THE INCORPORATED OWNERS OF KAM LUK BUILDING v. POON MUI SANG AND OTHERS

DCCJ 1649/2016

[2018] HKDC 1493

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1649 OF 2016

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JUDGMENT

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INTRODUCTION

1.  This is a claim brought by the plaintiff (“P”) to evict the occupants from some common areas underneath the staircases of an old commercial/residential building in Kwai Chung, New Territories.

2.  P’s case against the 2^nd and 3^rd defendants had been discontinued some time ago.  Further, no person fitting the description of the 5^th defendant has ever joined as a party to the proceedings. Hence, the only defendants left in the proceedings by the time of the trial are the 1^st and 4^th defendants (“D1” & “D4” respectively and “Ds” collectively).

3.  D1 and D4 claim adverse possession against P and say that by virtue of their adverse possession to the staircases, they should be declared as the lawful owners of those areas. Alternatively, they claim P, together with its predecessors, has waived or acquiesced their presence after putting up with the situation for over 40 years. Hence, it is now debarred from doing so.

BACKGROUND

4.  P is the Incorporated Owners of Kam Luk Building which is situated at 61-83 Shek Yam Road, Kwai Chung, New Territories (“the Building”). 

5.  D1 was the registered owner of Flat 6A on 2/F of the Building from 1973 to June 2016.  He assigned the unit to his daughter shortly after the writ in these proceedings was issued in April 2016. 

6.  D4 is the son of the registered owners of Flat 2A on 2/F who had owned the unit from 1973 to 2006.  His father had been the co-owner of the unit (together with D4’s mother) since 1973 until his death in 1993.  His mother then became the sole registered owner until 2006 when she sold the property to a third unrelated party. 

7.  P’s case is that the area under the staircases on the ground floor are common parts under the Deed of Mutual Covenants (“DMC”) and/or by virtue of section 2 and Schedule 1 of the Building Management Ordinance, Cap 344 (“BMO”). Since 2010 at the latest, P says that D1 and D4 have trespassed on those common parts by fencing off and operated 2 different shops under those staircases.

8.  D1 and D4 admitted that they or their families have occupied the areas underneath the staircases respectively at Nos 75 and 81 (“Staircase 75” and “Staircase 81” respectively or “Staircases” collectively) on the ground floor of the Buildingsince or around 1973. The Staircases had first been used by the families to operate different businesses, namely, Staircase 75 by D1 for selling fruits and Staircase 81 by D4’s parents in running a photography shop. Then they were rented out to other parties respectively by D1 and D4’s parents (and later by D4).  Their defence is that: (a) their family have adversely possessed those areas and/or (b) P’s alleged inaction amounted to wavier or acquiescence.  D1 & D4 further raise a counterclaim in adverse possession. 

9.  P’s primary case against D1 & D4 is that the DMC (“DMC”) of the Building provides, inter alia, that no party shall use the common staircases for the purpose of placing or storing anything thereon or therein: See clauses 12 & 13 of the DMC. Further, it says that the DMC is binding on persons claiming through, under or in trust for a co-owner, and has effect on the tenants and licensees of a party: See, for example, the preamble, clauses 2 and 24 of the DMC.

10.  Further or in the alternative, P claims that the conversion of the common parts of the Building is prohibited by section 34I of the BMO.

DISCUSSION

A. Issues in dispute

11.  The issues that this court will have to resolve in this case will include:

(a)   whether D1 and D4 have been in exclusive possession of Staircase 75 and Staircase 81 for a period exceeding 12 or 20 years before the commencement of this action, and by so doing have acquired a possessory title thereto by way of adverse possession;

(b)   whether the alleged inaction on the part of P amounts to waiver and acquiescence;

(c)   whether P is debarred from seeking vacant possession of Staircase 75 and Staircase 81 by virtue of the provisions of the Limitation Ordinance, Cap 347 (“LO”); and

(d)   in the event that D1 and/or D4 fails in their defence, whether P is entitled to recover mense profits and other damages from them; if so, how much.

B. Witnesses called at trial

12.  Insofar as oral evidence is concerned, the following witnesses have been called to give evidence at trial:

(a)   On P’s side: Mr Fung Chi Ching (“Fung”), PW1, the property manager of the company appointed by the Incorporated Owners which manages the Building; 

(b)   On Ds’ side:

(i)   D1, who is DW1 at the trial and who claims to have occupied and possessed Staircase 75 since 1973;

(ii)   Tsoi Chi Shing (蔡志成), DW2, D1’s relative who has resided in the Building;

(iii)   Tsang Hing Biu (曾慶標), DW3, a friend of D1;

(iv)   Lam Tak Ming (林達明), DW4, a friend of D1 who has resided in the Building;

(v)   Poon Mui Kin (潘梅堅), DW5, D1’s elder brother who has resided in the Building;

(vi)   Wong Shun Hing (黃順興), DW6, wife of DW5 who has also resided in the Building;

(vii)   D4, DW7, who allegedly has occupied and managed Staircase 81 since 2000;

(viii)   Lo Yee Kay (勞漪淇), DW8, (“Madam Lo”) who is the mother of D4 and registered owner of Flat 2A of the Building between 31 May 2001 and 8 August 2006;

(ix)   Ng Kwai Ying (吳桂英), DW9, who is D4’s aunt;

(x)   Lo Cheung Chung (勞肇沖), DW10, who is D4’s cousin; and

(xi)   Lam Kwok Wah (林幗華), DW11, the aunt of D4. 

C. Legal Principles Involved

C.1 Adverse possession: basic principles

13.  The basic principles in relation to adverse possession itself are trite and in any event they are not seriously in dispute amongst the parties in this case. 

14.  The essential elements of adverse possession can be briefly stated as follows:

(a)   A person claiming to be in adverse possession must be shown to have both possession and the requisite intention to possess, namely the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner: Wong Tak Yue v Kung Kwok Wai David & Another (1997-98) 1 HKCFAR 55 at 68E-J;

(b)   Adverse possession is possession “as of wrong”: Wong Tak Yue, supra at 68H, 69F; Kung Wong Sau Hin & Another v Sze To Chun Keung & Another [1997] 1 WLR 1232 at 1235; Cheermark Investment Ltd v The Director of Lands (LDLR 2/2013; 3 November 2015) §§90-91; and 

(c)   Where the occupier has made self-serving statements as to what was his intention, whether during the period of occupation or when challenged in legal proceedings, the courts should approach them with some skepticism.  Conversely, where the occupier has made statements as to what was his intention and such statements are against his interest, the courts would usually accord to them considerable weight: Wong Tak Yue, supra at 69B-C.

15.  The legal principles on what it takes to establish a claim on adverse possession have been succinctly summarized by Cheung JA in Yu Kit Chiu & Another v Chan Shek Woo(陳錫湖), unreported, CACV 137/2010 (Cheung, Yuen JJA and Fung J; 18.2.2011), at §§15-22 as follows:

“Principles

15. A person claiming to be in adverse possession must be shown to have both factual possession and the requisite intention to possess animus possidendi. This requirement has been authoritatively affirmed by the Court of Final Appeal in Wong Tak Yue v. Kung Kwok Wai & Another (No. 2) (1997-1998) 1 HKCFAR 55, which approved the principles enunciated by Slade J in Powell v McFarlane (1979) 38 P & CR 452 and adopted in the subsequent line of cases such as R v. Secretary of State for the Environemnt ex p Davies (1990) 61 P & CR 487, Buckinghamshire County Council v. Moran [1990] Ch. 623.

16. The intention to possess involves the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as is reasonably practicable and so far as the process of law will allow (per Slade J in Powell at pp 471-472). The question of intention to possess is one of facts;

17. In The Incorporated Owners of San Po Kong Mansion v. Shine Empire Limited (2007) 10 HKCFAR 588 the Court of Final Appeal, per Nazareth NPJ, stated that

‘7.    The principles for the application of ss. 7(2), s.17 and the associated provisions of the Limitation Ordinance are well settled.  They were formulated and set out by Slade J in Powell v. McFarlane [1977] 38 P & CR 452, approved by the House of Lords in JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419, and adopted by this Court in Wong Tak Yue v. Kung Kwok Wai (1997-98) 1 HKCFAR 55.”

House of Lords’ decision

18.   In J A Pye (Oxford) Ltd and another v Graham and another [2003] 1 AC 419, the House of Lords affirmed the principles stated by Slade J in Powell.  Lord Browne-Wilkinson at paragraphs 32 to 38 referred to the history of the English Limitation Act (upon which the Hong Kong Limitation Ordinance is based) and discussed the confusion in this area of the law.  He held the problem was caused by the concept of ‘non-adverse possession’ engrafted by the common law and equity onto the early limitation statutes.  He held at paragraph 36, that

‘36 Many of the difficulties with these sections which I will have to consider are due to a conscious or subconscious feeling that in order for a squatter to gain title by lapse of time he has to act adversely to the paper title owner. It is said that he has to “oust” the true owner in order to dispossess him; that he has to intend to exclude the whole world including the true owner; that the squatter’s use of the land has to be inconsistent with any present or future use by the true owner. In my judgment much confusion and complication would be avoided if reference to adverse possession were to be avoided so far as possible and effect given to the clear words of the Acts. The question is simply whether the defendant squatter has dispossessed the paper owner by going into ordinary possession of the land for the requisite period without the consent of the owner.’

19.   He continued to state at paragraph 37 that

‘The taking or continuation of possession by a squatter with the actual consent of the paper title owner does not constitute dispossession or possession by the squatter for the purposes of the Act.’

   and

‘there will be a “dispossession” of the paper owner in any case where (there being no discontinuance of possession by the paper owner) a squatter assumes possession in the ordinary sense of the word. Except in the case of joint possessors, possession is single and exclusive. Therefore if the squatter is in possession the paper owner cannot be. If the paper owner was at one stage in possession of the land but the squatter’s subsequent occupation of it in law constitutes possession the squatter must have “dispossessed” the true owner for the purposes of [our section 8(1)] [paragraph 38].’

20.   Referring to paragraph 8(1) of Schedule 1 of 1980 Limitation Act [our section 13(1)], Lord Browne-Wilkinson held that the reference to adverse possession in that paragraph is directed not to the nature of the possession but to the capacity of the squatter [paragraph 35].

21.   The only matter that Lord Browne-Wilkinson said Slade J had erred was his reference in pages 476 and 478 to the necessary intention as being an ‘intention to own’.  Lord Brown-Wilkinson held that

‘Once it is accepted that in the Limitation Acts, the word “possession” has its ordinary meaning (being the same as in the law of trespass or conversion) it is clear that, at any given moment, the only relevant question is whether the person in factual possession also has an intention to possess: if a stranger enters on to land occupied by a squatter, the entry is a trespass against the possession of the squatter whether or not the squatter has any long term intention to acquire a title. [paragraph 42].

22.   Other than that, Lord Browne-Wilkinson expressly affirmed as correct Slade J’s formulation of the ‘intention to possess’ stated earlier at paragraph 15 of this judgment.”

16.  Payment of the property’s utility fees and government rates are factors that the court can take into account to find adverse possession in favour of a squatter: Bring All Ltd v Choi Wah, unreported, HCA 2347/2009 (Sakhrani J; 9.9.2010) at §11; Kam Wai Tim v The Estate of Chow Miu Kwai, Deceased, unreported, DCMP 2583/2009 (HHJ Chow; 4.11.2010) at §2.

17.  It is also trite that the adverse possessor needs not personally be in physical possession of the land in question.  He can acquire an adverse possessory title to the land by leasing out the land and through occupation by his licensee or his tenant, which is an exercise of an act of ownership by the possessor and inconsistent with the title of the paper owner: Cheung Yat Fuk v Tang Tak Hong & Others (2004) 7 HKCFAR 70 at pp 77D-78E, per Bokhary PJ, §§16-20.

C.2 Adverse possession by co-owners or their licensees

18.  However, when it comes to adverse possession by co-owners or their licensees, the parties’ understanding regarding the law and its application differs greatly.  I think it is important for me to set out their arguments in full here.

19.  P has pleaded, inter alia, that the alleged possession was consented by D1 and D4’s parents in their capacity as co-owners of the Building and therefore was not adverse to P.[1]

20.  Mr Tom Ng, counsel for P, submits that, as a matter of law, it appears that a co-owner simply cannot adversely possess the common area.  He based his arguments on the following:

(a)   In The Incorporated Owners of Chungking Mansions v Shamdasani [1991] 2 HKC 342, the court observed that “the law cannot assume one to act adversely to one's own interest.  Thus, consent, in his capacity as P.W.2’s predecessor in title, must necessarily be implied to the breach of the covenant and the ouster by himself, as predecessor in title of the defendant” (at 355G);

(b)   This conclusion is purportedly supported by the recent decision of Cheermark Investment Ltd v The Director of Lands, unrep, LDLR 2/2013 (Deputy Judge Tracy Chan; 3.11.2015), where the Lands Tribunal held that “on a proper interpretation of the s 34I, it is clear that a co-owner is unable, without contravening the provision, to claim that he had obtained an interest in the common parts to the exclusion of other co-owners.  We therefore dismiss the applicant’s claim made under adverse possession” (at §97);

(c)   Likewise, in The Incorporated Owners of Lux Theatre Building v Fung Chi Hung & Another,unrep,LDBM 86/2001 (Deputy Judge Michael Wong (as he then was); 11.10.2001), it was held that “業權擁有人不能以另外一個身分去逆權管有他與其他業權擁有人所共同擁有的物業” (at §15).  It is claimed by P that this proposition of law was accepted and applied by another judge in the Land Tribunal in 梁文光 對 地政總署署長 unrep, LDLR 6/2012 (HH Judge Ko; 16 August 2013) at §§38-41;

(d)   P further submits that the same principle was applied in The Pun Tak Land Investment & Agency Co Ltd v The Incorporated Owners of Lok Kwan House, unrep, DCCJ 433/2002 (HH Judge HC Wong; 29 March 2004) at §§40-41 where the learned judge stated that:

“40. Mr. Chow submitted that the Plaintiff has an interest in the undivided share of the common parts, and as a co-owner of the common parts could not be in adverse possession against itself.

41. It is certainly illogical and defies common reasoning for anyone to be able to obtain a possessory title against oneself”;

(e) This proposition is allegedly further supported by practitioners/academic texts:

(i) As stated in Hong Kong Conveyancing Law & Practice, (Judith Sihombing & Michael Wilkinson 2017) at [179] V133I: “(I)t would appear that one co-owner of shares in a multi-storey building cannot obtain a possessory title against the other co-owners over the common parts of the building”;

(ii) This is echoed by Malcolm Merry, Building Management in Hong Kong (3^rd edn, 2016), at §7.85: “Adverse possession is ‘possession as of wrong’. Hence a person in lawful possession of land, for example under a lease or a licence granted by the lawful owner, cannot acquire title by adverse possession. The law cannot assume that a person would act adversely to his own interests, or in his own home. For this reason one tenant-in-common cannot adversely possess the common areas of a building of which he is a co-owner. He occupies common parts by virtue of his joint ownership and must be taken to have consented to his use of them”;

(iii) Likewise, Professors Alice Lee and Say Goo take the same view in Land Law in Hong Kong (4^th edn, 2015), at §6.80: “if the claimant himself is also a tenant in common in occupation, he cannot claim adverse possession against the other tenants in common (including himself in that capacity) in his capacity as adverse possessor because his occupation must have been consented to by himself in his capacity as a tenant in common”; and

(iv) However, the Law Reform Commission, relying on Incorporated Owners of Chungking Mansions v Shamdasani, stated in its Report on Adverse Possession (October 2014) that: “it seems that co-owners in a multi-storey building can claim adverse possession in respect of the common areas. Academics, however, have a different opinion” (at §6.13); and

21.  Mr Adrian Leung, counsel for D1 and D4, takes issue with P on this matter.  He submits that the law in relation to adverse possession of the common area of a building has been recently clarified by the Court of Appeal (“CA”) in Wong King Lim v The Incorporated Owners of Peony House [2013] 4 HKC 295 (“Wong King Lim”).  He submits that the starting point is that, as Yuen JA held at §§14-15.2 in that case, the law did not adopt a position that “so long as the subject property had been designated a common part, there could not be adverse possession at all, whether by a co-owner or a stranger to the DMC.”

22.  Mr Leung further submits that Wong King Lim is binding on this court and therefore it must be followed.  He further submits that the decision has been hailed as “an important decision” by DHCJ Sakhrani who has followed and applied Wong King Lim in the recent case of Yeung Mau Cheung v The Incorporated Owners of Ka Ming Court, Castle Peak Road [2013] 4 HKLRD 211: see §42 (“Yeung Mau Cheung”).

23.  Mr Leung on behalf of D1 and D4 also submits that Yeung Mau Cheung is of particular relevance to the present case because:

(a)   Similar to the present case, that case before DHCJ Sakhrani also concerned an adverse possession claim to a “staircase shop/space” on the ground floor of a building: see §20.

(b)   DHCJ Sakhrani dealt with comprehensively at §§40-59 the line of authorities including Man Hong Apartments and Chatham Road now relied upon heavily by P in its opening submissions at §§11-12 and P’s list of authorities items 12-14.

(c)   DHCJ Sakhrani distinguished the aforesaid line of authorities relied heavily by P on the ground that unlike the previous cases, all the squatters in that case were never co-owners of the building.  They had never covenanted to use the common part, namely, the suit portions in common with the other owners of the building: §§47-50.

24.  In Yeung Mau Cheung, DHCJ Sakhrani relied heavily on the judgments of Yuen JA and Lam JA in Wong King Lim and considered that it was an authority binding on him.  He specifically ruled that the case of The Incorporated Owners of Man Hong Apartments v Kwong Yuk Ching & Another, Incorporated Owners of No 27A Chatham Road, Kowloon v Lee Kai Kong and The Incorporated Owners of Mountain View Mansion v Heart Cuisine & Others are distinguishable and in fact had been distinguished in Wong King Lim: see §§53-59.

25.  In light of Wong King Lim, which is binding on this court, it is submitted by D1 & D4 that there is no rule in preventing Staircases 75 and 81, despite forming the common parts of the Building, from being adversely possessed by D1 and D4.

C.3 Findings on co-owners and their licencees

26.  I accept Mr Leung’s submissions made on behalf of D1 & D4 above that, in the light of Wong King Lim, as applied in Yeung Mau Cheung, as a matter of law, there is now no rule preventing a common part of a building (in this case Staircases 75 & 81 of the Building) from being adversely possessed by a co-owner or a stranger.

27.  In this regard, I reject Mr Ng’s submission that a co-owner cannot adversely possess the common area.  With respect, the older and/or the lower courts’ authorities cited by him in his submissions must now be seen in the light of the CA’s decision in Wong King Lim as applied in the Court of First Instance (“CFI”) in Yeung Mau Cheung.  In this respect, I also agree with the Law Reform Commission’s report that, despite some academics may hold a different opinion on this, it seems there is no reason why a co-owner in a multi-storey building cannot, as a matter of law, claim adverse possession in respect of the common areas.

28.  The important question in each case, however, is whether, as a matter of fact, the disputed land or premises had been so adversely possessed by the occupants.  In this particular case: whether the Staircases had been occupied by D1 & D4 respectively for over 12 or 20 years.

29.  In respect of D4’s case where D4 tries to argue that the adverse possession was conducted by himself “and/or his family”[2], including his parents who were previously co-owners of the Building,  D4 submits that D4’s occupation was with the consent of his parents, ie the registered co-owners. I find there is no evidence to suggest that D4 was adversely possessing his parents’ land.  In the circumstances, the fact that D4 was an occupier with the consent of a co-owner, rather than a co-owner himself, in my view, is immaterial in deciding whether D4 is entitled to claim adverse possession. I reject such argument of D4 as it is clear that adverse possession has to be done by D4 himself and not through the consent and/or conduct on behalf of his parents.

D. Findings of fact

D.1 The disputed and undisputed facts

30.  The factual and physical possession of the Staircases by D1 and D4 and/or their respective family since 1973 until today is largely not disputed by P.

31.  What is however in dispute is whether the occupied areas, namely, Staircase 75 and Staircase 81 are common areas by virtue of Section 2 and Schedule 1 of the BMO. 

32.  What is also in dispute is whether D1 and D4 personally had exclusive possession of the Staircases from or about 1973 onwards.  If not, when did their exclusive possession began and whether they can now say that they have adversely possessed against the owners of the areas for the periods specified under the LO. 

D.2 In respect of P’s case

33.  At the trial, P did not adduce any evidence to dispute D1 and D4’s occupation of the Staircases.  In fact, P has only called its property manager Fung to give evidence.  As Fung has only joined the company in 2011 and began to manage the Building from that date onwards, he naturally has no direct personal knowledge of any matters concerning the Building before that time.

34.  Under cross-examination, Fung confirmed that before he was employed by P and began managing the Building on 1 March 2011, (i) he did not have any direct knowledge of any matters relating to the Building and the Staircase; and (ii) he had never been to the Building or visited the Staircases prior to that date.  

35.  Thus, I find Fung’s evidence does not add or deduct anything material to Ds’ case.  At best, his evidence is neutral.  At the end of the day, it is my findings on the evidence of Ds’ witnesses that matter the most in this case. 

D.3 In respect of Staircase 75 allegedly occupied by D1

36.  D1 and his witnesses gave evidence on the following matters at trial which is not disputed or disputable by P.

37.  In respect of Staircase 75, D1 began his exclusive occupation in May 1973 by setting up a fruit store by the name of ‘Chun Chun Fruit Shop’ (「珍珍時果」) (“the Fruit Store”).  D1 operated the Fruit Store at Staircase 75 until 1997. 

38.  Although there are some discrepancies in his accounts, I find it was Mr Wu Bing (“Wu Bing”), the original owner/developer of the Building who had given consent to his father, in the presence of D1, to make use of Staircase 75.  Eventhough the “promise” might not have given to D1 directly, in my judgment, this has little bearing on D1’s adverse claim to the premises as it is clear from the evidence that D1 himself has been in continuous occupation and/or possession of the premises since or about 1973 onwards. Further, in my view, although Wu Bing or his company might have been the original owner/developer of the Building, he or his company did not exclusively “own” the common parts of the Building, including the Staircase as, the other units of the Building had been sold to individual owners already. Thus, his “consent” or “promise” would not make D1’s occupation of Staircase 75 become “right” or lawful.

39.  In his capacity as the occupier of Staircase 75 and the owner of the Fruit Store, I find D1 had:

(a)   obtained and paid for the business registration certificates for Staircase 75 from 1975 to 1997 as shown by copies of the BR certificates;

(b)   paid for property tax of Staircase 75 as shown by the notices of assessment and demand since early 1977;

(c)   paid for rates of Staircase 75 as demonstrated by the demands for rates from the Treasury from 1977 to 2015;

(d)   paid for the electricity charges of Staircase 75 as shown by the electricity bills over the years.  In fact, China Light & Power has installed a separate electrical meter for Staircase 75; and

(e)   enclosed the Staircase Shop 75 by erecting a metal gate and a roller shutter in late 1970s. 

40.  I also find as a fact that after D1 had ceased to operate the Fruit Store in 1997:

(a)   Between 1997 and 2016, D1 leased Staircase 75 to one Law Hoi Pang (“Law”). This is supported by the tenancy agreements and rental receipts produced by D1 at trial.  Law had operated a CD shop at Staircase 75 until around mid-2016; and

(b)   From mid-2016 onwards, D1 placed Staircase 75 in the open market for short-term leases for around $300 per day.  Hence, D1 earned around $10,000 per month from renting out Staircase 75 on such short leases.

41.  I also find that during the above periods of exclusive possession by D1 of Staircase 75, D1 had never paid any rent or licence fees to P or its predecessor.  Nor had P or its predecessor claimed or interrupted the possession of D1.

42.  In fact, it is not in dispute that there are two other staircase shops in the Building with a similar set-up as that of D1 and D4’s:-

(a)   Staircase 63: originally a shop for photography and recently also rented out under short term leases; and

(b)   Staircase 69: a shop selling clothes.

43.  Further, D1’s evidence in respect of the exclusive possession of Staircase 75 is at least corroborated by 5 other witnesses, namely, DW2 to DW6.  Although I have warned myself that their evidence must be treated with caution as they are all either relatives or old family friends/neighbours of D1 or his family, I find they are largely credible witnesses who have tried their best to recall events from the past, some of them rather long time ago. I accept their evidence that D1 personally has been in continuous occupation of Staircase 75 since or about 1973. 

D.4 In respect of Staircase 81 allegedly occupied by D4

44.  In respect of Staircase 81, since or around May 1973, D4’s parents began their exclusive occupation of the same by setting up a photography shop by the name of ‘Mei Fa’ (「美化照相店」) (“the Photography Shop”).  They did so by erecting a metal gate and a roller shutter surrounding the area underneath the Staircase at No 81.  They operated the Photography Shop at Staircase 81 until around 1990.  Thereafter, D4’s family leased out Staircase 81 to different parties to the present date.  It is not disputed that D4 has never been a registered owner of any unit in the Building.

45.  The Photography Shop ceased to operate in or around 1990 and thereafter allegedly:

(a)   Between 1990 and 1997, D4’s parents, ie his father (before he passed away in December 1993) and his mother (after his father passed away) leased Staircase 81 to a tenant who sold clothing for HK$5,000 per month;

(b)   From around 1997 or 1998, his mother leased Staircase 81 to Law to run a CD shop;

(c)   In or around 1999/2000, D4 returned to reside in Hong Kong from the UK and allegedly took charge of the running of Staircase 81; and

(d)   On 12 June 2016, Law terminated the lease of Staircase 81 with D4.

46.  Thus, judging from the above, it can hardly be disputed that D4’s parents had exclusive and physical possession of Staircase 81 since the early 1970s.  However, what is not clear in my view is when did D4 first come into possession of Staircase 81 himself in light of the following evidence:

(a)   The ‘Demands for Rates’ produced at trial show that D4 has been paying the rates for Staircase 81 since January 2003 until today but not before.  This strongly suggests that most likely it was either Ho Senior or Madam Lo who had been paying the rates before that date.  In this regard, I do not accept D4’s explanation given in court that the rate demands had been changed to his name since 2000 but he could not locate copies of them.  As D4 was able to produce the complete set of rate demands record between January 2003 and March 2016, it is in my view difficult to imagine that not a single copy of the rate demands could be found for the period between 2000 and 2003 to support his case;

(b)   A receipt dated 25 May 2004 to the tenant was issued in the printed stationery under the letter head of D4’s father, namely, ‘Man Fai Ho’ and not D4;

(c)   A document showing Madam Lo had agreed with the then tenant of Staircase 81 to share the costs of erecting an awning in front of the shop on 1 June 2000.  However, D4, who asserted that he had started to manage Staircase 81 since 2000, was not a signatory to that agreement;

(d)   The only 2 electricity bills produced, which were dated 22 December 2016 and 19 January 2017 respectively was not in the name of D4 but one ‘Lau Kwun Tang’, which presumably was the name of the tenant;

(e)   The tenancy agreement with the tenant Law dated 29 March 2000 was signed by D4’s mother Madam Lo in her capacity as “landlord” of Staircase 81 but not D4;

(f)   The earliest tenancy agreement which D4’s name appeared (alongside with that of Madam Lo) in the capacity as “landlord” was dated 31 March 2004 but not before; and

(g)   the first tenancy agreement signed in the sole name of D4 as “landlord” was dated 1 April 2006 which is consistent with what D4 and Madam Lo have stated in their witness statements regarding when D4 first took over possession and management of Staircase 81.  

47.  In my judgment, what is significant to note in D4’s case are the following indisputable facts.  D4 was born in 1963.  Thus, he was only a child/teenager when he and his family was living in the Building from 1973 to 1980.  Thus, at best, he was a licensee of his father who was then the registered owner of the unit that the family was living in.  D4 went to study in the UK in 1980 and lived and worked there until 1999 when he returned to reside in Hong Kong.

48.  Following the death of D4’s father in December 1993, it is apparent from the documentary evidence that Madam Lo took over the management of Staircase 81 herself and not D4 as he has only returned to live in Hong Kong in 1999 only. 

49.  According to D4’s witness statement dated 9 March 2017 filed in this case, his mother “handled with the matter (sic) relating to Staircase Shop 81 until about 2006 when she decided that she was getting too old and no longer had the capacity to deal with and handle the same.”[3] He also confirmed in the same witness statement that: “… from 2006 onwards, I took over from my mother and became in charge of managing and collecting rents on behalf of my family in respect of Staircase shop 81.”[4]  [emphasis added]

50.  In other words, at least according to his own witness statement, which was verified by a statement of truth signed by D4 at the end, D4 did not occupy or manage the shop from 1980 to 2006.  Instead, the shop was occupied and managed by a registered co-owner of the Building, namely, first by his father and then by his mother.

51.  It is very significant to note that when D4 gave evidence in the witness box, he has completely changed his case and disowned his own witness statement in this aspect. For the first time in this case, D4 mentioned that he has started managing Staircase 81 in 2000, ie shortly after his return to live in Hong Kong from the UK, rather than in 2006 which was stated in his witness statement. 

52.  I have no hesitation to reject D4’s evidence on this matter for the following reasons:

(a)   D4’s alleged occupation or managing of Staircase from 2000 onwards is not a matter which was pleaded by D4 in his defence, this is despite of the fact that he has had at least 2 opportunities to amend the pleadings, first in April 2017 and then in September 2017;

(b)   It could not be an oversight or simply a typographical error in the witness statement as claimed by D4 in the witness box as the year 2006 was mentioned at least twice in his witness statement with detailed reasons given;

(c)   I note that the witness statement was verified by a statement of truth signed by D4 himself;

(d)   Under cross-examination, D4 explained that he had discovered the error in October 2017, namely, a few weeks prior to the trial.  Yet, no attempt had been made for a supplemental witness statement to be filed to rectify such a crucial matter nor was there any notice given by his solicitors to inform the other side or the court that such major change of his evidence would be forthcoming; and

(e)   This important piece of evidence was corroborated by D4’s mother, Madam Lo, in her witness statement dated 20 March 2017 when she stated quite clearly that “from 1990 until around 2006”, all the management of Staircase 81, including all matters in relation to the tenancy and collection of rent, was handled by her (「自1990直到約於2006，該81號地下舖的租約事宜包括租戶租金收取都是由本人跟進。」).  [emphasis added].  She claims that it was only afterwards that D4 took over the management of the shop from her.[5]  I note that Madam Lo also tried to belatedly change her evidence on this crucial matter in the witness box.  This is clearly not believable.  I would prefer and find what she had originally stated in her witness statement dated 20 March 2017, which was again verified by a statement of truth, to be the truth on this matter.  

53.  Hence, on this critical issue, I accept the submission of Mr Ng, counsel for P, that, D4 had only started to occupy and manage Staircase 81 from 2006 onwards and not in 2000 as asserted by him in the witness box.  In my judgment, even if D4 did manage the shop from 2000 to 2006, it was done on behalf of his mother only.  I find as a fact that he did not do so on his own, least of occupying or in possession of Staircase 81 by himself.

54.  D4’s other witnesses, namely, Lam Kwok Wah (林幗華) (DW11), Ng Kwai Ying (吳桂英) (DW9) and Lo Siu Chung (勞肇沖) (DW10) although in their evidence confirmed the factual possession of Ho Senior, Madam Lo and D4 of Staircase 81 over the years, their evidence in my view has to be taken with extreme caution as they are all relatives and/or old neighbours of D4’s family and could only state what they could observe as an “outsider” over the years.  I find some of the matters stated in their witness statements are clearly factually incorrect.  For example, they say that they had regularly visited D4’s family in the Building until they moved out their unit in 2006. In fact, D4’s family had already moved out of their unit to live in an apartment on Prince Edward Road as early as in 1976. I reject their evidence.

55.  As a matter of law, where the occupier has made self-serving statement as to his intention, the courts should approach them with skepticism.  The courts would scrutinize the circumstances in which they were made and would give them such weight, if any, as they may deserve.  Conversely, where the occupier has made statements as to what was his intention and such statements are against his interest, the courts would usually accord to them considerable weight: See Wong Tak Yu, supra, at 69B-C.

56.  In view of the self-serving nature of the evidence given by D4 and his witnesses on the timing of his occupation and, in particular, of what both D4 and his mother Madam Lo had originally stated regarding the time of D4 in taking over the management and occupation of Staircase 81 in their witness statements, I find as a fact that D4 has only taken over the possession and management of Staircase 81 from 2006 onwards as stated in his witness statement and not from 2000 after his return to live in Hong Kong from the UK as asserted by him and his mother for the first time in the witness box. 

57.  In the aforesaid circumstances, I find as a fact that D4’s parents, ie Ho Senior and Madam Lo had factual possession of Staircase 81 from May 1973 until Ho Senior’s passing in December 1993.  Thereafter, Madam Lo occupied and managed Staircase 81 by herself until D4 took over possession and management of the same in or around early 2006.  Thereafter, I find D4 has continuous possession of the same from early 2006 onwards until the date of trial.

D.5 Were Staircases 75 and 81 “common areas” of the Building?

58.  At the trial, rather surprisingly D1 & D4 have refused to even admit the rather flagrant fact that Staircases 75 and 81 are “common areas” by virtue of section 2 and Schedule 1 of the BMO. 

59.  In my judgment, such stance of the Ds is clearly untenable due to the following:

(a)   The word “Staircases” is expressly identified in Schedule 1 and the words “entrance-hall” and “staircases” are expressly identified by Clause 2 of the DMC as areas which all owners are entitled to have access to or entitled to use;

(b)   On a plain reading of the words, the phrases “entrance-hall” and “staircases” would include the space “underneath the staircase” (「樓梯底」) on the ground floor.  The same phrase “underneath the staircase” (「樓梯底」) was used in the Buildings Department’s letter dated 3 November 2011 and the P solicitors’ letter dated 8 November 2010 to describe the areas occupied by the Ds; and

(c)   Ds have no positive case to speak of on this matter as it merely put P to strict proof on the issue.

60.  Thus, in my judgment, there is no doubt that Staircases 75 & 81 are “common areas” of the Building. In my view, they fall within the definition of section 2 and Schedule 1 of the BMO.  I so find this being the case.

D.6 Were the D1 & D4 bound by the DMC?

61.  S 34I of BMO provides that:

“(1) No person may-

(a) convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee (if any);

(b) use or permit to be used the common parts of a building in such a manner as-

(i) unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or

(ii) to cause a nuisance or hazard to any person lawfully in the building.

(2)   Any person who contravenes subsection (1) shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building.”

62.  P submits that even if the Ds are entitled to adversely possess the common areas, adverse possession is still no defence to the P’s claim based on the DMC and/or section 34I of the BMO.  According to Mr Ng’s submissions, the reasons are as follows:

(a)   This proposition is supported by the decision in The Incorporated Owners of Man Hong Apartments v Kwong Yuk Ching & Others [2001] 3 HKC 116, CA.  In that case the owner of a shop in a multi-storey building (a co-owner) occupied a passageway adjacent to his shop.  The shop owner claimed that he had acquired title by adverse possession, but CA ruled that the shop owner was a successor in title to a party to the DMC and subject to its obligations.  These would include an obligation to only use the common parts in common with the other co-owners and not convert the common parts to his own individual use;

(b)   In any event, CA stated that, “even if the defendants were able to establish that they had exclusive possession of the suit portion as a consequence of their adverse possession the land would still be subject to the terms and conditions contained in the DMC” (at 122I-123A).

(c)   As to section 34I of the BMO, CA in Incorporated Owners of No 27A Chatham Road, Kowloon v Lee Kai Kong [2001-2003] HKCLRT 273 held that (at §19); and

“The word “person” under s. 34I simply refers to any person who occupies the common parts.  The Ordinance empowers an owners incorporation to manage the common parts, and this certainly includes granting the incorporation the power to take legal proceedings against any person who occupies the common parts.  What the Presiding Officer said means that the incorporation would not be able to take legal action against those persons because they were not bound by the deed of mutual covenant.  This would run against the legislative intent of empowering the incorporation to manage the common parts.”

(d)   These two CA decisions were affirmed by the Court of Appeal again in The Incorporated Owners of Mountain View Mansion v Heart Cuisine & Others [2012] 4 HKLRD 628.

63.  With respect, in my judgment, it must now be accepted that, as a matter of law, the above 3 cases should be seen in the light of the CA’s decision in Wong King Lim where the adverse possessor “was never a party to the DMC and had never covenanted to use the Lane only in common with the owners of the Building” (at §19) but succeeded in claiming adverse possession against the title owners.

64.  I therefore reject P’s submissions on this issue and find that the occupiers can still claim adverse possession, even not being a party to the DMC.

65.  In any event, I accept Mr Leung’s submissions made on behalf of D1 & D4 that:

(a)   Both D1 & D4 are currently not registered owner of any part of the Building.  As such, not being co-owners, they are not bound by the provisions of the DMC; and

(b)   D4 has never been a registered owner of any unit in the Building and thus has never covenanted to use Staircase 81 “in common” with other co-owners of the Building;

66.  However, what I do not and cannot agree with Mr Leung’s submission is that both D1 and D4 have adverse possession of the Staircases for over 12 years and/or 12 years and as such the plaintiff’s title to the same have been extinguished pursuant to ss 7 & 17 of LO.

67.  In the case of D1, based on the discussions above (see §§36-43) as a matter of fact, I have no difficulty to find that he has indeed occupied Staircase 75 since 1973 and therefore has dispossessed the title owner for over 12 and 20 years as specified respectively under ss 7 & 17 of LO at the time when the writ in this case was issued.

68.  However, in the case of D4, according to my factual findings above (see §§44-57), it is quite clear that he has only come into possession of Staircase 81 at its earliest in 2006.  As such, he has not been in continuous possession of the same for even 12 years at the time when P issued the present proceedings.  Hence, it cannot be said that he has dispossessed the title owner for a continuous period of over 12 years, let alone 20 years.  On that count alone, in my judgment, D4 has failed to meet the most basic criteria for claiming adverse possession, namely, to unlawfully occupy the premises continuously for either 12 or 20 years, according to ss 7 & 17 of LO. 

E. Waiver and Acquiescence

E.1 P’s case on Acquiescence

69.  P’s primary submission under the alleged acquiescence claimed by Ds is that P as incorporated owners of the Building is under the statutory duties imposed by section 18(1) of the BMO to maintain the common parts and to enforce the DMC.  That particular section provides as follows:

“(1) The corporation shall-

(a) maintain the common parts and the property of the corporation in a state of good and serviceable repair and clean condition;

(b) carry out such work as may be ordered or required in respect of the common parts by any public officer or public body in exercise of the powers conferred by any Ordinance;

(c)   do all things reasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant (if any) for the control, management and administration of the building.”

70.  Mr Ng submits that the starting point is that P cannot be estopped by acquiescence or wavier, since it is simply duty-bound to maintain the common parts and to enforce the DMC.  He based his arguments on the following:

(a)   In The Incorporated Owners of Hoi Luen Industrial Centre & Another v Ohashi Chemical Industries (Hong Kong) Ltd [1995] 2 HKC 11, at 12I-13E, it has been stated that:-

“It has to be remembered that almost every multi-storey building in Hong Kong, residential and industrial alike, operates under a system of local law, being the rules prescribed for its management by a Deed of Mutual Covenant. So important is this aspect of Hong Kong life that the legislature has been compelled from time to time to intervene. In particular, it passed in 1972 the Multi-storey Buildings (Owners Incorporation) Ordinance (Cap 344), under which incorporated owners are placed under a statutory duty to do all things reasonably necessary for the enforcement of the obligations contained in the Deed of Mutual Covenant: see s 18(1)(c). When, then, the incorporated owners find that there is a breach of covenant being perpetrated by one of the owners, it is not only their right but their duty to seek to enforce the covenant...

It follows that in the instant case the plaintiffs were not only entitled but bound to take proceedings for the enforcement of these covenants. It follows, too, that they could not have granted expressly to this defendant or any other owner of any unit in the building the right to act in contravention of the Deed of Mutual Covenant as this defendant has done. What cannot be done expressly cannot be done impliedly. Although equity will sometimes restrain a plaintiff in the exercise of his legal rights because it would be inequitable and unjust in all the circumstances to allow him so to exercise those legal rights, equity will not hold him bound by acquiescence to allow something which he could not have allowed by express grant.”;

(b) This decision was applied in Urban Property Management Ltd v Hui Pui San & Another (HCA 2213/1998, 4 November 1998) concerning an action brought by the manager rather than the Incorporated Owners. See likewise Taikoo Shing (Management) Ltd v Trillon (HK) Ltd [1997] 4 HKC 304; and

(c) This principle was affirmed in Yick Fung Holdings Ltd v Sandwood Ltd [2009] 2 HKLRD 573, at §21: “The incorporated owners are not in a position to acquiesce in breaches of the DMC because of the duties imposed on them by section 18(1)(c) of the Building Management Ordinance, Cap.344.; see also The Incorporated Owners of Chungking Mansion v Shamdasani, Murlipessumal (CACV 199/1991, 26 February 1993).

71.  In fairness to Mr Ng, he did submit that it appears that a breach of s 34I(1)(a) is a type of breach within the power of the Incorporated Owners to acquiesce as held in Hollywood Shopping Centre Owners Committee Limited v The Incorporated Owners of Wing Wah Building Mongkok Kowloon, [2011] 4 HKLRD 623, at §§68-69; and The Incorporated Owners of Freder Centre v Gringo Ltd [2016] 2 HKLRD 190, at §24.

72.  In any event, Mr Ng submits that it is not unjust for P to enforce the DMC and section 34I of the BMO, based on the following:

(a)   InThe Incorporated Owners of Freder Centre v Gringo Ltd, the Court of Appeal found that in order to succeed in a defence of acquiescence, it must be shown: “firstly, there was on the part of the plaintiff, an assent or lying by in relation to the acts of another person; secondly, in view of the assent or lying by and consequent acts it is unjust in all the circumstances to grant the relief in question” (at §26);

(b)   In the present case, enforcement cannot be unjust: P’s case is that it made a demand (to a Mr Poon Kai Leung and D4) in 2010;

(c)   This is particularly so when P’s case is that safety considerations are involved.  In particular, on 13 April 2011, the Director of Fire Services issued Fire Safety Directions to P, instructing it to provide or improve its fire services installations and equipment.  P believes that compliance is necessary and shall be carried out in the common parts of the Building[6]; and

(d)   Further, the P’s case is that the Buildings Department issued a letter to P stating that the structure at Staircases 75 and 81 are illegal structures.

E.2 Ds’ case on Acquiescence

73.  D1 & D4’s case on the issue of acquiescence can be summarized as follow:

(a)   Even if the Staircases 75 & 81 were held to be common part of the Building and that D1 and D4’s occupation of the Staircases contravenes the DMC and the BMO as alleged by P, the inaction of P, its predecessor and/or all other owners of the Building over the past 40 years gave rise to waiver and acquiescence on their part and would entitle the court to dismiss the present action;

(b)   In particular, the Building has 2 other staircase shops similar to Staircases 75 & 81, namely, Staircases 63 & 69, which have been existed for almost 40-50 years and are located on the ground floor of the Building, which could readily be seen by anyone;

(c)   Over the past 40 years, no action has ever been taken by the 1^st Owner of the Building, namely, Shun Shing Weaving Company Limited (“Shun Shing Weaving”) and/or its director Wu Bing, any other owners of the Building, P, ie the IO and/or its predecessor, an Owners’ Incorporation formed more than 10 years before P 's incorporation (“Owners’ Incorporation”).  At all times, the aforesaid parties including P and its predecessor have been silent and dormant for the past 40 years in respect of the Staircases on the ground floor of the Building;

(d)   In fact, the Owners’ Incorporation (predecessor of P) expressly told D1 and his family and Madam Lo to manage and take care of Staircases 75 & 81 on their own, and that no demands or requests or objection were ever made by the Owner’s Incorporation to D1 and D4 or Madam Lo to move out from Staircases 75 & 81;

(e)   Further, Wu Bing representing Shun Shing Weaving (ie the developer/1^st Owner of the Building) had expressly asked the father of D1 and D4 to make exclusive use of their respective Staircase;

(f)   There had been cases where other staircases in the Building were allowed to be used for commercial purposes.  For example, Staircase 63 had been used as a photography shop until recently when it was rented out on short-term leases.  Staircase Shop 69 had been used for selling shoes initially and more recently was leased out for selling clothes.  Staircase 81 had been used as a photograph shop until 1990 and was later leased out for selling CDs until 2016;

(g)   In the past 40 years, none of the other staircase shops such as Staircase 63 and Staircase 69 had been ordered to close down by P and/or the Owners’ Incorporation and/or other owners of the Building;

(h)   The evidence is that these Staircases, namely, Staircases 63, 69, 75 and 81, are still being exclusively occupied and used by different parties at present; and

(i)   Accordingly, if there has been any breach of the DMC and/or the provisions of the BMO as alleged, P and its predecessor (including all other owners and/or the 1^st Owner of the Building and/or the Owners’ Incorporation) has chosen to tolerate and acquiesce such breach by their inaction over the span of 40 years in the past and that inaction of their part amounts to acquiescence and waiver of the breach of the DMC or BMO.  It is therefore unjust and inequitable to grant any injunctive remedies against D1 and D4.

E. 3 The Court’s findings on Acquiescence

74.  Based on the evidence adduced at trial and the submissions made by the parties as summarized above, I make the following factual findings on the issue of acquiescence.

75.  First, I agree with Mr Leung’s submissions that, “there was on the part of P, an assent or lying by in relation to the acts of D1 and D4” which could be ascertained by the following matters relied on by the defendants:

(a)   It is not in dispute that since its establishment in July 2008, no enforcement proceedings or legal actions had been commenced against D1 and D4 until 11 April 2006;

(b)   For about 8 years, P had stood by and tolerated the occupation of the Staircases 75 & 81 without taking any enforcement proceedings;

(c)   It is also not in dispute that in the past 8 years, no legal proceedings have been commenced against the other two Staircases, namely Staircases 63 & 69;

(d)   Hence, the understanding of D1 and D4 that they have never been aware that P and/or its predecessor has taken any enforcement actions against the other Staircases, namely Staircases 63 & 69; 

(e)   The breaches by the other two Staircases “were no less grave than the breaches committed by D1 and D4”, the inaction and lying by of P in the past 8 years without commencing any enforcement action “could reasonably have been considered by D1 and D4 as a representation” that the staircase shops in the Building “would be tolerated by P”: see Freder Centre, at §29, per Chu JA;

(f)   Indeed, in all of P’s pleadings (which was amended and re-amended many times) and the entire witness statement of Fung, P has never mentioned that it had attempted to start any legal action against Staircases 63 & 69;

(g)   Having sight of D1 and D4’s opening submissions, then Fung for the very first time mentioned on day 1 of the trial during examination-in-chief that P had recently commenced legal action against Staircases 63 & 69, but those actions have not yet reached the stage of trial;

(h)   This belated piece of Fung’s evidence is immaterial.  Because the commencing of legal actions against the Staircases 63 & 69 in 2016 or even 2017 does not detract from the fact that P had chosen to assent and lye by the occupation of the Staircase 63 and Staircase 69 over the past 8 years since 2008; and

(i)   The “representation” by P due to their inaction against Staircases 63 & 69 which “could have been reasonably understood” by D1 and D4 that these Staircases “would be tolerated” is clear and unequivocal in the past 8 years until April 2016.

76.  Second, I further accept Mr Leung’s submission that, in view of the assent or lying by of P and the consequent acts made by D1 & D4, it is “unjust in all the circumstances” to grant the injunctive relief in question. In this regard, I accept Mr Leung’s following submissions made on behalf of D1 & D4:

(a)   It is plain from the CA judgment in The IO of Oriental Gardens, the inaction of the IO’s predecessor, namely, the management committee in that case was a material and weighty factor to be taken into account in considering an equitable defence of acquiescence: §15, per Leonard J and at §20, per Cons J (pp 172F-173G);

(b)   Here, it is beyond dispute that P’s predecessor ie the Owners’ Incorporation has never raised any objection nor taken any enforcement actions against any occupation of the Staircase Shops in the Building throughout the 1990s and 2000s;

(c)   What is even more significant in this present case is that apart from simply lying by, P’s predecessor ie. the Owners’ Incorporation in fact went further and expressly made the representation to D1 and D4’s mother Madam Lo that they should “manage and take care of Staircase Shop 71 and Staircase Shop 81 on their own”[7];

(d)   In reliance of the express representation by the Owners’ Incorporation in 1990s, D1’s evidence was that he therefore went on to manage the Staircase Shop on his own and spent time and money in maintaining the lighting in the staircases of the Building;

(e)   By the same token, it is not in dispute that throughout the 1990s and 2000s, no enforcement proceedings were issued by the Owners’ Incorporation against the 2 Staircase namely Staircase Shop 63 and 69.  This inaction on their part “could have reasonably considered by D1 and D4” as a “representation” that their occupation of Staircases 75 & 81 “would be tolerated”;

(f)   Further, D1, D4 and Madam Lo also gave evidence that even before the construction of the Building and their moving into the Building, Wu Bing of Shun Shing Weaving had expressly gifted the Staircases 75 & 81 to them and asked them to look after the staircases for him.  Thereafter, in 1970s and 1980s, no action or recovery proceedings were ever commenced by Wu Bing against D1 and D4 in relation to their occupation of the Staircases; and

(g)   Given that it is clear from the CA judgment in Freder Centre at §26 that “all circumstances” of the case should be considered, taking into account the substantial period of time for 40 years during which Wu Bing and P’s predecessor ie the Owners’ Incorporation has raised no objection and commenced any enforcement actions against D1 and D4, it is unjust and inequitable to grant P the injunctive relief sough in all circumstances of this case.

E.4 Issues raised by P’s in challenge of Ds’ defence of acquiescence

77.  I would reject the following issues raised by P by way of reply to D1 & D4’s defence of acquiescence:

(a)   That P’s predecessor, Wu Bing on behalf of Shun Shing Weaving, either did not give the Staircase Shops to Ds or had no authority to acquiesce Ds’ breaches (“The Wu Bing Issue”);

(b)   P’s predecessor, the Owners’ Incorporation, had no power to acquiesce Ds’ breach (“The Owners’ Incorporation Issue”);

(c)   P is under a statutory duty under s 18(1) of BMO to maintain the common parts of the Building and to enforce the DMC.  P cannot be estopped by acquiescence (“The Duty-Bound Issue”);

(d)   P had sent a demand letter to a Poon Kai Leung and D4 in 8 November 2010 (“The 2010 Letter Issue”);

(e)   There are fire safety considerations involved.  The Director of Fire Services issued Fire Safety Directions instructing P to improve its fire services installations and equipment.  P believes that compliance is necessary and shall carry out such works in the common parts of the Building, including the Staircase Shops (“The Fire Safety Facilities Issue”);

(f)   The metal gate and roller shutter were illegal structures.  As a matter of law P had no power to acquiesce to the erection of illegal structures (“The Illegal Structure Issue”);

(g)   Ds’ possession of the Staircase Shops amount to nuisance or hazard to residents of the Building within the meaning of s34(I)(1)(b) of the BMO (“The Section 34(I)(1)(b) Issue”).

78.  I shall deal with each of P’s objections to the issue of acquiescence briefly below.

E.4.1 The Wu Bing Issue

79.  I do not accept P’s contention that just because there were no documents to support the fact that Wu Bing had promised Ds that they could make use of the Staircases for business, it is possible that Wu Bing had never done so.

80.  Bearing in mind that this is not a criminal case where the burden of proof is of a much higher standard of proving the matter beyond reasonable doubt, but a civil case where a balance of probabilities applies, I would prefer the evidence given by D1 & D4, as well as Madam Lo, that Wu Bing did make that promise to at least D1 and/or D4’s father.  Given the financial hardship the families were then facing and the social and economic environment in Hong Kong in the early 1970s, I am not surprised that Wu Bing would make such promise to D1 and/or D4’s father and of which they would gladly accept.

81.  I find as a fact that the meeting related to by D1 in his evidence did take place in the way as he has testified to the court.  It was at a dinner at Wu Bing’s home about 1 to 1.5 year prior to the family moving into the Building that Wu Bing had personally “gifted” Staircase 75 for him and/or his father to sell fruits.  I find it was perfectly reasonable for D1 not to expect or demand any signed documents as Wu was the “owner” and developer of the Building and was his father’s employer.  I accept D1’s evidence on this that to do so would be seen as a lack of respect or trust to a respected elderly close family friend.  

82.  I also accept D4’s evidence that he had overheard the conversation between him and his father where Wu Bing had expressly asked his father to make exclusive use of Staircase 81 for carrying on a small business.  He might even have heard the same from his father.  I accept the time of that conversation between his father and Wu Bing took place before they moved into the Building.

83.  Further, I accept Madam Lo’s evidence that her family’s occupation and possession of Staircase 81 was done without any objection from either Wu Bing or Shum Shing Weaving, the former being the de facto owner of the latter.

84.  However, as I found above, that promise or consent given by Wu Bing was made to D4’s father and not to D4.  It could not had given to D4 as he was only a small boy then.  However, P and/or its predecessors has still acquired the state of affairs for the owner of over 40 years and it will not be fair or equitable for it to claim the Staircase 81 now.

E.4.2 The Owners’ Incorporated Issue

85.  Fung gave evidence to the effect that the Owners’ Incorporation was only responsible for matters on the first floor and above and therefore not responsible for the matters on the ground floor of the Building.  By saying this, he seems to suggest that the Owners’ Incorporation did not have the power to acquiesce and/or could not have acquiesced to Ds’ possession of the Staircases, which of course are located on the ground floor of the Building.

86.  I agree with Mr Leung that this proposition is both disingenuous and has been totally misconceived.

87.  First, as a matter of evidence, Fung himself has confirmed under cross-examination that:

(a)   He has no knowledge of anything relation to the incorporation of the Owners’ Incorporation in 1990s; and

(b)   He has no knowledge as to matters relating to the Owners’ Incorporation in the period between 2000 and 2008, up to the incorporation of P.

88.  Thus, whatever evidence that Fung gave in relation to the Owners’ Incorporation, at best it is a matter of his own opinion rather than what might have actually happened as a matter of fact.  As such, his opinion on the responsibility of the Owners’ Incorporation in my view has very little evidential value, if any at all.

89.  In any event, under re-examination, Fung has confirmed that he “did not know very well” about the powers of the Owners’ Incorporation.  He has no knowledge as to whether any action had been taken by the Owners’ Incorporation against the occupiers of the Staircases concerned as he has only started to look after the Building in March 2011.

90.  On this issue, I would reject Fung’s evidence and accept at least D1’s evidence if not D4’s:

(1)   He disagrees with Fung’s suggestion that the Owners’ Incorporation was not responsible for matters concerning the ground floor;

(2)   He recalled that the Owners’ Incorporation was established in around 1980s with the help of the then Kwai Tsing District Councillor.  For a long time, the chairman of the Owners’ Incorporation was a Mr Yip.

(3)   D1 recalled that the Owners’ Incorporation was responsible for the entire Building at the time.  For example, Mr Yip would ensure tenants of the staircase shops did not place their goods beyond or outside the boundary of the shops.

(4)   The Owners’ Incorporation had also asked him to clear the rubbish on the staircase and change and maintain the lights on the staircase from time to time.

(5)   Under cross-examination, D1 confirmed the same and clarified that the Owners’ Incorporation acknowledged that the Staircase Shop 75 belonged to him and asked him to manage the rubbish and lighting on his own.  This applied to every staircase shop in the Building.

91.  However, I would also reject D4’s evidence on this as most of what he has stated in court was “secondhand’ information which came from his mother. It is clear that he himself has no personal knowledge on this matter.  Thus, what he has told the court on his issue is not here nor there.

92.  On balance, I prefer the evidence of D1 to Fung and find that the Owners’ Incorporation did not confine their management powers to the upper floors only.  In my view, it does not make sense and simply fly in the face of common sense that the Owners’ Incorporation only confined their powers to the first floor and above but not the ground floor of the Building.

93.  As a matter of law, I agree with Mr Leung’s submission that the Owners’ Incorporation was in a position to acquiesce based on section 16 of the BMO which provides as follows:-

“16. When the owners of a building have been incorporated under section 8, the rights, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by, and the liabilities of the owners in relation to the common parts of the building shall, subject to the provisions of this Ordinance, be enforceable against, the corporation to the exclusion of the owners, and accordingly—

(a) any notice, order or other document which relates to any of the common parts of the building may be served upon the corporation at its registered office; and

(b)   any proceedings in the tribunal in respect of any of the common parts of the building may be brought and pursued by or against the corporation.” [emphasis added]

94.  I accept the Ds submission that s 16 of the BMO merely vested P with the power and duties originally vested in the owners as a group.  The Owners’ Incorporation, in Chinese (「大廈業主委員會」) or sometimes known as the “management committee” (「互助委員會」), is no more than an unincorporated form of the owners as a group.  In my judgment, the powers and duties of P and its predecessor, namely, the Owners’ Incorporation, are exactly the same.  Therefore, I agree with Mr Leung’s submission that it is disingenuous to suggest that the Owners’ Incorporation was only responsible for the first floor of the Building and above.  Thus, I find P’s contention on this issue has been misconceived both as a matter of law and fact.    

E.4.3 The Duty Bound Argument

95.  P contends that it is duty-bound to enforce the DMC and hence cannot acquiesce a breach of the DMC.

96.  With respect, I do not agree.

97.  First, in Freder Centre, Chu JA has held at §24 that “it is impact in s.34I(i) of the BMO that [IO] can give approval to an owner to convert part a common part to hios own use.”  Thus, in that case, the CA held that the breach of the DMC and BMO was within the power of the IO to acquiesce: at p191.

98.  Thus, I agree with Mr Leung that it is no answer to an acquiescence defence for P to say that it is duty-bound under the BMO to enforce the DMC.

99.  Second, Mr Ng in his opening submissions has accepted that breach of s 34I(1)(a) of BMO is “a kind of breach” which is within the power of P to acquiesce.

100.  Third, I agree with Mr Leung for D1 & D4 that the present case falls within all fours of IO of Oriental Gardens, supra.  Without going into the facts and the important principles established in that case, I make the following findings of facts in this case:-

(a)   It is not contended by D1 & D4 that P cannot do anything to prevent breach of the DMC, however serious;

(b)   It is Ds’ case that P has simply acquiesced in the particular kinds of breach which D1 and D4 have committed, namely, by tolerating their families in running the shops underneath the Staircases over 40 years;

(c)   Staircases 63 and 69 have committed similar braches since 1970s and no enforcement action was taken by P and no legal action (and enforcement order) was issued by the Buildings Department in the past 40 years, it is therefore inequurable to prevent D1 and D4 from doing what other have been allowed to do.

101.  Third, as neither D1 nor D4 is presently an owner of any unit in the Building, they are not bound by the terms of the DMS.  The reasons being:

(a)   It is trite that:-

“The liability of the original covenantor in a contract is, at common law, unaffected even after he has disposed of the land to others, unless a clear limitation is expressed in the covenant itself (Thursdby v Plant (1670) 1 Wms Saund 230).  However a successor in title or person deriving title from the covenantor is liable only during the period of his ownership of the land.  This is the case even where such successor in title or person deriving title has been in occupation of the land before acquiring the ownership.” [Emphasis added] The Annotated Ordinance of Hong Kong - Conveyancing and Property Ordinance Cap. 219, §41.27

(b)   Section 41(8) of the Conveyancing and Property Ordinance, Cap 219 provides that:-

“41. Enforcement of covenants

(8)   A covenant shall not bind a person after he has ceased to have any estate or interest in the land affected by that covenant except in respect of a breach of that covenant committed by him before that cessation.” [Emphasis added]

(c)   Clause 24 of the DMC provide:-

“24. If any one of the parties hereto shall cease to have any share or interest in the said premises such party shall not be responsible for any liability arising in respect thereof at any time thereafter Provided however that the mutual covenants herein contained are intended to and shall run with the Land or the interest therein of the parties hereto both as to the benefit and burden of such covenants, and that the Law of Property (Enforcement of Covenants) Ordinance, 1956 and any statutory amendment or modification thereto for the time being in force shall apply to these presents.” [Emphasis added]

102.  In the present case, it is not in dispute that D1 had sold the Flat 6A unit in 2016. 

103.  It is also not in dispute that D4 was never an owner of any unit in the Building.  In fact, he had moved out of the Building with his family in 1976. He had never returned to live in the Building since 1976.

104.  Thus, I find that D1 and D4 are simply not bound by the provisions of the DMC as contended by P.  In this regard, P’s contention must fail.

E.4.4 The 2010 Letter Issue

105.  This issue can be quickly disposed of.

106.  First, P has failed to produce a copy of the letter allegedly sent in 2010.  It cannot be found in the trial bundles. 

107.  Madam Lo denied ever receiving such letter in her evidence.  D4 also stated in evidence that he has never received such letter.

108.  Thus, insofar as P case against D4 is concerned on this issue, I agree with Mr Leung that it does not even take off the ground.

109.  I further agree with Mr Leung that, even if P did issue any letters to Ds in 2010 as alleged, P has apparently done nothing to follow up with the matter in the ensuing 6 years until the commencement of the present proceedings in April 2016.  As a result, I think it is reasonable for Ds to assume that the inaction on the part of P could be interpreted by D1 and D4 that the continuous occupation of Staircases 75 and 81 would at least be tolerated by P: see dicta of Freder Centre at §32.

110.  I also agree with Mr Leung’s submissions that even if P did send out the letters to Ds in 2010 as alleged (but without taking any legal and enforcement proceedings until 2016/17), the inaction from 2010 onwards would further reinforce Ds’ understanding and belief that their occpution of the Staircases would be tolerated by P.  In my judgment, the mere issuing of the alleged letters in 2010 is not insufficient to save P’s case in light of its and its predecessors’ 40 years of silence and inaction.  To put it bluntly, it was too little, too late.

E.4.5 The Fire Safety Facilities Issue

111.  I find this whole issue was created by P as a “smoke screen” or excuse for reclaiming the Staircases.  But it was, with respect, done without any conviction or substance.

112.  On this issue, P relies on the Fire Safety Directions dated 13 April 2011 issued by the Fire Services Department (“the FS Directions”) and a letter from a fire service consultant called Wilco & Associates Ltd dated 23 December 2015 (“the Wilco Letter”). 

113.  First, I find the Wilco Letter to be self-serving and of little value. In the letter, it suggests that the contractor of the Building had received an official confirmation from the Fire Services Department that “all sprinkler inlets” should be provide on the ground floor of the Building, including the common area where Staircases 75 and 81 are located at.  Hence, Wilco advised P that “(I)n this connection, recovery of the above-mentioned common area from the current occupiers is necessary in order to allow the Contractor to proceed with the captioned installation works.”

114.  Second, there was no evidence produced by P to show the expertise and qualifications of the directors and/or owners of Wilco.  P has not even bothered to call or produce any representative to give evidence from the firm at the trial.  The court does not know the context and background of which the Wilco Letter was written.  And why all out of a sudden in December 2015, just a few months before the writ in this case was issued, this company was consulted on the matter.  Thus, I do not think any weight should be given to this letter at all.

115.  Thus, even if the “advice” of Wilco is right, I do not see how installing of the fire sprinklers inlets would need the recovery of the Staircases from the common parts of the Building by P.  At most, the occupiers may have to move out temporary or clear part of the ceiling areas for the installation of the sprinklers. This is something that D1 and D4 and their tenants are more than willing to do.  If necessary, to bear the expenses of the installation also.  Thus, I do not see how the so called fire services’ installation would be able to support P’s case.

116.  In my judgment, this is merely a “dressed up” excuse for P to justify their recovery of possession for the purported installation of the fire services equipment.

117.  It is clear that the Wilco Letter and the content of a letter dated 1 August 2017 from the contractor Kwok Shing that it was self-serving and written for the purpose of the trial.  The letter says that the fire safety equipment needs to be installed inside the Staircases premises while the Wilco Letter merely states that it needed to be installed on the ground floor.  They are clearly contradictory to each other and self-serving.

118.  I therefore would reject Fung’s evidence given at trial that fire service installations are needed, particularly on the ground floor of the Building where the Staircases are situated.

119.  I further reject P’s submission and find that the possible installation of the fire services facilities would not require the dispossession of Ds and the removal of the entire Staircases of 75 and 81.

E.4.6 The Illegal Structures Issue

120.  This issue can be quickly disposed of also.

121.  P contends that the roller shutter and the metal gate inside the Staircases are illegal structure and P has no power to acquiesce the erection of illegal structures. 

122.  I agree with Mr Leung that the above proposition cannot stand in light of the comments made by Huggins JA in IO of Oriental Gardens, supra at §13 (at p 172D-E):-

“141.1 The Plaintiff has sought to uphold the mandatory injunction in respect of the façade extensions on the ground that there can be no acquiescence in a breach of covenant which is illegal.

141.2   The answer to that is that what the Plaintiff has done is to acquiesce in the erection of extensions and not to the erection of extensions without the approval of the Building Authority.  In setting up their equitable defence the Defendants do not have to rely upon an illegality.” [emphasis added]

123.  P also purportedly relies on a letter from the Buildings Authority dated 3 November 2011 (“the BA Letter”) suggesting that the Staircases are illegal structures obstructing the fires escape route.

124.  With respect to Mr Ng acting on behalf of P, I find the argument difficult to comprehend:

(a)   From the photographs produced at the trial, it is clear that the space fenced off by the roller shutter and the metal gate are the space/void underneath the main Staircases to the Building and not to the steps leading up to the upper floors of the Building.  As such, I do not see how they could form part of the escape route in a fire;

(b)   In any event, there has not been any orders from the BA to remove the metal gate and the roller shutter.  It is therefore unclear on what basis P says that the meatal gate and roller shutter are illegal structures;

(c)   Whether enforcement action has been taken by the authority is one of the main considerations in a case involving possible unauthorized structures: see Yeung Mau Cheung, per DHCJ Sakhrani at §§33-35; and

(d)   In this case, P has not produced any evidence that any enforcement proceedings or action had been commenced by the authority up to the date of trial.  As such, I am not convinced that such alleged illegal structures, even if proved, should affect the claims of D1 and D4 for adverse possession;

125.  At trial, Fung gave evidence to the effect that Buildings Department had actually issued an order prior to the BD Letter.

126.  I have no hesitation in rejecting such evidence on the following grounds:

(a)   No such alleged order has ever been produced by P, whether prior to or at trial;

(b)   There was no mention of this during discovery or any of P’s witness statement;

(c)   Fung has never mentioned the existence of such order before coming to court to give evidence;

(d)   This is inconsistent with the language used in the BA Letter in that they mentioned orders “will be issued” instead of “has already been issued”; and

(e)   The entire alleged order which supposed to have been issued are self-serving and illusory.

127.  Based on the above, I cannot see how the alleged illegal structures ground can be used by P against Ds.

E.4.7 The Section 34I(1)(b) Issue

128.  Fung belatedly in his evidence during the trial alleged that there were security concerns arising from Ds’ possession of the Staircases.  Examples he gave included (i) strangers would go up to rooftop to smoke; and (ii) there would be random people knocking on the door.

129.  I find such allegations not only had come very late in the day but also hard to believe.

130.  First, it has never been part of P’s pleaded case that Ds were in breach of s 34(I)(1)(b). 

131.  Second, it has been contradicted by D1’s evidence who said that he went up to the roof top to water his plants often and did not notice any strangers wondering around. 

132.  Third, the installation of a security gate at the entrance of each staircase is clearly not feasible as there are many businesses operating on the first floor of the Building, such as a hair salon and a travel agent.

133.  Fourth, I accept D1’s evidence that there had never been any crime took place in the Building for the past 20 years and therefore any suggestion that security gates are needed in my judgment is just a pathetic excuse from P to try to get rid of D1 and D4.

134.  Based on the above, I find P’s contention on this issue unsustainable and should be rejected.

E.4 Conclusion on Acquiescence

135.  In the aforesaid premises, I find D1 & D4’s case of acquiescence against P has been established on the factual circumstances in this particular case.

F. Mesne profits

136.  It is well-established that mesne profits may be awarded when there was trespass to land: Clerk & Lindsell on Torts (21^st edn, 2014), at §19-74.

137.  However, a party who fails to establish a claim in adverse possession and therefore liable for mesne profit/damages for trespass to land, expert evidence in the form of expert valuation report should be adduced in order to establish the market value of the land in dispute.

138.  In the present case, no such evidence was made available by P at trial.

139.  In such cases, the court’s practice is to award nominal mesne profits only: see for example Chan Kan Mun v Sanyear Investments Ltd (DCCJ 520 & 3328 of 2014l 18.9.20-17) at §§78-80 and Wong King Lim v The IO of Peony Court, DCCJ 2313 of 2009 (11.11.2011) at §§65-67.

140.  In my judgment, even if P were able to succeed in this case, the best it can obtain against Ds are nominal mesne profits.

CONCLUSION

G.1 Conclusion on the 4 Issues in Dispute

141.  Based on the discussions above, the conclusions I have reached on the 4 issues set out in §11 above will be answered in the following manner:

142.  On issue (a), namely, whether D1 and D4 have been in exclusive possession of Staircase 75 and Staircase 81 for a period exceeding 12 or 20 years before the commencement of this action, and by so doing have acquired a possessory title thereto by way of adverse possession:

(i)   In the case of D1, I find that he has been in exclusive possession of Staircase 75 since 1973 and therefore for a period exceeding 20 years, and by so doing has acquired a possessory title thereto by way of adverse possession; and

(ii)   In the case of D4, I find that he has not been in exclusive possession of Staircase 81 for a period exceeding either 12 or 20 years.  I find that he has only come into occupation and/or exclusive possession of Staircase 81 since 2006 only. Therefore, he has failed to acquire a possessory title to Staircase 81 by way of adverse possession.

143.  On issue (b), namely, whether the alleged inaction on the part of P amounts to waiver and acquiescence:

(i)   I find the inaction on the part of P and its predecessors for over 40 years amounts to acquiescence in both the D1 and D4’s case and it will be unjust and inequitable for it to be able to re-possess Staircases 75 and 81 now.

144.  On issue (c), namely, whether P is debarred from seeking vacant possession of Staircase 75 and Staircase 81 by virtue of the provisions of LO:

(i)   I find P is debarred from seeking vacant possession of Staircase 75 against D1 by virtue of the provisions of LO and on the ground of acquiescence; and

(ii)   I further find that eventhough P is not debarred from seeking vacant possession against D4 based on the provisions of LO, it has acquiesced the situation for too long that it will now be unjust and inequitable for it to do so.

145.  On issue (d), namely, in the event that D1 and/or D4 fails in their defence, whether P is entitled to recover mense profits and other damages from them; if so, how much:

(i)   I find that this does not apply in this case as D1 and D4 have succeed in their defence.  Even if I were to find against them, I would consider that P at most will be entitled to nominal damages in this case only.

146.  In the aforesaid circumstances, I would make an order that P’s claims in these proceedings against D1 and D4 to be dismissed with costs in favour of Ds, such costs to be taxed if not agreed, with certificate for counsel.

G.2 D1’s Counterclaim

147.  Also based on the discussions above, on D1’s counterclaim against P, I order that a declaration to be made that D1 and /or his family have been in exclusive possession of Staircase 75 for more than 20 years or a period in excess of 12 years before the commencement of the action and that P has lost the right to bring any action to recover any part of Staircase 75 by virtue of s 7(2) of LO.  Further, I order that a declaration to be made that, by virtue of s 17 of LO, P’s title to any part of Staircase 75 has been extinguished and that D1 has acquired possessory title to Staircase 75. 

148.  I further order that P to pay the costs of D1’s counterclaim, such costs to be taxed if not agreed, with certificate for counsel.

G.3 D4’s Counterclaim

149.  Again, based on the discussions above, I find D4 has failed to succeed in claiming adverse possession against P and therefore has failed in his counterclaim under s 7(2) and 17 of LO, eventhough he has succeeded in his defence based on acquiescence.  Therefore, his counterclaim will be dismissed with costs in favour of P, such costs to be taxed if not agreed, with certificate for counsel.

150.  Lastly, I would like to thank counsel on both sides for their very helpful assistance.