Yau Sang Galvanizing (Hot-dip) Company Ltd (Formerly Known As Yau Sang Galvanizers (Hot-dip) Company Ltd v. Fashion Tress (America) Engineering Company Ltd and Others
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HCA 1702/2021 [2025] HKCFI 529 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1702 OF 2021 ________________________ BETWEEN
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________________________ J U D G M E N T ________________________ A. INTRODUCTION 1.This is the trial of a land dispute in relation to industrial premises located at No. 59 Fuk Hi Street, Yuen Long Industrial Estate, Yuen Long, New Territories (“Premises”). 2.The Plaintiff, Yau Sang Galvanizing (Hot-Dip) Company Limited (“P”), claims against the Defendants (“Ds”), being the occupants of the Premises for, inter alia, vacant possession of the Premises and mesne profits. 3.By way of counterclaim, Ds claim against P for:
B. INDISPUTABLE FACTUAL BACKGROUND 4.Unless otherwise indicated, the following facts are undisputed or indisputable, and I find them as facts. Matters from the parties’ agreed statement of facts have also been incorporated. B1. THE PARTIES, RELATED ENTITIES AND PERSONNEL (1) P, related entities and personnel 5.P is and was at all material times:
6.Between 3 March 1998 to 2 March 2002, P’s directors were as follows:
7.Prior to around July 2005, Mr Vincent Choi (“Mr Choi”) was at all material times P’s Managing Director and General Manager (董事總經理及總經理) and was responsible for overseeing the overall management of its business strategy, production and daily operations. 8.Kam Ming was associated with Mr Choi in that:
9.As for Favour Progress and Rockley:
10.In or around 2005, P’s directors, including, inter alia, Kam Ming, were removed as part of a management change (“2005 Management Change”) and new directors, including, Mr Yan Hing Cheong (“Mr Yan”) (i.e. P’s only factual witness in this trial) were appointed. (2) Ds, related entities and personnel 11.D1 and the 2nd Defendant, Yau Sang (Shotblasting-Painting) Engineering Limited (“D2”), at all material times are and were both Hong Kong incorporated companies with their registered offices at No. 59, Fuk Hi Street, Yuen Long Industrial Estate, Yuen Long. 12.The shareholding of D1 is currently held as follows:
13.The shareholding of D2 is currently held as follows:
14.D3 and D4 at all material times are and were directors of D1 and D2. 15.Apart from D1 and D2, D3 and D4 also at the material times owned and controlled the following companies:
B2. THE LEASE 16.By the Lease (as varied by the Deed of Extension) between P and HKSTP, HKSTP demised the Premises unto P from 3 September 1985 to 27 June 2047 subject to its terms and conditions. 17.The Extended Lease contained, inter alia, the following non-alienation clauses (“Non-Alienation Clauses”):
B3. DS’ OCCUPATION OF THE PREMISES AND THE EVICTION NOTICES 18.At some point in time prior to 2005, Ds began to occupy and use the Premises. However, as will be seen in the paragraphs below, the parties are in disagreement as to the circumstances and reasons upon which Ds came into occupation and use of the Premises. 19.By a circular dated 4 February 2021, HKSTP stated to all its lessees (including P), inter alia, that with immediate effect, it would only permit classes of entities, including companies in which a lessee holds more than 20% but not exceeding 50% of the issued and paid up share capital with voting rights of that company, to be considered an associate of the lessee in question for the purpose of granting permission to use the leased premises. 20.In around late June 2021, HKSTP sent an email to Mr Yan stating, inter alia, that D1 and D2 were occupying or sharing the use of the space of the Premises, which raised a concern that P might be subletting, licensing or parting with possession of the Premises to a third party. 21.By a letter dated 21 July 2021, P’s solicitors at the time, Messrs Tse Yuen Ting Wong (“TYTW”), wrote to D1 stating that it had come to P’s attention that D1 had used and occupied the Premises from an unknown date without P’s authorisation and consent, and demanded it to vacate the Premises forthwith. 22.By another letter dated 21 July 2021, TYTW wrote to D2 stating, inter alia, that (1) they understood that D2 was then using the Premises by way of licence; (2) gave D2 written notice of termination of the licence; and (3) asked for a reply within 3 days as to when D2 could vacate the Premises. 23.By 4 separate letters dated 21 October 2021 to each of Ds (“Eviction Notices”), TYTW (1) stated that the occupation of the Premises by D1 and D2 was without the consent of HKSTP and in breach of the terms of the Lease; (2) demanded the delivery of vacant possession of the Premises within 14 days; and (3) reserved P’s rights and remedies including the right to commence legal action for repossession of the Premises and seek damages / mesne profits. B4. COMMENCEMENT OF THE PRESENT PROCEEDINGS AND PROCEEDINGS COMMENCED BY HKSTP AGAINST P 24.On 10 November 2021, P commenced these proceedings against Ds for vacant possession of the Premises and mesne profits. 25.On 21 April 2022, HKSTP commenced proceedings against P and D2 in HCA 439/2022, seeking damages for the breach of the Lease constituted by D2’s occupation of the Premises. 26.On 25 April 2022, HKSTP commenced proceedings against P before the Lands Tribunal in LDPE 256/2022, which were subsequently transferred to the High Court under HCA 941/2022. 27.To date, the proceedings commenced by HKSTP against P are still ongoing and Ds continue to occupy the Premises. C. THE PARTIES’ PLEADED CASES C1. P’S PLEADED CASE 28.P’s case as pleaded in the Statement of Claim filed on 10 November 2021 (“SOC”) may be summarised as follows.
29.Accordingly, in the prayer of its SOC, P seeks the following reliefs:
30.Mr Val Chow (with Mr Zenith Chan), acting for P, in their written opening submissions, helpfully clarified that P only intends to seek mesne profits and will not pursue other heads of special damage. C2. DS’ PLEADED CASE 31.In a nutshell, Ds’ pleaded case as set out in their Defence and Counterclaim filed on 25 February 2022 (“D&C”) is that they did not occupy the Premises pursuant to the Alleged Licence. Instead, they have been occupying the Premises pursuant to an oral agreement concluded between Mr Choi (on behalf of P) and D4 (on behalf of D1) in around July 2001, whereby it was agreed that P’s interests in the Premises would be sold to D1 at a consideration of HK$5,000,000 along with the ancillary machinery at HK$500,000 (“Alleged Oral Agreement”). 32.According to Ds, the circumstances giving rise to the Alleged Oral Agreement were as follows.
33.Thereafter, the parties took steps to implement the Alleged Oral Agreement. 34.In this regard, there is no dispute that between around August and October 2001, P received a total amount of HK$5,500,000 from FTI by the following 3 cheques:
35.In addition to the aforesaid payments, the other steps taken by the parties to implement the Alleged Oral Agreement included the following.
36.The arrangements including (1) the incorporation of D2, (2) the entering into of the Pledge Agreement and the Sale of Equipment Declaration, (3) the share transfers on 19 November 2021, and (iv) in return, the making of the Declarations of Trust and the signing and delivering of the Instruments of Transfer in blank (collectively “Corporate Arrangements”) were all carried out solely pursuant to Mr Choi’s suggestion without any input or query from any of Ds. The transactional documents were also prepared by Messrs Anthony YT Tse & Co, an accounting firm engaged by P. 37.With the benefit of hindsight, the net effect of the Corporate Arrangements was to make D2 (which had a name very similar to that of P) appear as P’s subsidiary (effectively wholly-owned or associated company) to an outsider including HKSTP. This allows the circumvention of the Non-Alienation Clauses in the Extended Lease. 38.It is Ds’ case that Mr Choi throughout had actual or at least apparent authority to represent and bind P by virtue of him:
39.In around mid-2005, D3 and D4 were aware that P underwent a major management change whereby Mr Choi was removed from its management (i.e. the 2005 Management Change). They felt insecure about the trust arrangement over their shares in D2 and they therefore caused the pre-signed Instrument of Transfer to be counter-signed. As a result, the trust arrangement collapsed. 40.Alternatively, Ds seek to rely on promissory estoppel, proprietary estoppel and/or estoppel by convention, the effect of which is that D1 and D2 have a better title to and/or better right to occupy the Premises vis-à-vis P because but for the Alleged Oral Agreement, D1 would not have transferred HK$5,500,000 to P. 41.In this regard, during oral closing submissions, Mr Vincent Lung (appearing on behalf of Ds, together with Ms Alice Lau) confirmed that Ds would abandon the plea of estoppel by convention and will only rely upon promissory estoppel and/or proprietary estoppel. 42.In the circumstances, Ds, in the prayer of their Counterclaim, seek the following reliefs:
C3. P’S PLEADED RESPONSES TO DS’ PLEADED CASE 43.In response to Ds’ case that their occupation of the Premises was pursuant to the Alleged Oral Agreement and/or that they are entitled to rely on promissory estoppel, proprietary estoppel and/or estoppel by convention, P pleaded in its Reply and Defence to Counterclaim filed on 19 May 2022 that:
D. ISSUES FOR DETERMINATION 44.At trial, Mr Lung helpfully indicated that Ds are agreeable to the formulation of the issues for determination as set out in §33 of P’s written opening submissions. 45.Having considered the parties’ pleaded cases, the formulation of the issues in P’s written opening submissions and the clarifications made by the parties during the course of the trial, I am of the view that the main issues which I am required to determine in the present case are as follows (collectively the “Issues”):
E. WITNESSES 46.P called Mr Yan as its only witness. Meanwhile, Ds called 2 witnesses in total, namely, D4 and Mr Lam Ng Kan (“Mr Lam”). 47.In assessing the parties’ evidence, I have had regard to the principles summarised by DHCJ Jin Pao SC in Leung Chin Sing, Rabo v Ko Chun Hay, Kelvin [2021] HKCFI 2242 at §§41-43: “ 41. Since this case concerns the existence of an alleged oral agreement, and turns on my assessment of the credibility of witnesses, the legal principles on evaluating the truthfulness of an account given by a witness are relevant. These principles were referred to in Hui Cheung Fai v Daiwa Development Ltd (HCA 1734/2009, 8 April 2014) at [77-80] by DHCJ Eugene Fung SC, and helpfully summarized by Recorder Yvonne Cheng SC in Joint and Several Trustees of the Property of Yeung Wing Sing v Yeung Wing Sing [2021] HKCFI 2018 at [26] as follows:
E1. P’S WITNESS – MR YAN 48.Mr Yan has been a director of P since his initial appointment on or around 16 July 2005, which took place as part of the 2005 Management Change. Therefore, as fairly acknowledged by Mr Yan during cross-examination, he had no personal knowledge as to the matters which happened prior to 2005 before P’s current management took over, including, inter alia, how the Alleged Licence came about by virtue of Mr Choi’s and Ds’ dealings in around 2001 and whether the Alleged Oral Agreement was concluded. 49.Ds in their closing submissions criticised Mr Yan for being evasive in the witness box. Nonetheless, I note that the examples relied upon by Ds mostly relate to matters before Mr Yan was appointed as a director, such as on what basis did he consider that the HK$5 million payment represented a loan from Ds to P. Therefore, it is understandable that Mr Yan was unable to give satisfactory answers to such questions. 50.In any event, given Mr Yan’s lack of personal knowledge as to the matters which happened prior to 2005, I find Mr Yan’s evidence to be of limited assistance to this Court when resolving the Issues and I therefore would not place much weight on his evidence. E2. DS’ WITNESSES – D4 AND MR LAM (1) D4 51.D4 is the director and shareholder of D1 and D2, and the wife of D3. 52.In the course of giving evidence, D4 portrayed herself as a highly experienced business person, having operated her family business via a complicated holding structure involving a BVI company. She was well-versed with corporate governance: for example, she understood the need for corporate documents, such as certificates of incumbency, and even used the word “incumbency” in English when giving evidence, which demonstrates her familiarity with technical business and legal terms. 53.I consider that D4 is an unreliable witness for the following reasons. 54.First, there were many occasions where D4 gave evidence which were contradictory to what were stated in her witness statement or even what she said earlier during her cross-examination. For example:
55.Second, D4 was evasive in the witness box and was prone to making self-serving speeches without giving direct answers to the questions posed to her under cross-examination. As pointed out by Mr Chow, examples of D4’s evasiveness include, inter alia, the following:
56.In the circumstances, I would approach D4’s evidence with caution. (2) Mr Lam 57.Mr Lam is a director of C & Hang Co. Ltd (“C & Hang”). His evidence, in gist, is that:
58.Mr Chow invited me to find Mr Lam’s evidence to be unreliable, as Mr Lam sought to make corrections to his witness statement in the witness box regarding the starting date for paying rent to D1 (i.e. from April 2021 to October 2021) and the amount of rent (from HK$6,000 to HK$12,000). 59.For present purposes, I am prepared to accept that Mr Lam is an honest witness, as there is no evidence to suggest that Mr Lam has any personal interest in the present litigation and that the outcome of these proceedings may impact him. I therefore see no motive for him to lie. 60.However, as will be further elaborated below, I do not consider that Mr Lam’s evidence assists Ds. This is because even accepting his evidence in full, it only suggests that P was looking for potential buyers in around 2000 and that he was told by P that “the management” of the Premises had been handed over to Ds. The fact that the management of the Premises had been handed over to Ds does not necessarily mean that there was any outright sale of P’s interest in it (which is what Ds are now contending). E3. Mr Choi 61.Mr Choi was not called as a witness in these proceedings. However, both sides in their written closing submissions have invited me to draw adverse inferences against one another based on the parties’ respective failure to call Mr Choi as a witness. 62.In considering whether I should do so, I have regard to the principles regarding the drawing of adverse inferences summarised by the Court of Appeal in Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd (unrep, CACV 91/2012, 17.9.2013) at §§106-107, which may be summarised as follows.
63.As Mr Choi was part of P’s management back in 2001 and as admitted by Mr Yan during cross-examination, Mr Choi was considered to be the “big boss” of P, there is no doubt that Mr Choi would be considered to be in a position to give key evidence for both sides. Specifically:
64.In this regard, I note the explanations of Mr Yan and D4 in the witness box that they had both reached out to and did successfully contact Mr Choi when preparing for this trial, but that he was not cooperative. Whilst Mr Yan said that Mr Choi claimed to have forgotten everything and it would be pointless to find Mr Choi in light of their previous quarrels, D4 said that Mr Choi was uncooperative because he was suffering from depression. 65.I do not consider such explanations to be satisfactory. Nonetheless, as the failure to call Mr Choi as a witness is a mutual failure common to both parties, I am not prepared to draw any adverse inference against any of the parties in the present case. In any event, I am of the view that the Issues can be resolved without the need to resort to the drawing of adverse inferences. 66.I now turn to consider the Issues. For the avoidance of doubt, this Court has duly considered all the submissions made by the parties when determining the Issues. F. ISSUE 1 – WHETHER THE PLAINTIFF HAD GRANTED THE ALLEGED LICENCE TO THE DEFENDANTS? 67.The parties have fairly accepted that whilst P bears the burden of proving its case based on the Alleged Licence, Ds equally bear the burden of proving their pleaded defence based on the existence of the Alleged Oral Agreement because “he who asserts must prove”: Chun Sang Plastics Co Ltd v Commissioner of Police [2011] 4 HKLRD 74 at §69 per Cheung CJHC (as he then was). 68.As noted above, P’s case is that sometime before the 2005 Management Change, P’s former management had granted a licence to occupy the Premises. Such licence, to the best of its knowledge, was granted by conduct, namely, by permitting Ds to occupy the Premises. 69.Having considered all the evidence placed before this Court, I am unable to find that P has discharged its burden of proof that Ds’ occupation of the Premises is pursuant to the Alleged Licence. 70.In coming to such a conclusion, I have had particular regard to the following matters. 71.First, P’s case on the Alleged Licence is extremely vague. P is unable to provide even the most basic particulars on the Alleged Licence, including, inter alia, when, where and between whom the Alleged Licence was concluded and the material terms of the Alleged Licence, let alone any objective and contemporaneous evidence supporting the existence of the Alleged Licence. Indeed, P admits in its Answers to Ds’ Request for Further and Better Particulars of the SOC that the “exact manner in which the Licence was granted is not known to the current management of [P]”. 72.Second, it is not P’s pleaded case that the Alleged Licence carried any licence fee. Thus, P’s undisputed receipt of HK$5,500,000 from Ds between around August and October 2001 does not seem to sit well with its case on the Alleged Licence. 73.Third, it is Mr Yan’s own evidence that he was informed by D4 that the Premises had been sold outright to Ds in around 2009 (though this is denied by Ds whose evidence is that they were not in contact with Mr Yan in around 2009). Assuming that Mr Yan’s evidence is accurate, if P had indeed granted the Alleged Licence to Ds, one would have thought that a reasonable person in the position of P would have put on record straight away, for example by sending a simple letter or even a WhatsApp message to D4, that Ds were occupying the Premises on the basis of the Alleged Licence. However, there is no evidence that Mr Yan or P had done so in the present case. 74.In the circumstances, I hold, on a balance of probabilities, that the Alleged Licence did not exist. G. ISSUE 2 – WHETHER THE ALLEGED ORAL AGREEMENT WAS REACHED BETWEEN MR CHOI AND D1? 75.Equally, I am unable to find that Ds have been able to discharge their burden of proof that Ds’ occupation of the Premises was pursuant to the Alleged Oral Agreement for the following reasons. 76.First, as admitted by D4 during cross-examination, she recognised the value of written documentation in commercial transactions. However, there is no written record of the Alleged Oral Agreement before this Court at all. 77.Even if D4 did not see the need to record the Alleged Oral Agreement in 2001, one would have expected that by 2005 (i.e. when Mr Choi was removed from P’s management as part of the 2005 Management Change), D4 would have put the Alleged Oral Agreement on record by that time so as to protect Ds’ position going forward. This is particularly so when D4, a highly experienced business person, admitted to feeling insecure at that time and collapsed the trust arrangements for that reason. 78.Second, the evidence given by D4 at trial is inconsistent with Ds’ pleaded case. In this regard:
79.Whilst this Court is prepared to accept that due to passage of time, D4 might not have accurately recalled all the details of the transaction, there were simply far too many inconsistencies in a fundamental respect between D4’s witness statement and her evidence at trial, which makes Ds’ case incredible. 80.In particular, D4’s evidence at trial suggests that the Alleged Oral Agreement was neither finalised nor intended to be a binding contract back in July 2021 and that it was really the Pledge Agreement (which was signed in October 2021) which she and Mr Choi regarded as the operative contractual document in the alleged transaction. D4’s evidence therefore suggests that the parties did not conclude the Alleged Oral Agreement in the manner as pleaded by Ds in §11 of D&C. The Alleged Oral Agreement was hence at most a “subject to contract” agreement, which did not constitute a binding agreement: Chitty on Contracts (35th edn) at §4-162. 81.It is trite that it is the parties’ pleaded cases which define the issues at trial. Unpleaded issues cannot be raised out of evidence (Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 at §21 per Ma CJ; Sinoearn International Ltd v Hyundai-CCECC Joint Venture (2013) 16 HKCFAR 632 at §§30-34 per Ribeiro PJ). Accordingly, once this Court is not satisfied that the Alleged Oral Agreement arose in the manner which was pleaded by Ds, it must follow that this Court must reject Ds’ case on the Alleged Oral Agreement. Otherwise, it would unfairly deprive the counterparty of the opportunity to respond properly if this Court allows Ds to rely upon unpleaded matters to make good their case. 82.For completeness, I shall also address the following points advanced on Ds’ behalf. 83.First, Ds submit that their case on the Alleged Oral Agreement and P’s case on the Alleged Licence are “two sides of the same coin in respect of the ultimate question as to the circumstances and reasons upon which D2 came into occupation and usage of the Premises”. I do not agree. The fact that I have rejected P’s case on the Alleged Licence does not make Ds’ case on the Alleged Oral Agreement more probable. Even in the absence of a positive case from P, Ds’ account of events must still be evaluated with reference to inherent probabilities and its consistency with the objective circumstances and the contemporaneous documents. For the reasons set out above, I do not consider that Ds have discharged their burden of proof in establishing that the Alleged Oral Agreement existed. 84.Second, Ds submit that as there is no dispute that P has received the total sum of HK$5,500,000 and there is no suggestion that any licence fee is/was involved on P’s own case, the undisputed payment and receipt is only explicable by the Alleged Oral Agreement. Again, I do not agree with such a submission. In my judgment, it does not logically follow that once this Court rejects that there was no licence, the payment must only be made pursuant to the Alleged Oral Agreement. There could be a myriad of reasons as to why money was paid and it is for the parties to demonstrate and satisfy the Court as to how the payment supports their case. 85.Third, Mr Lung has placed much emphasis on the creation of the Pledge Agreement, which according to him, reinforces evidentially the existence of the Alleged Oral Agreement and certain understanding that existed between Mr Choi and D4. 86.In this regard, it is important for me to first set out the key terms of the Pledge Agreement (insofar as they are relevant for present purposes):
87.The terms of the Pledge Agreement are clearly inconsistent with the Alleged Oral Agreement in that:
88.In light of such inconsistencies, I asked Mr Lung in the course of the trial how he could rely upon the terms of the Pledge Agreement to support Ds’ factual case based on the Alleged Oral Agreement when the terms of that document do not reflect the terms of the Alleged Oral Agreement at all. 89.Mr Lung’s response was that if one looks through the terms of the Pledge Agreement, it is obvious that the underlying transaction is in substance a sale and purchase (rather than secured lending). According to him, the Pledge Agreement evidentially tallies with the existence of the Alleged Oral Agreement in the following ways:
90.I also note that under cross-examination, when asked why the terms of the Pledge Agreement are inconsistent with the terms of the Alleged Oral Agreement, D4’s answer was that the transaction felt logical and reasonable to her and she simply trusted Mr Choi’s idea to implement the transaction through the Pledge Agreement and in establishing D2 as a “董事屋”to hold the Premises whereby the sale and purchase was in effect implemented by a transfer of the shares in D2. She also added that she had been given time to consider the draft pledge agreement and she proposed adding Clause 1 after reviewing the draft. The reason why she wanted this clause to be inserted was to reflect that the transaction was a sale, not a loan; hence she wanted a clause to make that clear and prevent P from simply repaying the amount and taking the Premises back. Mr Choi acceded to her request, which resulted in Clause 1 of the Pledge Agreement as ultimately executed. 91.As pointed out by P, the short answer to such a point is that even assuming in Ds’ favour that some understanding might have been reached, it does not logically follow that the understanding must have been the Alleged Oral Agreement. No such conclusion can be drawn from the Pledge Agreement, especially when Ds have expressly pleaded in §14(b) of D&C that the Pledge Agreement “did not record or reflect the true intention of the parties”. If its contents did not reflect the parties’ intention, then the Pledge Agreement cannot shed any light on the parties’ true agreement (if any). In other words, Ds’ argument that the Pledge Agreement somehow evidences the parties’ true agreement is actually the precise opposite of their own pleaded case. 92.Lastly, I also note that it is Mr Lam’s unchallenged evidence that since around 2001, his company, C & Hang, rented the premises and that he paid rent to D1 after he was told by Mr Sam Cheung that D1 had taken over the “management” of the Premises. In this regard, I accept Mr Chow’s submission that Mr Lam’s evidence does not assist Ds’ case. The fact that D1 had taken over the “management” of the Premises does not necessarily mean that there was a sale of the Premises by P to D1. 93.In the circumstances, I hold, on a balance of probabilities, that the Alleged Oral Agreement was not concluded and did not exist as pleaded by Ds. H. ISSUE 3: WHETHER MR CHOI HAD ACTUAL AND/OR APPARENT AUTHORITY TO ENTER INTO THE ALLEGED ORAL AGREEMENT ON BEHALF OF THE PLAINTIFF? 94.For completeness, even if I were to find that the Alleged Oral Agreement was concluded and did exist, I would have found that Mr Choi did not have actual and/or apparent authority to enter into the Alleged Oral Agreement on behalf of P. 95.The starting point is always the parties’ pleaded cases. In this regard, it is Ds’ pleaded case that Mr Choi throughout had actual or at least apparent authority to represent and bind P by virtue of him:
96.During his oral closing submissions, Mr Lung clarified that Ds would no longer be running their case on express actual authority. Instead, Ds would only be relying upon implied and apparent authority. As it is trite that the issues in a trial are defined by pleadings and not by evidence, I will only consider the issue of authority based upon the 2 bases of Mr Choi’s authority pleaded by Ds as set out in §95 above: Sinoearn at §§30-34 per Ribeiro PJ; Kwok Chin Wing at §§21-23 per Ma CJ. H1. LEGAL PRINCIPLES ON IMPLIED AND APPARENT AUTHORITY 97.Given Mr Lung’s indication, it is not necessary for me to discuss express actual authority. 98.As to implied authority:
“ I need not consider at length the law on the authority of an agent, actual, apparent, or ostensible. That has been done in the judgments of this court in Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd. It is there shown that actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a resolution which authorises two of their number to sign cheques. It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be managing director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office. Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and others, whether they are within the company or outside it.
99.As to ostensible or apparent authority:
“ The representation which creates “apparent” authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal’s business with other persons. By so doing the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principal’s business has usually “actual” authority to enter into.”
“ The commonest form of representation by a principal creating an “apparent” authority of an agent is by conduct, namely, by permitting the agent to act in the management or conduct of the principal’s business. Thus, if in the case of a company the board of directors who have “actual” authority under the memorandum and articles of association to manage the company’s business permit the agent to act in the management or conduct of the company’s business, they thereby represent to all persons dealing with such agent that he has authority to enter on behalf of the corporation into contracts of a kind which an agent authorised to do acts of the kind which he is in fact permitted to do usually enters into in the ordinary course of such business. ...”
H2. MR CHOI’S POSITIONS OF “CHAIRMAN” AND “CHIEF EXECUTIVE OFFICER” 100.The first pleaded basis relied upon by Ds in contending that Mr Choi had authority is his holding of the positions of “Chairman” and “Chief Executive Officer” of P at all material times until mid 2005. 101.However, I have difficulties in finding that Mr Choi had implied actual authority and/or apparent authority to enter into the Alleged Oral Agreement on behalf of P by virtue of him allegedly holding these positions. 102.As for implied actual authority:
103.As for apparent / ostensible authority, in addition to the matters set out in §102 above, as pointed out by P, one of the requirements for apparent / ostensible authority is that there must be a representation of authority of Mr Choi made by P (see also §99(2) above). Whatever D4 might have thought in her mind is therefore irrelevant when considering whether there was such a representation of authority. 104.In the circumstances, I find that Ds have not made out their case that Mr Choi had implied actual authority and/or apparent authority to enter into the Alleged Oral Agreement on behalf of P by virtue of him holding the positions of Chairman and Chief Executive Officer of P. H3. MR CHOI BEING A DIRECTOR OF P BETWEEN 1982 AND 1998 AND A DE FACTO DIRECTOR OF P THROUGH KAM MING BETWEEN 1998 AND 2005 105.The second pleaded basis relied upon by Ds is Mr Choi’s directorship of P between 1982 and 1998 and de facto directorship of P through Kam Ming between 1998 and 2005. 106.As the Alleged Oral Agreement was said to have been concluded in around July 2001, I only have to consider whether Mr Choi indeed had the authority to bind P by reason of him being a “de facto director” of P at around that time. 107.The principles regarding de facto directorship were summarised by Coleman J in Cyberworks Audio Video Technology Ltd v Mei Ah (HK) Co Ltd [2020] HKCFI 398 at §56 as follows:
108.Further, in Re Hydrodam (Corby) Ltd [1994] BCC 161, Millet J (as he then was) said at 163D as follows: “ A de facto director is a person who assumes to act as a director. He is held out as a director by the company, and claims and purports to be a director, although never actually or validly appointed as such. To establish that a person was a de facto director of a company it is necessary to plead and prove that he undertook functions in relation to the company which could properly be discharged only by a director. It is not sufficient to show that he was concerned in the management of the company's affairs or undertook tasks in relation to its business which can properly be performed by a manager below board level.” (emphasis added) 109.In my judgment, there is no proper case based upon de facto directorship pleaded in the present case for the following reasons:
110.On this ground alone, any claim that Mr Choi had authority by reason of his de facto directorship of P cannot succeed. 111.In this regard, Mr Chow has pointed out that a similar approach was taken by the Court in Shown Wai Investment Company Limited v Hui Yip Wing David [2024] HKCFI 1477 at §§108-118 in finding that the claim based upon the alleged de facto directorship cannot succeed as the plaintiff failed to plead the functions which could only be discharged by a director of the company in question in the statement of claim. 112.Accordingly, since I am not satisfied that Ds have authority based upon the 2 pleaded bases of Mr Choi’s authority as set out in §95 above, I find that even if the Alleged Oral Agreement had existed, Mr Choi had no implied actual authority and/or apparent / ostensible authority to conclude the Alleged Oral Agreement on behalf of P. H4. THE INVOLVEMENT OF MR FONG, MR TING AND MR TSE AT THE YUEN LONG DINNER 113.For completeness, I will also deal with Ds’ argument that the involvement of Mr Fong, Mr Ting and Mr Tse at the Yuen Long Dinner shows that Mr Choi had actual or at least apparent authority in representing and binding P in concluding the Alleged Oral Agreement and/or that Ds were reasonable in relying on Mr Choi’s apparent authority. 114.I am unable to accept such a submission for the following reasons:
115.In view of the above, even if I were to find that Mr Choi and D1 entered into the Alleged Oral Agreement, I would have found that the Alleged Oral Agreement was unenforceable, as it was entered into by Mr Choi without P’s authority. I. ISSUE 4: WHETHER THE ALLEGED ORAL AGREEMENT IS UNENFORCEABLE BY REASON OF SECTIONS 3, 4, 5 AND/OR 6 OF THE CPO? 116.Section 3(1) of CPO provides that no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorised by him for that purpose. 117.Section 4(1) of CPO provides that a legal estate in land may be created, extinguished or disposed of only by deed, unless one of the exceptions in subsection (2) applies. 118.Section 5 of CPO relevantly provides that no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same, and that the disposition of equitable interest is required to be made by writing. 119.Section 6 of CPO further provides that, if a contract for sale of land does not comply with the formality requirements in sections 3 to 5 of CPO, then the creation of interest pursuant to such contract would only be an interest at will. 120.It is P’s case that the Alleged Oral Agreement was not made in writing and signed by P. As such, even if this Court finds that the Alleged Oral Agreement had been concluded between the parties as a binding agreement as alleged by Ds, it would still be unenforceable by virtue of the CPO provisions. 121.Meanwhile, whilst Ds do not dispute that the formality requirements in the CPO were not complied with, their case is that as Ds are not asserting a contractual claim on the basis of the Alleged Oral Agreement but are relying on the tenor of the Alleged Oral Agreement as forming the underlying basis of proprietary estoppel and/or promissory estoppel, the CPO provisions are not engaged and the operation and/or legal effect of sections 3 to 6 of CPO have no bearing to the present case. 122.However, in light of my finding that the Alleged Oral Agreement was not concluded and did not exist between the parties, it is unnecessary for me to deal with Issue 4. 123.For completeness, I will also point out that in P’s written closing submissions, Mr Chow raised for the first time that it is open to this Court to find that P had granted Ds the Alleged Licence by reference to Ds’ own pleaded case by relying on the case of Poon Hau Kei v Hsin Chong Construction Co Ltd (2004) 7 HKCFAR 148 at §19. According to P, even if Ds are right to say that there was the Alleged Oral Agreement, given the unenforceability provisions in the CPO, the legal consequences flowing from that would be that Ds’ interests in respect of the Premises would be an interest at will only, which is the same thing as a licence. I reject such a submission for the following reasons.
J. ISSUE 5: ARE THE DEFENDANTS ENTITLED TO RELY UPON THE DOCTRINES OF PROMISSORY ESTOPPEL AND/OR PROPRIETARY ESTOPPEL AND WHETHER THE DEFENDANTS ARE BARRED FROM SUCH DEFENCES BY REASON OF THE DOCTRINES OF ILLEGALITY AND/OR UNCLEAN HANDS 124.In Ds’ written closing submissions, Mr Lung confirmed that Ds’ case is that “the tenor of the [Alleged] Oral Agreement forms the underlying basis of Ds’ reliance on proprietary estoppel and/or promissory estoppel and/or estoppel by convention” and that it is the Alleged Oral Agreement that “gave rise to the representations and understandings between the parties”. In other words, the only premise upon which estoppel is argued by Ds is the Alleged Oral Agreement. Accordingly, in light of my finding that the Alleged Oral Agreement was not concluded and did not exist, I also reject Ds’ case on estoppel. K. ISSUE 6: VACANT POSSESSION AND MESNE PROFITS 125.Issue 6 concerns the reliefs to be granted by this Court. 126.As held above, this Court considers that both sides have failed to make out their respective cases in that this Court is not satisfied that either the Alleged Licence or the Alleged Oral Agreement existed. 127.During oral closing submissions, I asked the parties what orders this Court should make if I were to find that neither the Alleged Licence nor the Alleged Oral Agreement existed. The parties’ responses to this question may be summarised as follows:
128.Having considered the parties’ submissions, I agree with Ds’ submissions. 129.As mentioned above, the parties’ pleaded cases define the scope of the issues at trial and unpleaded issues cannot be raised out of evidence. Whilst I agree that P as the registered lessee of the Premises would be prima facie entitled to possession of the Premises, P’s pleas for relief in the SOC, including, inter alia, an order for vacant possession and mesne profits, are based on its plea that the Alleged Licence existed, which this Court has already rejected. This is evident from SOC §§7 and 10-12: “ C. The Licence
130.Nowhere in P’s pleadings has P pleaded any alternative case that if the Alleged Licence does not exist, P, as the registered lessee of the Premises, would still be entitled to vacant possession and/or mesne profits. 131.In the circumstances, I consider that the most appropriate order to be made is to dismiss both P’s claim and Ds’ counterclaim. L. CONCLUSION 132.For the above reasons, I dismiss both P’s claim and Ds’ counterclaim. 133.As for costs, as neither party is successful, I consider that the proper order should be no order as to costs and I make such an order on a nisi basis, which is to be made absolute if neither party applies for variation within 14 days after the date of handing down of this judgment. 134.It remains for me to thank counsel for their helpful assistance.
Mr Val Chow and Mr Zenith Chan, instructed by Fongs, for the plaintiff. Mr Vincent Lung and Ms Alice Lau, instructed by Keith Lam Lau & Chan, for the defendants. |
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