Lee Pak Yan, The Personal Representative of the Estate of Lee Chi Ying, Deceased v. Sha Lo Tung Development Co Ltd
Read the full judgment text of HCA 2220/2018 on BabelCite. This High Court CFI judgment was delivered on 9 September 2019.
1. By summon dated 20 December 2018 (“the Summons”), the defendant applies for:
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HCA 2220/2018 [2019] HKCFI 2159 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2220 OF 2018 ____________
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____________ JUDGMENT ____________ APPLICATIONS 1.By summon dated 20 December 2018 (“the Summons”), the defendant applies for:
2.By summons dated 30 May 2019, the plaintiff applies for leave to amend the Statement of Claim as per the Amended Statement of Claim. I will consider both summonses together and deal with the striking out application on the facts as pleaded in the proposed Amended Statement of Claim. MATERIAL FACTS 3.The defendant’s predecessor acquired 95% of the private lots inSha Lo Tung (“SLT”) from the villagers of Cheung Uk and Lei Uk in order to facilitate a redevelopment project for a golf course and private residence. At the time of acquisition, the ecological value of SLT was unknown. 4.In one of the development agreements executed in 1979, the following terms are material for these applications: 5.In a supplemental agreement executed in January 1980, the following terms are material: 6.In a Conveyance on Sale dated 12 August 1982, it is recorded that:
7.On the same date, for a consideration of HK$400,000, Mr Li Chi Ying also assigned Lots Nos 515 (Area: 0.02 acre — House), 519 (Area: 0.01 acre — House) and 1316 (Area: 700 sq ft — House) to the defendant. 8.By an agreement dated 20 February 1989, it is recorded that: 9.In a supplemental agreement executed in July 1990, it is recorded that: 10.In the minutes of a meeting dated 11 May 2001 where both Mr Cheung Tin Fook and Mr Lee Wan Choi attended, it is recorded that:
11.In a further supplemental agreement dated 16 November 2004 (“the 2004 Agreement”), it is recorded that:
12.In another supplemental agreement dated 29 November 2004, it is recorded that:
13.The agreement dated 4 November 1990 (“the 1990 Agreement”) contains the following material terms: 14.In 2018, the defendant made an offer to the representatives of Cheung Uk and Lei Uk but the offer was not accepted (“the Offer”). The Offer contains the following relevant clauses:
THE AMENDED STATEMENT OF CLAIM 15.In the plaintiff’s Amended Statement of Claim, the following pleas in §§6, 16, 22, 36, 46, 47 and 52 are material to the striking out application:
16.The plaintiff’s primary relief is set out in paragraph (a) of its Prayer which reads:
17.The Plaintiff also seeks the following relief:
APPLICABLE LEGAL PRINCIPLES 18.The legal principles in relation to striking out and amendment of pleadings are well established and are summarised as follows:
19.Insofar as vacating of the registration of lis pendens is concerned, the only lis pendens which are registrable are those which affect land. (See Thian’s Plastics Industrial Co Ltd & others (No 2) v Tin’s Chemical Industrial Co Ltd & another [1971] HKLR 249 at p 252 per Briggs J (as he then was) and at p 256 per Huggins J (as he then was). 20.Section 19 of the Land Registration Ordinance, Cap 128 provides that:
ANALYSIS 21.It is an express term of the development agreements including the 1990 Agreement that the building of new village houses for villagers is subject to an express condition that the Government’s approval had to be obtained. Clause 2(1) and 2(12) of the 1990 Agreement specifically provide that the defendant shall, after Government approval was obtained,build 160 new village houses at locations designated by the Government for the villagers of Cheung Uk and Lei Uk, and that the defendant shall commence construction of new village houses within one month of the Government approving the entire development proposal and all relevant plans, legal documents and occupation permit. 22.It is a fact that the Government rejected the defendant’s redevelopment proposals over the last few decades, particularly after the ecological value of SLT was discovered. In November 2000,the defendant made a planning application under section 16 of the Town Planning Ordinance, Cap 131, on behalf of the villagers of Cheung Uk and Lei Uk to the Town Planning Board for approval for comprehensive village housing development in SLT. However, the application was rejected due to, inter alia, ecological concerns. 23.Over the years from 1980s to 2010s, the defendant submitted various development proposals in respect of SLT to the Government. No substantial progress had been made. 24.It was not until January 2017 when the Government announced that it is actively considering the long-term conservation of SLT through a non–in-situ land exchange for the private land with high ecological value therein in return for the Shuen Wan restored landfill, and that the Chief Executive in Council had given approval in principle to the non–in‑situ land exchange. 25.This development is significant because it makes the building of small houses in SLT out of the question. 26.It is also against such development that the Offer was made. In the Offer, the defendant made various proposals to compensate the villagers of Cheung Uk and Lei Uk. 27.Ms Wong SC for the defendant submitted that following the announcement by the Government of the non–in-situ land exchange plan on 15 June 2017, which would require the defendant to surrender approximately 25 hectares of private land in SLT in exchange for the Government granting a piece of land of approximately 50 hectares in Shuen Wan restored landfill, the plaintiff, amongst others, began to carry out trespassing activities in relation to other Lot Nos 513, 1315 and 1320 in DD No 31 owned by the defendant. Accordingly, the defendant applied for an injunction against the plaintiff and other trespassers. 28.On 25 August 2017, Mr Justice Lok granted an interim injunction against the plaintiff and other trespassers. The defendants in those proceedings including the plaintiff herein raised a number of defences including (1) easement of necessity, (2) public right of way by dedication and (3) easement by prescription under the doctrine of lost modern grant. Those claims were dismissed by Recorder Whitehead SC on 16 January 2018 and the interim injunction granted by Mr Justice Lok was continued until further order of the court. 29.Ms Wong SC for the defendant submitted that there was a second round of trespassing and harassing activities starting from November 2018. On 17 December 2018, the defendant, Green Power Limited and a volunteer representing other workers and volunteers applied for injunctive relief from the court to allow conservation works to be undertaken by green groups at SLT and to protect the workers and volunteers of green groups, who have been victims of serious harassment. Mr Justice Lok granted an injunction order against several villagers including the plaintiff,restraining them from carrying out trespassing and harassing acts. 30.Ms Wong SC for the defendant further submitted that the motive of the plaintiff in commencing the present proceedings viewed in context of the trespassing and harassing activities is highly suspicious. It was submitted that the improper motive on the part of the plaintiff in bringing these proceedings is to obstruct the defendant’s negotiations with the Government with the aim to exert undue pressure on the defendant. 31.However, I am of the view that it is not necessary for this Court to speculate on the motives of the plaintiff in commencing these proceedings. The key issue is whether the pleas in the present action are properly constituted. If they are, it does not matter what are the motives behind the commencement of the present action. If they are not, then this Court should strike them out. 32.For sake of convenience, in the Statement of Claim and the draft Amended Statement of Claim, the plaintiff defined “House Lots” to include all the 11 Lots. However, out of the 11 Lots, 8 of them (Lot Nos 498, 499, 501, 526, 536, 1238, 1252, 1253 in DD 31) are agricultural lots (“Agricultural Lots”) and 3 (Lot Nos 515, 519 and 1316 in DD 31) are house lots (“House Lots”). 33.Half shares in the Agricultural Lots and House Lots were conveyed by Mr Lee Chi Ying to the defendant by separate conveyances dated 12 August 1982. Implied trust 34.I am of the firm view that the plaintiff’s implied trust claim must be struck out as it has no legal basis. First, it is clear that by reason of the various development agreements, and in particular, the 1990 Agreement,the villagers including the plaintiff had conveyed the title of their land to the defendant absolutely. I find the plaintiff’s plea that “[t]here was a mutual understanding or common knowledge that defendant would hold the properties on trust for the villagers” unsustainable. 35.First, Ms Wong SC for the defendant submitted that the reference to “properties” is equivocal. There is no plea as to what specific “properties” are said to be subjected to the implied trust. As such, the subject matter of the trust is uncertain and vague. I am of the view that there is considerable force in Ms Wong SC’s submissions on this point. 36.If it refers to half of existing lots and houses on the lots, then those properties were clearly conveyed to the defendant. The Conveyances on Sales dated 12 August 1982 makes it clear that for consideration stated therein title of the subject lots were passed to the defendant. This can also be gleaned from:
37.The pleaded implied term that the “properties being held on trust” goes directly against the express term of the development agreements that both the legal and beneficial titles were passed to the defendant. 38.If it refers to future houses to be built in areas designated by the Government, the same cannot be subjected to any trust (see Clause 2(1)of the 1990 Agreement). It is established law that no trust can be asserted over future, uncertain property. 39.Secondly, I am of the view that the intention of the parties then must have been to convey the absolute title, both legal and equitable, to the defendant without any trust. If it were otherwise, the defendant would not have the relevant locus standi as the absolute owner of the relevant lots to apply to the Government for redevelopment. It is against common and commercial sense that after the conveyancing of the lots to the defendant,an implied trust would nevertheless arise so as to pass or reserve an equitable interest back to the villagers. I find this unthinkable given that the conveyance was to facilitate the application for redevelopment of SLT. 40.Thirdly, I agree that the plea that the plaintiff would not be in a position to apply for a small house after the assignment of the relevant lots to the defendant is irrelevant. That fact itself cannot support the creation of an implied trust. 41.Fourthly, Ms Wong SC for the defendant rightly referred this Court to section 17 of the Conveyancing and Property Ordinance, Cap 219 which specifically provides that:
42.For the above reasons, I am of the view that no implied trust could have arisen from the pleaded facts of the present case. Vendor’s lien 43.I am also of the view that the plaintiff’s plea of a vendor’s lien is bad. The plaintiff’s whole case of a vendor’s lien is premised upon part of the consideration for the assignment of the relevant lots is the promise tobuild small houses in areas designated by the Government, and the defendantfailed to deliver that specific part of the consideration. (See Sihombing & Wilkinson’s Hong Kong Conveyancing Vol 1 at XII [166].) 44.This plea is bad because first, the consideration is stated clearly in the various development agreements including the 1990 Agreement and the Conveyances on Sales. The consideration does not include a future or contingent event provided for in the relevant agreements. Ms Wong SC for the defendant submitted that a conditional term cannot be part of the consideration as the same lacks the relevant certainty to qualify as an essential term of a contract. 45.Further, stamp duties were paid according to the specific considerations as stated in the various development agreements. The various clauses in the agreements as highlighted above which make it clear that the vendors were satisfied with the consideration they received. 46.Ms Wong SC for the defendant also referred this Court to section 18(1) of the Conveyancing and Property Ordinance, Cap 219 which provides that:
47.Mr Wong for the plaintiff, however, submitted that a lien is not excluded by the fact that the purchase-deed contains a receipt for the purchase-money. I agree. The learned editors of Snell’s Equity (33rd ed) at §44-007 states:
48.Mr Wong for the plaintiff also referred this Court to Professor Sarah Worthington’s article ‘Equitable Liens in Commercial Transactions’ (1994) 53 CLJ 263 at 267 where the learned author stated:
49.Mr Wong for the plaintiff relied on the last sentence to advance the submission that the consideration for the various development agreements including the 1990 Agreement consists of (a) the contractual sums as stated therein and (b) the promise to build small houses for the villagers in areas to be designated by the Government. 50.However, as analysed above, the consideration is not divided into two parts as suggested by the plaintiff. The sale of the relevant lots was absolute and not subject to any conditions. 51.Mr Wong for the plaintiff referred this Court to the case of Low Tuck Kwong & others v Dynasty Line Ltd (unrep., HCA 9505/1999, 6 April 2001) where Waung J at §8 said:
52.It is not at all clear as to what the plaintiff says about specific enforceability and identification of property. It appears to this Court that as far as future properties are concerned, they are not specifically enforceable and cannot be easily identified. As far as the relevant and specific lots are concerned, they were absolutely conveyed. 53.Importantly, I am of the view that a vendor’s lien cannot arise if the contract, expressly or in substance, denies this. The Conveyances on Sales and the subsequent agreements in 1989 and 1990 have ensured that both legal and beneficial interests have already been passed to the defendant due to the satisfaction of full payment of the purchase price. If it were otherwise, there would be no basis for the defendant, qua absolute owner of the relevant lots, to apply for development from the Government. Accordingly, I am of the view that there is no scope for the operation of a vendor’s lien or an equitable lien on the pleaded facts of the present case. 54.Further, Ms Wong SC for the defendant submitted that the plaintiff’s plea of a vendor lien stems from the defendant’s alleged failure tobuild two new houses for the plaintiff. (See §52 of the Amended Statementof Claim.) However, even on the plaintiff’s pleaded case, the defendant was only obliged to construct new village or small houses for the villagers after approval was obtained from the Government and at locations designated by the Government (see §§30 and 35 of the Amended Statementof Claim). Since governmental approval was never granted, it is indisputablethat the defendant’s obligation to construct new village or small houses hadnot accrued or materialised yet. It is therefore unsustainable for the plaintiff to allege that the defendant had “failed to build two new houses”. I agree. 55.For all the above reasons, I am of the view that the plaintiff’s plea in relation to a vendor’s lien is defective and should be struck out. Registration of lis pendens 56.I agree that upon the striking out of the implied trust claim andthe vendor’s lien claim, it follows that there is no lis pendens that could affect the interests of the relevant lots. As such, the registration of lis pendens against the relevant lots should be vacated. Implied contractual terms 57.The plaintiff’s pleaded case on breach of the 1990 Agreement is premised upon the breach of an implied term in the 1990 Agreement that “the Defendant and the villagers were to make their best and continuous effort in the application to the Government to build houses for the eligible villagers affected by the Sha Lo Tung Development Plan. Further, the Defendant will include the building of new houses for the villagers when negotiating with the Government.” (“the Implied Terms”). 58.First, Ms Wong SC for the defendant submitted that the Implied Terms plea is defective because as a matter of pleading, the plaintiff is in flagrant disregard of the elementary rules of pleading. It gave no particulars whatsoever of the material facts upon which the Implied Terms are said to arise. There is only a bare assertion that the Implied Terms arose. It is unclear as to whether the Implied Terms are implied by necessity or by law or otherwise. Ms Wong SC submitted that despite complaints from the defendant about the want of particulars to support the plea of Implied Terms, the plaintiff has not sought to propose amendments to include particulars of the material facts upon which the Implied Terms are said to arise. Hence, it is clear that the Implied Terms are spurious and untenable, to an extent that the plaintiff could not plead any material facts tosubstantiate the same. I am of the view that Ms Wong SC for the defendant has made a valid complaint. There are indeed no pleaded material facts to support the Implied Terms. 59.As a matter of law, where an implied contractual term is pleaded, particulars should be given of the material facts upon which the implied termis said to arise. (See Hong Kong Civil Procedure 2019 Vol 1 at §18/12/16A.) 60.In Willy Fine Ltd v Janyet Investments Ltd (unrep., HCA 4430/2001,6 January 2003) Chu J (as she then was) at §21 said:
61.A fortiori, in the present case, there are no particulars in the proposed Amended Statement of Claim to justify the plea of the Implied Terms. 62.Secondly, I also agree with Ms Wong SC’s submission that there is no factual or legal basis (and none is put forward) to argue that it is so obvious that it goes without saying or necessary for the business efficacy of the 1990 Agreement for the defendant to be subject to a vague and uncertain obligation which subsists for an uncertain and indefinite period to make a “best and continuous effort” in applying to the Governmentto build houses for eligible villagers and/or that the defendant will include thebuilding of new houses for villagers when negotiating with the Government. 63.In response to the question posted by this Court as to the period for which the defendant should make the best and continuous effort as pleaded,Mr Wong for the plaintiff submitted that it should be about two generations. First, it is nowadays unclear how many years constitute a generation. Secondly, it is equally unclear as to why the proper period is two generations. These concerns demonstrate the inherent uncertainty of the terms to be implied. The fact is that the defendant had made various attempts from 1980s to 2017 and its applications have not been successful. 64.Mr Wong for the plaintiff submitted that in the event governmental approval cannot be obtained, the outstanding purpose of the 1990 Agreement would fail and the defendant could not deliver the promised consideration. Remedies should then be awarded to the plaintiff. It was submitted that this is more consistent with common or commercial sense. I express no view on the case of a failure of purpose of the 1990 Agreement. However, this is not the way the plaintiff pleads his case, whether in the proposed amendments or in the original version. 65.Finally, I observe from recital 2 of the 2004 Agreement that the village representative duly acknowledged that repeated efforts were made to submit redevelopment proposals for SLT, but the proposals had been repeatedly rejected. 66.Accordingly, I am of the view that the Implied Terms plea is also bad and should be struck out. DISPOSITION 67.For all the reasons stated above, I make the following orders:
68.I also make a costs order nisi that:
69.The above costs order nisi will be made absolute unless application is taken out to vary the same within 14 days from the date hereof. 70.Finally, it remains for me to thank Mr Wong and Mr Chan for the plaintiff and Ms Wong SC and Ms Yuen for the defendant for their helpful assistance rendered to this Court.
Mr Charles T C Wong and Mr Alwin Chan, instructed by H Y Leung & Co LLP, for the plaintiff Ms Maggie Wong SC and Ms Sharon Yuen, instructed by Ho and Wong, for the defendant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment