Law Siu Leung v. The Occupiers and Another

DCMP 3093/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 3093 OF 2011

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Coram : Deputy District Judge Grace Chan in Chambers (open to public)

Dates of hearing : 9 May 2012

Date of handing down Decision : 15 May 2012

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DECISION

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Introduction

1.There are 2 applications before me:

(1)   An application of the Plaintiff by way of an originating summons issued under Order 113 of the Rules of District Court to recover possession of the land known as No. 3A Yuet Lun Street, Lai Chi Kok, Kowloon (“Property”) ;

(2)   An application by the 2^nd Defendant to transfer the present proceedings to the Court of First Instance on the ground that the present proceedings should be consolidated with HCA 1395/2011 (in which the 2^nd Defendant is the plaintiff and the Plaintiff is the 1^st defendant) (“HC Action”).

2.But essentially, I am only required to deal with the Plaintiff’s application for recovering possession of the Property, for it is the Plaintiff’s position that if I was to dismiss his application, he would not object to the transfer application of the 2^nd Defendant.

Background Facts

3.The Plaintiff was a son and an administrator of the estate of the late Madam Law Har Sio Ying.

4.Since 1976, the late Madam Law rented the Property from the Government under a series of short term tenancies subject to payment of rent and the conditions therein (“Government Tenancy”). When she died in 1989, the Government continues to grant the Government Tenancy in favour of the Plaintiff.

5.On 22 April 1992, the Plaintiff and the 2^nd Defendant entered into a written joint venture agreement (“JV Agreement”) which embodied the following major terms:

(1)   A joint venture would be set up solely for the purpose of running a godown at the Property (Clause 1).

(2)   The 2^nd Defendant was to be solely responsible for paying all charges and fees relating to the Property and the premises thereon, including the quarterly rent payable to the Government (Clause 4).

(3)   All profits and losses of the joint venture would be solely enjoyed or shouldered by the 2^nd Defendant (Clause 6).

(4)   A sum of $135,580.64 was paid by the 2^nd Defendant to the Plaintiff on signing of the JV Agreement (Clause 7); and thereafter the 2^nd Defendant was required to pay to the Plaintiff a monthly sum of $3,000 until the termination of the Government Tenancy (Clause 8).

(5)   The JV Agreement shall be terminated if the monthly sum of $3,000 is not paid to the Plaintiff on the due day (Clause 9). Upon termination of the JV Agreement, the 2^nd Defendant shall re-instate the Property to its original state and condition (Clause 10).

(6)   In the event of termination of the Government Tenancy by the Government, any compensation offered by the Government shall wholly belong to the 2^nd Defendant and the Plaintiff shall forfeit his right to claim for such compensation (Clause 12).

6.Subsequent to the JV Agreement, the Plaintiff and the 2^nd Defendant purportedly signed a supplemental agreement dated 8 September 2003 under which the monthly sum payable to the Plaintiff was reduced from $3,000 to $2,000 (“2003 Agreement”)[1].

7.The JV Agreement as purportedly varied by the 2003 Agreement was said to be further amended by a written agreement dated 15 April 2005 (“2005 Agreement”)[2] which provided, inter alias, that:

(1)  The monthly sum payable to the Plaintiff was further reduced from $2,000 to $300 and that the 2^nd Defendant was to pre-pay the monthly fee to the Plaintiff for 10 years from October 2005 to September 2015 in the total sum of $36,000 (“Advanced Payment”);

(2)  The Plaintiff agreed that he should have the procedures for changing the name of the tenant completed with the Government (“同意需向政府辦理好承租人轉名手續 ”).

8.In or about July 2009, the 2^nd Defendant granted a licence to the 2^nd defendant (a company limited) and 3^rd defendant (a shareholder and director of the 2^nd defendant) in the HC Action (collectively “Sub-licensees”) in return for licence fee of $40,000 per month. A written licence agreement was signed on 19 February 2010. However, the Sub-licensees vacated the Property on or about 16 June 2011 without prior notice or consent of the 2^nd Defendant.

9.By a letter dated 30 January 2011 (“30/1/2011 Letter”), the Plaintiff through his solicitors wrote to the 2^nd Defendant alleging the latter of breaching the JV Agreement by granting a licence to the Sub-licensees. The Plaintiff demanded that the 2^nd Defendant should deliver vacant possession of the Property within 7 days thereof.

10.By a letter dated 27 June 2011(“27/6/2011 Letter”), the Plaintiff through his solicitors purportedly terminated the JV Agreement and demanded the 2^nd Defendant to deliver up vacant possession of the Property before 1 August 2011.

11.By a reply letter of the same day, the 2^nd Defendant treated the termination as a wrongful repudiation of the JV Agreement by the Plaintiff.  The 2^nd Defendant accepted the repudiation and vacated the Property.

12.The rent under the Government Tenancy was paid up to 12 July 2011 by the 2^nd Defendant. The rent after 13 July 2011 was settled by the Plaintiff.

13.On 6 July 2011, the Plaintiff entered the Property and changed the lock thereof.

14.However, the 2^nd Defendant later re-entered the Property. Two weeks after 6 July 2011, the Plaintiff visited the Property again and found that the lock of the Property was changed without his prior knowledge. A group of 4 or 5 people (including the younger sister of the 2^nd Defendant) came up and claimed to the Plaintiff that the Property belonged to the 2^nd Defendant.

15.On 7 September 2011, the 2^nd Defendant filed his statement of claim under the HC Action to sue the Sub-licensees (for breach of the licence agreement) and the Plaintiff (for breach of the JV Agreement and for inducing the Sub-licensees to breach the licence agreement).

16.Further, on 22 November 2011, the 2^nd Defendant wrote to the District Lands Office alleging that he was the actual occupier of the Property and applying for the change of the tenant’s name under the Government Tenancy into his own name. This triggered the Government to write to the Plaintiff and request the Plaintiff to rectify the situation. As a result, the Plaintiff took out this originating summons to seek recovery of possession of the Property on 22 December 2011.

The 2^nd Defendant’s Latest Position & Arguments

17.The 2^nd Defendant has filed 2 affirmations to oppose the Plaintiff’s application, in which he puts up two main defences: contractual defence and the defence of promissory/proprietary estoppel.

18.In so far as the contractual defence is concerned, the 2^nd Defendant deposed that he has through his companies occupied the Property since 1 May 1992 pursuant to the JV Agreement. Further, he has paid in advance 10 years of monthly fee in total sum of $36,000 to the Plaintiff pursuant to the JV Agreement as varied by the 2005 Agreement. Thus, he should be entitled to stay in the Property until September 2015 (“Contract Defence”).

19.Although his written submission expands much on the Contract Defence, Mr Lau, Counsel for the 2^nd Defendant, tells me orally in this hearing that the 2^nd Defendant no longer relies on the Contract Defence, for he is bound by the statement of claim in the HC Action which pleads that he had accepted the alleged repudiation of the JV Agreement by the Plaintiff and had vacated the Property in June 2011.

20.As such, the 2^nd Defendant would proceed in this hearing only on the defence of promissory estoppel and of proprietary estoppel (collectively “Estoppel Defence”).

21.Mr Lau’s argument, if I understand him correctly, runs like this. The underlying intention or agenda of the JV Agreement (as varied by the 2003 and 2005 Agreements) was for the 2^nd Defendant to take over the Government Tenancy with the assistance of the Plaintiff. The Plaintiff made a promise to help the 2^nd Defendant taking up the Government Tenancy in place of the Plaintiff. However, due to the restriction of non-assigning/sub-letting etc under Clause 2 (g) of the Government Tenancy, they drafted their agreement in the form of a joint venture agreement, but in substance it is a licence agreement.

22.The 2^nd Defendant relied on the assurance/promise of the Plaintiff and suffered 4 forms of detriments, namely:

(1) paying all outstanding rent to the Government as at 1992 in the sum of $135,580.64;

(2) erecting a new 2-storey building on the Property;

(3) providing loans in the sum of $36,000 ad $34,000 respectively to the Plaintiff;

(4) pre-paying 10 years’ licence fee up to September 2015.

23.It is thus unconscionable for the Plaintiff to evict the 2^nd Defendant from the Property; the 2^nd Defendant should be granted continued possession over the Property.  

The Plaintiff’s Arguments

24.The Plaintiff has filed 4 affirmations in support of his application and/or in reply to the 2^nd Defendant’s affirmation.

25.Since Mr Lau concedes that the 2^nd Defendant will not rely on the Contract Defence, I do not propose to expend at length on the Plaintiff’s affirmation evidence or argument relating to this defence. Suffice for me to take note of the Plaintiff’s argument that any factual disputes enunciated from the affirmation evidence have become irrelevant to the Plaintiff’s present application, for the reason that the 2^nd Defendant had already accepted the alleged repudiation of the JV Agreement and vacated the Property as at June 2011. Once the 2^nd Defendant has accepted the alleged repudiation of the JV Agreement, such acceptance cannot be withdrawn (See Chitty on Contract, 13^th edition, vol 1, p1551, para 24-013). The 2^nd Defendant cannot afterwards seek specific performance; all he can do is only to continue with his monetary claim in the HC Action (See Johnson v Agnew [1980] AC 367).

26.On the Estoppel Defence, Mr Chai, Counsel for the Plaintiff, submits to me that the 2^nd Defendant tries to frame the Estoppel Defence based on the very “promise” (that the Plaintiff would assist in the change of tenant/transfer of tenancy) as he relied on in the Contract Defence, and thus the so-called Estoppel Defence is a contractual claim in substance. 

27.Further, it is just a bare assertion of the 2^nd Defendant that the Plaintiff assured him that he was the tenant in all but name only. The 2^nd Defendant fails to give any particulars such as when and where the alleged assurance was made. He also fails to state that he acted to his detriment by relying on the said assurance and to identify what detriment he had suffered in any of his affirmations.

28.Mr Chai goes further to say that even if there ever existed a promise from the Plaintiff as alleged, the Plaintiff is entitled to withdraw his promise on giving reasonable notice, which the Plaintiff had done so as early as January 2011 followed by another notice of June 2011.

Order 113: The Applicable Test

29.It does not seem to me that Counsel for the Plaintiff and for the 2^nd Defendant dispute the applicable test in an Order 113 application, which is very akin to a summary judgment application under Order 14 application.

30.If case of any possible doubt, I would refer to the Court of Appeal decision in Direk Mahadumrongkul v Lau Chun Keung & Ors, CACV 133 of 1998 where Nazareth VP (as he then was) explained on Order 113 as follows:

“ 24. [O. 113] provides a summary procedure which enables the court in a proper case to deal more quickly with a claim for possession than it would otherwise be able to do.

25. In earlier editions of the annual practice it was stated that this summary procedure was intended for uncontested and clear cases. The latter statement has been omitted from the latest two editions. However, that is said to have been the result of the increased material that has had to be included in the White Book rather than because of any authority to the contrary. Certainly, counsel has not been able to find such authority. In that context Godfrey J (as he then was) in Vipac Engineers & Scientists Ltd v Karpovich & anor [1989] 2 HKC 358 at 359H said this:

“I have to say that this goes further than the judgments themselves and somewhat overstates the matter. If the case is a clear one, it cannot matter that the defendant has contested it.  The right test, in my view, is whether the issue between the parties is one which the defendant is entitled to have sent to a trial – whether it be an issue of fact or of law.  If the issue is seen on analysis to be capable of determination in only one way, in favour of the plaintiff, then, as it seems to me, it is proper to the court to exercise the power conferred on it by O. 113 and determine the matter, however vigorous the contest may have been.”

That seems to me to be obviously right and not to be significantly different from the approach under O. 14.” (emphasis added)

31.Therefore, the 2^nd Defendant in this case has to prove to me that the Estoppel Defence is a real and bona fide defence, and that he has raised triable issue(s) that should be determined in a proper trial. If he is able to do so, this court should not grant an order for possession in favour of the Plaintiff and vice versa (See also Hong Kong Civil Procedure 2012, Vol One, p1525 at para 113/8/10).

Whether Real and Bona Fide Defence

32.It is pertinent to note that the Plaintiff is not the registered owner of the Property. However, a licensee with the right to occupy land, whether or not he was in actual occupation, was entitled to bring an action under this Order against a trespasser in order to give effect to the rights under the licence (See Hong Kong Civil Procedure 2012, Vol One, p1524 at para 113/8/7). It is thus clear that the Plaintiff, as a tenant of the Property with the right to occupy the Property under the Government Tenancy, is entitled to take out this application. This does not seem to be disputed by either Counsel.

33.The doctrine of promissory estoppels and proprietary estoppels is well known. Put in a nutshell, both estoppels are based on 3 main elements of (1) a promise or assurance made to the claimant; (2) reliance on it by the claimant; and (3) detriment to the claimant  in  consequence of his reliance.

34.Since both estoppels entail the same 3 main elements, I think that is the reason why Mr Lau says that he draws no difference between the said two estoppels in this hearing.

35.As a starting point, I should note (which is rightly pointed out by Mr Chai) that the Estoppel Defence of the 2^nd Defendant is not premised on a domestic or friendship setting (where proprietary estoppel is often invoked). According to the 2^nd Defendant, he did not know the Plaintiff until about 1992 through the introduction by the Plaintiff’s wife. The relationship between the Plaintiff and the 2^nd Defendant, in my view, must be in the commercial context.  It goes without saying that there is difference in expectation in the commercial context from the domestic/family context. In the commercial context, the claimant is typically a business person with access to legal advice and what he or she is expecting to get is a contract. In the domestic or family context, the typical claimant is not a business person and is not receiving legal advice.  As a general principle, the court should be very slow to introduce uncertainty into commercial transaction by over-ready use of equitable concepts (See Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752.

36.Mr Lau submits that there is triable issue as to what “promise” the Plaintiff had made to the 2^nd Defendant. It seems to me clear, by reading his affidavits, that the 2^nd Defendant’s assertion remains always that the “promise” made by the Plaintiff was to help him for applying to change the Government Tenancy into his name. However, in order to establish promissory estoppel, the 2^nd Defendant must show that the Plaintiff had made a clear and unequivocal promise or assurance that the Plaintiff’s strict legal rights would not be enforced (See Snell’s Equity, 32th edition pp371-372).  Even on the 2^nd Defendant’s own case, a “promise to help” is a sea difference from a promise that a person’s strict legal right would not be enforced. As such and with respect to Mr Lau, I cannot see that there is any real triable issue concerning the element of “promise” under the Estoppel Defence.

37.If my analysis in the preceding para was wrong, I then say that the “promise to help” in the context of the Estoppel Defence is actually a repetition of the alleged contractual duty of the Plaintiff under, at the very least, the 2005 Agreement which was, however, terminated upon the acceptance by the 2^nd Defendant of the alleged repudiation committed by the Plaintiff. That said, I agree with Mr Chai that the Estoppel Defence is in substance a contractual defence but disguised as an estoppel defence. It is thus not a real and bona fide defence. It is purportedly put up by the 2^nd Defendant in the hope to get around the hurdle of non-withdrawal of acceptance and inapplicability of specific performance as a relief under the Contract Defence (which the 2^nd Defendant no longer relies on).

38.Another reason why I say the Estoppel Defence is a sham defence is that the 2^nd Defendant had unequivocally acted in such a way which was inconsistent with his own case on the Estoppel Defence or alleged equity right in the Property. For example, he had vacated the Property upon the 27/6/2011 Letter; he had not paid rent to the Government since 13 July 2011; he has claimed loss of use of the Property until September 2015 in the HC Action.

39.Further, it is settled law that a promissor would usually be entitled to withdraw the promise on giving reasonable notice; the promise will only become final and irrevocable if the promisee cannot resume his or her former position: Snell’s Equity, 32th edition, pp381-382.  Simply put, even if there ever existed a valid promise, the Plaintiff had by way of the 30/1/2011 Letter notified the 2^nd Defendant of the withdrawal of such notice; if not, the Plaintiff must have by way of the 27/6/2011 Letter notified the withdrawal of the promise and it is undeniable that the 2^nd Defendant had acted upon this letter and vacated the Property in June 2011.

40.Mr Lau tried to argue that the 2^nd Defendant vacated the Property in June 2011 for a transient period of time only and that the “break” in possession is so irrelevant and insignificant that the 2^nd Defendant could not be regarded as giving up his equity right in the Property. With respect, I cannot agree with Mr Lau. I take the view that what matters here is not the duration of departing with the possession of the Property, but whether such departing with the possession of the Property amounts to an unequivocal act of the same. The 2^nd Defendant has clearly demonstrated unequivocally that he intended to depart with the possession of the Property and he also acted to that effect by for example stopping payment of the rent to the Government, or by pleading expressly in the statement of claim as verified by a statement of truth that he vacated the Property and claimed for loss of use of the Property up to September 2015 in the HC Action.

41.As such, any attempted re-entry into the Property by the 2^nd Defendant after June 2011 without the Plaintiff’s prior knowledge or consent was unsupported by any contractual right or right under any estoppels. In this sense, the 2^nd Defendant is a trespasser to the Property after June 2011.

42.Mr Lau has made submission that if this court should grant an order for possession, the Plaintiff would be allowed to take the unjust benefit of the 2-storey building that was erected by the 2^nd Defendant on the Property. I would simply say (and Mr Lau also agrees) that the 2^nd Defendant can always amend his statement of claim in the HC Action to include or update all the losses allegedly suffered by him as a result of the alleged breach of the JV Agreement (as varied) by the Plaintiff.

43.Due to the matters set out above, I am of the view that the 2^nd Defendant’s Estoppel Defence is not a real and bona fide defence. There is no real triable issue in the Estoppel Defence raised by the 2^nd Defendant. The Plaintiff should be allowed to recover possession of the Property.

Conclusion

44.For the aforesaid reasons, I grant an order in terms of the originating summons of the Plaintiff and dismiss the 2^nd Defendant’s summons to transfer this action to the Court of First Instance.

45.Costs should follow the event. I thus make a costs order nisi that the Plaintiff should have costs of this action, with certificate for Counsel, to be taxed if not agreed. If there is no application to vary the said costs order nisi, it will become absolute within 14 days from the date of this judgment.

Mr Michael Chai and Mr Kelvin Liu instructed by Messrs Ong & Chung for the Plaintiff

The 1^st Defendant was not represented and did not appear

Mr Raymond Lau instructed by Messrs K Y Leung & Carina Chen for the 2^nd Defendant

[1] The Plaintiff alleges that the 2003 Agreement was signed by him under mistake or false representation of the 2^nd Defendant.

[2] The Plaintiff alleges that the 2005 Agreement was signed by him under mistake or false representation of the 2^nd Defendant.

Please refer to HCMP1311/2012 for the relevant appeal(s) to the Court of Appeal.