Lau Tim Fat and Others v. Li Bang Yuen and Others

HCMP 1117/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. OF 200

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BETWEEN

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Before : Deputy High Court Judge Muttrie in Chambers

Date of Hearing : 24 November 2006

Date of Ruling : 1 December 2006

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REASONS FOR RULING

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1.The applicant, Mr Chu Pak Hei applied for an order that the execution of the order for possession of Lots 19-28 in DD 455 made by me on 22 March 2006, the order made by Master Ho on 29 June 2006 and the order made by Yam J on 30 August 2006 all be stayed pending determination of his appeal in case no. CACV 2006.  On 24 November 2006 I granted the stay.  I now give reasons.

Background

2.The plaintiffs are all New Territories villagers in the Tsuen Wan area.  From their Statement of Claim it appears that they are the registered owners of various parcels of land in Lots 19 to 28 of DD 455, collectively called “the Land” which they (apart from the 5^th plaintiff, who obtained his parcel by assignment from an individual) all obtained by way of assignments from one Success Chart Development Ltd on 15 October 1997.  They claim against the three defendants for a declaration that they were entitled to possession of the Land and that an alleged tenancy agreement relied on by the 3^rd defendant was null and void, as well as an order for possession and other consequential remedies.

3.The proceedings were begun by Originating Summons in May 2004.  A Statement of Claim was filed on 5 January 2006. The Statement of Claim recited that the 3^rd defendant had alleged in an affirmation filed in July 2004 that his interest in the land was derived from an agreement signed with the “real owner”, one Winker Development Holdings Ltd in 2001, and that he had by a later affirmation alleged that he had entered into a tenancy agreement with Success Chart dated 1 November 2001.

4.On 22 March 2006 the plaintiffs applied before me for default judgment against the three defendants.  The 1^st and 2^nd defendants were absent, having never taken any part in the proceedings.  The 3^rd defendant was absent but represented by a solicitor, who said that he had no instructions from his client.  I therefore granted a default judgment against the three defendants for the remedies sought.  

5.By this time, Mr Chu had applied to be joined; his application is dated 2 February 2006.  He was neither present nor represented before me on 22 March 2006.  Although he had filed some documents in court, they were in Chinese and no translations were available.  In fact some of the documents exhibited to his first affirmation dated 6 February 2006 are still not translated.  Master Ho dismissed his application on 29 June 2006.  Mr Chu appealed and on 30 August 2006 Yam J dismissed the appeal.

6.In his judgment Yam J noted that Mr Chu claimed to be the subtenant of the 3^rd defendant.  However, on 22 March 2006, judgment had already been entered for the plaintiffs, being the registered owner of the suit property, against the 3^rd defendant.  Yam J continued:

“	2.	Thus even if the applicant is the subtenant of the 3rd defendant, the applicant’s interest, as he claimed, in part of the property had already been terminated by reason of the termination of the head lease.  In fact, Deputy Judge Muttrie made a declaration that the head tenancy was null and void and of no effect at all times.
	3.	The applicant’s counsel submitted before me that that decision of Deputy Judge Muttrie is on appeal and if Deputy Judge Muttrie’s decision is reversed, then the applicant can be said to be an interested party in the action.
	4.

Mr Chu’s grounds for stay

7.These appear in Mr Chu’s 4^th affirmation dated 14 November 2006.  Mr Chu wishes to be joined in order to challenge the default judgment.  He says that it should not have been granted because the plaintiffs failed to disclose to the court that the suit premises were not wholly owned by the plaintiffs.  Part of the Land was owned by Success Chart and part by the Government.  The judgment was granted without testing the evidence of the case.  The possession order was mistakenly granted to parties who did not own the relevant properties.  The possession order should not have been granted because Success Chart and the Government were not parties.

8.Mr Chu says that he is operating a car park on part of the Land and there are also two garages operating there.  If stay is not granted he and the garage owners will be put out of business.  In other words, the appeal will be rendered nugatory.

9.It appears from Mr Chu’s first affirmation, filed in support of his application to be joined, that he claims that he derives his interest in the Land as a sub-tenant from the head landlord, Success Chart.  He relies on a written tenancy agreement between Success Chart and Lam Kwok Wai, the 3^rd defendant, dated 1 November 2001. 

10.This agreement, which is apparently signed by one Chan Sai Kit on behalf of Winker as agent for Success Chart, is for a lease of the Land commencing on 1 November 2001 and expiring on 30 October 2006.  The lease recites that Success Chart is the real owner, having caused the registration of the land in the names of 14 men of Wo Yi Hop Village by way of trust to be the registered owners of the property for the purpose of small housing development. 

11.There is no written sub-tenancy agreement between Mr Chu and the 3^rd defendant but he says that the rent was $7,000 per month, and the sub-tenancy expires on 31 October 2006.  He produces three rental receipts dated in 2004 and 2005 in support.  He also relies on a letter from Chan Sai Kit on behalf of Winker to the effect that the land may be sub-let, notwithstanding a term of the tenancy agreement prohibiting that, and another letter from the same source dated 10 November 2001 purportedly granting an option to renew the tenancy agreement for three years to Lam Kwok Wai or his sub-tenant(s).

12.In his 2^nd affirmation, dated 22 June 2006 and also filed in support of the application to be joined, Mr Chan referred to three agreements which, he said, clearly showed the status of beneficial ownerships of Success Chart in the Land and these he exhibited as exhibit A10.  They were not translated.  I had to ask counsel to make rough translations of them, to find if there was any support for the contention that Success Chart is the beneficial owner of the Land.  In fact these translations were made after the parties had been heard and I had retired to consider my decision; I then heard further argument. 

13.Some of these documents do not appear to be relevant; they refer to lots other than the Land.  But the memorandum dated 9 November 1993 purports to be made between all the plaintiffs except two (the 4^th and 5^th) plus two unknown persons, and Success Chart.  I am advised that this document contains, in rough translation, the following (at page 44 of the document bundle):

“to develop the “ting” lands on Lot 19-28 Success Chart is the real or beneficial owner of the title.  For convenience sake for the application of building those “ting” houses at various parts of Lot 19 to 28, and the entitlement thereat, our village people will register our names at the Land Registry as registered owner but we know clearly that we are not the real legal owner and we cannot and will not exercise our right as registered owner; say for example we will not collect any rental payment or interest from the tenant of Success Chart or interfere with the tenant; say for example to apply for possession of land from the court.”

14.In his 3^rd affirmation, filed in support of his appeal, Mr Chu referred to the fact that some parts of the Land in Lot 20 were resumed by Government since they were assigned to a plaintiff in 1997.  Further land searches show that one part of Lot 19 always belonged to one Bermuda Trust (Hong Kong) Ltd since 1995, and in December 2004 some parts of Lots 22, 24, 27 and 28 were assigned back to Success Chart by some of the plaintiffs.

15.In addition I have been shown a 5th affirmation dated 21 November, filed by Mr Chu in connection with the plaintiffs’ application for security for costs in the appeal proceedings.  To this affirmation he exhibits another letter from Success Chart, signed by the same Chan Sai Kit, addressed to Chu Pak Hei and the 3^rd defendant, confirming Success Chart’s extension of “the tenancy” for a further 3 years at an increment of 10% on the old monthly rental, i.e. $5,500 per month.

Principles

16.Stay is discretionary.  The principles on stay pending appeal are set out in Star Play Development Ltd v. Bess Fashion Management Co. Ltd, HCA 4726 of 2002.  A successful party should not be deprived of the fruits of his judgment.  Stay should only be granted if there are good reasons for it, such as that the appeal is meritorious or that the absence of the stay would render the appeal nugatory.  The appeal must at least be arguable.  If it be said that the absence of stay will render appeal nugatory this needs to be supported by evidence. 

Discussion

17.The plaintiffs argue that there is no real evidence of any trust.  Some of the documents in Exhibit A10 refer to lots other than those contained in the Land.  One document requires the villagers to go to a designated solicitors’ firm in order to sign documents including a trust document but no such documents have been put in evidence. 

18.The plaintiffs also rely on the fact that, even if there was a trust, the original head lease has in any event now expired.  If the letter purporting to extend the tenancy is valid, it extends the head lease; Mr Chu cannot rely on it as evidence of any kind of lease directly from Success Chart to himself.  There is no evidence of any new or extended sub-lease from the 3^rd defendant to Mr Chu.

19.The judgment of Yam J relies in part on the default judgment, in particular the declaration contained in it that the head tenancy was null and void and of no effect at all times.  However this judgment was a default judgment.  It was not based on evidence.  It could be set aside if a defendant, or Mr Chu if he were joined, were able to show a meritorious defence.

20.Now it may be that there is nothing in the allegations of a trust.  If there were anything in it, it is surprising that Success Chart is doing no more than to produce letters, signed by Chan Sai Kit, which suit Mr Chu’s purposes.  It may be that Mr Chu is simply employing the tactics of evasion and delay, in the hope that the plaintiffs will pay him, or pay him more, to go away.

21.However, if there really was some kind of trust arrangement between Success Chart and the plaintiffs, which would enable Success Chart to lease out the Land in its own name pending the later development of small houses, that would call the default judgment into question. 

22.Arguably, if there is a question mark over the default judgment, because it was relied on for purposes of the order refusing joinder, there is a question mark over that order too.  If the 3^rd defendant has completely disappeared, then if Success Chart is the beneficial owner of the Land, and if Mr Chu is paying rent directly to it for his occupation of it, there could be a direct tenancy.

23.I realise that if Mr Chu is joined he may have difficulties in attacking the default judgment in any event.  He will have to show a real prospect of success; see Alpine Bulk Transport Co. Inc. v. Saudi Eagle Shipping Co. Inc. [1986] 2 Lloyd’s Rep. 221, CA.  This means, in the words of the authors of the Hong Kong Civil Procedure 2006 at paragraph 13/9/14 that:

“The defendant must show that he has a ‘real prospect of success’.  To do so, he must satisfy the court that his case and the evidence that he adduces in support of it is potentially credible and carries some degree of conviction.”

24.Nevertheless, it seems to me that the interests of justice require that Mr Chu be joined so as to have the opportunity to attack the default judgment, if he can. 

25.I was given to understand that if the judgment was not stayed, the possession order would be executed on 29 November 2006.  The appeal is listed to be heard in February 2007.  Obviously, the appeal would be rendered nugatory by the execution of the possession order.

Result

26.In the circumstances it seems proper that a stay be granted. 

Mr J Chang, for Messrs Rowland Chow, Chan & Co., for the 1^st to 14^th Plaintiffs

Mr Daniel Tang, for Messrs C W Lau & Co., for the Applicant