defendant has not raised any defence, let alone a real or bona defence with regard to Lot 600 SA.

The 1^st defendant’s defence regrading Lot 599

31.  With regard to Lot 599, the 1^st defendant raised two issues in defence.

Tenancy agreements

32.  Firstly, the 1^st defendant claimed that he and his business (Ying Ho Transportation Co (Hong Kong)) “are and were the lawful occupier as the tenant under a series of oral and duly stamped written tenancy agreements concerning Lot 599 since August 2014.” (paragraph 3 of the D&C, hearing bundle A page 41)

33.  Mr. Eric Chim, counsel for the plaintiff (“Mr. Chim”), observed that despite claiming that these tenancy agreements are duly stamped, the 1^st TA, the 3^rd TA and the 4^th TA were not stamped when the 1^st defendant first produced them under his (1^st) Affirmation of 10 October 2022 thus rendering them inadmissible as evidence at that point. In fact, the 1^st TA and the 3^rd TA were only stamped on 24 October 2022 and the 4^th TA was only stamped on 20 October 2022, all of which were some 3 months after the OS was commenced.

34.  More importantly, these purported tenancy agreements are not registered at the Land Registry. This is evidenced by the Land Search records exhibited (hearing bundle C3, page 311-317 for Lot 599 and hearing bundle C3, page 319-325 for Lot 600 SA).

35.  Mr. Chan does not dispute such evidence.

36.  As the 1^st TA, 2^nd TA and 3^rd TA have all expired, only the 4^th TA is relevant to this action: it purported to cover a 5 year rental period from 1 August 2021 until 31 July 2026. If genuine (which I presume it is for the purpose of this application), it would have been in existence at the time of the Assignment of the Lots (15 February 2022) and still on-going now.

37.  Section 3(2) of the Land Registration Ordinance (Cap. 128) (the “LRO”) stipulated that:

“All such deeds, conveyances, and other instruments in writing…which are not registered shall, as against any subsequent bona fide purchaser…be absolutely null and void to all intents and purposes:

Provided that nothing herein contained shall extend to bona fide leases at rack rent for any term not exceeding 3 years…”

38.  As the 4^th TA is purported for a term exceeding 3 years, it is clear that it is null and void against the plaintiff as a subsequent bona fide purchaser.

39.  Similarly, the “Lending Agreement” introduced as exhibit “CHM-75” by way of the 7^th Affirmation of the 1^st defendant (which he purported to be a lending agreement dated 26 August 2005 of Lot 599 and Lot 600 SA from the previous owner to certain tenants for a period from that date to the date of resumption by the Government of the HKSAR) which the court is considering on a de bene vesse basis, would not assist the 1^st defendant. It has not been stamped and therefore inadmissible and even if the court allows otherwise, it is not registered so is null and void against the plaintiff under the same section of the LRO.

40.  Mr. Chim pointed out that the purpose of the LRO, as stated under its Preamble, was “to prevent secret and fraudulent conveyances, and to provide means whereby the title to real and immoveable property may be easily traced and ascertained”. It is clear that this longstanding legislation aims to put a stop to situations like the current one by introducing a Land Registration system.

41.  Mr. Chan does not dispute the law nor the plaintiff’s position as a subsequent bona fide purchaser. As such, the 4^th TA, and all of the other alleged agreements produced as evidence by the 1^st defendant, do not support the 1^st defendant’s defence.

42.  As for the allegation that “the plaintiff had knowledge, whether actual or constructive, that Lot 599 had long been lawfully occupied by the 1^st defendant” by way of site inspection etc., Mr. Chan further raised that since the assignments of the Lots were on an “as is” (instead of “vacant possession”) basis, the plaintiff should bear the risk.

43.  The assignments of the Lots were contracts between the vendor and the plaintiff and its terms only binds the rights of those contracting parties. The fact that the plaintiff chose to assume the risk only meant that it has abandoned its rights to claim against the vendor if there was no vacant possession on assignment. This will not affect the right of the plaintiff, now as the registered owner, against unlawful occupiers.

44.  In any case, whether the plaintiff has “actual or constructive” knowledge of the 1^st defendant is irrelevant: section 4 of the LRO stipulated:

“No notice whatsoever, either actual or constructive, of any prior unregistered deed, conveyance, or other instrument in writing…shall affect the priority of any such instrument as aforesaid as is duly registered.”

45.  There is no dispute that the assignment of the Lots are duly registered so any assertion of actual or constructive notice of unregistered instruments is clearly not a viable defence.

Proprietary estoppel

46.  As for the 1^st defendant’s “alternative” defence, the one based on proprietary estoppel, the 1^st defendant stated under paragraph 26 of his (1st) Affirmation (hearing bundle B, page 122):

“In October 2022…Mr. Choi (whom the 1^st defendant claimed to have represented himself as “a real estate agent of the plaintiff” but yet no full name was provided (paragraph 25 of the same affirmation, hearing bundle B, p. 121)) told me that I would not be compensated…because I was not a lawful occupier…However, he, for and on behalf of the plaintiff, confirmed to me that the plaintiff promised to continue to lease the Land to me on the condition that I undertook on the development and construction works…and converting the entire Lot 600SA…into good and usable levelled cement-covered concrete platform at my cost and expenses. I accepted the terms offered by Mr. Choi on the plaintiff’s behalf for which I subsequently signed on a 1-page agreement in Chinese dated 31 December 2021 (“Clearance Agreement”) for evidence purpose, which was also signed as witness by the village representative of…”

47.  The Clearance Agreement is produced at Hearing Bundle C3, p.452.

48.  Firstly, this alleged agreement was not signed by “Mr. Choi” nor the plaintiff. It was only signed by the 1^st defendant and a witness. I cannot see how this document would bound the plaintiff in any way.

49.  Further, the Clearance Agreement stated that (as I translate):

“For the monthly rental of HK$67,082. Rental period is 1 year until 31 December 2022. Both parties can further agree for one more year rental period with rental sum to be negotiated.” (Incidentally, the copy of the Clearance Agreement provided by the 1^st Defendant was a very poor one but Mr. Chan did not dispute the terms as mentioned above.)

50.  This Clearance Agreement is not even consistent with the evidence in the 1^st Defendant’s (1st) Affirmation as stated in paragraph 46 above. This agreement does not show that the plaintiff (even assuming that the plaintiff, or its alleged agent, Mr. Choi, has signed it) has “promised to continue to lease the Land” to the 1^st defendant. At the highest, the Clearance Agreement only showed that the plaintiff would lease the Lots for one more year until 31 December 2022 with an option to extend for another year.

51.  No evidence was produced that there was further negotiation and agreement to extend the rental period in the Clearance Agreement. So even if this document is accepted without question, the rental period has already expired on 31 December 2022.

52.  This is not the end of the problem with the 1^st defendant’s defence.

53.  This alleged scenario now advanced is entirely inconsistent with the 1^st defendant own pleadings in the D&C which, as stated in paragraph 13 above, is that, in exchange of the 1^st defendant’s work on Lot 600 SA, the plaintiff promised:

“to affirm the 4^th TA (the 4^th and last alleged sub-tenancy agreement dated 1 August 2021) until its expiration on 31 July 2026...”

54.  The alleged rental sum in the 4^th TA was HK$25,000 per month and not the HK$67,082 stated in the Clearance Agreement.

55.  The terms for the rental period are also completely different: the 4^th TA was supposed to expire on 31 July 2026 whilst the Clearance Agreement was to expire on 31 December 2022 with an option to extend one more year.

56.  When faced with such glaring inconsistencies of his own case, Mr. Chan admitted that the terms between the “oral agreement” (allegedly given by Mr. Choi) and the written Clearance Agreement were inconsistent but suggested that this inconsistency “warranted further investigation”. He argued that, as such, the case should proceed to trial.

57.  I found this a totally unconvincing argument.

58.  The 1^st defendant has been given ample opportunity to plead his defence and to put forward the supportive evidence (numbering in some 6 affirmations with numerous exhibits). Yet, he still cannot satisfy the court that his evidence is reasonably capable of belief: it is clear that the 1^st defendant does not have a fair or reasonable probability of showing a real or bona fides defence.

59.  To allow the 1^st defendant a chance to proceed with the action for “further investigation” under the circumstances would indeed be allowing “a 2^nd bite at the cherry” as well as making a mockery of the very purpose of a summary judgment application.

60.  There are also disputes regarding the Undertaking Agreement (Hearing Bundle C3, page 430).

61.  This document was signed by the 1^st defendant on 28 May 2022. Under the clauses, the 1^st defendant made various admissions (including that he has illegally placed various items on Lot 599 and Lot 600S.A), various declarations (including declaring that all documents signed by him in relation to the Lots to others were illegal and invalid and that he has no rights to the Lots) and various undertakings (including that he would remove those illegally placed items).

62.  In his defence, the 1^st defendant argued that this Undertaking Agreement was “null, void and unenforceable” because he has signed it under coercion and pressure and also that certain part of the agreement was blank when he signed it. However, the 1^st defendant did not dispute that he received a total of HK$600,000 from the plaintiff which was the sum mentioned under this agreement.

63.  I am of the view that this dispute is not important in the legal test for summary judgment as it does not concern the defence raised regarding liability (which is that the 1^st defendant was and is in lawful occupation of the Lots). The establishment of the Undertaking Agreement might only show the 1^st defendant has previously admitted otherwise.

64.  However, irrespective of whether the 1^st defendant has made such admissions or not, the court has already found that he has no real or bona fide defence to assert that he was and is in lawful occupation. As such, the determination of the validity of this agreement might only be relevant to the issue of damages.

65.  Mr. Chan has also raised various criticisms on the pleadings of the Statement of Claim. For example, he argued that the plaintiff must particularized to show the locations, description and ownership of each and every item on the Lots in the Statement of Claim otherwise the pleadings are defective. He also argued that the plaintiff must adduce evidence to show that the 1^st defendant owned such items otherwise the case should proceed to trial to determine such.

66.  I see no sense in these lines of argument: since the 1^st defendant’s defence is that he is the lawful occupier of the Lots, there is no need (and indeed a complete waste of time and costs) for such an exercise. Even assuming that there is point in embarking on such exercise, there may be hundreds of items in the Lots and I wonder how the plaintiff can be asked to “prove” the ownership of each and every item even if the case were to proceed to trial.

67.  I need not list all of Mr. Chan’s other arguments but, suffice to say, I have considered them and find them unconvincing.

Conclusion

68.  I would accordingly give summary judgment for the plaintiff and grant order in terms of all the relief under Prayers (1) – (19) in the SOC with mense profits under Prayer (7), damages under Prayer (8), account of profits under Prayer (9), consequential accounts under Prayer (12), interest under Prayer (13) to be assessed.

69.  Further, I would order that the D&C be struck out.

70.  There be a cost order nisi that the cost of this action, including the costs of the current applications before the court, be to the plaintiff to be taxed if not agreed, with certificate granted to one counsel.