Sum Koon Tai and Others v. Au Cheung

DCCJ 661/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 661 OF 2007

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BETWEEN

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Coram : Deputy District Judge A. Yuen in Chambers

Date of Hearing : 24^th August 2007

Date of Handing Down of Decision : 13^th August 2007

DECISION

1.This is an application by the Plaintiff (P) pursuant to O.14 of RDC for an order that judgment be entered against the Defendant (D).

The Plaintiff’s Case

2.P is the registered manager of a Sham Kiu Ming Tso (the “Tso”) which is a Chinese ancestral worship trust.  The premises known as the Remaining Portion of Lot No. 577 in Demarcation District No. 8 Tai Po, N.T. (the “Premises”) is held from the Government under lease in the name of the Tso.  Pursuant to s.15 of the New Territories Ord. (CAP 97).  P and two other registered managers of the Tso have the full power to dispose of or in any way deal with the said Premises as if they are the sole owners of the Premises.

3.On or about 28 January 1979, the former registered manager (“Sham”) of the Tso entered into an oral agreement with D whereby a portion of the Premises was let to D at a yearly rental of $200.  The annual rent was increased to $1,000 in 2003.

4.Since 28 January 2003, D failed to pay the annual rent and P took out a writ of summons claiming against D for the rent in arrear in June 2005.  The case was subsequently settled on 29 July 2005.  Pursuant to a Consent Order, D agreed to pay a sum of $3,000 being the arrears in rent, covering the period from 28 January 2003 to 27 January 2006, and P agreed to withdraw the action.

5.P also served a Notice of Termination of Tenancy (the “Notice”) dated 29 December 2005 to D, informing D that the tenancy would be terminated on 27 January 2007 or one year from the date of the Notice.  P demanded for vacant possession of the Premises upon termination of the tenancy.

6.Since 28 January 2006, D no longer pays the annual rent, therefore, P also claims for arrears in rent and mesne profit at the rate of $1,000 per annum.

The Defendant’s Case

7.D was a friend of Sham.  In or about October 1978, Sham told D that the tenant of the Premises, Li Choi, had passed away and the Premises was left vacant, and D could use and occupy it.  D was told that the Premises was let to Li Choi permanently at an annual rent of $200.  Since the term was a permanent one, it could not be terminated and the owner could not take back the Premises.  D was also allowed to use a piece of land in front of the Premises permanently and at an annual rent of $100.  However, D had to obtain the consent of Li Choi’s family before he could become a tenant.  As a result, D paid $11,500 to Li Choi’s family in December 1978 for their consent to assign their rights under the tenancy to D.

8.Believing that he had a right to use the premises permanently, D built on it a 2-storey house in 1979 at a cost of $300,000.  D had all along been paying a total annual rent of $300 to Sham until his death in 2003.

9.D said the annual rent had never been raised to $1,000.  It’s just that D volunteered to pay a larger sum as a form of gratitude.

10.D alleged that it was P who refused to collect the rent from D, not that D who refuses to pay it.

Triable issue or Arguable Defence?

11.D pleaded in his defence that:

(1)	The tenancy is a permanent tenancy;
(2)	P is estopped from claiming recovery of the Premises because of proprietary estoppel;
(3)	The tenancy is protected by Part II of Landlord and Tenant (Consolidation) Ord. (CAP 7)

12.At the time of the hearing of this application, D conceded that permanent tenancy is not recognized in law and the only defence is proprietary estoppel and/or estoppel by convention.

Proprietary Estoppel

13.Proprietary estoppel arises in situation where a person has done acts in reliance on the belief that he has rights in another’s land.

14.In the present case, D said because of the representation of Sham that the tenancy was a permanent one and that the owner could not take back the land, D built on it a 2-storey house.

15.P doubted whether or not there was such a representation and argued that even if there was such a representation, D suffered no detriment even though he had done acts in reliance on it.

Any detriment?

16.P submitted that the annual rent of the Premises was only $200, which was subsequently increased to $1,000 after 2003.  The building cost of the house was $300,000.  D’s family has been living in the Premises from 1979 to present, therefore, making the average expenditure for his living in the Premises less than $900 per month.  Therefore, it can only be to D’s enjoyment and benefit, let alone detriment.

17.D submitted that the present value of the house is between $800,000 and $1 million, therefore P would benefit unjustly if he be allowed to take back the Premises after he’d induced D to make improvement to it.

18.After hearing submission from both parties, I found that the doctrine of Proprietary Estoppel did arise in the present case.  The remaining question is whether or not the promise P made, i.e. that the owner could not take back the land, is revocable.  This depends on whether or not D is able to restore to his position before he’d acted in reliance on the promise.

19.If the promise P made is not revocable, then the next question is to what extent  is the “equity” conferred on D.  Is D allowed to stay in the Premises for life with a rent, and if so, what should be the rent, or is D only allowed to stay subject to a tenancy with a term, and if so, what should be the term.

20.These are all triable issues to be resolved in trial.  Therefore, I do not find it a suitable case for O.14 application.

21.In the light of my abovementioned ruling, I don’t think I need to go into the doctrine of estoppel by convention.

Leave to Defend with or without condition?

22.There is no dispute that D hasn’t paid the annual rent since January 2006.  I’ll therefore grant leave to D to defend on condition that D pays $2,000 into Court as security.

Directions

23.Parties do file and serve a list of document within 14 days from the date of this decision; and mutual discovery of documents and exchange of witnesses statements within 42 days thereafter.

Costs

24.I’ll make an order nisi that costs of this application be costs in the cause.

Mr. Tommy K.K. Ho instructed by Messrs Kevin Li & Co. for the Plaintiff

Mr. Kenny Chan instructed by Messrs Terry Yeung & Lai for the Defendant