Land Zone Ltd v. Land Zone Ltd and Another

HCA 10/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10 OF 2008

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J U D G M E N T

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1.This action concerns the rights and interest in three pieces of land located on both sides of San Hing Road (“the Road”), Tuen Mun, New Territories (collectively “the Property”). Purportedly on the strength of a lease (“the Lease”) granted in a tenancy agreement, Mr To commenced the original action against Land Zone Limited (“LZL”) which is the current registered owner of the Property by virtue of an assignment dated 18 June 2007 (“the Assignment”) and its director Mr Chow for the alleged trespasses committed in the course of their action taken to recover from him the possession of the Property.

2.LZL and Mr Chow deny both the existence and the validity of the Lease. By its counterclaim, LZL claims against Mr To, Sunny Group Limited (“SGL”) and its sole shareholder and director Madam Chen in respect of their trespass of certain part of the Property and damages including mense profits. SGL and Madam Chen deny the validity of the legal title of LZL to the Property and in any event they insist on their right to stay in possession of a part of the Property by virtue of an oral licence/covenant of use and access (“the Licence”). SGL further counterclaims against LZL and Mr Chow for damages resulting from their recovery action taken.

3.The Property consists of (1) the Remaining Portion of Section B of Lot 449 in D.D. 130 (“Lot 449B RP”), Portion 1 of the Remaining Portion of Section C of Lot 449 in D.D.130 (“Lot 449C1 RP”) and Portion 2 of the of the Remaining Portion of Section C of Lot 449 in D.D.130  (“Lot 449C2 RP”).  Lot 449B RP and Lot 449 C2 RP (collectively “the Land”) are on the southern side of the Road whereas Lot 449C1 RP are on the other side. SGL and Madam Chen occupied the Land and this is the core complaint of this trial.

4.Mr To was adjudicated bankrupt on 8 December 2008. The Official Receiver in charge of his bankruptcy indicated that they decided not to take part in these proceedings. As a result, Master de Souza ordered that the original action be dismissed and judgment be entered on the counterclaim against Mr To on 30 April 2013. LZL also obtained vacant possession of Lot 449C1 RP from Mr To.

5.Therefore, the present trial is between LZL and Mr Chow, represented by Mr C.Y. Li SC leading Mr Jeremy Kwong on the one side and SGL and Madam Chen, represented by Mr Leung on the other. For simplicity, the counterclaim of LZL is referred to in this Judgment as the claim and the counterclaim to counterclaim of SGL is referred to as the counterclaim. 

6.Each side has a different story to tell in regard to the Assignment and the Licence. The primary task of this court is to rule on their existence and validity. In the event that both are valid, there remains a legal question as to whether LZL should take the Land subject to the Licence. The issue as to which party has committed trespass can be determined accordingly. There is also an issue as to whether LZL and Mr Chow unlawfully caused property damage to SGL.

7.I shall divide this Judgment into two sections. In the first section, namely, Section A, I shall deal with the fundamental question of the validity of the Lease and the Assignment. In the second section, namely, Section B, I shall determine the issue of tortious liability depending on the findings in Section A.

Section A

LZL’s case of ownership of the Property

8.The historical facts leading to the acquisition of the Property of LZL can be outlined briefly. They are evidenced by contemporaneous documents, the authenticity of which is not in dispute.

9.I should first start with the Assignment, which was executed by Ng Pui Kuen a.k.a. Tai Kuen (“Madam Ng”) as vendor. The Recital of the Assignment contains the following facts:

(1)   By an Indenture of Conveyance on Sale dated 14 November 1969 and registered in the Land Registry by Memorial No. TM 163806 (“the 1^st 1969 Assignment”), Lot 449B in D.D.130 was assigned to Lee Ngan Ching (李雁貞) (“Madam NC Lee”), Lee Mui Chai (李妹仔) (“Madam MC Lee”) and Madam Ng (collectively “the Trustees”).

(2)   By a Declaration of Trust dated 14 November 1969 and registered in the Land Registry by Memorial No. TM 163807 (“the 1^st Declaration of Trust”), the Trustees declared that they hold Lot 449B in trust for the partnership firm of Castle Peak Cold Storage Ice Manufactory (靑山凍房製衣廠) (“the Partnership Firm”).

(3)   Lot 449B had since been carved out into Subsection 1 which was resumed by the Government and the remaining portion which remained vested in the Trustees.

(4)   By an Indenture of Conveyance on Sale dated 14 November 1969 and registered in the Land Registry by Memorial No. TM 163808 (“the 2^nd 1969 Assignment”), Lot 449C in D.D.130 was assigned to the Trustees.

(5)   By a Declaration of Trust dated 14 November 1969 and registered in the Land Registry by Memorial No. TM 163809 (“the 2^nd Declaration of Trust”), the Trustees declared that they hold Lot 449C in trust for the Partnership Firm.

(6)   Lot 449C had since been carved out into Subsection 1 which was resumed by the Government and the remaining portion, subsequently divided into 2 portions, namely, Lot 449C1 RP and Lot 449C2 RP, which remained vested in the Trustees.

(7)   At the time of the execution of the Assignment, Madam Ng was the sole surviving trustee holding the Property in trust for the Partnership Firm. Madam NC Lee died in February 1994 and Lee Mui Chai passed away twelve months later.

(8)   Madam NG was directed by the Partnership Firm to sell and assign the Property to LZL for the price of HK$2,544,062.50 (“the Purchase Price”).

10.From the two aforementioned Indentures of Conveyance on Sale, it can be seen that the vendor was one Wong Yip Wan (“Mr Wong”). Mr Wong himself was one of the 5 founding partners of the Partnership Firm and is the father-in-law of Mr Chow. The other founding partners, as shown in a written partnership agreement dated 31 May 1965, (“the Partnership Agreement”) included Fung Siu Cheung (馮兆祥) (“SC Fung”) whose wife was Madam NC Lee, Ho Wing Chung (何榮忠) whose mother was Madam MC Lee, Ho Kam Ming (何鑑銘) and Fung Kam Tong (馮錦堂).

11.One Mr Wong Yip Tan and Madam NC Lee witnessed the execution of the Partnership Agreement. From the inception, out of the entire 23 shares, Mr Wong held 9 shares in the Partnership Firm.

12.Under the Partnership Agreement, Mr Wong expressly agreed to make available the Property for the use and operation of the Partnership Firm.

13.According to the minutes of a meeting of the Partnership Firm dated 29 November 1996 which was chaired by Mr Wong (“the 1996 Minutes”), it was resolved that the Partnership Firm should be dissolved and the Property should be sold at the price of HK$4 million. Apparently George YC Mok & Co, a firm of solicitors, sent a letter dated 28 October 1996 to the Partnership Firm and indicated that someone was willing to purchase the properties of the Partnership Firm at the price of HK$4 million. It was recorded that SC Fung, who was absent, first demanded to have 50% of the sale proceeds and the attending partners disagreed.

14.In a letter received on 18 November 1996, the daughter of SC Fung suggested that her father took one third of the sale proceeds. Ho Wing Chung, Ho Kam Ming and Fung Kam Tong agreed to this suggestion and other partners including Mr Wong, Tai Yik Cheung (“Mr Tai”) and Yu Bun (“Mr Yu”) needed further consideration.

15.From the annexure to the 1996 Minutes, it can be seen that there had been changes in the composition of the Partnership Firm and at that time Mr Wong held 23 shares out of 39 shares.

16.The attending partners also resolved that Mr Wong should be authorized to represent the Partnership Firm and resolve all the issues with SC Fung relating to his shares and entitlement.

17.Mr Wong acted promptly and sent a letter to SC Fung dated 29 November 1996 and inform him that there would be a meeting to be held on 27 December 1996 for the partners to discuss the assets of the Partnership Firm.

18.SC Fung sent Mr Wong a handwritten fax dated 26 January 1997 (“the 1997 Fax”). Its contents are important and I have to set them out here in detail. First, SC Fung apologized for the unavailability of his son-in-law to attend the partnership meeting. He then pointed out that he had made contribution to the Partnership Firm by way of labour and kept running the same till then. The property had reached a certain level. He said that he had intended to strike a deal with Mok Wak Shing a.k.a. Mok Shing (“Mok”) at a rock bottom price with a view to a quick liquidation. He referred to Mr Wong’s indication to purchase his shares and he stated that according to the accounts prepared by a firm of accountants his shares were 400/1000. Lastly, he indicated that with the agreement of Mr Wong, he being in Toronto would instruct lawyers to prepare the paperwork with Mr Wong and asked Mr Wong to make a decision within 15 days apparently in respect of the sale of his shares.

19.There came a partnership meeting on 26 July 1997. According to the minutes of the meeting (“the 1997 Minutes”), Mr Wong chaired the meeting and altogether 5 partners attended. SC Fung was absent. It was unanimously resolved that SC Fung’s suggestion as related by Mr Wong that all his interests in the Partnership Firm be sold back to the remaining partners at the price of HK$1.3 million be accepted. The sale was never materialized nevertheless.

20.On or about 14 March 2005, Mr Wong and four other partners signed a written agreement including Mr Tai whereby it was agreed, among other matters, that the Property was to be sold at a price of HK$175 per square feet in the like amount of the Purchase Price paid by LZL two years later.

21.Mr Wong, almost 88 years old at trial, testified in support of the claim of LZL and verified the foregoing matters evidenced by documentary proof. He added that the business of the Partnership Firm actually ceased in the early 1970s and many partners had since left Hong Kong for good or retired. He also related to an account concerning the conflict between SC Fung and the Partnership Firm culminating in a law suit in Hong Kong commenced by SC Fung’s own company “環球冷氣公司” against the Partnership Firm. It was eventually settled.

22.LZL had intended to call Mr Tai and Madam Ng, husband and wife, to testify but for reasons given below they turned out to be unavailable. At this stage, to complete the picture, I need only mention an uncontroversial document which is a letter written by Madam Ng to LZL dated 5 June 2007. There, Madam Ng directed LZL as purchaser on completion of the sale to pay the Purchase Price to Kam and Fan for the account of SC Fung, Mr Wong, Ho Wing Chung, Ho Kam Wing, Fung Kam Tong, Mr Tai and Mr Yu as the beneficiaries of the Property. Kam and Fan were the former solicitor of LZL in these proceedings. I shall return to their evidence after setting out the defence case of SGL and Madam Chen, which is premised upon certain transactions involving SC Fung.

SGL’s case of its legal rights and interest in the Property

23.In the pleaded case, SGL accepts the validity of the 1^st and 2^nd 1969 Assignments and the 1^st and 2^nd Declarations of Trust. Its version differs in the composition of the partnership. It avers that only SC Fung and Madam NC Lee were the owners and operators of the Partnership Firm and the partnership business was carried on in the Property until it ceased in the 1970s.

24.Next, it refers to a Notice of Severance dated 4 May 1991 registered in the Land Registry by Memorial No. TM483585 whereby Madam MC Lee and Madam Ng purportedly severed the co-ownership of the Property from joint tenancy to tenants in equal shares.

25.Its major contention is premised on the Lease created by a document entitled Tenancy Agreement dated 3 October 1997 (“the Tenancy Agreement”) entered into by SC Fung as landlord and Fung Siu Wai (“SW Fung”) who is his brother and Mok as tenants. By the Tenancy Agreement, SC Fung alone agreed to grant the Lease to SW Fung and Mok Lot 449 RP B and C for a term of 50 years from 3 October 1997 to 30 June 2047 at the rental charge of HK$1.4 million to be paid in one go. The pleaded case is that SC Fung granted the Lease under the Tenancy Agreement on behalf of the Partnership Firm owned by Madam NC Lee and him.

26.On the same date, SC Fung purportedly entered into another agreement with SW Fung and Mok entitled “Transfer Agreement” (“the Transfer Agreement”) whereby SC Fung on behalf of Madam NC Lee and he himself agreed to sell to SW Fung and Mok all the fixtures, equipment, machineries and tools of the Partnership Firm and all the entitlements to the compensation paid by the Government arising from the resumption of the Property in consideration of HK$1.4 million.

27.There is a receipt dated 3 October 1997 (“the Receipt”) produced by the defence and it apparently evidenced the rental payment made by Mok by way of a cheque in the amount of HK$700,000. The Receipt bore the signature of SC Fung.

28.SW Fung later left the Partnership Firm and surrendered his right to use the Property to Mok.  Mok became in sole possession of the Property.

29.Mok passed away in August 2002. His widow Madam Lee Wan Ho (“Madam WH Lee”) obtained the grant of the Letters of Administration of his estate. The Property fell into the possession of Madam WH Lee and his son Mok Kai Ming (“KM Mok”). It is pleaded that both Madam WH Lee and KM Mok inherited and enjoyed the rights and interest of Mok under the Tenancy Agreement.

30.On the other hand, KM Mok was the legal owner of three neighbouring pieces of land, namely, Lot 459 RP, Lot 447 SA and Lot 447SB (collectively “the Lots”). From the survey plan dated August 2007, it can be seen that both Lot 459 RP and Lot 447 SA adjoin Lot 449 C2 RP. While the former is to its east, the latter is to its south and part of Lot 449B RP too.

31.SGL and Madam Chen aver that they have acquired full legal right to use, occupy and access through the Land by virtue of the License granted in or about 2007 verbally by Madam WH Lee and KM Mok as part and partial of the conditions for sale of the Lots by KM Mok to those three corporate purchasers, all of which were represented by Madam Chen on or about 4 December 2007. Those three corporate purchasers included Shampala Limited, King Holding Limited and SGL (collectively “the Three Purchasers”). Initially SGL acquired Lot 447 SA only and subsequently on 9 May 2008 it purchased from Shampala Limited and King Holding Limited Lot 459 RP and Lot 447 SB and became the sole owner of the Lots.

32.The defence avers that the Licence is essential to the use and enjoyment of the Lots which are surrounded by the Land. The Three Purchasers allegedly agreed to pay a sum in excess of near HK$1 million above the market prices to acquire the Lots only because of the Licence, which was agreed to last until the expiry of the term under the Tenancy Agreement.

33.As regards the Assignment, the defence case is that it was a sham transaction in that Madam Ng was deceived or misled by LZL and/or Mr Chow without consultation with the partners of the Partnership Firm or their successors-in-title and that the Purchase Price had not actually been paid to Madam Ng or any partners of the Partnership Firm or their successors-in-title.

34.Further, the defence contends that Madam Ng was only one of the Trustees and she could not pass the complete beneficial interest in the Property to LZL given the Notice of Severance. In the alternative, the defence contends that the Assignment was subject to the Lease and hence the Licence and LZL and/or Mr Chow could not be a bona fide purchaser without notice of the Lease by reason of the obvious occupation and use of the Property by Mok and his successors-in-title since 1997.

Analysis of evidence relating to the Assignment and the License

35.Plainly the defence case stands or falls on my finding of the validity of the Tenancy Agreement. The whole case of the Licence depends on whether SW Fung and Mok had acquired any interest in the Property under the Tenancy Agreement. As such, I shall first deal with this major issue without losing sight of the defence’s challenge to the validity of the Assignment.

36.In terms of factual evidence, all of Mr Wong, Mr Tai and Madam Ng had prepared their witness statements for the purpose of this trial. Mr Tai and Madam Ng had also prepared their affirmations, the contents of which were identical to those of their respective witness statements. By summons dated 20 August 2015, less than a week before the first day of the trial, LZL applied to adduce their affirmations as evidence in light of their unavailability to attend the trial. The application was supported by two affirmations and argued by Mr Li. After hearing the application, I allowed the application in relation to Mr Tai’s affirmation but refused to admit the affirmation of Madam Ng. I should briefly state my reasons for my decision here.

37.There is no debate about the relevant principles. The guiding principles as to how the unfettered discretion under section 47 of the Evidence Ordinance, Cap.8 should be exercised were clearly expounded by Johnson Lam J (as he then was) in Vivien Cheung v Centaline [2004] 1 HKC. 692 and DHCJ Johnson Lam (as he then was) in High Fashion v Ng Siu Tong [2004] 1 HKLRD 928.

38.Both of Mr Tai and Madam Ng resided in Guangzhou. Mr Tai passed away in October 2013 whereas Madam Ng is said to have a heart problem and is unable to travel from her residence to Hong Kong. The suggestion of giving evidence through video-link was made to Madam Ng but according to her son, she did not want to take part in the trial at all.

39.First, I have to mark my disapproval for the lateness of this application. I cannot accept the explanation that the condition of Mr Tai and Madam Ng could not be found out any earlier. The pre-trial review hearing was held in May 2015 and LZL had the same legal representation. No application was made in respect of the affirmations of Mr Tai and Madam Ng. It was indicated to this court that LZL was ready for trial. This indication could only be made in a responsible manner if LZL had taken steps to ensure that all its witnesses would be ready to testify. I assumed LZL had done so but it did not.

40.For Mr Tai, given his death, I can accept that there is good reason for his affirmation evidence, the relevance of which is indisputable, to be adduced as hearsay evidence subject to the question of weight to attach to the same given its contentious nature.

41.The same cannot be said about Madam Ng’s affirmation. I am not convinced in the absence of medical evidence that she was prevented by her health problem from attending the trial. She had actually opted not to do so. Prejudice would be caused to the defence if her controversial evidence cannot be tested by cross-examination. Thus, I did not think there was good reason for me to exercise my discretion to admit her affirmation evidence. I therefore partially allowed the application of LZL with costs be to the defence, to be taxed if not agreed. For taxation purposes, I would say that the hearing of the summons lasted for 25 minutes.

42.Returning to the evidence admitted, on the issue of the validity of the Tenancy Agreement, first I am prepared to accept the evidence of Mr Wong, who appeared to me to be an honest and straightforward witness on the whole. His evidence is by and large supported by contemporaneous documents and not really contradicted by the evidence of the defence.

43.I am well alive to some problems with his evidence. For example, he could not remember the exact details concerning the land resumption of the Government in respect of the Property. Nor did he remember the details about the litigation between SC Fung and the Partnership Firm. It appears to me that such deficiencies in his evidence were merely due to his lapse of memory explainable by his advanced age. On important matters such as the ownership of the Property and the validity of the Tenancy Agreement, his evidence was clear and consistent with the contemporaneous documents. I have full confidence in the truth of such evidence.

44.I should mention that I once had a slight concern about his admission that he had already been aware of the Tenancy Agreement well before the commencement of these proceedings though he had no prior knowledge of its creation. In his witness statement, he clearly stated that it was only after the institution of the present action that he became cognizant of the contention of the defence relating to the Tenancy Agreement. Mr Chow also did so in his affirmation. Mr Wong also accepted that he had seen the Receipt before.

45.On further deliberation, I can draw no adverse inference from these discrepancies. Mr Wong’s evidence was that SC Fung made the Tenancy Agreement without any prior notice given to and approval by any of the partners and this was not challenged by cross-examination. Mr Wong has all along been adamant that it was a sham transaction and he never thought SC Fung was entitled to grant the Lease. His inaction about the same could not be taken to prove otherwise.

46.In summary, I accept that the business of the Partnership Firm ceased in or about 1973 though the resolution to dissolve the partnership only came in November 1996. I accept that SC Fung fell out with other partners and initially was not allowed to take over the business of the Partnership Firm. Eventually the partners agreed that SC Fung could use the Property to carry on his own ice cube business and he had to pay market rent for such use. I accept Mr Wong’s evidence that SC Fung despite demands had never paid rent on the pretext that his business was not profitable.

47.I further accept that SC Fung had misrepresented that he was the entire beneficial owner of the Property. In view of his misrepresentation, Madam MC Lee and Madam Ng made their statutory declarations on 4 May 1991 prepared by George Y.C. Mok & Co. (“the Statutory Declarations”) to make it clear that the Trustees held the Property only on trust for the partners of the Partnership Firm, very fairly, including SC Fung. I also accept the truth in the contents of these two Statutory Declarations. In the Statutory Declarations, to clean the air, it was expressly highlighted that the Property did not belong to the private business of SC Fung and that the two business entities were separate and unrelated. It is understandable that only Madam MC Lee and Madam Ng out of the three Trustees were asked to produces the Statutory Declarations given the marital relationship of Madam NC Lee and SC Fung.

48.The Notice of Severance bore the same date of these statutory declarations and it was also prepared by George Y.C. Mok & Co.. All of these documents were registered on the same day and they bore similar memorial numbers.

49.Mr Wong insisted that he was unaware of the making of the Notice of Severance and he had no idea why it was made. The defence relies heavily on the Notice of Severance in its challenge to the legal title of LZL to the Property. I shall deal with the defence’s arguments in this regard below.

50.The beneficial ownership of the Property had never been changed nevertheless. The Statutory Declarations, the 1996 Minutes, 1997 Minutes and most importantly, the 1997 Fax bore this out. Both Mr Wong and Mr Tai said they had no knowledge of the Tenancy Agreement at the time it was made. I accept their evidence. SC Fung made the Tenancy Agreement only a few months after the 1997 Fax. I cannot accept the pleaded case of the defence that the Tenancy Agreement was made by SC Fung’s own partnership through he himself alone. It is merely a bare assertion not supported by any direct evidence. Nor can it sit comfortably with the aforementioned documentary evidence. Not long before the Tenancy Agreement was made, SC Fung acknowledged to Mr Wong in the 1997 Fax that he merely owned 40% of the shares in the Partnership Firm. He could not possibly change his position shortly afterwards and assert that the Property belonged to the partnership consisting of his wife and him only and he was authorized to grant the Lease. 

51.Indeed, I agree with Mr Li that the Tenancy Agreement looks very suspicious. It is remarkable that none of the signatories was called to testify in support of its validity. The defence gave no explanation why SC Fung and SW Fung had not been able to give evidence to confirm the validity of the Tenancy Agreement, which forms the bedrock of the defence case. I believe it is appropriate to apply the maxim omina prasesumuntur contra spoloatorem in the circumstances: see Telings International Hong Kong Limited v John Ho & Ors, unreported, CACV 10/2010, 22.10.2010 per Le Pichon JA at §79. I can infer from the failure of the defence to call these two signatories to the Tenancy Agreement that they could not support it validity at all.  The same can be said about the absence of KM Mok and Madam WH Lee, who allegedly granted the Licence, from this trial.

52.I also note that the defence did not put the allegation to Mr Wong in his cross-examination that SC Fung had the authority and consent of the partners of the Partnership Firm to enter into the Tenancy Agreement on behalf of the Partnership Firm. Indeed this is not the pleaded case.

53.The pleaded case is that the beneficiary of the Property being an ice manufacture and cold storage partnership business operated and owned by SC Fung and Madam NC Lee (“the Alleged Partnership”) acting through SC Fung granted the Lease by the Tenancy Agreement. I pause to note that that in the Tenancy Agreement, there is no mention about the Alleged Partnership or any partnership at all and the Property was on the face of the Tenancy Agreement leased by SC Fung in his own capacity.

54.Mr Leung submits that the Alleged Partnership was confirmed by a letter of Mr Wong issued to his daughter dated 13 December 1996 (“the 1996 Letter”).  I do not think the 1996 Letter is amenable to such an interpretation.

55.In the 1996 Letter, Mr Wong warned his daughter against the treachery of SC Fung in her dealing with him in the course of winding-up of the Partnership Firm and sale of the Property. It can be seen that from 1972 to the early 1990s, SC Fung carried on the partnership business with the approval of all the partners. He promised that profits would be made and shared among the partners but he failed to do so. He even did not need to pay any rent for his use of the Property for almost 20 years.  Mr Wong told his daughter that the other partners had been able to tolerate him for three decades and hence they should also continue to put up with him. There he reiterated that SC Fung only held 8 out of the 58 shares in the Partnership Firm.    

56.The contents of the 1996 Letter were not challenged by way of cross-examination. I believe it more or less revealed the real picture and dovetails Mr Wong’s evidence in his witness statement. There is no reason why Mr Wong did not tell his daughter a truthful account. 

57.Thus, I do not think that the Alleged Partnership took over the Partnership Firm entirely including the Property. The Partnership Firm was still in existence and SC Fung was only one of the partners. He might have carried on the business of the Partnership Firm in the Property after 1973 for some time through the Alleged Partnership but it is a fry cry from a takeover of the Partnership Firm by the Alleged Partnership. I cannot accept that the Property had ever become the partnership property of the Alleged Partnership or the personal property of SC Fung. What SC Fung stated in the 1997 Fax actually confirmed the ownership of the Property and negated his pleaded case.

58.I therefore conclude as a matter of fact that as at the date of the Tenancy Agreement, the Property remained to be the partnership property of the Partnership Firm pending its formal dissolution and not the personal property of SC Fung or his partnership with Madam NC Chan.

59.I am not convinced that SW Fung and Mok were bona fide purchaser for value as well. I cannot accept that SW Fung and/Mok ever genuinely believed that SC Fung was capable of entering into the Tenancy Agreement with them. The land search record would tell them that the Property was held by the Trustees on trust for the Partnership Firm. The Statutory Declarations would tell them the full background. They could not possibly agree to such a long lease involving a significant rental amount without pay any regard to all this information in the public domain. 

60.I agree with Mr Li’s various submissions concerning the problems with the evidence of the defence relating to the Tenancy Agreement. The Receipt showed that only half of the contractual rental amount was paid and this is contrary to the payment term of the Tenancy Agreement.    

61.The pleaded case of LZL is that the Tenancy Agreement was a sham in that, among other matters, SW Fung and Mok had not used or enjoyed the Property. The combined effect of the Tenancy Agreement and the Transfer Agreement was that SW Fung and Mok would take over the business of SC Fung carried on at the Property. Though there is only evidence of the payment of HK$700,000 by Mok to SC Fung and not the full sum of HK$2.8 million under both the Tenancy Agreement and the Transfer Agreement, a substantial sum was purportedly paid. One would have thought the Tenancy Agreement and the Transfer Agreement would be performed and SW Fung and Mok would succeed the business of SC Fung there.                

62.However, there is not a shred of evidence of any commercial activities carried on in the Property by either one of SW Fung and Mok such as their business registration certificates and tax returns. Quite on the contrary, Mr Wong was still the applicant on behalf of the Partnership Firm for the business registration certificate dated 23 August 1979 despite its cessation of business. In the total absence of such evidence adduced by the defence, I am not convinced that SW Fung and Mok ever made use of the Lease and the Transfer Agreement so as to take possession of the Property and carried on business there. I agree that the Tenancy Agreement was merely a sham and it must be null and void against the rightful owner of the Property.

63.Mr Li correctly pointed out that the registration of the Tenancy Agreement was not done until 18 December 2007, a decade after its creation subsequent to the Assignment. But this per se cannot really be an evidence of falsity of the document. After all, the Tenancy Agreement was duly stamped on 9 October 1997, as shown by the chop of the Stamp Duty Office that it bore.

64.Mr Li submits that the duration of the purported tenancy was for an extraordinary long term. It was close to 50 years and could not have been feasible in the ordinary course of business of the Partnership Firm or for the purpose of winding up its affairs.

65.I agree that it was an extraordinary long term and this made it improbable to be a genuine term of a commercial tenancy, particularly given the unequivocal indication that the Property was to be sold immediately upon the dissolution of the Partnership Firm.

66.More importantly, as rightly pointed out by Mr Li, the alleged term was for the same duration of the Government lease of the Property without revision. Hence in effect the Lease was an assignment and in contravention of section 4 of the Conveyancing and Property Ordinance Cap.219 (“the CPO”), which provides that any creation of a legal estate in land must be by deed.

67.Mr Leung argues that even the Lease amounting to an assignment was made not by deed and thereby in contravention of section 4 of the CPO, it is only void in law but not in equity. He argues that as such SW Fung and Mok were still equitable assignees of SC Fung’s share of beneficiary interest in the Property.  

68.I fail to see how this unpleaded allegation can assist the defence. On the foregoing analysis, SC Fung could not acquire any beneficial interest in the Property at all and he was not in a position to assign or purport to assign his beneficial interest to SW Fung and Mok by the Tenancy Agreement in the first place.

69.Even if the Lease had been made by deed, its belated registration renders it void against LZL, which, for reasons given below, was a bona fide purchaser for value without notice of the Tenancy Agreement. The Assignment was duly registered shortly after it was created and hence had priority over the Tenancy Agreement by reason of section 3(2) of the Land Registration Ordinance, Cap. 128 (“the LRO”).

70.The defence adduced no direct evidence of the circumstances under which the Tenancy Agreement was made. As pointed out above, the signatories had not been called to testify. The defence merely relies on the hearsay evidence of one late Mr Lee Ming Hoi. There is no evidence how he had acquired the knowledge of those assertions. Hence, I can attach no weight to such evidence.

71.By reason of the foregoing matters, I am of the firm view that the Tenancy Agreement was a bogus transaction, null and void against the Partnership Firm despite its having been stamped and in any event LZL as assignee of the Property can take free of it. Neither SW Fung nor Mok could acquire any interest in the Property under the Tenancy Agreement. None of the beneficial owner of the estate of Mok including KM Mok could be in a position to grant a licence in respect of any part of the Property. The defence case falls apart accordingly. So do all the allegations based on the Tenancy Agreement and/or the Licence.

72.For completeness, I should make it clear that I am not convinced that KM Mok and Madam WH Lee ever granted the Licence to the Three Purchasers including SGL represented by Madam Chen in the alleged terms at all. Madam Chen was unable to furnish any reason why neither of them was called to testify about the Licence. She claimed to be in a good relationship with KM Mok and she knew that he worked as a civil servant. Her lame excuse was that she did not want to cause any inconvenience to him.

73.I cannot accept her explanation. The importance of KM Mok and Madam WH Lee being the alleged grantees must be obvious to her case and they were not even asked to produce any statement in support of the allegation of the Licence. I am satisfied that an adverse inference can be drawn from the lack of evidence emanating from KM Mok and Madam WH Lee in regard to the Licence. I do not believe the Licence was so granted to the Three Purchasers at all.

74.The evidence of Madam Chen regarding the Licence was weak. She could not explain why there was no mention about the Licence in any of the conveyancing documents for the sale and purchase of the Lots particularly given its alleged indispensability to the use of the Lots by the Three Purchasers. Madam Chen merely insisted that she trusted KM Mok. She even told the court that she in fact trusted everyone in the village so as to lend more credence to her explanation. This is wholly unacceptable especially she herself was an estate agent. She should know very well that any creation of rights or interest in land should best be evidenced in writing.

75.More importantly, Madam Chen testified that despite the Licence, the Three Purchasers did not have any exclusive right to use the Land. She was well aware of the two containers placed on the Land for the use of Madam Suen who was the girlfriend of SW Fung and the properties stored on the Land by Ocean Dragon Machinery Ltd. (“Ocean Dragon”). Madam Chen even under cross-examination agreed that by the Licence, the Three Purchasers were granted a right of way only without any exclusive possession of any part of the Land.  This is a serious deviation from her pleaded case.

76.Mr Yau, a practicing solicitor, testified in support of the defence. He acted for KM Mok in the sale of the Lots to the Three Purchasers. In his witness statement made to the police dated 15 July 2008, he confirmed that KM Mok orally agreed without documentary record that Madam Chen upon her purchase of the Lots through the Three Purchasers could use the Land free of charge for the time being (暫時免費使用). This cannot be the Licence, which purportedly lasted for decades, that SGL and Madam Chen would like this court to accept. 

77.In cross-examination, Mr Yau further gave another version. Rather than making an express promise to grant the Licence to SGL, KM Mok merely had no strong objection when Mr Yau asked him about the Licence. Inconsistencies aside, this is very curious if the Licence was actually granted.

78.What is most inexplicable is that Madam Chen produced to this court a written tenancy agreement dated 1 May 2008. It was created after the commencement of these proceedings and was entered into between Mr To and Madam Chen on behalf of SGL. By this tenancy agreement, SGL was granted a lease for the use of the Land from 1 May 2008 to 30 April 2047 at the rental charge of HK$3,000 for the first three years. This tenancy agreement was duly stamped. I pause to note that there is also another tenancy agreement dated 16 November 2008 granting to one Mr Leung a lease in respect of the Land for 4 years with immediate effect.

79.If the Licence indeed existed, I see no reason why SGL would enter into the tenancy agreement additionally and pay an extra sum for using exactly the same pieces of land. Madam Chen could not persuade this court that there was a good reason for the tenancy agreement on top of the Licence. She only said that the tenancy agreement was for convenience without further elaboration.

80.Madam Chen’s attitude towards her own documentary evidence was far from satisfactory and I am unable to accept her explanation. This tenancy agreement was plainly created by Mr To for the purpose of these proceedings and it speaks volume for the validity of the allegation of the Licence. It also reflects badly on the credibility of the defence case.  

81.Lastly, a mention has to be made about another perplexing document entitled Management Authorisation Certificate (“授權管理書”) dated 12 December 2004 (“the POA”). By the POA, which was again duly stamped, Madam WH Lee in her capacity as the administrator of the estate of Mok granted Mr Lee Ming Hoi and Mr To the exclusive power to manage all the matters relating to the Lease. If the POA was made for a genuine purpose, there was no reason why MK Mok instead of these two gentlemen purportedly granted the Licence to the Three Purchasers in 2007.    

82.All in all, on the evidence adduced by the defence, I am unable to accept the Licence was granted to the Three Purchasers including SGL as alleged even on the assumption that MK Mok was capable of granting such a licence in respect of the Land.

83.Mr Leung raises a number of arguments in support of the Tenancy Agreement and the Licence in his closing submissions. With my factual findings above, a lot of them cannot be sustainable. It is sufficient for me to expressly deal with the following submissions.

84.Mr Leung submits that even if the Partnership Firm was established by SC Fung, Fung Kam Tong, Mr Wong, Mr Ho Wing Chung and Mr Ho Kam Ming, SC Fung was still the ultimate beneficiaries of the Property. By the Notice of Severance, the equitable joint tenancy was severed into equitable tenancy in common.

85.In this regard, Mr Leung relies on section 8(2) of the CPO, which provides for equitable severance of joint tenancy in the following terms,

“A joint tenancy of an estate or interest in land may be severed in equity by a notice served by a joint tenant on the other joint tenants or by any other method that is effective in equity or that would, but for subsection (1), be effective in law.”

86.Mr Leung contends that the equitable severance was achieved by the grant of the Lease: see Wong Kwong Lung v Wong Ming Yau, unreported, HCA 1111/2011, 4.9.2014 per Chow J at §51(3).  As a result of the equitable severance, SC Fung could lease his share of beneficial interest in the Property to SW Fung and Mok.

87.I cannot accept his submissions. As rightly pointed out by Mr Li, this allegation of equitable severance is nowhere to be found in the pleadings. All along the defence relies on the Notice of Severance pursuant to section 8(1) of the CPO only.

88.In any event, it has no merit at all. The fact that the Property belonged to the Partnership Firm does not mean that SC Fung was the ultimate beneficiary of the Property and hence he could grant a lease in respect of his share in the Property. It is imperative to understand the nature of a partner’s interest in a partnership property.  The following extract from Lindley & Banks on Partnership (19^th ed.) §19-08 is apposite:

“… Nevertheless, it is submitted that, irrespective off the terms of the agreements, each Pontus Shale will display two characteristics which may be regarded as constants. First, each partner’s beneficial interest, expressed in terms of its realisability is in the nature of a future interest taking effect in possession on (and not before the determination of the partnership), whether brought about by his departure or by a general dissolution. This limitation on his entitlement may be explained by reference to the fact that, as long as the partnership continues, each partner is entitled to require the partnership asset to be applied for partnership purposes and no partner is entitled to use or enjoy his share of those assets to the exclusion of his co-partners. Secondly, , when the partnership is determined and the partner’s beneficial interest in the partnership assets notionally falls into possession, it will take effect subject to the rights of the other partners to have those assets applied towards payment of the firm debts and liabilities and any surplus divided between the partners in the manner prescribed by the Partnership Act 1890.” (emphasis supplied)

89.The 1997 Fax shows that the Partnership had not yet been determined and SC Fung was still talking about the sale of his shares in the Partnership Firm. He could not have his individual beneficial interest in the Property to dispose of before the formal dissolution of the Partnership Firm and he could not possibly be in a position to grant the Lease.

90.Next, Mr Leung relies on section 7 of the Partnership Ordinance, Cap. 38 for the general proposition that a partnership is normally bound by the acts of a partner acting as an agent of all other partners in the usual course of business. He further relies on section 8 which provides that an act or instrument relating to the business of the firm and done or executed in the firm-name, or in any other manner showing an intention to bind the firm, by any person thereto authorized, whether a partner or not, is binding on the firm and all the partners.

91.Again, I fail to see how these basic principles of partnerships can assist to prove the validity of the Tenancy Agreement. To say the least, it is never the defence case that SC Fung granted the Lease for and on behalf of the Partnership Firm and no mention about the same was made whatsoever in the Tenancy Agreement. Rather, SC Fung alleges that the Lease was actually granted by the Alleged Partnership acting through him. It is not open to him to say now that his acted as an agent of the Partnership Firm and hence his act was binding on other partners of the Partnership Firm. The Tenancy Agreement was not executed in the name of the Partnership Firm at all.  

92.In addition, the pleaded case of LZL is that in any event SW Fung had surrendered the Lease, referring to the pleaded case of the defence before amendment. I accept Mr Leung’s submission that on the present state of the pleadings, it is only pleaded that SW Fung abandoned his rights under the Lease and allowed Mok to exclusively enjoy the rights and benefit under the Lease. The surrender was in other words made to Mok and not the purported landlord. This plea, though incapable of inflicting further damage to the defence case, is bad in law indeed.

93.I now turn to the challenges to the validity of the Assignment. Firstly, I could readily dismiss the serious allegation that Madam Ng was deceived or misled by LZL and/or Mr Chow into executing the Assignment without consultation or agreement by any partners of the Partnership Firm as baseless.

94.The only evidential basis is derived from the allegation of Madam Chen that Mr Tai told her that Madam Ng thought she was selling the Property to one Mr Siu instead of LZL. I certainly prefer the evidence of Mr Tai and do not believe he had ever told Madam Chen so. It should be noted that according to the statement of account (as explained below), Mr Tai had already obtained his share of the sale proceeds in the sum of HK$241,372.00 back in September 2008. It is simply incredible that Madam Ng would have been under any misapprehension about the identity of the purchaser when it was clearly stated in the Assignment. I do not understand how it could appear in the pleadings (not drafted by Mr Leung) without the requisite statement of truth to start with.

95.Secondly, the fact that the partners of the Partnership Firm were not identified by their names in the Recital of the Assignment could not possibly render the transaction a sham. This plea is wholly unmeritorious. So is the allegation that none of the partners signed the Assignment.

96.On the other hand, there is an allegation that the Purchase Price has never been paid to Madam Ng or to any of the partners of the Partnership Firm or their successors-in-title. The defence adduces no direct evidence to substantiate this complaint at all. On the contrary, Mr Chow has disclosed the two receipts issued by Kam & Fan issued to LZL for its payment of the Purchase Price both issued in 2007 and their statement of account issued to the Partnership Firm dated 23 September 2008 (“the Statement of Account”) setting out how the Purchase Price was distributed to the 7 partners of the Partnership Firm. There is no substance in the allegation that LZL was not a purchaser for valuable consideration. 

97.Form the Statement of Account, it can also be seen that a sum of HK$310,338 being the share of SC Fung and a sum of HK$344,482 being the share of Mr Yu had not yet been distributed. This is nevertheless irrelevant to the integrity of the Assignment and the pleaded allegation has no merit at all.

98.Next I turn to the alleged legal problems with the Assignment raised by the defence. It is pleaded that Madam Ng was only one out of the three Trustees and so she alone could not effectively pass any complete beneficial interest in the Property to LZL.

99.I do not understand this contention. The Trustees were assigned the Property as joint tenants. The terms of the Declarations of Trust clearly show that the last survivor(s) or their executors and administrators should dispose of the Property at the request of the partners and in such manner as the partners of the Partnership Firm shall direct or appoint.

100.I now have to deal with the Notice of Severance in greater detail. The defence contends that by the Notice of Severance, Madam Ng became a tenant in common of one third of the beneficial interest of the Property and so the maximum interest in the Property that Madam Ng could assign to LZL was one third only.

101.The pleaded case of LZL is that the Notice of Severance has no legal effect. Mr Li in his closing submissions submits that it was ineffective and invalid.

102.There is no direct evidence as to why and how the Notice of Severance came into being. The defence says nothing about its creation. On the other hand, Mr Wong even claims he was not aware of this document. There is no contrary evidence and Mr Wong was not cross-examined about his purported lack of knowledge either.

103.Judging from the contents of the Statutory Declarations made round about the same time, there seemed to be a pressing concern to Madam MC Lee and Madam Ng that SC Fung made a false claim of his beneficial interest in the Property. Apparently, they were wary that Madam NC Lee might one day misuse her position to interfere with the entire beneficial interest in the Property as directed by SC Fung if she was to hold the beneficial interest as a joint tenant with them.

104.Mr Li submits that in order to be effective, the Notice of Severance must be served on Madam NC Lee: section 8(1)(a) of the CPO. There is however no evidence of such a service.

105.In my view, this submission overlooks the fact that, even in the absence of an effective service, a joint tenancy may also be severed at law by an instrument: section  8(1)(b) of the CPO. The Notice of Severance was also duly registered in the Land Office and apparently it binds a subsequent purchaser: section 3(2) of the LRO. I do not find that there is any formality problem with the Notice of Severance.

106.However, I am not convinced that it was the intention and the agreement of the Partnership Firm to execute the Notice of Severance. On the evidence available, I am not satisfied that the Partnership Firm ever intended to make the purported severance.

107.From the historical documents it is abundantly clear that the Trustees held the Property as joint tenants and the last surviving trustee(s) by themselves or by their personal representative should deal with the Property as directed by the Partnership Firm. The Property was for the purpose of the Partnership Firm. The Trustees themselves had no beneficial interests in the Property and should not be concerned about how their beneficial interest should be allocated as a result of their co-ownership of the Property. The Declarations of Trust did not empower any of the Trustees to sever their joint tenancy unilaterally, either. I note that the Notice of Severance was not mentioned in the Recital of the Assignment too.

108.The Notice of Severance runs counter to the whole idea of having the Property registered in the names of the Trustees holding the same on trust for the Partnership Firm as joint tenants right from the outset. If co-trustees were not joint tenants, then on the death of the trustees a conveyance of the trust property to the surviving trustee would be necessary, because the office of trustee does not devolve on the trustee’s legal personal representative upon her death. Hence, a severance cannot serve the stated purpose of the Declarations of Trust and actually defies the raison d’être of the trust created for the Property.

109.Mr Li pertinently refers to me the case of White v White [2001] EWCA Civ 955 where the Court of Appeal dealt with the validity of a notice of severance. The parties there were brothers and the notice of severance was served to sever the beneficial joint tenancy in respect of a council house where they had been brought up.  The trial judge found that there was an oral agreement among the brothers that the plaintiff was in the normal course of events to become sole beneficial owner of the house through survivorship under a beneficial joint tenancy.

110.In light of this factual finding, the Court of Appeal agreed that the notice of severance was ineffective because equity would disregard a notice given in contravention of the oral agreement.   

111.In the present case, as explained, a severance was in contravention of the original idea of the partners of the Partnership Firm and defeats the purpose of the trust set up relating to the Property. It is true that it was George YC Mok & Co., which had long served the Partnership Firm, that prepared the Notice of Severance. It might be assumed that they had duly obtained the authorization/instruction of the Partnership Firm to have the Notice of Severance executed and registered. However, I cannot lose sight of the unchallenged evidence of Mr Wong about his lack of knowledge of this document as well. On the balance of probabilities, I accept Mr Wong’s evidence and find that the Notice of Severance was not really intended and agreed upon by the Partnership Firm absent cogent evidence of a change of intention and/or an agreement among the partners of the Partnership Firm. Accordingly, I am not prepared to uphold the validity of the Notice of Severance. I agree with Mr Li that it was ineffective and invalid.  

112.On the other hand, there was ample evidence of the agreement of the Partnership Firm to dispose of their entire interest in the Property through the Trustees. Madam Ng merely carried out the instruction to execute the necessary conveyancing documents including the Assignment on the behalf of the Partnership Firm. Her dealings with the sale proceeds including the distribution of the same among the partners were above challenge. The lateness of the sale causes me no concern at all and certainly does not suggest a change of intention of the partners.

113.Thus, I see no problem with the authority of Madam Ng to assign to LZL the entire legal title to and beneficial interest in the Property by way of the Assignment.

114.Indeed, given my ruling against the validity of both the Tenancy Agreement and the Licence (and its very existence), SGL and Madam Chen had no right to remain or use the Land whatsoever in the absence of any consent or approval of the registered owner. Their case is not about any easement or right of way. Whether or not Madam Ng could pass only one third of the beneficial interest in the Property to LZL is irrelevant. Even with the minimal beneficial interest, LZL must have the legal right to evict any outright trespassers remaining in the Land including SGL and Madam Chen.

115.Before proceeding to Section B, I shall briefly give my assessment of the evidence of the defence witnesses. The general feeling I have got is that whereas the defence did not adduce evidence from the most relevant persons, the witnesses called to testify were unhelpful in that they did not really have personal knowledge of the key matters in dispute. In any event, my determination of the validity of the Tenancy Agreement and the Licence did not really necessitate consideration of their evidence except those of Mr Yau and Madam Chen. Their evidence in that regard turned out to be unsupportive of the defence case.

116.Mr To, to my surprise, came forward to assist the defence though he himself has lost his legal battle with LZL and Mr Chow by reason of his bankruptcy. Judgment was entered against him and he should not be allowed to deny the factual allegations that founded the judgment. In any event, I do not find him to be a truthful witness.  He obviously cashed in on the POA and dealt with the Property as if it were his property without accounting to anyone the profits he had made out of such dealings. He was obviously evasive in his testimony.

117.I am unable to accept his evidence concerning his visit to Mr Tai in Guangzhou, trying to get an affirmation signed by him. I accept Mr Tai’s evidence that those comments written by him in the draft affirmation prepared by Madam Chen were his genuine response. Clearly Mr To and Madam Chen worked together to convince Mr Tai to give evidence in their favour to support their challenge to the title to the Property of LZL but in vain.

118.Mr Yau was not a forthcoming witness and his evidence was marked by a strong sense of non-committal. He carefully opted to give unhelpful rather than false evidence in my view.  

119.Ms Tess Chiu was one of the persons-in-charge of Ocean Dragon. She dealt with KM Mok in respect of the Land. She under cross-examination agreed that Ocean Dragon had paid rent to LZL for the period 1 December 2007 to 31 December 2007 in the sum of HK$4,000 as evidenced by a receipt dated 1 December 2007. She confirmed that Mr Chow had not harassed or caused any nuisance to Ocean Dragon.

120.For unknown reason, Madam Lo Wai Han was very forgetful and did not even remember the contents of her witness statement. She even said Mok granted the Licence to Ocean Dragon when in fact Mok had already passed away. No weight can attach to her evidence at all.

121.Lastly, Mr Siu’s evidence was irrelevant. If anything, his offer to buy the Property, which was better than the Purchase Price, could only negate the existence of any encumbrances including the Lease and the Licence. 

Section B

122.I now turn to the counterclaim of SGL. It is alleged that on 14 and 15 May 2008, LZL and Mr Chow broke and caused damage to a padlock at the gate of Lot 449C2 RP, attempted to break into the Land, caused damage to the anti-theft alarm system at the gate of Lot 449C2 RP and blocked the gate of Lot 449C2 RP first by a private car and then subsequently by 4 motor bicycles on 12 November 2008.

123.As a result, SGL claims damages in the sum of HK$50 being the price of the padlock, HK$5,400 being the price of the anti-theft alarm system and HK$4,800 being the costs for opening another entrance on the Road with a new gate installed.

124.SGL further claims an injunction against LZL and Mr Chow to avoid further trespass.

125.The pleaded case of LZL and Mr Chow in relation to these allegations contains bare denials coupled with an assertion that neither SGL nor Madam Chen was entitled to use the Land and install such security device on the Land. It was expressly averred that the police had wrongfully charged Mr Chow with the offence of criminal damage regarding the anti-theft alarm system. Eventually Mr Chow was tried in a magistrates’ court and was acquitted on 8 April 2009. Very fairly Mr Leung refers to the acquittal in his closing submission.

126.There are indeed some witness statements relating to the criminal prosecution of Mr Chow and a lot of photographs depicting the standoff between the parties in the vicinity of the Property. Good sense prevailed among counsel on both sides and it was agreed that they would not deal with all the petty allegations and cross-allegations in the course of the trial.  Rather, they focused on the rights and interest of the Land. Their agreement was indeed helpful.

127.With respect to the damaged padlock, I accept Mr Chow’s evidence that it was necessary to break the padlock to gain entry to the Land to prevent further trespass by way of self-help. I also accept his evidence that indeed he had been advised by the police to break the padlock beforehand. I cannot find him to be liable for doing so.

128.As regards the anti-theft alarm system, even on the evidence of Madam Chen, no allegation of any damage caused to the system was made at all. Mr Chow admitted that he interfered with the system so that the system was activated with a view to evicting those trespassers from the Land. There is no evidence of physical damage caused to the system at all. I must reject this claim. I should make it clear that this conclusion has nothing to do with the acquittal because I do not know on what basis Mr Chow was acquitted of the charge at all.

129.For the alleged blocking of the entrance of the Land by the private car and the 4 motor bicycles, in law SGL and Madam Chen were trespassers and no right to use the Land. The acts under complaint were within the  bounds of propriety in the context of self-help against trespassers. More importantly, I am not convinced that there was no other entrances/exits to the Road from the Lots and it was necessary for SGL to make a new entrance with a new gate. Alarmingly, Madam Chen herself forgot whether she had made one. I have little hesitation in rejecting this complaint accordingly.

130.I now have to deal with the monetary claim of LZL for trespass by SGL and Madam Chen. First Mr Li complains that SGL and Madam Chen are liable to pay HK$3,600 being the costs of the reinstallation of new fences on the Land. The evidence is that Mr Chow on 15 December 2007 found out that some fences erected on the border of Lot 449C2 RP had been taken down. However there was no eye-witness. This complaint was actually directed at Mr To on the pleading: §22 of the Re-Re-Amended Defence and Counterclaim and Re-re-Amended Defence of the 1^st and 2^nd Defendants. No liability can attach to SGL and Madam Chen. 

131.Lastly, LZL asks for damages and/or mense profits at the monthly rate of HK$5,279 against SGL and Madam Chen for their trespass. There is no valuation evidence. Trying his very best to assist, Mr Li submits that the rate is a reasonable one taking into account the monthly rental income of HK$8,000 yielded by a lease of Lot 449C1 RP. Lot 449C2 RP is smaller than Lot 449C1 RP in area.

132.I do not feel sufficiently confident in making an assessment of the mense profits without actual valuation evidence in the circumstances of this matter. In the absence of any split-trial directions, I can only dismiss this monetary claim of LZL.   

Conclusion and order

133.I do not attempt to resolve all the factual and legal issues in this matter. Mr Li has provided to this court a closing submission running into 119 pages with references to more than 40 authorities. Much as I am appreciative of his customary industry, without disrespect and certainly not indicating any disagreement with such submissions, I have just made the essential determinations for the fair disposal of the parties’ respective pleaded cases. I believe that my findings against the allegations of the Tenancy Agreement and the Licence are determinative of the major disputes of the parties.

134.For the reasons given, LZL must be entitled possession of the Land and an injunction to avoid further trespass. I therefore allow its claim against SGL and Madam Chen except the monetary claims.

135.On the other hand, the counterclaim of SGL must be dismissed. 

136.The general rule of costs following the event should apply. I make a costs order nisi that SGL and Madam Chen should bear the costs of LZL in respect of its claim against them and SGL should pay the costs of LZL and Mr Chow in respect of its counterclaim against them, to be taxed if not agreed with certificate for two counsel.

137.Last but not least, I thank Mr Li, Mr Kwong and Mr Leung for their helpful assistance in this matter.

Mr Li Chau Yuen, S.C. and Mr Jeremy Kwong, instructed by Haldanes for the plaintiff (By Counterclaim)

Mr Richard Leung, instructed by Philip K.Y. Lee & Co for the 2^nd and 3^rd defendants (By Counterclaim)