Kwan Chun Investments Ltd v. Sik Tak Kwong and Others
Read the full judgment text of HCA 3102/2016 on BabelCite. This High Court CFI judgment was delivered on 19 March 2021.
1. In this Action, the Plaintiff (“ P ”) claims against the 1 st and 2 nd Defendants (“ D1 ” and “ D2 ”, together “ Ds ”) in respect of a Deed of Licence dated 17 April 2008 (“ Deed of Licence ”) pursuant to which a traditional Chinese customary trust known as Chong Fung (or Fun) Wing T’ong (鍾寬永堂) (“ T’ong ”) granted P a right (“ Right ”) to use 892 niches (“ Niches ”) in a columbarium known as Kung Tak Tong (功德堂) (“ Columbarium ”) for the sum of HK$3,000,000.
Cited by 1 case · Cites 8 cases
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HCA 3102/2016 [2021] HKCFI 714 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 3102 OF 2016 ________________________ BETWEEN
________________________ Before: Hon Linda Chan J in Court Dates of Hearing: 17, 18 and 24 February 2021 Date of Judgment: 19 March 2021 ________________________ J U D G M E N T ________________________ 1.In this Action, the Plaintiff (“P”) claims against the 1st and 2nd Defendants (“D1” and “D2”, together “Ds”) in respect of a Deed of Licence dated 17 April 2008 (“Deed of Licence”) pursuant to which a traditional Chinese customary trust known as Chong Fung (or Fun) Wing T’ong (鍾寬永堂) (“T’ong”) granted P a right (“Right”) to use 892 niches (“Niches”) in a columbarium known as Kung Tak Tong (功德堂) (“Columbarium”) for the sum of HK$3,000,000. 2.P seeks specific performance of the Deed of Licence and injunctive relief to protect the Right, and alternatively damages. A. BACKGROUND 3.P is a Hong Kong company which operates a property investment business. Mr Lai Yuk Keung (“Mr Lai”) was at all material times and still is a director of P. 4.D1 are sued in their capacity as managers of the T’ong. 5.Between 15 March 1999 and 28 February 2014, Mr Chow Yuen Leung (“Mr Chow”) was the sole registered manager of the T’ong. On 28 February 2014, Mr Chow was removed as registered manager of the T’ong and D1 were appointed as registered managers in his place pursuant to s 15 of the New Territories Ordinance (Cap 97) (“NTO”). 6.Ms Ko Mei and Master Sik Tak Kwong passed away in April 2016 and June 2020 respectively. Their appointments as managers of the T’ong terminated upon their demise (Chan Choy Fong v Secretary for Home Affairs [1998] 1 HKLRD 431, 435E per Nazareth VP). Master Sik Chi Hang is the only surviving manager of the T’ong. 7.D2 is a company limited by guarantee and incorporated in Hong Kong on 6 June 2013. Ms Sze Wai Chun (“Ms Sze”) and Mr Li Ka Cheung (“Mr Li”) were at all material times and still are directors of D2. 8.The Columbarium is situated in a Buddhist monastery in Tuen Mun known as Kok Chan Bip Yuan (覺塵別院) (“Monastery”). It is not clear when exactly the Monastery and the Columbarium were established and built. There is a suggestion in the evidence that ashes were first interred in the Monastery in 1932 and, in any event, there is no dispute that the Columbarium had been constructed by the time P and the T’ong entered into the Deed of Licence in 2008.[1] There is also some uncertainty as to the precise number of niches in the Columbarium, but the records maintained by the Food and Environmental Hygiene Department indicate that the Columbarium contained at least 1164 niches for the interment of cremated ashes. Other than the 892 Niches which form the subject matter of the Deed of Licence, there are 270-odd niches which the T’ong had sold to members of the public prior to 2008. 9.The land on which the Monastery is built, namely Lots No 706, 775, 776 and 777 in DD 131 (“Land Lots”), was held in the name of the T’ong until 27 November 2015. 10.On or around 17 April 2008, the Deed of Licence was executed between P and Mr Chow on behalf of the T’ong. The Deed of Licence (as translated) contained the following material terms:
11.D2 made no admission to the validity of the Deed of Licence in its Re-Amended Defence.[2] Mr Chang SC, counsel for D2,[3] maintains the same stance in his written opening, referring in a footnote to “the evident lack of authority or consent from the T’ong’s beneficiaries, and potential breaches of duties owed by [Mr Chow]; and/or … the lack of consent from the Secretary of Home Affairs in respect of the Deed of Licence under s. 15 of the NTO”.[4] However, Mr Chang confirms in his oral closing that D2 does not take issue with Mr Chow’s authority to enter into the Deed of Licence on behalf of T’ong. That being the case, I will proceed on the basis that the Deed of Licence is valid and binding as between P and the T’ong. 12.There is no dispute that after entering into the Deed, P arranged for refurbishment and repair of the Columbarium between April 2008 and November 2008 which involved setting up an office for P, installing some drawings and wall lamps at the Columbarium and replacing the memorial plaques on the Niches. P incurred expenses of not less than HK$2,300,000 in so doing. P also employed a caretaker for the Columbarium, whose duties included burning incense, receiving visitors to the Columbarium and assisting them with the worship of their ancestors. 13.Between 2008 and 2016, P sold its rights in a total of 275 niches to third parties for HK$9,599,550. 14.In late 2011, Mr Chow attempted to sell the Land Lots to a third party, Billion Fortune Limited, by way of a provisional Sale and Purchase Agreement (“PSPA”) dated 15 November 2011. However, the transaction did not go ahead after the Tuen Mun District Office refused its consent to the transaction under s 15 NTO, on the basis that there was insufficient evidence that the members of the T’ong agreed to the proposed sale. 15.In around 2012, members of the T’ong including Ms Sze began making allegations of misconduct against Mr Chow in respect of, inter alia, the attempted sale of the Land Lots to Billion Fortune. Ms Sze thus approached Mr Li, the honorary legal advisor to the Hong Kong Buddhist Association at the time, for assistance. Mr Li proposed that the members of the T’ong apply for removal of Mr Chow as manager of the T’ong and appointment of new managers in his place. In view of Sik Tak Kwong’s advanced age at the time, Mr Li also advised the members of the T’ong to set up a charitable institution to manage the T’ong’s affairs and properties to facilitate long-term planning. 16.Mr Li’s proposal was accepted and put into action by the beneficiaries of the T’ong. 17.D2 was accordingly incorporated in June 2013. As stated in its Memorandum of Association (“MOA”), the objects for which D2 was established were, inter alia:
18.As mentioned above, Mr Chow was removed as manager of the T’ong on 28 February 2014. 19.With the consent of the District Officer of Tuen Mun District Office, D1 in their capacity as the registered managers of the T’ong assigned the Land Lots to D2 by a Deed of Gift dated 27 November 2015 (“Deed of Gift”). 20.At around that time, the T’ong and later D2 received 2 warning letters (“Warning Letters”) from the Lands Department stating that the use of the Land Lots for columbarium purposes was in breach of General Condition No 15 (“GC 15”) published in GN 570 of 1924 (“GN 570”) which applied to the Government Lease in respect of the Land Lots. GC 15 provided that “without the consent of the District Officer no grave shall be made on, nor shall any human remains be interred in, or deposited on the lot sold either in earthenware jars or otherwise”. In the Warning Letters, the Lands Department threatened to take enforcement action without further notice unless the breach was purged. 21.On 15 May 2016, D2 published a notice in the name of the Monastery stating inter alia that the Columbarium was an illegal building structure and might be demolished by the Government. D2 locked the gates of the Monastery and affixed a notice stating that persons wishing to worship their ancestors could only do so if they book an appointment with the Monastery in advance (“New Worship Arrangement”). D2 also denied access to the Monastery to P’s customers who wished to inter ashes in the Niches. 22.P commenced the present action on 28 November 2016. 23.D1 filed their Defence on 19 April 2017 but failed to file and serve their List of Documents. On 18 October 2018, Master Lui made an order that unless D1 filed and served their List of Documents within 14 days of service of the order, D1’s defence was to be struck out and P shall be at liberty to apply for judgment against D1 with costs (“Unless Order”). 24.The Unless Order was served on D1 on 5 November 2018. 25.D1 did not comply with the Unless Order. No relief from sanction was sought or granted. Pursuant to Order 2 rule 4 of the Rules of the High Court, the sanctions specified in the Unless Order took effect immediately upon default with the effect that D1 is now debarred from defending this action (Daimler AG v Leiduck [2012] 3 HKLRD 119, §47 per Fok JA). B. WITNESSES 26.P calls Mr Lai, Ms Ip Kit Lan (“Ms Ip”), Ms Chan Shuk Yee (“Ms Chan”), Ms Yim Shun Lan (“Ms Yim”), and Ms Ma Kwai Bo (“Ms Ma”) as its witnesses at the trial. Only Mr Lai is cross-examined. 27.Mr Lai is not forthcoming in certain aspects of his testimony. For example, under cross-examination, he reveals that he had a separate agreement with Billion Fortune for Billion Fortune to acquire the Right if the PSPA went ahead. However, after Mr Chong objects to the relevance of this line of questioning (an objection which I dismiss), Mr Lai first parrots Mr Chong’s objection, then claims to have forgotten all matters relating to this agreement. This casts doubt on the truthfulness of his evidence as a whole. Accordingly, where Mr Lai’s evidence is disputed by and different from the evidence given by Mr Li and Ms Sze, I prefer the evidence of Mr Li and Ms Sze over that of Mr Lai. That said, most of the discrepancies between their evidence, such as in relation to the contents of several meetings between the parties from 2013 to 2016, are not really relevant to the issues I have to decide and it is unnecessary to make any definitive finding on these matters. 28.Ms Ip is an employee, shareholder and director of P, and worked at the Columbarium between January 2010 and May 2016. Ms Chan, Ms Yim and Ms Ma all purchased rights to use niches in the Columbarium from P. They give evidence as to their experience in attempting to accessing the Monastery after D2 locked the gates on 15 May 2016. 29.P also filed a Witness Statement of a Mr Wan Lun (“Mr Wan”), who was employed by P as a caretaker of the Columbarium between June 2009 and May 2016. Unfortunately, Mr Wan is by reason of his health condition unable to attend trial. Mr Chong applies to admit his witness statement as hearsay evidence (under Order 38 rule 2A(17) of the Rules of the High Court and s 47 of the Evidence Ordinance (Cap 8)), to which Mr Chang SC has no objection. I accede to Mr Chong’s application. His evidence is not in dispute. 30.D calls Mr Li and Ms Sze to give evidence at trial. I find them to be truthful and meticulous witnesses who give evidence in a candid and straightforward manner, and I accept their evidence. C. DISCUSSION C1. P’s claim against D1 31.In his oral opening, Mr Chong, counsel for P,[5] submits that P is automatically entitled to judgment against D1 following their failure to comply with the Unless Order, and there is no need for the Court to examine the merits of P’s claims. Mr Chong confirms in his written closing that P is applying for judgment against D1 in terms of the prayers set out in its Amended Statement of Claim (“ASOC”) pursuant to Order 19 rule 7 of the Rules of the High Court.[6] 32.I am unable to agree with Mr Chong’s submissions. Order 19 rule 7 provides:
33.P did not issue any summons for default judgment as required by Order 19 rule 7(3) and, as such, the Court’s jurisdiction under the rule is not engaged. 34.Even if a summons can be dispensed with, it is clear from the wording of the rule that the Court only has the power to grant judgment under this rule in 3 specified situations, namely where: (1) a plaintiff claims against a sole defendant and there is a default of defence by that defendant, (2) the plaintiff claims against multiple defendants and all defendants are in default of defence, or (3) the plaintiff claims against multiple defendants, one of those defendants is in default of defence and the claim against that defendant is severable from the claims against the other defendants. 35.The present case does not fall within any of the above situations. P has brought a claim against 2 defendants, only one of which is in default of defence. P’s claims against D1 cannot possibly be severed from its claim against D2 as P claims the same relief against both parties. 36.When this point is raised with Mr Chong during closing, he abandons his reliance on Order 19 rule 7(2) and submits instead that P is entitled to judgment on the basis of the Unless Order alone. I disagree. The sanctions specified in the Unless Order are: (1) D1’s Defence shall be struck out, and (2) P shall be at liberty to apply for judgment against D1 with costs. The application contemplated by the second limb is an application for judgment on the basis that D1’s Defence has been struck out, i.e. an application for judgment in default of defence under Order 19. The Unless Order does not create any route outside the Rules of the High Court by which P can apply for judgment, and Mr Chong has not been able to cite any authority in support of his contention. 37.My view is reinforced by the fact that, if Mr Chong were right, P would be able to bypass all the limitations on the Court’s power to grant default judgment in Order 19, including, relevantly, the rule that the Court will not grant default judgment against a defendant if the claim is not severable from that against the other defendants (rule 7(2)(a)). This creates a real risk of inconsistent findings and relief. Such concern is particularly relevant in the present case given that the same relief is sought against D1 and D2, and the order for specific performance and injunction which P says it is entitled to against D1 as a matter of course under the Unless Order directly impinge upon D2’s position. 38.For these reasons, I consider that P must prove its case against D1 on the merits. As there is some overlap in the issues applicable to the 2 defendants, I will deal with D1’s position after I deal with P’s claim against D2. C2. P’s claim against D2 39.As a preliminary point, it will be noted that Mr Chong’s submission in his written opening that this case concerns a “claim against D1 and D2 for breach of contract” [7] (underline added) is misconceived as a matter of law. The only contract pleaded is the Deed of Licence which was entered into between P and the T’ong. Insofar as P contends that D2 is somehow bound by an interest in the Land Lots by reason of its ownership of the land, that is a matter of land law and not contract. 40.Mr Chong formulates P’s proprietary claim in the Niches in 4 alternative ways:
41.Mr Chang SC submits that P has not pleaded any claim based on a tenancy or an equitable interest (whether this be a common intention constructive trust or a proprietary estoppel, and whether this is said to have arisen before or upon the assignment of the Land Lots from the T’ong to D2), and is thus barred from advancing a case on these bases. Counsel then submits that each of the proprietary claims formulated is devoid of merit in any event in that:
42.Mr Chang SC further contends that P is not entitled to the relief sought even if it is able to show the existence of a proprietary interest in the Land Lots given that:
C3. Tenancy 43.I agree with Mr Chang SC that P has not pleaded a case of tenancy. The only paragraph in the ASOC relies on by Mr Chong as a plea of a tenancy is as follows:
44.There is no plea that the Right amounted to a “lease” or “tenancy”, unlike the Government Lease in respect of the Land Lots which is expressly referred to as such. Although there is a plea that the Deed of Licence created a (non-specific) “interest in land”, it is incumbent upon P to plead the precise interest in land which is said to have been created together with the necessary material facts. As Mr Chong accepts in his written closing,[8] the purpose of pleadings is to fairly inform the other party of the case it has to meet and to avoid surprise. As P had not pleaded a lease or tenancy, D2 was deprived of the opportunity to investigate and adduce factual evidence on the quality, nature and extent of P’s de facto control over the Land Lots (or the Columbarium, or the Niches), which is relevant to P’s contention that the parties’ agreement, as a matter of substance, was that P would enjoy exclusive possession. For these reasons, I do not think that P should be permitted to run an unpleaded case of tenancy. 45.In trying to get around the fact that no tenancy has been pleaded in the ASOC, Mr Chong contends that there is no strict requirement in the Rules of the High Court that a party must plead the legal consequences of particular facts (citing Hong Kong Civil Procedure 2021 §§18/7/4, 18/11/1; Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd (2020) 23 HKCFAR 138, [2020] HKCFA 6, §§9-10 per Fok PJ). These authorities do not assist P. The issue of whether an agreement gave rise to a tenancy or a mere licence is not merely a question of law (or legal consequence as Mr Chong suggests), but a mixed question of fact and law (Leung Wai Ip v Chan Ming Fai HCMP 2229/2016 (unrep, 2 December 2016), §24 per Chu JA). This must be right as it is incumbent upon the party alleging that there was a tenancy to plead the material facts of such tenancy including whether it arose from an agreement and, if so, when and where such agreement was made and what were the terms of such agreement. 46.It is well established that the minimum terms (essential terms) which must be agreed before there can be a concluded agreement for any lease are the terms dealing with (1) the identity of the parties; (2) the premises to be leased; (3) the commencement and duration of the term; and (4) the rent or other consideration to be paid. Additionally, for there to be a concluded contract for the grant of a particular lease, the parties must reach unconditional agreement on all the terms that they intend to have in the particular case (World Food Fair Ltd v Hong Kong Island Development Ltd (2006) 9 HKCFAR 735, §16 per Ribeiro PJ). 47.While one may contend that P has pleaded the identity of the parties,[9] the duration of the term,[10] and the consideration paid,[11] there is no plea on the territorial extent of the alleged tenancy, specifically the inter-relationship between the Right over the use of the Niches and the Land Lots. The chapeau of §11 of the ASOC states that the Deed of Licence gave rise to an “interest in the Land Lots”, which Mr Chong accepts in his oral closing to be a reference to a tenancy of the entirety of the Land Lots. However, §11(a) of the ASOC states that the rights conferred or granted under the Deed of Licence only pertained to a part of the Columbarium. Further, as Mr Chang SC points out in his oral closing, the suggestion that a deed giving P the right to use a portion of the Columbarium gave rise to a tenancy over the whole of the Land Lots on which the Columbarium is built involves a quantum leap, and Mr Chong has no answer to the point. 48.Regardless of the above, I agree with Mr Chang SC that the Deed of Licence did not on its proper construction create a tenancy. 49.The relevant principles are well-established and I do not understand there to be any dispute between the parties in this regard:
50.I do not consider that the Deed of Licence conferred any exclusive right of possession on P. 51.First, the Deed of Licence was a commercial transaction negotiated between parties of comparable bargaining power. There is no suggestion that the terms of the Deed of Licence were imposed by one party on another (as may be the case with residential or office tenancies). On Mr Lai’s own evidence, P operated a property investment business and also operates a business of managing and investing in columbarium niches.[12] I must therefore approach the Deed of Licence from the starting point that the parties appreciated the significance of the words used and intended to create a relationship with that effect. 52.The words chosen by the parties clearly demonstrate that P and the T’ong only intended to create a licence in respect of the Niches. The Right was described as a mere right to “use” the Niches (“892 個骨灰龕之使用權”). As Mr Chang SC points out in his written opening submissions,[13] the parties did not create a right to “occupy” or “possess” the Niches. More significantly, the parties expressly declared in clause 7 that no relationship of landlord and tenant had been created. 53.One will also note that the parties described the Right parenthetically as a “LICENSE”, a label which was repeated every time the parties referred to the Right.[14] Furthermore, the parties did not refer to the HK$3,000,000 payment as a “premium”or stipulate the payment of any “rent”, and instead just referred to it as the “sum”. I also place weight on these 2 factors in ascertaining the intentions of the parties. 54.Mr Chong relies on Facchini v Bryson [1952] 1 Times LR 1386 in submitting that clause 7 of the Deed of Licence does not itself preclude the existence of a lease. In that case, the English Court of Appeal found that an agreement which contained a materially identical clause nonetheless created a tenancy. 55.I have no quarrel with Somervell LJ’s remarks in that case (at 1387 and 1389) that the Court must construe the document as a whole and focus on the rights created by the operative clauses of the agreement. However, I do not think that the Court’s finding of a tenancy on the facts of Facchini assists P. In that case, the terms of the agreement (with the exception of the deeming clause) pointed inexorably to a tenancy: pursuant to clause 2 of the agreement, the defendant was granted the right to “occupy” the dwelling house. Under clause 3(a), the defendant agreed to, inter alia, yield up the premises in clean condition “at the end of the tenancy”, and under clause 3(d) he covenanted to “keep the premises in tenantable repair”. 56.Somervell LJ also placed weight on clause 3(b) of the agreement, which obliged the defendant to “permit the [plaintiff] or his agent at all reasonable times and where necessary with workmen and appliances to enter the premises to examine the condition thereof and to take inventories of the fixtures”. As His Lordship observed, such a clause is only appropriate and relevant if the document gave the defendant exclusive possession in the first place. 57.The facts of the present case are far removed from those in Facchini. There is nothing in the Deed of Licence which is inconsistent with the label chosen by the parties and their characterisation of their relationship in recital (a) and clauses 2, 3 and 7. Furthermore, as Lord Denning noted in his concurring judgment, that case concerned a residential tenancy subject to the Rent Acts where the courts will be cautious to prevent a landlord from driving a coach and horses (or as His Lordship vividly put it, “an articulated vehicle”) through the statute. There is no equivalent statutory regime in respect of the Columbarium in the present case. 58.Before leaving this point, I must echo Parker LJ’s observation in Clear Channel UK §29 that it is surprising, if not unedifying, that a commercial party who freely entered into an agreement should then seek to persuade the Court that its true effect was directly contrary to the parties’ intentions expressed in the agreement. I would add that it is even more so where such a party seeks to disown the terms of his own agreement against a person (here D2) who was not a party to the Deed of Licence and who ex hypothesi had no influence over its terms. 59.Second, I am unable to agree with Mr Chong’s submission[15] that the irrevocability and transferability of the Right are inconsistent with it being only a personal right and as such a “strong indicator” of its proprietary effect. Mr Chong cites Lord Wilberforce’s famous dictum in National Provincial Bank Ltd v Ainsworth [1965] AC 1175, 1247G-1248A that a right can only be classed as proprietary if it is “definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence and stability” in support of his proposition. 60.Mr Chong’s assertion is fallacious. It does not follow from the fact that property rights are generally[16] irrevocable and assignable that a given right which is irrevocable and assignable is necessarily (or likely to be) proprietary in nature.[17] Lord Wilberforce did not suggest that such characteristics were peculiar to proprietary rights. On the contrary, it is well-established that a contractual licence to use land (as with any other contract) is irrevocable and assignable if and insofar as the contract so provides (Megarry and Wade §§33-008, 33-014). 61.In any event, I do not think Mr Chong is right when he says that P had “the sole and exclusive right to assign [the Right] to third parties”.[18] Pursuant to clause 4 of the Deed of Licence, P agreed to be “solely responsible for matters relating to assignment of [the Right] to third parties”, but this is subject to the proviso that when P collects the fee from a third party for the assignment of the Right, the T’ong shall issue receipts in the name of the Monastery to signify its assent to the assignment of the Right. In my view, this reflects the parties’ intention that the T’ong should retain a substantial degree of control over the Niches notwithstanding the Deed of Licence. 62.Third, and independent of the above, the Right granted to P under the Deed of Licence was plainly limited in scope:
63.Mr Chong raises several points in response. He first submits that the Right granted to P was an exclusive right to use the Niches, which militates against any intention of the parties that the T’ong would nonetheless retain the right to use, control or dispose of any of the Niches.[20] In his submission, the reference to the T’ong’s sole discretion to deal with the Niches after the expiry of the Deed of Licence in clause 3 also meant that P had sole control of the Niches during the subsistence of the Deed. 64.Mr Chong then suggests that “management” and “possession” are distinct concepts, such that the T’ong’s obligation to manage the Niches does not negate exclusive possession on part of P. 65.Finally, Mr Chong relies on Mr Lai and Ms Sze’s evidence that P and its employees were the only persons who had possession of, or control and power to deal with the niches in the Columbarium.[21] This is presumably an argument that clause 5 of the Deed of Licence did not reflect the true intentions of the parties and ought to be disregarded as a sham (see §49(4) above). 66.I do not agree with Mr Chong’s submissions. 67.First of all, I accept that by reason of the very nature of columbarium niches, the Right granted to P under the Deed of Licence was a right to use the Niches for purposes of ancestral worship to the exclusion of third parties. However, a person only has exclusive possession if he has the right to exclude all others, including the legal owner, from the property (save where the legal owner exercises its right to enter the premises for purposes of inspections and repair). 68.In my view, the Deed of Licence did not grant P the exclusive right of possession of the Niches to the exclusion of the T’ong. Under recital (a) of the Deed of Licence, P was simply granted a “right to use 892 niches in the [Columbarium]”. The wording of this recital may be contrasted with clause 4 of the Deed of Licence which makes P “solely responsible” (全面負責) (underline added) vis-à-vis the T’ong for matters relating to the assignment of the Right to third parties.[22] In any event, as explained above, the T’ong’s sweeping right and obligation to manage the Niches under clause 5 necessarily involves the grant of a right to the T’ong to access the Niches for such a purpose. 69.As far as clause 3 is concerned, I reject Mr Chong’s submission that it implies that P had the sole right to control the Niches during the subsistence of the Deed of Licence. All that clause 3 suggests is that the T’ong did not have the exclusive right to control the Niches during the term of the Deed of Licence. It does not say that the T’ong had no right at all to control the Niches during this period. 70.I am also not persuaded by the distinction which Mr Chong seeks to draw between “management” and “possession”. It is well-established that the provision of services by the owner, if this requires that the owner be granted unrestricted access to the property, is a factor which may negate exclusive possession (Megarry and Wade §16-019). I consider that the T’ong’s obligation to manage the Niches under clause 5 is of such a nature. 71.Finally, Mr Chong’s reliance on Mr Lai and Ms Sze’s evidence is misplaced:
72.For the reasons above, I hold that the Deed of Licence did not create a tenancy over the Land Lots. C4. Licence coupled with interest 73.Mr Chong contends that the Deed of Licence created a licence coupled with an interest in the Land Lots, which is binding on the T’ong’s successors-in-title. The relevant “interest” is the right to inter cremated ashes in the Niches, which Mr Chong submits is proprietary in nature. Mr Chong draws an analogy with the right of burial in land, which was considered to be a proprietary right in the Australian case of Smith v Tamworth City Council (1997) 41 NSWLR 680, and the English case of Reed v Madon [1989] 1 Ch 408. 74.I am unable to accept Mr Chong’s submissions. 75.First, one must start from the fact that the Deed of Licence described the Right as a “license” [sic]. There is no suggestion, let alone evidence, that P and the T’ong did not appreciate the legal significance of the label they chose to attach to the Right. Prima facie, therefore, it suggests that the parties only intended to create a licence and nothing more (see IDC Group Ltd v Clark (1993) 65 P&CR 179, 183 per Nourse LJ). 76.Second, Mr Chong is unable to explain what kind of property interest the Right supposedly entails. It is not an easement, for there is no dominant tenement to which such a right relates.[26] It is not a profit à prendre, as it is a right to store something on the land as opposed to a right to take something off the land. Nor does it fall within any of the other established categories of incorporeal hereditaments.[27] Insofar as Mr Chong suggests that the right to inter ashes on land is sui generis, this runs contrary to the longstanding policy of the law not to recognise any novel forms of property rights in land in view of the need for certainty in matters relating to title to land (London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1993] 1 WLR 31, 37F-H per Peter Gibson LJ). 77.Third, I agree with Mr Chang SC that the passages in Smith v Tamworth CC and Reed v Madon relied on by Mr Chong are decided on the basis of the relevant statutes, and are in any event materially distinguishable from the present case. 78.Smith v Tamworth CC concerned a dispute between the biological and adoptive parents of the deceased. The adoptive parents obtained a grave space from the local council to bury the deceased and erected a headstone in his memory. Subsequent to the burial, the biological parents paid for the expenses of burial including the cost of the burial plot, and then claimed to be entitled to the rights to the burial plot, including, inter alia, the right to install a gravestone in substitution to that erected by the adoptive parents. 79.Young J (as he then was) held at 694F-695A that since the adoptive parents had priority over the biological parents to determine the manner in which the deceased was buried, they were vested with the right to bury the deceased on council land. 80.His Lordship went on to consider the biological parents’ assertion that the right of burial had been transferred to them. He rejected this assertion on the basis that (1) the conversations between the parties indicated that the adoptive parents never intended to transfer their rights in the grave and (2) the fact that the biological parents paid for the grave does not change the legal rights of the parties (695B-F). 81.The relevance of this decision for present purposes is that His Lordship rejected the biological parents’ case of assignment on the additional basis that the right of burial was an interest in land and thus could only be made in writing. The judge cited with approval his extrajudicial view that once a body was interred in a grave site with permission of the cemetery authority, there was an irrevocable licence for that body to remain at least until the natural process of dissolution (689C), and held as follows (695F):
82.As is clear from the above passage, Young J did not express a definitive view on the point and his view was not founded on common law principles in that:
83.In Reed v Madon, the plaintiffs purchased the exclusive right of burial in a cemetery from the 3rd defendant, who then conveyed the land to the 4th defendant. The 1st defendant purchased an exclusive right of burial in one of the plots reserved for the plaintiffs and erected a memorial for his deceased wife. The plaintiff sought various remedies including disinterment, injunction and damages against the 1st defendant, claiming (1) a statutory right to the exclusive right of burial in the plot under section 48 of the Cemeteries Clauses Act 1847[29] and (2) alternatively, the exclusive right of burial conferred on them an interest in the burial plot. 84.Morritt J (as he then was) held that the plaintiffs were entitled to succeed under his first claim. He first referred to section 44 of the 1847 Act, which provided that “the exclusive right of burial in any such place of burial shall, whether granted in perpetuity or for a limited time, be considered as the personal estate of the grantee, and may be assigned in his lifetime or bequeathed by his will”. His Lordship reasoned as follows (at 419F-H):
85.The judge then declined to deal with the second claim having found in favour of the plaintiffs in respect of the first claim (at 419H-420A). 86.It is clear that His Lordship’s decision that the plaintiffs’ exclusive right of burial in the plot was enforceable against the 1st defendant turned entirely on the wording of the 1847 Act, in particular ss 44 and 48. The passing observation that the exclusive right of burial is “equated with a right of property” was simply a comment as to the effect of s 44 of the Act which expressly provided that such a right forms part of the personal estate[30] of the grantee. Given that His Lordship declined to express any view on whether an exclusive right of burial is an interest in land, it is surprising that Mr Chong relies on this case as authority for that very proposition. 87.In any event, I do not think one can draw an analogy between a right of burial in land and a right to inter ashes in a columbarium niche. Following well-established principles of property law, a corpse which is buried in land becomes part and parcel of the land by reason of the degree of annexation and purpose for which it is annexed.[31] On the other hand, the interment of ashes in a columbarium does not extinguish the separate corporeal nature of the ashes[32] and the urn in which the ashes are kept. 88.That being the case, even if the right to bury a corpse in land (thereby annexing it to the land) is recognised as an interest in land (which I do not think is the case), it does not follow that a right to inter ashes in a columbarium niche is similarly an interest in land. As Mr Chang SC submits, a right to use columbarium niches is far less connected to the land than a right to bury a body in land. 89.I therefore hold that the Deed of Licence did not give rise to any proprietary right to inter ashes in the Niches, still less an interest in the Land Lots. C5. Common intention constructive trust 90.P’s case of common intention constructive trust is pleaded in §12 of ASOC:
91.This claim can be disposed of shortly. 92.There is no dispute that P expended some HK$2.3 million renovating the Niches and the Columbarium. However, as Mr Chong concedes in his oral closing, there is no evidence of any common intention between P and the T’ong that P would acquire any interest in the Land Lots over and above what P was granted under the Deed of Licence by reason of such renovation works. Mr Lai’s evidence shows that the renovation works were nothing more than a suggestion by Mr Chow to Mr Lai on how to improve the attractiveness of the Niches to potential purchasers:[34]
93.In other words, the only “common intention” between the parties was that the Right granted by the Deed of Licence would become more valuable in P’s hands if P renovated the Columbarium. 94.The absence of any common intention for P to acquire any further proprietary interest by way of its investment in the Land Lots is consistent with the inherent probabilities. The suggestion to renovate the Columbarium was made against the background of ongoing negotiations for the sale of the Right, negotiations which culminated in the execution of a formal Deed of Licence. If the parties did have the alleged common intention, they would undoubtedly have recorded this agreement in the Deed of Licence. Their failure to do so (and indeed the absence of any reference to the contemplated renovation works in the Deed of Licence) is extremely telling. 95.It is also significant that the renovation works contemplated by Mr Chow and Mr Lai and ultimately undertaken by P were confined entirely to the Columbarium. It is inherently improbable that the parties intended for P to acquire a beneficial interest in the whole of the Land Lots simply by performing works on one part of a structure built on the Land Lots. 96.For completeness, I record that the parties did not make any submissions on the applicability or otherwise of the doctrine of common intention constructive trust to commercial transactions.[35] I do not intend to express, and should not be taken as expressing, any view on the matter. C6. Proprietary estoppel 97.Mr Chong refers to the doctrines of common intention constructive trusts and proprietary estoppel interchangeably in his submissions, all under the heading of a “licence coupled with an equity”.[36] This is unhelpful, as the 2 doctrines are theoretically distinct, have different requirements and give rise to different remedial consequences (Stack v Dowden [2007] UKHL 17 [2007] 2 AC 432, §37 per Lord Walker, Megarry and Wade §10-034). 98.The distinction between the 2 doctrines is relevant for present purposes, as P only pleaded a case of common intention constructive trust, and did not plead any case of proprietary estoppel. It is well-established that estoppel must be specifically pleaded regardless of whether it is relied on as a defence or a cause of action (Hong Kong Civil Procedure 2021 §18/8/11). In relation to proprietary estoppel, a plaintiff must plead the following material facts (Megarry and Wade §15-002):
99.Read in context, the ASOC (at its highest) only discloses a claim based on common intention constructive trust. Indeed, Mr Chong is unable to identify any facts pleaded in the ASOC which support its case of proprietary estoppel in his written closing.[37] The only matters referred to in the ASOC are that (1) the T’ong requested P to carry out renovation works to the Land Lots, and (2) P and the T’ong had a common intention that P would acquire an interest in the Land Lots by reason of its renovations.[38] P has simply not pleaded any representation by the T’ong that P has or will enjoy a right in the Land Lots. 100.P is thus not entitled to run a case of proprietary estoppel. 101.In any event, P’s claim of proprietary estoppel fails for essentially the same reasons as its claim for common intention constructive trust. As Mr Lai’s own evidence demonstrates, the T’ong’s “request” was nothing more than a suggestion that P could renovate the Columbarium to improve the value of the Right if it so wished. There was simply no representation (let alone a clear and unequivocal representation)[39] that P would acquire a separate proprietary interest in the Land Lots by reason of its investment and expenditure. 102.P’s claim of proprietary estoppel faces a further hurdle in that it must show that it was unconscionable for the T’ong to act in such a way so as to defeat its expectation of a proprietary interest (Megarry and Wade §15-020). Mr Chong is unable to articulate any basis for suggesting that it would be unconscionable for the T’ong to deny P a proprietary interest which it allegedly believed it was entitled to by reason of its investment in the Land Lots.[40] C7. Constructive trust or upon acquisition of the Land Lots by D2 103.This is again not part of P’s pleaded case. In his oral opening, Mr Chong accepts that the only pleaded claims relate to proprietary interests which were created prior to the assignment of the Land Lots from the T’ong to D2. He is unable to identify any paragraph in the ASOC which pleaded that P had acquired a proprietary interest in the Land Lots by reason of D2’s acquisition of the Land Lots. 104.The closest one gets to such a plea is in §§14-17 of the ASOC, which are in the following terms:
105.However, as Mr Chong himself notes in his written closing,[42] these averments only go to the issue of whether D2 is bound by P’s alleged prior interests in the Land Lots. There is nothing in these paragraphs which suggests that these facts and circumstances themselves entitle P to a new proprietary interest in the Land Lots. 106.For this reason alone, P’s claim under this heading must fail. 107.In any event, P’s claim to a constructive trust is unsustainable. 108.The relevant principles are summarised by Yuen JA in Chen Tek Yee v Chan Moon Shing, CACV 136/2015, unreported, 29 February 2016 at §34:
109.I also note that in IDC Group Ltd v Clark [1992] 1 EGLR 187, 190, Sir Browne-Wilkinson VC stated that “there will have to be very special circumstances showing that the transferee of the property undertook a new liability to give effect to provisions for the benefit of third parties”.[43] 110.Mr Chong relies on the following matters which it says renders it unconscionable for D2 to deny P’s rights under the Deed of Licence:[44]
111.I am unable to agree. 112.First, the Deed of Licence was not a “covenant” which D2 had promised in its objects to observe. §3(c) of D2’s MOA provided that it would “pay all rent and charges and for the observance of all covenants and conditions in respect of the land as managed by the T’ong”. As Mr Chong suggests in his oral opening, the word “covenant” is prima facie wide enough to cover purely contractual obligations assumed by the T’ong. However, one must read the term “covenant” alongside the references to “rent”, “charges” and “conditions”. This makes clear that §3(c) was primarily concerned with the terms of the Government Lease under which the T’ong held the Land Lots, as opposed to any other obligations (proprietary or personal) which pertained to the Land Lots. 113.Furthermore, the word “covenant” is a legal term of art in land law denoting obligations which are proprietary in nature and run with the land. The draftsman of the MOA, who was evidently a professional, was certainly aware of, and must have intended to adopt, this specialised meaning. From this it follows that the Deed of Licence, which only created personal rights in respect of the Land Lots, was not a “covenant” for purposes of §3(c) of the MOA. 114.Mr Chong then points to Ms Sze’s acceptance in cross-examination that §3(c) embraced P’s rights under the Deed of Licence.[45] But this does not assist P, since the terms of the MOA must be construed objectively. 115.Even if Mr Chong were right on the construction of §3(c), I do not think that its terms were sufficiently clear so to disclose any intention on D2’s part to undertake a new obligation to P. It was simply a non-specific reference to “covenants”. It seems to me that to impose a constructive trust on the basis of this word alone would be to do so on “slender materials”. 116.Second, while I accept that Ms Sze knew that P and Mr Chow had entered into some arrangement or agreement whereby Mr Chow permitted P to sell the Niches to third parties, it is Ms Sze’s unchallenged evidence that she and other directors of D2 did not know of the existence of the Deed of Licence until they received a pre-action letter from P in October 2016.[46] There is thus no evidence before the Court which suggests that D2 knew of any contractual relationship between P and the T’ong (as opposed to any formal or informal arrangement between P and Mr Chow) at the time of the Deed of Assignment, A fortiori, there can be no suggestion of bad faith or sharp practice on part of D2’s directors, viz that they engineered the assignment of the Land Lots for the purpose of defeating P’s Right to the Niches. 117.Third, while D2 did share common management and members with the T’ong (after Mr Chow’s removal in 2013), one must not lose sight of the fact that the T’ong and D2 are separate entities with each having its own rights and obligations. The starting point must be that D2 is not required to perform any of obligations of the T’ong. I do not think that there is anything unconscionable on the facts of the case which justify a contrary conclusion, particularly when there is no suggestion of bad faith on part of D2. 118.Fourth, I do not think the fact that D2 was a donee without consideration advances things much further. There is no suggestion, for example, that the T’ong and D2 agreed to waive any purchase price because D2 undertook to respect P’s contractual rights to the Niches (cf Chen Tek Yee §34(4)). More pertinently, I consider that this fact only assists P if and insofar as it is able to show that it had an existing interest in the Land Lots, such that D2 is now bound by it. If (as I have found) P has no pre-existing proprietary interest, that seems to me to be the end of the matter as far as D2’s status as a volunteer is concerned. 119.Fifth, P’s renovation and improvement works are similarly irrelevant. I have found above that P did not perform the works with any intention or expectation of acquiring an interest in the Land Lots over and above its rights in the Deed of Licence. If it is not unconscionable for the T’ong to deny P an interest in the Land Lots resulting from these works, I do not see why it would be unconscionable for D2 to do so as well. In any event, there is no suggestion that D2 knew of the renovation and improvement works at the time of the Deed of Assignment. 120.Sixth, it is to my mind relevant that the Deed of Licence was a commercial transaction which P entered into with another entity of comparable bargaining power as part of its property investment and columbaria management business. That being the case, it was open to P to protect its position by bargaining for a proprietary right binding against the T’ong’s successors-in-title. Having decided to enter into a Deed of Licence which only created personal rights vis-à-vis the T’ong (and which expressly negated the existence of any landlord and tenant relationship), I do not think it is unconscionable that P is held to the consequences of its bargain. 121.Finally, I have not lost sight of the fact that (1) the assignment of the Land Lots by way of the Deed of Gift was expressed as “subject to [the PSPA] so far as the same may still relate to or affect the property” and (2) the sale and purchase of the Land Lots was arguably subject to P’s rights under the Deed of Licence by virtue of clause 4, which provided that the T’ong shall, inter alia hand over an original copy of the Deed of Licence at completion. Curiously, this point is not relied on by Mr Chong as a matter which rendered it inequitable for D2 to deny P an interest in the property. However, I am satisfied that this does not affect my analysis above. First of all, the assignment of the Land Lots to D2 was only subject to the PSPA so far as it continued to affect the property. Given that the PSPA was not proceeded with, there was simply no right to which the Deed of Gift was subject. It is also noteworthy that the Deed of Gift was only expressed as subject to the PSPA and not the Deed of Licence. It seems to me that the parties would have explicitly referred to the Deed of Licence in the Deed of Gift if they did in fact intend for the assignment to be subject to D2’s rights. Lastly, the mere fact that land is expressed to be conveyed “subject to” a contract does not by itself mean that the grantee has undertaken a new obligation to give effect to that contract (Chen Tek Yee §34(2)). As Dillon J explained in Lyus v Prowsa Ltd [1982] 1 WLR 1044, 1051H-1052A:
122.His Lordship’s remarks are entirely apposite to the present case. The reference to the PSPA in the Deed of Gift is entirely explicable as part of T’ong’s duty to disclose all possible incumbrances over the Land Lots. After all, the PSPA, if it were still valid, would have given rise to an equitable interest in the Land Lots binding on D2 as a volunteer. There was simply no need for D2 to undertake a separate obligation to respect Billion Fortune’s rights under the PSPA. 123.I therefore hold that the assignment of the Land Lots from the T’ong to D2 did not give rise to a constructive trust in favour of P. D. RELIEF 124.P’s claim against D2 fails. However, in case I am wrong, I will go on to discuss the various heads of relief sought by P. D1. Specific performance 125.P’s claim for specific performance of the Deed of Licence against D2 is a non-starter. Mr Chong has not addressed the obvious question of how P can claim to be entitled to a contractual remedy against D2 when it was never a party to the Deed of Licence. 126.In any event, I agree with Mr Chang SC that there is nothing in the Deed of Licence left to be performed. It is not P’s case that the T’ong has failed to grant the Right to P; after all, P is seeking to assert the Right against D2 in this very action. P’s real complaint is that it has been prevented from exercising the Right by D2, and the proper remedy in respect thereof is an injunction restraining D2 from interfering with the Right, to which I now turn. D2. Injunction 127.I would have declined to exercise my discretion to grant an injunction restraining D2 from interfering with P’s access to the Columbarium even if I had found that P had a proprietary interest in the Niches. While I am not persuaded by Mr Chang SC’s submission that such an injunction would necessarily entail the commission of a criminal offence under the PCO, I am satisfied that injunctive relief ought to be refused on the basis that it would likely give rise to a breach of the Government Lease. 128.The relevant provisions of the PCO are as follows.
129.2 points flow from the statutory scheme set out above:
130.Given the above, I do not think Mr Chang SC is right when he says that the injunction would necessarily amount to the commission of a criminal offence. Had this Court found in favour of P on the issue of liability, subject to the matters discussed in §§131-146 below, it could have granted an injunction:
131.However, the PCO is not the only obstacle to the grant of an injunction in the present case. It is also necessary to consider the possibility of the injunction amounting to a breach of the Government Lease. 132.Mr Chong does not dispute the proposition that the storage of cremated ashes amounts to a breach of GC 15 in GN 570 (Regal Shining v Secretary for Justice [2014] 5 HKLRD 832, §§48-89 per Anthony Chan J). Instead, he submits that, according to information supplied by the Land Registry, the copy of the relevant New Grant is “lost and untraceable”. As such, there is no proof that GN 570 was incorporated in the Government Lease in respect of the Land Lots, and the GC 15 issue simply does not arise. 133.Mr Chang SC first raises a pleading point in response, saying that on a closer reading of P’s Reply, it only pleaded a non-admission as to whether GC 15 in GN 570 “prevented P from exercising its rights under the [Deed of Licence]”. In other words, it was a non-admission as to the legal effect of GC 15, not a non-admission as to whether GN 570 was incorporated into the New Grant. I agree. 134.This, however, is not the only flaw in Mr Chong’s submission. I agree with Mr Chang SC that there is sufficient evidence for the Court to find on a balance of probabilities that GN 570 applies to the Land Lots. 135.GN 570 was dated 10 October 1924 and provided as follows:
136.The passage quoted above makes clear that its terms were deemed to be incorporated into all Government leases in the New Territories granted from 1924 onwards[48] unless otherwise stated.[49] 137.The Land Registry’s copy of the New Grant Register indicates that the Land Lots were sold to the T’ong predecessor-in-title by public auction on 25 September 1930. GN 570 is thus prima facie incorporated into the New Grant. There is nothing in the “Remarks” column which suggests otherwise. 138.There is no basis to doubt the accuracy of this copy of the New Grant Register. As such, I do not think there is any basis for Mr Chong to challenge the applicability of GN 570 to the Land Lots. 139.In any event, the Lands Department has issued multiple Warning Letters complaining about the breach of GC 15 and threatening to take lease enforcement action if the breach is not rectified. As a consequence, there is at the very least a real risk that the Government would exercise its right to re-enter the Land Lots if P were to continue managing and selling the Niches relying on an injunction granted by this Court. 140.This risk of re-entry action is certainly a factor which strongly points against the injunction sought by P, not least because it would prevent P from continuing to use the Niches, rendering the injunction nugatory. 141.Unlike the position in relation to the PCO, there does not appear to be any way for P to regularise the situation itself by seeking (1) the District Land Officer’s consent pursuant to the terms of GC 15 or (2) a modification of the Government Lease in respect of the Land Lots. It seems to me that this is entirely a matter between the lessor (the Government) and the lessee (D2). There is certainly no suggestion by Mr Chong to the contrary. 142.Mr Chong complains that this unsatisfactory state of affairs is entirely of D2’s own making, and that P should not be deprived of a remedy simply because D2 has refused to make the necessary applications. He submits that the Court should grant an order compelling D2 to do so, on the basis such an order (1) would protect D2 from liability in respect of the 272 niches which the T’ong sold to third parties prior to 2008, and (2) is in the best interests of the general public by increasing the supply of columbarium niches for the interment of cremated ashes. 143.I am unable to accept Mr Chong’s submission. Not only would such an order be mandatory in nature, it is also highly onerous in terms of the time and effort which it is likely to require. I also harbour significant doubts about the workability and enforceability of such an order.[50] More fundamentally, however, I think Mr Chang SC is right when he says that D2 is simply under no duty (contractual or otherwise) to P to make these applications. It is notable that even under the Deed of Licence between the original contracting parties, the T’ong was under no obligation to apply for the modification of the Government Lease. Instead, Clause 6 of the Deed of Licence provided that the parties would simply not proceed with performance if there were any issues which rendered it unlawful to perform the Deed of Licence. It is plain that any alleged interest capable of binding D2 now cannot exceed the scope of the original obligations imposed on the T’ong under the Deed of Licence. 144.In light of the above, D2’s potential liability to the purchasers of the 272 niches from the T’ong and the wider public interest in the supply of columbarium niches (even assuming that there is evidence before the Court in support of such concerns, of which there is none) simply pale into insignificance. 145.I am of course mindful that, in addition to the 892 Niches which form the subject matter of the Deed of Licence, there are a further 270-odd niches in the Columbarium which the T’ong had previously sold to members of the public, and that ashes have been interred in at least some of these niches. There is thus a risk of the Government exercising its right of re-entry regardless of whether the Court grants the injunction sought. However:
146.Finally, I note Mr Chong’s submission that the withholding of injunctive relief would similarly procure a breach of contract between P and its purchasers. There is, however, no evidence to this effect before the Court. Furthermore, I do not think the objection to the Court making an order positively compelling a breach of contract applies equally to the situation where the Court’s refusal of relief places a party in breach of their contractual obligations. More importantly, P’s concern for its contracts with its purchasers does not really assist it in the present case, given that (1) on its case, it would similarly be in breach of contract if the Government exercises its right of re-entry after an injunction is granted; and (2) following the introduction of the statutory regime regulating the operation of columbaria in PCO in 2017, any breach by P of its contracts with its purchasers was arguably in part of its own making, given that there is no evidence whatsoever that P has taken any step to obtain the requisite licence for operating the Columbarium. D3. Damages 147.P claims damages for “loss of bargain”.[51] I agree with Mr Chang SC that such a claim is unsustainable insofar as it is a claim for damages for breach of contract, as there is no contract between P and D2. 148.That said, it does not follow (as Mr Chang SC submits) that P is not entitled to any damages against D2 at all. The Court has the power under s 17 of the High Court Ordinance (Cap 4) to award damages in substitution for an injunction. One way of quantifying these damages is by reference to the value of the right which the court has declined to enforce (One Step (Support) Ltd v Morris-Garner [2018] UKSC 20 [2019] AC 649, §95(3) per Lord Reed). Given that P has pleaded a claim for an injunction and damages in the alternative,[52] I consider that P would have been entitled to damages in lieu of an injunction had it been able to make out a proprietary interest in the Niches. This interest may in turn be valued by reference to the profits which P would have made had it been able to continue to enjoy this interest, i.e. P’s “loss of bargain”. 149.P quantifies its claim in its ASOC as follows:[53]
150.Upon this Court’s enquiries as to how P can claim a sum which it has already received (i.e. item (a)) as damages at his oral opening, Mr Chong withdraws the claim for item (a) and says instead that P’s claim is one for item (b) minus items (c), (d) and (e). However, Mr Chong performs a volte-face in his written closing, and contends that P’s loss is in truth the total of items (a) and (b), without any deduction for items (c), (d) and (e). He submits, firstly, that the revenue P received from the sale of the rights to 275 niches forms part of its loss as it would be obliged to make refunds to its customers if no decree of specific performance was granted, and secondly, P’s costs and expenses should not be deducted as they have already been incurred.[54] 151.It is highly unsatisfactory for Mr Chong to change P’s case on quantum after the parties have closed their evidence and, were it necessary, I would have refused to allow Mr Chong to do so. The Court should not be required to pick through convoluted pleadings to work out for the amount which a plaintiff is claiming. D2 is also entitled to know precisely the amount which P is claiming so as to decide whether to challenge P’s evidence and what submissions should be made in response. 152.Mr Chang SC criticises P’s case on quantum in 5 respects:
153.There is considerable force in Mr Chang SC’s submissions, and Mr Chong has not really been able to answer any of the points. 154.In relation to item (a), P has simply not adduced any evidence that it is liable to refund to all 275 purchasers. This evidently depends on the terms of the contracts it made with the respective purchasers. Mr Chong does not explain how P is allegedly in breach of its contracts with those purchasers. Furthermore, even assuming that P is under such a liability, it is by no means certain that all 275 purchasers would enforce their rights against P. The fact that P has so far only made refunds in respect of 5 niches suggests that this prospect is unlikely. As matters now stand, to allow P to recover the sale price of all 275 niches would give it a substantial windfall. 155.I note that one of the purchasers, a Mr Chu Yun Chung (“Mr Chu”), has filed a claim for HK$45,800 against P in the Small Claims Tribunal.[56] I see no reason for treating Mr Chu’s position differently to those of the other purchasers who have not been refunded by P. The fact remains that there is no evidence before the Court as to whether P is in fact liable to Mr Chu. For this reason, I do not think P should be entitled to recover the HK$45,800 claimed by Mr Chu as damages. 156.That said, I consider that there is no obstacle to P recovering the amounts which it has already refunded to third parties. I therefore assess damages in respect of the previously sold niches at HK$262,080.00. 157.As for item (b), I agree with Mr Chang SC that P must demonstrate that it could have obtained (or had a reasonable prospect of obtaining) the requisite licence under the PCO and relaxation of the conditions of the Government Lease if it is to make out a claim for loss of profits in respect of the 617 niches which remain unsold. As P has failed to adduce any evidence as to feasibility of obtaining such a licence and modification, it fails to prove on the balance of probabilities that any losses arising from its inability to sell the remaining 617 niches was caused by D2. 158.I also agree with Mr Chang SC that P has in any event failed to prove that it suffered any loss as a result of its inability to sell the 617 niches. There are just too many uncertainties in the expected income and expenses in selling these niches:
159.Given the above, it is impossible for the Court to assess whether the expected revenue from selling the remaining Niches is likely to exceed the expected costs, and consequently whether P has suffered a loss as a result of its inability to now do so. As such, P is not entitled to any damages in respect of item (b). 160.In relation to items (c), (d) and (e), these expenses had already been incurred by P and need not be deducted from the future revenue. To do otherwise would effectively be to require P to pay these expenses twice over. 161.Summarising the above, had I found that P had a proprietary interest in the Niches, I would have awarded damages against D2 in the sum of HK$262,080.00. D4. P’s claim against D1 162.P’s claim against D1 is one for breach of contract. However, Mr Chong does not clearly articulate how the Deed of Licence is alleged to have been breached in his submissions. I am able to identify 3 possibilities:
163.The first implied term is not pleaded and can be rejected on this basis. In any event, I am not satisfied that such a term ought to be implied in the Deed of Licence. The assignment of or transfer of control over the Land Lots to a third party does not necessarily frustrate P’s (contractual) rights under the Deed of Licence. After all, the Land Lots could be assigned or transferred on condition that the third party do undertake an equivalent obligation to P. There is only an interference with P’s rights insofar as the assignee or transferee refuses to give effect to P’s rights under the Deed of Licence. 164.The second and third implied terms are pleaded.[57] I am satisfied that the second term was necessary to give business efficacy to the contract and that it was breached by D2. There is no dispute that P and several purchasers were blocked from entering the Monastery to inter ashes of their ancestors on 15 May 2016, and that they have been prevented from entering the Monastery to do so ever since.[58] 165.I am satisfied that the third term was implied in the Deed of Licence, but I do not think it was breached on the facts. The evidence shows that P and its purchasers were still able to enter the Monastery to worship their ancestors after D2 instituted the New Worship Arrangement:
166.In these circumstances, I do not consider that D1 has breached its contractual obligation to ensure that P and its purchasers are able to access to the Monastery. In my view, Ms Yim and Ms Ma’s evidence demonstrates that the New Worship Arrangement has been workable and not so unduly restrictive so to amount to an effective denial of access. 167.Finally, there is a suggestion in Mr Chong’s written closing submissions that there was a breach of the Deed of Licence in that under the New Worship Arrangement, only the purchasers of the Niches are able to visit the Columbarium to worship their ancestors, whereas other persons including friends and descendants of the deceased are unable to do so.[63] Not only is this not pleaded as a term of the ASOC, such an allegation is flatly contradicted by the evidence. It is Ms Ma’s evidence that her daughters were able to make appointments to worship their grandmother-in-law.[64] D5. Relief against D1 168.In his oral closing submissions, Mr Chong abandons the claims for an order for specific performance and an injunction against D1, accepting, realistically, that such an order would be futile. Only P’s claim for damages for loss of bargain remains. This I assess at HK$36,600:
E. DISPOSITION AND COSTS 169.For the reasons above, I find that D1 was in breach of the Deed of Licence and award damages of HK$36,600. I dismiss P’s claim against D2. 170.As for costs, I make orders nisi that:
Mr KM Chong and Ms Emma Wong, instructed by K.C. Ho & Fong, for the plaintiff Mr Jonathan Chang SC leading Mr Wong Cho Lik and Ms Sheena Wong, instructed by Law Offices of Y.C. Lee, for the 2nd defendant The 1st defendant is not represented and absent [1] Agreed Facts §4. [2] §§6, 6A and 7. [3] Leading Mr Wong Cho Lik and Ms Sheena Wong. [4] fn 28. [5] Appearing with Ms Emma Wong. [6] §1. [7] §1. [8] §7. [9] ASOC §6. [10] ASOC §11(b) and end text. As a matter of law, a lease which is expressed as determinable on an uncertain event is nonetheless valid so long as its maximum duration is ascertainable at the time of its commencement: Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386. Furthermore, where a landlord whose powers of disposition are limited agrees to grant an indefinite tenancy, the court may give effect to the tenant’s rights by holding the tenant entitled to the longest term which the landlord had the power to grant: Megarry and Wade §16-066. [11] ASOC §6. [12] Mr Lai’s 1st Witness Statement §1. [13] §38. [14] Recital (a) and clauses (2), (3), (4) and (6) of the Deed of Licence. [15] P’s Opening Submissions §21; Closing Submissions §34. [16] See Gray and Gray, Elements of Land Law (5th ed), §1.5.30; R v Toohey ex p Meneling Station Pty Ltd [1982] 158 CLR 327, 342 (Mason J). [17] This may be contrasted with the inverse proposition, namely the fact that a particular right is revocable or non-assignable points against the right being proprietary in nature (Ainsworth 1248A, Toohey 343). [18] P’s Opening Submissions, §22(a) [19] See, by analogy, Megarry and Wade §16-019 and fn 95. [20] P’s Opening Submissions §22; Closing Submissions §25. [21] P’s Closing Submissions §§26-28. [22] Subject to the T’ong’s supervision, as discussed in §61 above. [23] Mr Lai’s 1st Witness Statement §§8-10. [24] Ms Yip’s Witness Statement §3, Mr Wan’s Witness Statement §4. [25] Mr Lai’s 1st Witness Statement §§6-7. [26] Megarry and Wade §26-005. [27] Megarry and Wade §30-004 et seq. [28] That is, easements without a corresponding dominant tenement. [29] Section 48 provided that “No body shall be buried in any place wherein the exclusive right of burial shall have been granted by the company, except with the consent of the owner for the time being of such exclusive right of burial”. [30] A person’s “personal estate” refers to all property other than that which forms part of his real estate. See, for example, the definition in s 1 of the Wills Act 1837 which defines personal property as extending to “leasehold estates and other chattels real, and also to monies, shares of government and other funds, securities for money (not being real estates), debts, choses in action, rights, credits, goods and all other property whatsoever which by law devolves upon the executor or administrator, and to any share or interest therein”. See also Megarry and Wade §1-011. [31] Halsbury’s Laws of Hong Kong Vol 35, §230.040; Elitestone v Morris [1997] 1 WLR 687, The Law of Personal Property (2nd ed) §3-016. [32] Albeit an object which is not susceptible to ownership: Yearworth v North Bristol NHS Trust [2009] EWCA Civ 37 [2010] QB 1. [33] This is presumably an erroneous reference to paragraph 10, as paragraph 9 does not refer to investment in the Land Lots but payment of the consideration of HK$3 million under the Deed of Licence. [34] Mr Lai’s 1st Witness Statement §6. [35] But see Marr v Collie [2017] UKPC 17 [2018] AC 631. [36] See P’s Opening Submissions §§30-35; Closing Submissions §§47-52. [37] P’s Closing Submissions §§9-11. [38] ASOC §§9, 12. [39] Thorner v Major [2009] UKHL 18 [2009] 1 WLR 776, §29 per Lord Walker. [40] Mr Chong only made submissions as to why it would be inequitable for D2 to deny P’s contractual rights under the Deed of Licence: see P’s Opening Submissions §35. [41] This is presumably a reference to D2. [42] §11. [43] See fn 122 to Megarry and Wade §33-019. [44] P’s Opening Submissions §35; Closing Submissions §57. [45] P’s Closing Submissions §58. [46] Mr Li’s Witness Statement §7, Ms Sze’s Witness Statement §14. [47] Defined in s 2 as a columbarium which was in operation, and in which ashes were interred in niches immediately before the cut-off time (8 am on 18 June 2014). [48] Until 1934, when it was revoked by GN 364 of 1934. [49] See also Splendid Resources v Secretary for Justice [2017] 2 HKLRD 421, §§23-24 per DHCJ Le Pichon. [50] See, by analogy, Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1. [51] ASOC §21 and the Schedule. [52] ASOC Prayer (2) and (3). [53] Schedule to the ASOC. [54] §115. [55] §23 of Mr Lai’s 1st Witness Statement states that it made 5 refunds of HK$18,690, HK$19,740, HK$73,480, HK$76,000 and HK$76,000 respectively (i.e. a total of HK$263,910). However, the Refund Agreement entered into between P and Mr Yeung Kam Mingshows that the first 2 refunds were actually for HK$18,800 and HK$17,800 respectively. [56] Mr Lai explains in his oral evidence that P agreed with the purchaser for that claim to be placed in abeyance pending the resolution of this action. [57] ASOC §8(a) and (b). [58] Mr Lai’s 1st Witness Statement §§18-19; Mr Lai’s 2nd Witness Statement §§16-19; Ms Chan’s Witness Statement §8; Ms Ma’s Witness Statement §§5-8. [59] Ms Yim’s Witness Statement §§5, 8. [60] Ms Yim’s Witness Statement §5. [61] Ms Ma’s Witness Statement §§5-10. [62] Mr Lai’s 1st Witness Statement §20; Mr Lai’s 2nd Witness Statement §18. cf. Ms Chan’s Witness Statement §8, which suggests that the New Worship Arrangement was already in place on 15 May 2016. I am content to accept Mr Lai’s evidence over that of Ms Chan, given that (1) the photographs of the locked gates of the Monastery taken on 15 May 2016 do not reveal any notice describing the New Worship Arrangement, and (2) D2’s Notice announcing the New Worship Arrangement is itself dated June 2016. [63] P’s Written Closing Submissions §75. [64] Ms Ma’s Witness Statement §7. |
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