Lee Cho Tseong and Another v. Lee King Tong

HCA005123/1983

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

Coram: Macdougall J.

Date: 22nd May 1984.

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JUDGMENT

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1. The plaintiffs who are the joint tenants and registered owners of a piece of land ("the land") in the New Territories seek a declaration that the defendant's use and occupation thereof has been as a licensee and that his licence has been terminated. They also claim damages in respect of financial loss which they allege they have suffered as a consequence of their inability to give vacant possession of the land to a willing purchaser by reason of the defendant's wilful refusal to vacate it.

2. It is agreed by both parties that the second plaintiff, who is the wife of the first plaintiff, came to know the defendant, the proprietor of a flower store known as Po Wah Yuen, when they both visited the Canton trade fair in the early nineteen seventies and that they became firm friends.

3. Evidence given by the plaintiffs disclosed that in 1974 they had been obliged to terminate the services of a watchman who had been responsible for looking after the land, and to find someone to take his place. Thinking that the defendant might be able to recommend a suitable replacement 2nd plaintiff sought his advice.

4. Initially he suggested that one of his employees could live on the land as caretaker without payment. It is not clear whether anything came of this suggestion. However, a few months later, the defendant approached 2nd plaintiff and asked her permission to store on the land some plants and trees that he had purchased from Canton explaining that he had nowhere to keep them.

5. On being assured that the defendant intended to dispose of these plants and trees during the Chinese new year fair the 1st plaintiff agreed to allow him to leave them on the land.

6. According to 2nd plaintiff the defendant suggested that as he would soon be obliged to vacate land which he had been occupying at Boundary Street he would look after the land for the plaintiffs. Although he stated that he would like to use the land for about three years he agreed to return it to the plaintiffs at any time they required it. As this seemed to be a mutually convenient arrangement the 2nd plaintiff agreed to grant the defendant a licence to use the land on the firm understanding that he would return it to her on demand.

7. Both plaintiffs were adamant that they allowed the defendant to enter the land rent free and that at no time was rent ever charged or paid.

8. When the plaintiffs originally purchased the land in 1968 they had intended to seek Government permission to use it to erect a factory. In 1970 they began to operate a factory at Fat Shan in Kwangtung province and decided to leave in abeyance their plans for development of the land. However, on various occasions they made applications to Government for permission either to use it for factory use or for the construction of home units.  None of these applications was successful and as the processing of each application was invariably protracted the plaintiffs were content to allow the defendant to continue to use the land.

9. Three years after the defendant had entered into possession the 2nd plaintiff asked the defendant when he would be able to return the land to her. The defendant responded by asking her whether she intended putting the land to any use. On being told that she had no plans for its immediate use the defendant requested her to allow him to continue in occupation for the time being and promised that if she wanted to use the land at any time he would move out.

10. On 30th July 1976, several months after this meeting, 2nd plaintiff at the urging of 1st plaintiff wrote a letter to defendant informing him that she and her husband required him to vacate the land before 31st August 1977.  In the letter she urged defendant to take steps to remove all his plants as no compensation would be paid to him.

11. It seems that lot plaintiff had become concerned that defendant had been continually bringing plants onto the land since his entry into possession and that it was this consideration coupled with a desire to put him on formal notice that his use of the land was purely temporary that caused 1st plaintiff to ask his wife to write to defendant. Notwithstanding that the letter was sent by registered mail to the defendant at his office at Jordan Path Tsimshatsui the plaintiffs received no reply from him. In his evidence the defendant denied having received the letter although he acknowledged that his wife's surname appeared in the space provided on the postal receipt card for the signature of the addressee.

12. As the defendant did not vacate the premises on the due date, 2nd plaintiff, again at her husband's urging, wrote to him on 19th September 1977 complaining that although almost a month had elapsed since the expiration of the period granted to him he had not only failed to vacate but had neither responded to the earlier letter nor had approached the plaintiffs with a view to discussing the matter. She also rebuked the defendant for abusing their friendly gesture allowing him to occupy the land free of rental, and threatened to take legal action against him. Again the defendant did not reply to plaintiffs. In his evidence he also denied that he had received this letter.

13. Notwithstanding their threat to take action against defendant, the plaintiffs held their hand until 5th October 1978 when 2nd plaintiff again wrote to him protesting that although more than a year had elapsed since their registered letter of July 1976 he had still failed to vacate the land. Again she remonstrated with defendant for his lack of ethics in taking advantage of their gratuitous friendly support and threatened that if he did not vacate before the end of November 1978 they would take legal proceedings.

14. This letter was despatched to defendant's office at Jordan Path and the postal receipt card was signed by one Lam Sum, who the defendant acknowledges was one of his employees.

15. Again the defendant failed to vacate the land. However, since the plaintiffs had no immediate intention of putting it to use they decided to allow him to remain in occupation terminable at three months notice, and in order to formalise matters a written agreement to that effect was drawn up and signed by the parties. The agreement also recited, among other matters, that on leaving the land the defendant would not have any claim for compensation against the plaintiffs in respect of any plants and seedlings that he might have there and that should Government resume the land any compensation granted in respect of seedlings, as distinct from plants on the land, would be divided equally between the plaintiffs on the one hand and the defendant on the other. This agreement was dated 6th May 1979.

16. I gained the distinct impression that there had been something of a domestic tug of war between the two plaintiffs over the years as to how to resolve the situation, that 1st plaintiff had become increasingly concerned at the defendant's occupation of the land and his continual use of it to store plants, but that 2nd plaintiff being on close friendly terms with defendant and realising that she and her husband were not making use of the land was more content to let the matter drift along without bringing it to a head.

17. 2nd plaintiff testified that over the years she had lent the defendant various sums of money ranging between a few thousand dollars and sums in excess of ten thousand dollars. She produced two cheques for $23,000 and $12,000 dated 27th and 30th April 1976 respectively which she said the defendant gave her in repayment of all the loans she had made to him. Both cheques had been dishonoured. She said however that he ultimately repaid the $12,000 in two sums, one of $7,000 and the other of $5,000.

18. Moreover, in 1975 in order to assist the defendant 1st plaintiff twice persuaded her husband to act as guarantor in the sum of $50,000 with the Nam Yeung Commercial Bank. The reason for doing so was that the defendant required bank facilities to meet payments clue on plants and flowers which he had ordered from China.

19. In January 1976 the plaintiffs morgaged the land to the same bank to secure the grant of banking facilities to the defendant in the sum of $130,000. 2nd plaintiff said that they had extended this favour to defendant because he had secured a contract with the Housing Authority for the supply of plants and needed funds to make the necessary purchases to fulfil the contract. She added that she had hoped that by helping the defendant in this manner he would vacate the land.  The 1st plaintiff also entered into a bond of $50,000 to secure the defendant's contract with the Housing Authority.

20. Subsequently the plaintiffs required banking facilities themselves. Accordingly they discharged the mortgage with the Nam Yeung Commercial Bank so that they could raise a mortgage for $12,000,000 with their own bankers, the National Commercial Bank, on the security of the land and other property which they owned.

21. In order to facilitate repayment of the amount due to them by the defendant in connexion with the discharge of the mortgage to the Nam Yeung Commercial Bank, an account was opened in the National Commercial Bank in the defendant's name with a provision that withdrawals could only be effected by defendant with the joint signature of one of plaintiffs. The defendant agreed to pay sums between $30,000 and $50,000 into this account until he had extinguished his indebtedness to plaintiffs which exceeded $260,000 and was composed of the two guarantees of $50,000, the $130,000 and interest paid to the bank. Notwithstanding this arrangement the only sum that defendant has paid to plaintiffs is one of $15,000.

22. Ultimately the plaintiffs' patience ran out and they instructed their solicitors to write to defendant requiring him to vacate the land either by 31st October 1982 or after the expiration of three months from receipt of the letter which was dated 29th July 1982. Because of his failure to do so these proceedings were commenced on 3rd May 1983.

23. The defendant testified that 2nd plaintiff offered to rent the land to him in June 1974 for $5,000 a year for as long as he wished to cultivate it. He claimed that after gaining possession he cleared the land, sank two wells and laid water pipes over its entire area. He also installed a telephone in the name of Po Wah Yuen. According to him he spent altogether between seventy and eighty thousand dollars in effecting improvements.

24. He agreed that he had borrowed money from the 2nd plaintiff from time to time but that on each occasion he wrote her a post dated cheque in the amount involved. On most occasions he repaid the loans in cash in exchange for the relevant post dated cheque. He identified the cheques for $23,000 and $12,000 as being two of the post dated cheques that he had given her when she had advanced money to him, and explained that when he had repaid these sums she had told him that she had lost the cheques.

25. The defendant acknowledged that the plaintiffs had acted as his guarantors in respect of the bank facilities granted to him by the Nam Yeung Commercial Bank to the extent of $130,000 and that of the total amount of $220,000 principal and interest outstanding, he had repaid $150,000 to them between 1978 and 1980 leaving a balance of some $70,000. He insisted that he effected these repayments in cash throughout the year but that most payments were made around Chinese New Year. No receipts were ever given to him so he made his own personal record of each repayment.

26. The defendant maintained that he paid rent in respect of each year for which he has been in occupation of the land. He paid $5,000 for the first year but thereafter paid $7,000 per year at 2nd plaintiff's request. All payments but the first were made by cheque. Apart from the one payment of $15,000 that he had made to the plaintiffs by way of a cashier order he failed to produce any documentary proof to support his claim. As to the $15,000, he claimed that this represented payment of two years rental in advance and that as the 2nd plaintiff had stated that she was badly in need of money and as "they knew each other very well" he paid her more than she had asked. This evidence is at variance with what is contained in a letter dated 10th May 1983 from his solicitors to plaintiffs' solicitors.

27. Not only did he deny that he had ever received any of the plaintiffs' letters but he maintained that it was not until 1980 that he realised that they wanted  him to vacate the land. This came about when 2nd plaintiff brought to his office two men, one named Man Kam-chuen and the other surnamed Chan. According to defendant both men behaved in a fierce manner and threatened him with a spanner and a pair of pliers. They then forced him to sigh some blank sheets of paper and took from the drawer his Po Wah Yuen chop and applied it to one or more of the sheets of paper. I was invited to believe that one of these was the written agreement dated 6th March 1979. He explained that the chop of International Art Studios Limited, one of the companies owned by 1st plaintiff, did not appear on the document at the time he had been forced to sign it. It is clear however that that "chop" was not applied to the paper but had been printed into the paper during the manufacturing process and thus had always been there.

28. Another document that the defendant said he had been forced to to sign that day was an acknowledgment that 1st plaintiff had lent him $30,000. His explanation for this was the originally he had intended to rent some land from Man Kam-Chuen for $30,000 in order to open another sales outlet, but that on the day on which 2nd plaintiff, Man and Chan visited him they forced him to go with them by car to inspect the land and that on arrival 2nd plaintiff handed him $30,000 so that he could pay $20,000 to Man of which $10,000 was for the rental of Man's land and another $10,000 related to the cost of refilling it with earth. The remaining $10,000 was given to Chan & Man as teamoney. The defendant was unable to give a satisfactory explanation as to why he did not report these matters to the police.

29. I found the defendant to be a completely untruthful witness. His evidence was riddled with contradictions and he frequently took refuge in convenient lapses of memory when pressed concerning matters that, despite the lapse of time, should not have been difficult to recall. He was unable to support his evidence with any credible independent documentation. Such documentary evidence that he relied upon was satisfactorily explained by the plaintiffs.

30. Although on occasion the 1st plaintiff's evidence was a little confused I am completely satisfied that this was due to his noticeable difficulty both in comprehending and expressing himself in Cantonese. Both he and his wife impressed me as being honest and truthful witnesses.

31. I am satisfied that they allowed the defendant to occupy the land rent free as a gesture of friendship, that he had not been granted exclusive possession and that although when he entered into possession he had hoped that he would be able to remain there for some years, he did so on the clear understanding that he would vacate the land when required. I am satisfied that he was a mere licensee.

32. I believe that the plaintiffs' evidence that in fact they used the land on one occasion in order to store a large quantity of goods and that in doing so they exercised their right to possession.

33. Moreover, I accept their testimony that they had encountered difficulty in getting the defendant to vacate the land and that he had received the three letters they had sent to him at his Jordan Path Office.

34. It is clear to me that the agreement of 6th May 1979 had been entered into by the parties as alleged by the plaintiffs and that it basically sets out in writing the original oral agreement to grant a licence to the defendant but that the written agreement makes special provision for three months' notice to vacate the land and, because of the defendant's use of the land for his plants and seedlings, includes specific provisions as to compensation.

35. I have no doubt that the plaintiffs have exercised the greatest of restraint in dealing with the defendant and that it is as a consequence of his outrageous exploitation of their generosity that they find themselves in their present predicament.

36. Initially both parties agreed that in the event that I find for the plaintiffs, the matter of damages would be referred to a Master for assessment. At a much later stage of the trial Mr. Yam for the plaintiffs requested me to assess damages. Mr. Yung indicated that he wanted the matter to be determined by a Master. Neither party explained to me its reasons and I left in abeyance my decision as to which course to follow.

37. At the conclusion of the trial, Mr. Yung, while conceding that I had not made a ruling on the matter, informed me that he had misunderstood what had taken place and that as a consequence he had not called evidence as to damages.

38. I then reserved my judgment as I wanted to consider whether I should accede to Mr. Yung's request and thus further delay the settlement of the plaintiffs' claim.

39. Having considered the matter I have reluctantly decided that I should refer the assessment of damages to a Master.

40. I therefore give judgment for the plaintiffs and grant a declaration in the terms sought in the amended statement of claim. I also order that the plaintiffs be given immediate exclusive possession of the land.

41. Mr. Yam seeks an order for costs on an indemnity basis in view of the completely unmeritorious defence advanced by the defendant, his unconscionable delaying tactics and his outrageous allegations of duress that were not pleaded in his defence but were unashamedly advanced during the trial. I have come to the conclusion that the plaintiffs should be awarded costs on an indemnity basis and I so order. I direct that the hearing of the assessment of damages be brought on before a Master as a matter of urgency.

42. Finally I consider that I should not allow the occasion to pass without observing that although the solicitors for both parties estimated that the trial would take two days and it was thus set down for that period of time, it was abundantly plain to me at the very outset that the matter could not be resolved within as much as four days.

43. In the event the trial proceeded and at the conclusion of the second day it became apparent that four more days would be needed for its completion. As I was due to depart from Hong Kong on annual leave it became impossible to conclude the trial before my departure. It was thus adjourned to a date to be fixed by the Registrar.

44. The result is that the trial having been part heard in December 1983 was not concluded until mid May 1984. The disadvantages and dangers involved in such a long lapse of time between hearings are too obvious to state. I take this opportunity to remind solicitors that an estimation of the length of hearing should not be given without careful consideration. If it is apparent to the trial judge from the very beginning that the trial is bound to exceed the estimated hearing time the parties may find that to prevent disruption of the lists, he may refuse to proceed and may order that the action be removed to the end of the running list with a further order that the solicitors for both parties appear to show cause why an order for costs should not be made against them under Order 62 rule 8.

Representation:

Mr. David Yam instructed by Sit, Fung, Kwong & Co. for plaintiffs.

Mr. Y.W. Yung instructed by Robertson, Double & Boase for defendant.