The Incorporated Owners of Kwai Chung Plaza v. Giant Earnings Ltd and Another

LDBM 126/2008

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO.126 OF 2008

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Coram: His Honour Judge Thomas Au, Presiding Officer

Date of hearing: 11, 12 & 18 March 2009

Date of Supplemental Written Submissions:  23 & 24 March 2009

Date of Handing Down Judgment:  3 April 2009

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J U D G M E N T

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A.  Introduction

1.This trial concerns only the Applicant and the 1^st Respondent, as the claim against the 2^nd Respondent was withdrawn on 21 August 2008.

2.The Applicant (“the IO”) is the Incorporated Owners of Kwai Chung Plaza, while the 1^st Respondent (“Giant Earnings”) has since October 1992 been the registered owner of Shop 23 (“the Shop”) on the Ground Floor (Level 2) of Kwai Chung Plaza (“the Plaza”).

3.This action concerns the question as to whether Giant Earnings upon its purchase of the Shop obtained an oral irrevocable licence from the developers (“the Developers”) of the Plaza for the use of signboard No. 7 (“Signboard 7”) located at the large signboard (“the Large Signboard”) affixed onto one of the external walls of the Plaza.    The Large Signboard is divided into 10 smaller and numbered signboard spaces (Signboard 7 being one of them) for putting up advertisement signs.

4.There is no dispute that, in March 2006, the Developers as owners of, inter alia, the Large Signboard assigned their interest it the IO.    By way of the present action, the IO claims against Giant Earnings for injunctions to restrain it from using Signboard 7 and for damages for its wrongful use (and thus trespass) of the same.

5.In its defence, it is Giant Earnings’ case that before it purchased the Shop, someone from the Developers orally represented that the purchaser of the Shop and its tenants would be allowed to use Signboard 7 free of charge.  These representations, says Giant Earnings, amounted to a licence coupled with or in aid of an interest in property (i.e. the Shop), and is as a matter of law irrevocable and binding on the Developers’ successors in title as long as Giant Earnings remains the owner of the Shop.   By way of a Counterclaim, Giant Earnings seeks a declaration to the same effect.

6.But as transpired in the trial, and later confirmed by its counsel, the IO would not now dispute that certain representations were made by one of the Developers to one of Giant Earnings’ shareholders and directors.  However, in gist it is the IO’s case that the representations amounted only to a bare licence but not one which is coupled with or in aid of an interest in property, and therefore does not bind the IO, or alternatively was effectively terminated by the IO through its letter dated 17 March 2006 denying that Giant Earnings had any further right to continue to use Signboard 7 free of charge.

7.Given the above and the common ground that Giant Earnings was given a licence to use Signboard 7, the principal issues that call for determination at trial are:

(1) What were the oral representations made by the Developers which resulted in the oral licence given to Giant Earnings.

(2) Whether the oral licence granted is irrevocable as it is one coupled with or in aid of an interest in the Shop.

(3) Whether the licence is binding on the IO as successor in title to the Developers.

8.I would now first set out the relevant undisputed background facts below to provide the context for later discussions on the evidence and the construction of the representations.

B.  Undisputed background facts

9.The following are the uncontroversial background facts to the present dispute.

10.The Plaza was developed by the Developers.  They were Nan Fung Textile Ltd, Marvel and Co Ltd, Kin Fung Garments and Investments Ltd, Bassora Ltd, E. Lay Realty Ltd and Tasudi Investments Ltd.  Nan Fung Textile Ltd was a member of the Nan Fung Group. 

11.The Plaza was subject to a Deed of Mutual Covenant (“the DMC”) dated 12 April 1990.  Main Shine Development Ltd (“the Manager”) has since the DMC been appointed as the manager of the Plaza.   

12.Before 1991 or 1992, the Developers had been letting out the shops at the Plaza.  Apparently, in about 1992, the Developers decided to offer the shops for sale.

13.By a provisional sale and purchase agreement dated 5 September 1992, Giant Earnings agreed to purchase the Shop from the Developers for the sum of HK$16,177,000.  The formal agreement was signed on 19 September 1992, and the assignment on 13 October 1992.

14.The sale of the Shop to Giant Earnings was made subject to and with the benefit of the tenancy granted in favour of Belgian Bank for a term of 3 years.

15.Giant Earnings was set up by Mr Howard Lau, Mr Peter Lai, and Mr Josip Ma as its shareholders and directors for the purpose of purchasing the Shop.   Since 2000, Mr Ma has ceased to be a shareholder and director of Giant Earnings.

16.Mr Lau was and still is an accountant by profession, while Mr Lai was and still is a banker. Both of them have an interest in property investments and are good friends with each other.

17.The idea of purchasing the Shop came from Mr Ma when he introduced it to Mr Lai.  At the material time, Mr Ma was a solicitor in practice and was a friend of Mr Lai. 

18.Mr Lau only first came to know Mr Ma on the introduction of Mr Lai when they considered purchasing the Shop.

19.It was only after they had decided to purchase the Shop that they set up Giant Earnings to use it as a vehicle to purchase the Shop.

20.Since the purchase of the Shop, it has been let to different tenants after Belgian Bank had left. 

21.After the purchase of the Shop and until March 2006, its various tenants had been using Signboard 7 free of charge without any interruption by the Manager or the Developers.

22.On 1 March 2006, the Developers assigned their interests, rights and title in the common area and common facilities (which included the Large Signboard) to the IO as trustee for all the owners of the Plaza.  The assignment expressly provides that it is subject to and with the benefit of any of the existing, inter alia, “licences and consent to use” thereof

23.By a letter dated 17 March 2006, the IO through its solicitors informed Giant Earnings of the above assignment made by the Developers and that Giant Earnings had priority to rent Signboard 7 before 30 March.  It further stated that if Giant Earnings did not inform the IO about its intention to rent it, the IO reserved the right to demand Giant Earnings to remove any advertisement placed at Signboard 7.

24.At that time, the Shop was rented to Bonjour (the 2^nd Respondent herein), and Bonjour had been making use of Signboard 7 and another signboard (“the Shop Signboard”) situated right above the entrance of the Shop.   For the Shop Signboard, Bonjour had directly obtained a licence from the Manager to use it at a monthly fee of $8,500.

25.Thereafter, there had been exchanges of correspondence between Giant Earnings’ solicitors and the IO’s solicitors.  In gist, Giant Earnings stated that, inter alia, the Developers had given it the right to use Signboard 7 free of charge and insisted that it could and would continue to use the same.   The IO disagreed.

26.The dispute could not be resolved by the parties.

27.By its Notice of Application taken out on 26 May 2008, the IO took brought the present application against Giant Earnings and Bonjour for injunctions and for damages on trespass to Signboard 7.

28.After the commencement of this application, although continued to remain as a tenant of the Shop, Bonjour had voluntarily removed its advertisement from Signboard 7.  Since then, no one, including Giant Earning, has been using Signboard 7. 

29.On 21 August 2008, the IO discontinued its claim against Bonjour.

C.  The issues

C1.    What were the oral representations made by the Developers when the Shop was purchased?

C1.1  The relevant evidence

30.No one from the Developers has come to give evidence at trial.

C1.1.1 Giant Earnings’ case and evidence

31.It is Giant Earnings’ case that the Developers had made oral representations to the effect that upon the purchase of the Shop, the purchaser and the tenants of the Shop would have the right to use Signboard 7 free of charge.   The representations were said to have been made by someone from Nan Fung (being one of the Developers) to Mr Ma, and Mr Ma conveyed the representations to Mr Lai and Mr Lau when they were discussing the purchase of the Shop.

32.Mr Lai and Mr Lau gave evidence at trial for Giant Earnings in support of the above case.  They accepted that as the events occurred more than 10 years ago, they could not now remember precisely what was said by Mr Ma in the conversations between them respectively in relation to the use of Signboard 7.  But doing the best as they could, their respective recollections of what Mr Ma had said in relation to Nan Fung’s representations are as follows.

33.Mr Lai’s evidence is:

(1) “我同埋馬沛東一齊去睇，咁一出地鐵呢就見到個好大嘅招牌，就係呢個華比銀行，咁跟住呢，呢個就好搶眼喇果陣時，跟住就見到個鋪位。咁我就問阿Josip [i.e. Mr Ma]「呢個位係咪我地？ 嗰個招牌。」佢話係呀，佢同南豐好熟，南豐已經同佢講話嗰啲咁嘅租客同埋買家呢，就可以用嗰個招牌咁樣。” (Examination-in-chief)

(2) “我去到嗰度睇到個招牌好靚，好搶眼，見到係華比銀行個鋪位，咁我就問Josip呢個鋪位係唔係個招牌係連埋咁樣。咁佢就話佢同發展商係好熟，呢個發展商係比呢一個招牌比個鋪位owner同tenant用咁樣，咁我話有冇問題，咁佢話原全冇問題，因為呢佢同佢哋熟，同埋你見到呢，呢啲咁嘅招牌同鋪位呢，大家非常之搶眼，如果唔係呢華比都唔會租。若莫係啲咁上下嘅野，exact wording呢就對唔住喇，真係唔記得。” (Re-Examination)

(3) “（咁根據你嘅講法呢佢【馬】一直都同你哋講話「我哋可以」，「我哋」你嘅意思就係指你啦，馬律師，同埋…）佢話「我哋」嘅意思係所謂嗰個買家啦，即係嗰個業主，「我哋」就係我哋全部三個人，即係換言之我哋三個shareholder或者係Giant Earnings咁解，即係exact嗰個意思呢，總然之係Giant Earnings。（意思就係Giant Earnings？）無錯。” (Cross-Examination)

(4) “我印象中同埋我所記得呢就係馬沛東就係話同南豐係好熟，係完全呢個招牌呢係比嗰個鋪用嘅。” (Cross-Examination)

(5) “個燈箱使用權，根據馬律師講就係比返個買家用同埋個租客。” (Cross-Examination)

34.Mr Lau’s evidence is as follows:

(1) “呢位馬律師呢，佢就話佢同南豐好熟。因為我問佢個鋪點攞返嚟，因為你唔係話睇報紙呀，嗰個姓馬嘅律師呢，就話佢同南豐好熟，所以攞咗呢個鋪出嚟。咁我問佢「我見到個廣告牌，係咪包埋一齊？」咁呢位馬律師呢就話「當然係，如果買咗個鋪呢就可以用呢個廣告牌喇。」” (Examination-in-Chief)

(2) “華比下面有個鋪上面有個廣告牌，咁我個好直接問題就係「喂，買咗個鋪係咪可以用埋個廣告牌？」以我記憶呢佢【馬】個反應係「當然啦，嗰個廣告牌係連鋪。」我能夠記得呢就係呢個咁嘅答案。” (Examination-in-Chief)

(3) When questioned whether Mr Ma had told him why he knew that the owner of the Shop could use Signboard No. 7 free of charge: “佢【馬】比我嘅感覺就係呢同埋解釋呢就係佢同南豐好熟，呢個係南豐同佢嘅接觸之中係講比佢聽嘅。” (Examination-in-Chief)

(4) “我好直接問佢【馬】「呢個牌係咪包埋在內？」佢比我嘅答案就係好快，係包埋在內，係牌連個鋪。（咁你駛唔駛再比錢去用嗰個廣告牌？）個價錢包埋在內。（意思係話你唔駛再另外比錢去用嗰個廣告牌？）唔駛。” (Examination-in-Chief)

(5) “（你見到馬律師嘅時候，你點樣問佢關於嗰個牌嘅用途？）我坐地鐵去到呢，我話嗰個牌呢就好eye-catching，即係好顯眼，我去之前唔知有個牌係豎，即係呢我去到第一眼見到個牌，咁我話呢喺個地鐵度呢，形成一個好嘅投資項目，因為嗰個鋪雖然係一個角落頭鋪，但係問題呢一落地鐵呢，你就見到喇，你都唔駛出街你就見到喇，因為呢，之前我講過，個地鐵呢係架空喺上面，咁當然問呢個係咪包埋，即係我問得好白，係咪包埋。咁佢話當然如果買之下會擁有嗰個牌喇。” (In answer to the Court’s question)

(6) “（記唔記得當時佢【馬】點講呢啲說話？）我嘅記憶就係「牌連鋪」，因為我問得好白。（你問係咪包埋嘅，咁佢【馬】點答？）佢話「當然係我哋啦。」” (In answer to the Court’s question)

35.Both Mr Lai and Mr Lau confirmed that they had not been able to get in touch with Mr Ma since 2000.  Mr Ma has also resigned as a director and stopped being a shareholder of Giant Earnings since then.  That is the reason why Mr Ma was not called by Giant Earnings to give evidence.

36.Giant Earnings also called one Ms Kitty Hui to give evidence. Ms Hui has been the administrative assistant to Mr Lau since 1993.  At the relevant times, her principal duty was to take care of all matters concerning the Shop, including matters relating to the tenants.

37.Ms Hui gave evidence that soon after her taking up the post in 1993, she had spoken to someone from the Manager on the use of Signboard 7.  She was informed that Giant Earnings and its tenants could use it free of charge.  She was also told that in future if the tenant wanted to use Signboard 7, they could directly liaise with staff of the Manager for any logistic matters.  

38.She also said throughout her involvements in the renting out of the Shop over these many years, she was under the impression that the estate agents (who had had made rental inquiries with her) were generally aware of the fact that the tenant of the Shop could also use Signboard 7 free of charge.  As such, other than Bonjour, no tenants seemed to be concerned with the right to use Signboard 7 free of charge.

39.For Bonjour, at its request, she had spoken to a Ms Chan May Yu over the phone inquiring about the use of Signboard 7.  In reply, Ms Chan again informed her that Giant Earnings could use Signboard 7 free of charge.   Later, at her request, the Manager issued a letter dated 28 January 2003 (“the Confirmation Letter”) stating that, as to its knowledge, Giant Earnings could use Signboard 7 free of charge.  I will deal with the evidence concerning the inquiries made on the request of Bonjour in greater detail below. 

C1.1.2 The IO’s evidence

40.The IO has called two witnesses: Mr Cheng Tak Chung (鄭德聰) and Ms Chan May Yu (陳美如).    Both of them worked for the Manager.

41.Mr Cheng joined the Manager and worked at the Plaza as an assistant estate manager. He now occupies the position of senior estate manager.

42.Ms Chan has been working at the Plaza as an assistant estate manager for some 18 years.  She has been assisting Mr Cheng in managing the Plaza.

43.Their evidence is summarized as follows.

44.Both of them fairly confirmed at trial that they had no knowledge whatsoever as to the dealings between Mr Ma, Mr Lau or Mr Lai with the Developers concerning the purchase of the Shop.    They therefore did not know what representations, if any, had been made by the Developers to Mr Ma, or anyone of Giant Earnings regarding the purchase of the Shop or the use of Signboard 7.

45.On the other hand, although they have never spoken to any of the Developers, they confirmed in their respective evidence at trial that, learning it from their predecessors and from the long practice adopted by the Manager, as far as they knew, Giant Earnings (being the registered owner of the Shop) and its tenants could use Signboard 7 free of charge. 

46.There were in fact other owners of others shops in the Plaza and their respective tenants who had been using the other spaces of the Large Signboard free of charge.  

47.This position only changed after the Assignment when the Manager was informed by the IO that the IO could charge for the use of Signboard 7 and some other (but not all) then existing users for the use of some (but not all) other spaces of the Large Signboard. 

48.Ms Chan also said that, after resuming duty with the Manager, she had spoken to two other owners of other shops, who told her in a proud manner they had been given the right by the Developers to use the respective signboard spaces of the Large Signboard free of charge after their respective purchases of the respective shops.

49.Ms Chan further said, if (as she could not remember whether she had done so) she had ever confirmed to Ms Hui over the phone that Giant Earnings could use Signboard 7 free of charge, she should have also qualified that by saying that it was only as far as she knew. 

C1.2  Discussion and finding

50.I find all the above witnesses to be honest and reliable in relation to the evidence they gave concerning this issue.  They all gave evidence in a direct and frank manner, and no serious challenge concerning their evidence has been made to any of them under the respective cross-examinations. 

51.I accept their evidence as set out above.  As far as I can see, there is no real conflict in between the evidence given by the witnesses.

52.I also accept Mr Lau and Mr Lai’s explanation as to why Mr Ma was not called to give evidence.  The IO does not challenge this.

53.Based on the evidence placed before me[1] and the oral evidence given in Court by the witnesses, I find that it is proved on the balance of probabilities that:

(1) Someone from Nan Fung had represented to Mr Ma to the effect that a purchaser of the Shop would also be given the right to use Signboard 7 free of charge, and

(2) These representations were further conveyed to Mr Lau and Mr Lai by Mr Ma. 

54.My reasons for coming to these conclusions on the evidence are as follows:

(1) There is nothing to contradict and challenge Mr Lai and Mr Lau’s evidence (which I accept) as to what were in gist the representations made by Nan Fung to Mr Ma concerning the purchase of the Shop and the right to use Signboard 7.

(2) This finding is consistent with the evidence that, before the present dispute, it had been within the knowledge and practice of the Manager to allow Giant Earnings (being the owner of the Shop) and its tenants to make use of Signboard 7 free of charge.   This practice continued despite the fact that there have been a number of changes in the identity of the tenants occupying the Shop.

(3) It is on balance inherently believable that the Developers would have made such representations on the right to use the signboard free of charge upon purchase of a shop, given:

(a)  The evidence that there were other shop owners and tenants who could similarly use other signboard spaces free of charge after their purchases;

(b) There were other owners confirming to Ms Chan that they had been given the right to use free of charge the signboard space by the Developers after they had purchased the shops, and that they felt so proud of that;

(c) It is Mr Lai’s evidence (which I also accept) that the Developers were at that time (i.e., 1992 to 1993) very eager to sell the shops at the Plaza as it was just soon after the Gulf War. In light of this, I regard it as not inherently improbable that they would link the use of the signboard space with the purchase of a shop to encourage sales.

55.I also find that although the evidence suggests that the representations were made by someone from Nan Fung, they were either authorized, or subsequently endorsed by all the other Developers.  It is so because it is common ground that, before the Assignment, none of the Developers had ever challenged or disputed the free of charge use by Giant Earnings and its various tenants of Signboard 7. 

56.I further accept that although the representations were made to Mr Ma personally, it was made with an intention to be conveyed to the actual purchaser of the Shop. I come to this finding based on the following:

(1) The purpose of the representations, as I said above, was likely to induce potential purchasers to purchase the Shop.  In the premises, there would have been no good reason (and none is suggested) that the representations were intended to be made solely and only personally to Mr Ma.

(2) The undisputed fact that Giant Earnings had been enjoying the free of charge use of Signboard 7 since the purchase of the Shop shows that the Developers had honoured the representations for the use of Signboard 7 with the actual purchaser (which is not Mr Ma) of the Shop.

57.Ms Wong (counsel for the IO) submits that there is a written licence dated 17 March 1992 given by the Developers to Belgian Bank concerning the use of Signboard 7 with detail terms.  This should serve to negate any suggestion that the Developers had given any oral licence to Giant Earnings coupled with the purchase of the Shop.

58.I am unable to accept the submissions. 

59.This written licence was issued to the tenant of the Shop well before the Shop was purchased by Giant Earnings.  The existence of the written licence given to a tenant when the Shop was still owned by the Developers is equivocal as to whether the Developers, while having an earnest intention to sell the Shop, later would have made those representations I have found above.   The more compelling evidence in support of the existence of the oral representations and licence is the continued un-objected free of charge use of Signboard 7 by Giant Earnings and its tenants after the Shop was sold and even after Belgian Bank had moved out of the Shop.

60.Ms Wong further submits that, the fact that Giant Earnings has never inserted in any of its tenancy agreements with the respective tenants a provision that the tenant could use Signboard 7 also puts suspect to the evidence that the Developers had given an oral licence to Giant Earnings to use Signboard 7 upon the purchase of the Shop.

61.I am also not persuaded by this submission.   

62.I accept Ms Kitty Hui’s evidence that the right to use Signboard 7 free of charge by the tenant of the Shop was widely known amongst the estate agents in that area, and no tenant (other than Bonjour) had ever asked to have such a clause inserted in the tenancy agreement.   In light of this evidence, I find that the lack of any express provision in the tenancy agreements do not in anyway outweigh the overwhelming evidence I set out in paragraphs 54 to 56 above in support of the finding of the oral representations and licence given by the Developers in relation to the use of Signboard 7.

63.Ms Wong also relies on the fact that in the renewed tenancy agreement dated 6 February 2006 (“Bonjour’s 2^nd Tenancy Agreement”) made with Bonjour, Giant Earnings inserted a clause (“the Disclaimer Clause”) asking Bonjour to directly negotiate with the IO for the right to use Signboard 7, and if the IO refused, Giant Earnings would not be liable and the tenancy agreement could not be terminated on that basis.  The Disclaimer Clause provides as follows:

“(5) Signage: 

(a)   Any licence(s)/ permission granted by us for you to use any signage space or commitment/ agreement on our part to allow/ arrange for the use of any signage by you shall be terminated or revoked on 8 February 2006 but without prejudice to our rights to claim against you for antecedent breach of the terms for such use prior to the date of termination or revocation.

(b)  You shall at your own costs and expenses apply to the management company and/ or the Incorporated Owners of Kwai Chung Plaza for consent/ permission to erect signage(s) or use signage space(s).

We shall be under no circumstances be liable to you and the tenancy hereunder shall under no circumstances be terminated in the event of the management company and/ or the Incorporated Owners of Kwai Chung Plaza refusing to grant such consent/ permission.”

64.In relation to background leading to the insertion of the Disclaimer Clause, Ms Hui’s evidence (which is not in anyway contradicted or challenged) is as follows:

(1) In late 2003, Ms Hui was in negotiations for the first tenancy agreement with Bonjour through its property agent one Mr Hung.  Although Mr Hung said he was aware of the fact that the tenant of the Shop could use the signboard free of charge, he was instructed by Bonjour to ask for a confirmation that it was the case.  Mr Hung also said Bonjour would like to use the Shop Signboard as well, which was a signboard situated right above the Shop entrance.

(2) Ms Hui told Mr Hung that he would have to directly negotiate with the Manager for the lease and use of the Shop Signboard, as that did not fall within Giant Earnings’ rights. 

(3) Ms Hui then further called Ms Chan to confirm whether the tenant of the Shop could use Signboard 7 for free, and the answer was positive.  Ms Hui relayed again the same message to Mr Hung.

(4) Later, Mr Hung called Ms Hui complaining to her that the Manager had changed its position on the amount of licence fee for the use of the Shop Signboard.  He said although the Manager initially already agreed in writing that the fee would be $4,000, it later changed its position and revised the licence fee to $10,000. 

(5) Mr Hung therefore asked Ms Hui to help to discuss with the Manager on the use of the Shop Signboard at a lower rate.  Mr Hung also expressed the concern that if the Manager could change the position even after agreeing in writing on the licence fee for the Shop Signboard, it might also change the position on the free use of Signboard 7.

(6) After consulting Giant Earning’s solicitors, Ms Hui then called Ms Chan to ask for a written confirmation from the Manager on Giant Earnings’ right to use Signboard 7 for free.  She also at the same time discussed with Ms Chan on Bonjour’s request for a lower licence fee for the use of the Shop Signboard.

(7) It was upon Ms Hui’s above request for written confirmation (which request was later reduced into writing upon Ms Chan’s suggestion) that the Confirmation Letter was eventually issued by the Manager to Giant Earnings.

(8) After showing the Confirmation Letter to Mr Hung, Bonjour no longer asked for an insertion into to the first tenancy agreement a clause for the right to use Signboard 7 free of charge.  Bonjour also eventually entered into an agreement with the manager for the use of the Shop Signboard for a monthly fee of $8,000.

(9) It appeared to Ms Hui that in relation to the 2 signboards, Bonjour was more concerned with the right to use the Shop Signboard than Signboard 7.

(10)    When the first tenancy was coming to an end in early 2006, and when Ms Hui and Mr Hung negotiated for its renewal, Mr Hung told Ms Hui that he heard a rumour that the IO was intending to cause trouble in relation to the right to use the signboard by the tenant, and might charge for the use of it.  Ms Hui told Mr Lau about the rumour and was instructed to consult Giant Earnings’ solicitors. 

(11)    Ms Hui consulted the solicitors, and it was their advice to insert the Disclaimer Clause in Bonjour’s 2^nd Tenancy Agreement.  This was not objected to by Bonjour.

65.I accept in full Ms Hui’s above evidence.

66.In light of this evidence, I accept the submission of Mr Lui (counsel for Giant Earnings) that the insertion of the Disclaimer Clause in Bonjour’s 2^nd Tenancy Agreement is not inconsistent with Giant Earnings’ case that the Developers had made the oral representations giving Giant Earnings the right to use Signboard 7 upon the purchase of the Shop.  The clause was inserted under legal advice to protect Giant Earnings position as a landlord in case Bonjour eventually could not make use of Signboard 7 by reason of the IO or the manager’s in-cooperation.  

67.This is in my view reasonably understandable, as even if Giant Earnings was of the view that it had been given an oral licence to use it free of charge, it could not avoid the IO or the Manager unilaterally taking a different stance preventing Bonjour from using Signboard 7 free of charge.  Therefore, there was no harm but only to benefit Giant Earnings to insert the Disclaimer Clause in order to fully protect its own interest and to avoid any risk of liability, especially when Bonjour did not object to it.    Such a stance when looked at against this background is not in my judgment inconsistent with Giant Earnings’ case on the oral representations and licence.

68.I therefore also reject Ms Wong’s submission that the Disclaimer Clause shows that the Developers had not orally given a licence to Giant Earnings to use Signboard 7 free of charge upon the purchase of the Shop.

69.For these reasons, I find that the Developers have granted Giant Earnings an oral licence to use Signboard 7 free of charge by representing to it effectively that, upon its purchase of the Shop, Giant Earnings and its tenants would have the right to use Signboard 7 free of charge. 

C2.    Was the oral licence irrevocable?

70.It is not Giant Earnings’ case that by reason of the terms of the oral licence, it is irrevocable.   Mr Lui for Giant Earnings also says he is not running a case of contractual licence.

71.Mr Lui however submits that given the nature of the oral licence and the circumstances under which it was granted, it is a licence granted in aid of or coupled with an interest in the Shop.  As such, as a matter of law, it is irrevocable.

72.The law on a licence coupled with or in aid of an interest in property has been summarized by the learned authors of The Law of Real Property (7^th ed)  at para 34-005 as follows:

“The one form of licence which caused no problems at common law was a licence coupled with a recognized interest in property.  A right to enter another man’s land to hung and take away the deer killed, or to enter and cut down a tree and take it away, involves two things, namely, a licence to enter the land and the grant of an interest (a profit a prendre) in the deer or tree.  At common law such a licence is both irrevocable and assignable, but only as an adjunct of the interest with which it is coupled.  It therefore has no independent existence merely as a licence.  It may be reinforced by the principle that a person may not derogate from his grant, which is explained further below.  In any case such a licence is not only irrevocable but is enforceable by and against successors in title of the grantee and grantor respectively, as part and parcel of the interest granted.”  (emphasis added)

73.Parker J in James Jones & Sons Ltd v Earl of Tankerville [1909] 2 Ch 440 at 442-443 also said as follows on the law regarding a licence coupled with or in aid of an interest in property (real or personal):

“A contract for the sale of specific timber growing on the vendor’s property, on the terms that such timber is cut and carried away by the purchaser, certainly confers on the purchaser a licence to enter and cut the timber sold, and, at any rate as soon as the purchaser has severed the timber, the legal property in the severed trees vests in him.  A licence to enter a man’s property is prima facie revocable, but is irrevocable even at law if coupled with or granted in aid of a legal interest conferred on the purchaser, and the interest so conferred may be a purely chattel interest or an interest in realty.  If A sells to B felled timber lying on A’s land on the terms that B may enter and carry it away, the licence conferred is an irrevocable licence because it is coupled with and granted in aid of the legal property in the timber which the contract for sale confers on B.: Wood v Manley (1839) 11 Ad. & E. 34.”

74.Ms Wong for the IO does not dispute the legal principles on licence coupled with or in aid of an interest in property as set out above.  She however says the question in this case is whether the oral licence, even if so found to have been granted by the Developers, is one granted in aid of or coupled with an interest in property.

75.In my view the answer is yes. 

76.My reasons are as follows:

(1) As I found above, the oral licence was granted to facilitate and induce the purchase of the Shop.  It was thus intended that the purchaser would have the right use Signboard 7 upon and after the purchase.  In other words, the right to use Signboard 7 came together or was linked with the purchaser’s legal interest in the Shop.

(2) Further, the Shop is for commercial and retail use, the business being carried on therein by the owner of the Shop (or the tenant of the owner) would usually and generally be enhanced by using the signboard to promote it.  The same is also true even if the registered owner makes use of the Shop by renting it out.  The right to the free use of Signboard 7 would and should enhance (and thus in aid) of the renting out use of the Shop. 

(3) In the circumstances, I am satisfied that the oral licence was granted in aid of the use of the Shop and/or coupled with the legal interest in the Shop. 

77.Ms Wong however says after the Assignment, the Developers only identified to the IO five shop units where they said could continue to use the respective signboard space at the Large Signboard.  They do not include Giant Earnings.  This shows that the Developers did not regard themselves to have granted an irrevocable licence to the Giant Earnings to use Signboard 7.

78.With respect, Ms Wong’s submissions are flawed and I reject them:

(1) As I mentioned above, once it is accepted that the licence is one coupled with or in aid of property, it is irrevocable as a matter of law.  It does not depend on the terms of the licence or the intention of the parties.  Therefore, whether or not the Developers identified Giant Earnings having the right to continue to use Signboard 7 is neither here nor there.

(2) In any event, as a matter of evidence I do not attach any weight to the Developers’ said identification of which shop owners or tenants having a continuous right to use the signboard space.  There is nothing to show on what basis the Developers had made those purported identifications.  They have also not come to the trial to give evidence and be cross-examined upon.  As such, I do not think it is right or fair (to Giant Earnings) to attach any weight to this evidence for the determination of the nature and effect of the oral licence.

79.For the above reasons, I find that the oral licence granted by the Developers to Giant Earnings is one coupled with or in aid of its legal and beneficial interest in the Shop.   The licence is thus irrevocable as a matter of law.

C3.    Is the licence binding on the IO?

80.Given that the licence is one coupled with or in aid of the legal interest in the Shop, as a matter of law, it is also binding on the IO as the successor-in-title to the grantor (the Developers) in Signboard 7.

C4:    A subsidiary issue:  If there were no irrevocable licence, would the IO have been successful in the present claim given the reliefs it sought?

81.Given my above findings in favour of Giant Earnings, strictly speaking I do not need to consider this issue.  But for completeness and in case I am wrong above, I would deal with it very briefly.

82.In the Notice of Application, the IO pleads the following effective reliefs in its prayers:

(1) An injunction against Giant Earnings and Bonjour to restrain them from using Signboard 7.

(2) An injunction against Giant Earnings and Bonjour to restrain them from interfering with the other owners of the Plaza from using Signboard 7.

(3) An injunction to compel Giant Earnings and Bonjour to remove the advertisement signs erected on Signboard 7.

(4) Damages to be assessed for trespassing Signboard 7.

83.Mr Lui for Giant Earnings submits that even if there were no irrevocable licence, IO must also fail in its claims since:

(1) There is nothing to justify the grant of any of the above injunctive reliefs as it is common ground that (after Bonjour had voluntarily removed the advertisement erected on Signboard 7 soon after the commencement of this action), there is no evidence to show that Giant Earnings is doing or threatening to do any of the acts sought to be restrained.  There is also no question of a mandatory injunction to compel Giant Earnings to remove the advertisement erected, as it has already been removed.

(2) There is no evidence to support the claim for damages, in particular there is no evidence to show what the reasonable market licence fee is for the use of Signboard 7. 

84.I agree with Mr Lui’s submissions that, given the state of the evidence, no injunctive reliefs as sought would have been granted to the IO.  To be fair to Ms Wong, I do not think she is seeking to contend otherwise.

85.As to damages, I am also of the view the IO has failed to prove the same:

(1) It is well established that a grantor is entitled to revoke a bare licence by giving reasonable notice. What amounts a reasonable notice depends on the circumstances of each case. See:  The Law of Real Property, supra, para 34-003.

(2) In the present case, there is insufficient evidence to show that the IO had given reasonable notice to terminate the oral licence.  In IO’s solicitors’ letter dated 17 March 2006 to Giant Earnings, it was stated that the right given to Giant Earnings to use Signboard 7 was already invalid and cancelled: 

“ 2. 倘獲配用外牆燈箱之業主/使用人業權轉讓或更改，有關燈箱之配用權無效及取消,但有優先權簽訂租用合約之安排… 鑑於 貴司使用上述燈箱是歸入 (2) 情況，故 貴司使用上述外牆燈箱之配用權已無效，但有優先權與法團簽訂租用合約之安排..”

(3) In my view, this amounted to an attempt to immediately revoke the licence granted to Giant Earnings for the use of Signboard 7.   In light of the 13 years’ continuous and un-objected use of Signboard 7 by Giant Earnings, I do not accept that the licence could be terminated without giving any reasonable notice.  As such, there has not been an effective termination of the licence.  There is thus no question of trespass to Signboard 7 by Giant Earnings, and no question of damages arises.

(4) In any event, there is also no evidence as to what is the reasonable market licence fee of Signboard 7 is.  I do not accept that the HK$8,500 monthly rental offer made to Giant Earnings by the IO in its solicitors’ letter dated 8 June 2006 amounts to sufficient proof of the market fee.  No evidence has been adduced to show the basis upon which this sum was reached.  There is also no evidence to show that there were other potential parties who would be willing to rent Signboard 7 or a similar signboard space at $8,500 per month.

86.In the premises, I would not have granted any damages to the IO even if I had found that there were only a revocable licence.

87.For all these reasons, I would have dismissed IO’s claims even if Giant Earnings were unsuccessful in its case for an irrevocable licence.

D.  Conclusion

88.As I have found above that Giant Earnings has an irrevocable licence to use Signboard 7, it succeeds in its Counterclaim.  I would also dismiss IO’s application.

89.I therefore grant the following orders:

(1) A declaration that Giant Earnings is entitled to an irrevocable licence for the use of Signboard 7 for advertising free of charge as long as Giant Earnings remains as the legal and beneficial owner of the Shop.

(2) An injunction to retrain the IO, whether by itself or its agents or servants or otherwise howsoever from interfering with Giant Earnings’ said use of Signboard 7 under the aforesaid licence, as long as the use is not in contravention or violation of the other provisions in the DMC.

(3) The IO’s application and claim herein is dismissed.

90.I see no reason why costs should not follow the event, I further make an order nisi that costs of this action be to Giant Earnings to be taxed if not agreed, with certificate for counsel.  Unless any of the parties applies to vary it by Summons, the costs order nisi shall be made absolute 14 days from today.

Ms. Catherine K.K. WONG, instructed by Messrs Huen & Partners for Applicant.

Mr. Mike S.K. LUI, instructed by Messrs Deacons for 1^st Respondent.

[1] Which includes all the witness statements and the documentary evidence.