GEOFFREY HOLDINGS LTD v. PERSONAL REPRESENTATIVE(S) OF LAM SHEK (林石) ALIAS LAM SHEK TAU (林石頭), DECEASED

DCCJ 5054 /2017

[2022] HKDC 551

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5054 OF 2017

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BETWEEN

AND BETWEEN

(By original Writ and Order to carry on made by Mr. Registrar Ho

dated 7th February 2018)

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DCCJ 5053/2017

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5053 OF 2017

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BETWEEN

(Consolidated pursuant to the Order of Mr. Registrar Ho

dated 7^th February 2018)

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JUDGMENT

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1.  Introduction

1.1  The plaintiff has since 3 April 1990 been the registered owner of (1) the Remaining Portion of Section C of Subsection 3 of Section C of Lot No 1212 and (2) the Remaining Portion of Subsection 1 of Section C of Subsection 3 of Section C of Lot No 1212 both in Demarcation District No 115, Yuen Long, New Territories (collectively “Land”).

1.2  The Land is adjacent to Subsection 2 of Section C of Lot No 1212 in Demarcation District No 115 (“Deceased’s Land”) which is and was at all material times owned by Mr Lam Shek alias Lam Shek Tau (“Deceased”) and formed part of his estate following his demise. The Deceased passed away on 30 March 2017 at the age of 88.

1.3  On 6 April 2017, the District Lands Office issued a letter to the plaintiff complaining of structures having been erected on the Land without its approval, which contravention constituted a breach of the conditions in the Government lease.

1.4  On 3 October 2017, the plaintiff’s solicitors issued two letters, one addressed to the occupiers of the Land and the other to the Deceased, by which the addressees were demanded, inter alia, to remove and demolish the unauthorized structures and to deliver vacant possession of the Land on or before 9 October 2017.

1.5  As the demands were not met, on 14 November 2017, the plaintiff commenced two sets of proceedings to recover possession of the occupied areas of the Land and damages. DCCJ 5053 of 2017 was commenced against the occupiers of what is defined in evidence as the Red Area of the Land. DCCJ 5054 of 2017 was instituted against the personal representatives of the Deceased in respect of what is defined in evidence as the Green Area of the Land. The Red Area and the Green Area are collectively referred to as the Occupied Areas.

1.6  The two sets of proceedings were consolidated by an order dated 7 February 2018. By that order, Mr Lam Che Chung (“Lam”), the youngest son of the Deceased, was appointed to represent the estate of the Deceased. Prior to the consolidation, Lam became an additional defendant in DCCJ 5053 of 2017. In these consolidated proceedings, the estate of the Deceased is the 1^st defendant, Lam the 2^nd defendant and the occupiers of the Red Area the 3^rd defendant. Only the 1^st and 2^nd defendants appeared to contest these proceedings (“Relevant Defendants”).

1.7  The Joint List of Issues identifies, in gist, the following matters for determination:-

(1) whether the plaintiff is barred from recovering the Occupied Areas by virtue (a) adverse possession by the Relevant Defendants, (b) encroachment by the Relevant Defendants, and/or (c) the doctrine proprietary estoppel and/or estoppel by standing by;

(2) what is the remedy should the Relevant Defendants succeed in their defence and counterclaim based on the issues summarized in the preceding subparagraph;[1]

(3) should the plaintiff prevail on liability, whether the plaintiff is entitled to immediate vacant possession of the Occupied Areas and/or payment of damages, and if so, the quantum of such damages.

1.8  At the trial, the plaintiff was represented by counsel Mr Derek JY Chan and the Relevant Defendants by Mr Martin Lau.

1.9  Mr Lau in closing helpfully curtailed and crystallized the issues for determination. In essence, upon Mr Lau’s clarification:-

(1) the Relevant Defendants’ primary case on the Occupied Areas is premised on the defence of estoppel by standing by, and the events giving rise to this defence are based on those transpiring in 2008 in respect of the Green Area and in May 2014 for the Red Area;

(2) as a fall-back position, the Relevant Defendants rely on the defence on adverse possession and/or encroachment but only in respect of the Green Area;

(3) should the plaintiff prevail on the issue of liability, whilst the Relevant Defendants contest the quantum of the damages to be awarded, they also put forward an (open) counter-offer to undertake to demolish the structures and to indemnify the plaintiff should the Relevant Defendants fail to do so within the time period ordered by the court.

1.10  In terms of witnesses, the plaintiff did not call any factual evidence but obtained leave to call expert evidence on three areas, namely land surveying, rental value and demolition costs. The experts engaged by the plaintiff for the three disciplines were respectively Mr Joseph Wong Yiu Cho (“Joseph Wong”), Mr Chan Yat Hei, (“YH Chan”) and Mr Wong Kin Piu (“KP Wong”). Conversely, the Relevant Defendants elected not to adduce expert evidence and called the 2^nd defendant as their only factual witness.

1.11  YH Chan was unable to attend the trial as his domestic helper tested positive for COVID-19 shortly before the commencement of the trial. Mr Lau was content to have the valuation expert’s evidence admitted into evidence without calling him and deal with the same in submissions.

1.12  The evidence relevant to the issue of liability is that of the 2^nd defendant and Joseph Wong. The evidence of YH Chan and KP Wong relates primarily to quantum.

2.  The current site condition of the Occupied Areas

2.1  As described by YH Chan in his report, the Occupied Areas are located on the north-eastern side of a private residential development known as The Parcville and the northern side of Shan Pui Hung Tin Tsuen. The Occupied Areas consists of two portions of agricultural land and their neighbourhood comprises mainly low-rise village-type houses and private residential buildings.

2.2  Annex 1 of Joseph Wong’s report is a plan of the Occupied Areas (“Plan”) and it is reproduced as an attachment to this judgment. It is common ground that the Plan represents the correct identification of the Occupied Areas.

2.3  As narrated by Joseph Wong and by reference to the Plan, the Red Area is in two portions. The southern portion is part of a narrow footpath leading to a larger footpath to the northern portion. At the southern end of the footpath is a metal gate with lock. The northern portion and the adjoining private lots are surrounded by hoardings and walls and altogether ten number of temporary structures are within the northern portion of which nine are used for residential purposes and one as a storeroom. The storeroom adjoins the Green Area with a door. The Green Area is occupied by a temporary structure and a canopy attached to the external wall of a house (No 241 Shan Pui Hung Tin Tsuen) (“House”) with the remainder being an open space fenced off by a fence wall. The House is located within the Deceased’s Land and stated in the 2^nd defendant’s witness statements to be his address.

3.  Summary of the parties’ positions (on liability issues)

3.1  As highlighted by Mr Lau in opening, the present proceedings concern disputes between owners of neighbouring plots. As stated at §1.9 (1) above, Mr Lau placed emphasis on two periods, namely 2008 and 2014 respectively for the Green Area and the Red Area. This is because, as observed by Joseph Wong, the Green Area was fully enclosed within walls from February 2008 onwards and the Red Area within fences since 2014.

3.2  The Relevant Defendants’ position in closing may be summarized as follows:-

(1) On the issue of estoppel by standing by, Mr Lau submitted that following the enclosures of the Occupied Areas in 2008 and 2014, there were visible and significant structural changes and in the face of these significant changes, the plaintiff simply stood by and did nothing until the demand letters were issued in October 2017: §1.3 above. He submitted that a case for estoppel was made out and invited the court to “tailor a relief to “feed” the estoppel”, such relief ranging from his primary position that the plaintiff is estopped from asserting its right to evict the Relevant Defendants to his secondary position that the Relevant Defendants should be granted a license on terms revocable on reasonable notice.

(2) On his fall-back position on adverse possession and/or encroachment, Mr Lau accepted that his case on encroachment could only succeed if he could establish the requisite elements to ground a claim for adverse possession. He submitted that the evidence adduced at the trial was sufficient to establish the defence of adverse possession in respect of only the Green Area but pursed a relief based on encroachment.

3.3  Mr Chan disagreed. The gist of the plaintiff’s arguments is as follows:-

(1) The Relevant Defendant’s primary case on estoppel was demurrable, as crucial elements of which would render conduct unconscionable have not been pleaded and in any event not proved. Further, even were any estoppel established, there was no evidence adduced at the trial on the expenditure or maintenance on the Occupied Areas and the court is therefore deprived of the opportunity to weigh the proportionality between the result the Relevant Defendants seek to achieve and the detriment which was allegedly suffered.

(2) On the Relevant Defendants’ case on adverse possession and/or encroachment, the Relevant Defendants have fallen far short of the burden of adducing cogent and compelling evidence to establish adverse possession of the Green Area, in that the factual evidence comprised solely the 2^nd defendant’s own self-serving assertions.

3.4  I shall first summarize the evidence relating to the liability issues, namely that of the 2^nd defendant and Joseph Wong.

4.  The 2^nd defendant’s evidence

4.1  The following matters are not in dispute.

(1) On 3 April 1990, the plaintiff purchased Lot 1212C3RP in Demarcation District No 115, Yuen Long (“Lot 1212C3RP”) from the sons of one Mr Lam Kai Fong (林啟芳) (“KF Lam”). KF Lam (now deceased) and the Deceased belonged to the same clan and were distant relatives.

(2) Lot 1212C3RP was subsequently divided into various portions of which the Land form part.

(3) The Deceased’s Land was previously owned by the Deceased’s father. Through a number of transactions which have not been suggested to be material to these proceedings, the Deceased became the sole owner of the Deceased’s Land on 13 October 1980.

(4) The Deceased is survived by his wife and six children. The 2^nd defendant, the youngest son, was born in January 1965.

4.2  According to the 2^nd defendant, some time before 1977, the Deceased and his family started to reside at a stone house erected on the Deceased’s land. The evidence in relation to their possession of the Occupied Areas is set out in very brief terms at the 2^nd defendant’s first statement §§14-17.

4.3  At his first statement §14, the 2^nd defendant said, amongst other things:-

“因為家居人數較多，我父親於1977年前已由被告土地伸延出去佔用當時屬於林啟芳的土地，即綠色部份及部份紅色部份（當時部份紅色部份是向北伸延至林啟芳的魚塘邊），作為我家用途之用。由父親告知，他和母親及兄長林定邦已將鐵絲網圍住綠色部份及部份伸延至林啟芳魚塘的紅色部份作為被告土地的一部份… 之後，我哥哥林定邦也曾經在綠色部份及部份紅色部份維修該鐵絲網及加上鐵閘，林啟芳或其家人也沒有阻止。…”

4.4  Mr Lau relied heavily on the following part of the 2^nd defendant’s first statement §15, which reads:-

“根據我的記憶，早於1980年前[2]，我家已將綠色部份及部份紅色部份用來起了豬欄來養住，部份用來養雞及養白鴿，種植果樹（如芒果樹，番石榴樹，木瓜樹，香蕉樹，油加利樹及番薯），番薯葉則用來養豬之用，餘下地方作為家中成員作消閑用途…”

4.5  At his first statement §16, the 2^nd defendant said:-

“大約在1980年時代[3]，我們將豬欄改建成可以供人住的居所，給林世傑婚後居住。”

4.6  The 2^nd defendant’s first witness statement §17 reads:-

“在2001年4月4日[4]，我的父親獲取Building Licence，在被告土地重建小型屋宇。因重建時，我們將向南綠色部份的樹木及圍網移除，用來放置建築材料及拆除原來屋宇的廢料，而我們繼續佔用及管有紅色部份及綠色部份，並不容許他人佔用。重建後仍然將紅色部份及綠色部份圍上，用作己用，直至今天。”

4.7  As I understand the evidence, the 2^nd defendant’s first statement §17 refers to the demolition of the stone house erected on the Deceased’s Land referred to at §4.2 above and the construction of the House in its place.[5]

4.8  As regards the evidence pertaining to the Relevant Defendants’ case on estoppel by standing by, as observed Mr Chan, the 2^nd defendant was silent on the plaintiff’s knowledge of the activities which took place at the Occupied Areas after 2008 and no evidence was adduced on the expenditures and maintenance incurred by the Relevant Defendants from 2008 onwards. Mr Lau did not contend otherwise.

4.9  The 2^nd defendant gave the following evidence when cross-examined by Mr Chan.

(1) The 2^nd defendant’s mother did not come forward to give evidence because she is of an advanced age. The 2^nd defendant had ascertained from his siblings that their evidence would have been substantially similar as his and therefore they were not asked to be witnesses.

(2) When he was challenged on the fact that he did not give evidence on the precise locations of the fencing from 1977 onwards, he referred to some of the photographs in the hearing bundle.[6]

(3) In relation to his first statement §§15 and 16,[7] he said that only a small part of the pigsty (and the house eventually rebuilt following the demolition of the pigsty as the residence of 林世傑) were within the Occupied Areas.

(4) Although the Building Licence was obtained in 2001, the construction of the House did not commence until April 2007. At the same time, to the west of the Red Area, KF Lam was also constructing two houses. The 2^nd defendant accepted that none of the construction activities took place within the Occupied Areas at that time.

(5) He further accepted that he knew, at least from 2008 onwards, that the Relevant Defendants were not the owners of the Occupied Areas.

5.  Joseph Wong’s evidence

5.1  At the Relevant Defendants’ Written Closing §44, it was accepted that the precise scope and location of the fencing cannot be delineated in the evidence. In the light of the Relevant Defendants’ concession, it seems to me that it is not necessary to refer to Joseph Wong’s evidence in any great detail. Indeed, Mr Chan in his written closing hardly made any reference to Joseph Wong’s evidence.

5.2  Mr Lau relied on the following aspects of Joseph Wong’s evidence as being consistent with the Relevant Defendants’ case.

(1) First, he relied on Joseph Wong’s observation that at least significant parts of the Green Areas have been covered by vegetation between 1997 to 2006.

(2) Secondly, he relied on Joseph Wong’s observation that there were reconstruction works in that a roof was replaced in around 1979. He submitted that the foregoing was consistent with the Relevant Defendants’ case that, in around 1980, the pigsty was reconstructed and that the roof was changed.

(3) Thirdly, he relied on Joseph Wong’s observation that at least by 1992 (according to the survey sheets) and 1994 (according to the aerial photographs), some fencing had been erected at the southern end of the Green Area.

5.3  I do not believe that Mr Lau’s characterization of Joseph Wong’s evidence was disputed by Mr Chan. I do not, however, agree with Mr Lau that §§5.2(1) and (2) above are consistent with the Relevant Defendants’ case.

5.4  As regards §5.2(1) above, Joseph Wong’s observation was that a portion of the Green Area was covered with wild vegetation. As invited by Mr Lau,[8] I have considered the relevant aerial photographs and there was no discernible “pattern” of the vegetation in the Green Area which appears to me to be more consistent with wild instead of cultivated vegetation. I also note that Mr Lau did not put to Joseph Wong that his characterization of wild vegetation was erroneous.

5.5  In relation to §5.2(2) above, Joseph Wong’s evidence was that reconstruction works were carried out to a portion of the structures within the Deceased’s Land in 1979. Mr Lau did not put to Joseph Wong that the reconstruction works took place in the Occupied Areas. Further, the timing is inconsistent with the 2^nd defendant’s evidence that the demolition of the pigsty took place in early 1980s: §4.5 above.

6.  The Relevant Defendants’ case on estoppel

6.1  The applicable principles are not in dispute.

6.2  As explained by Recorder H Wong SC at Best Star Holdings Limited v Lam Chun Hing & Ors, HCA 409 of 2008, 22 February 2012 §136, a proprietary estoppel by standing by may arise in the following circumstances:-

“If a stranger begins to build on my land, supposing it to be his own, and I, perceiving his mistake abstain from setting him right, and leave him to persevere in his error, a Court of Equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land what is own. It considers that, when I saw the mistake into which he had fallen, it was my duty to be active and to state my adverse title; and that it would be dishonest in me to remain wilfully passive on such an occasion, in order afterwards to profit by the mistake which I might have prevented.”

6.3  It is common ground that the touchstone of the doctrine is unconscionability. At Li Kwok Ching v Secretary for Justice, CACV 88 of 2015, 13 January 2016 §32, Lam VP (as he then was) formulated the principle as this: it is unconscionable that a landowner should knowingly stand by while a stranger incurs a detriment or disadvantage acting upon some misapprehension of his legal position regarding the land.

6.4  Mr Chan made a forensic observation that the Relevant Defendants had in closing decided to shift its primary case from adverse possession to proprietary estoppel. That proprietary estoppel was originally the Relevant Defendants’ secondary case in opening was, Mr Chan submitted, a recognition of its weakness and it has become even weaker following the close of evidence.

6.5  On the issue of whether an estoppel is made out, Mr Chan made the following points.

(1) First, he submitted that there is an unanswerable pleading point (and unanswered by Mr Lau) that the Relevant Defendants have not pleaded that they had acted upon some misapprehension of his legal position regarding the Occupied Areas, and in any event, it was the 2^nd defendant’s own evidence that the Relevant Defendants knew that they did not own the Occupied Areas.

(2) Secondly, apart from the pleaded assertion that the plaintiff knew or ought to have known of the Relevant Defendants’ occupation of the Occupied Areas and the development thereon and the upkeep and maintenance of the same, the Relevant Defendants have not adduced any evidence to supported the pleaded averment.

6.6  In my view, Mr Chan is right in his first submission. The Relevant Defendants’ case on proprietary estoppel is pleaded at Amended Consolidated Defence and Counterclaim §12 (in respect of the Green Area) and §24 (in respect of the Red Area).[9] There is no plea that the Relevant Defendants acted upon some misapprehension of their legal position regarding the Occupied Areas.

6.7  Further, as set out at §4.9(5) above, the 2^nd defendant accepted that he knew that he did not own the Occupied Areas, at least from 2008 onwards. In these circumstances, the observations of Lam VP (as he then was) at Li Kwok Ching §§21 and 33 to 35 are apposite. At those paragraphs, the Court of Appeal upheld the findings by the court below that it was not unconscionable for the Government to assert its title over the land in question. In particular at §35, Lam VP (as he then was) said:-

“… There was no explanation by the plaintiff or Lee Tim-choi why, if either of them genuinely believed that he had a right to erect the new wall (as repositioned) and encroached upon the Land, there was such a time gap between the construction of the house and these works. The judge was plainly right in holding that the court could not be satisfied that there was mistaken belief or reliance upon such beliefs of the part of the Plaintiff in carrying out such works.”

6.8  The present case is factually even more advantageous to the plaintiff, as unlike the factual findings in Li Kwok Ching (where there was an absence of explanation by the plaintiff in that case of his belief), there is an express acceptance by the 2^nd defendant that there was no mistaken belief. On this ground alone, the Relevant Defendants’ case on estoppel by standing by fails.

6.9  In so far as it is necessary, I also agree with Mr Chan’s second submission. As stated at §4.8 above, no evidence has been adduced by the Relevant Defendants on the plaintiff’s knowledge of the activities which took place at the Occupied Areas after 2008. Whilst the 2^nd defendant’s evidence made reference to certain works being carried out by the plaintiff shortly after its acquisition of the Land in 1990, the 2^nd defendant expressly did not adduce any evidence on the plaintiff’s knowledge of the activities carried out in 2008 or thereafter on which the Relevant Defendants relied in closing. Where there is no such evidence adduced by the Relevant Defendants, I decline to accede to Mr Lau’s invitation to draw an adverse inference against the plaintiff, on the basis that no factual evidence was adduced by it, to the effect that it did have knowledge and yet stood by the Relevant Defendants’ enclosure and building activities in 2008 and 2014.

6.10  Even if an estoppel by standing by were made out, as set out at §4.8 above, no evidence was adduced by the Relevant Defendants on the expenditures and maintenance incurred by the Relevant Defendants from 2008 onwards. There is equally no evidence adduced by the Relevant Defendants as to whether the structures erected on the Occupied Areas (at least in the Red Area) were incoming producing. I believe Mr Lau was cognizant of the difficulties in this part of his case caused by the lack of evidence, as he submitted that the Relevant Defendants are entirely in the court’s hand as to what is the appropriate relief.

6.11  There is no real quarrel between the parties that in determining what is the appropriate relief, the court will seek the minimum equity to do justice to the party relying on the estoppel and there must be proportionality between the expectation and the detriment: Crabb v Arun District Council [1976] Ch 179 at 198G and Sledmore v Dalby (1996) 72 P&CR 196 at 209.

6.12  I bear in mind that the present case does not involve the abode of the 2^nd defendant and his family, as the House is not within the Occupied Areas: §2.3 above. There is no evidence on who are the users of the temporary structures in the Red Area and the structures in the Green Area are peripheral to the use of the House as a residence (for storage and recreational use). Also by reason of the matters stated at §6.10 above, I am therefore not in any position to properly assess the proportionality between the expectation and the detriment in respect of the Red Area and it appears to me that any detriment as regards the Green Area cannot be said to be substantial. In these circumstances, I do not see how the Relevant Defendants can satisfy me that the minimum equity lies in the Relevant Defendants’ primary position, namely the plaintiff is estopped from asserting its right to evict the Relevant Defendants: §3.2(1) above.

6.13  Had it been necessary to grant relief, I would have accepted Mr Chan’s submission that even if I were to accede to Mr Lau’s secondary position, namely to grant the Relevant Defendants a licence to remain on the Occupied Areas revocable on reasonable notice, such notice would have expired by now given the fact that the writs were issued in November 2017.

6.14  For the reasons stated in this section, I reject the Relevant Defendants’ case on estoppel by standing by.

7.  The Relevant Defendants’ case on adverse possession and/or encroachment

7.1  There is again no real difference between counsel on the applicable principles. They may be summarized as follows.

7.2  In Richlands Properties Ltd v Occupiers of Lot 1347 of DD102 & Anor [2021] 4 HKLRD 262 at §§22-25, DDJ Zabrina Lau observed that:-

“22. A person claiming to be in adverse possession must be shown to have both factual possession with a sufficient degree of exclusive physical control and the requisite intention to possess: Wong Tak Yue v Kung Kwok Wai David (No 2) (1997–98) 1 HKCFAR 55, 68E–F, per Li CJ.

23. The question as to what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances. Acts of possession done on parts of land to which a possessory title is sought may be evidence of possession of the whole. Whether or not acts of possession done on parts of an area establish title to the whole area must, however, be a matter of degree: Incorporated Owners of San Po Kong Mansion v Shine Empire Ltd (2007) 10 HKCFAR 588, 592J–593I, per Nazareth NPJ.

24. The burden is on the squatter to prove uninterrupted possession for the requisite period and there is no presumption, whether legal or evidential, of continued possession in favour of a squatter even if adverse possession is established to have commenced: On Yip Property Development Co Ltd v Kwok Tai Kuen Alan (HCMP 3192/2013, [2014] HKEC 650, 15 April 2014), [8], per Cheung CJHC (as he then was).

25. The question of intention to possess is one of fact which is dependent on an assessment of all the circumstances in a particular case. This 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 is not himself the possessor, so far as it is reasonably practical and so far as the process of the law will allow: Wong Tak Yue, p.68.”

7.3  The evidence required to establish the essential elements of adverse possession must be “compelling”, which gives recognition to the serious consequence of a finding that the title of a paper owner is displaced by an adverse possessor, although the standard of proof is still the normal civil standard, ie on a balance of probabilities: Tsang Foo (aka Fu) Keung and Key Kwong Development Ltd v Chu Jim Mi Jimmy [2015] 6 HKC 200 at §42 per Chow J; Tsang Foo Keung v Chu Jim Mi Jimmy [2017] 3 HKC 527 at §22(4) per Harris J.

7.4  It is a further common ground between the parties that the relevant limitation period is 20 years as the Relevant Defendants’ possession of the Occupied Areas is alleged to have commenced before 1 July 1991: sections 7(2) and 38A of the Limitation Ordinance Cap 347.

7.5  Yet another common ground is that the defence of encroachment can only get off the ground if the Relevant Defendants are able to succeed on a case of adverse possession although the relief between the two is different: Secretary for Justice v Chau Ka Chik Tso (2011) 14 HKCFAR 889 at §§20 and 59. As stated at Jourdan & Radley-Gardner: Adverse Possession (2^nd Edn) §25-42:-

“Where there are two leases of adjacent land owned by the same landlord, and the tenant of one, A, encroaches on the land of the other, B, for a period in excess of the limitation period, B’s leasehold title to the land is extinguished… The effect of encroachment is that the land encroached on is treated for all purposes as forming part of A’s lease rather than B’s lease…”

7.6  As stated at §3.2(2) above, the Relevant Defendants only pursue their fall-back case on adverse possession or encroachment in respect of the Green Area.

7.7  In closing, the predominant evidence referred to by Mr Lau which was said to be supportive of the Relevant Defendants’ case on factual possession was a part of the 2^nd defendant’s first statement §15: §4.4 above.[10] Mr Lau submitted that this part of the 2^nd defendant’s evidence was not seriously challenged and therefore sufficient evidence has been adduced to establish a claim for adverse possession of the Green Area.

7.8  I am unable to agree that such scanty bare assertions can amount to compelling evidence to support the essential elements of adverse possession.

7.9  The activities alleged at relevant parts of the 2^nd defendant’s first statement §15 are: (1) raising pigs at the pigsty, (2) rearing chickens and pigeons, (3) growing various fruit trees and (4) family’s recreational activities. I am not satisfied that the foregoing activities, whether individually or collectively, can amount to sufficient evidence of continuous exclusive possession of the Green Area for the requisite time period for the following reasons.

(1) As a general observation, as submitted by Mr Chan, the 2^nd defendant’s first statement §15 is a composite statement dealing with the Occupied Areas and does not deal specifically with the Green Area. As the Relevant Defendants have in closing abandoned their case on adverse possession in respect of the Red Area, it is incumbent upon them to identify which activities were conducted at the Green Area. Mr Lau did not attempt to do so.

(2) In relation to the allegation of raising pigs at the pigsty, as stated at §4.9(3) above, the 2^nd defendant accepted that only a small part of the pigsty was within the Occupied Areas without identifying which part of the Occupied Areas. The 2^nd defendant said that the pigsty was a covered structure of an area of about 300 ft². No such structure can be seen within or near the Green Area in any of the relevant aerial photographs (for example those of years 1979 to 1982).

(3) In relation to the allegations of rearing chickens and pigeons and planting of fruit trees, there is no other evidence to support the bare allegations (for example, purchase of poultry feed or sale of fruits or vegetables). As stated at §5.4 above, I do not find the aerial photographs to be consistent with the allegation of cultivated vegetation. I note that Mr Lau did not suggest that any of the other photographs in the hearing bundle[11] can be amount to probative evidence of these allegations. These other photographs do not show any rearing of chickens and pigeons and do not show any or any extensive cultivated vegetation.

(4) In any event, it is part of the Relevant Defendants’ pleaded case that the Green Area was vacant from 2000 to 2010 and served as a recreational area for the Deceased’s family.[12] As regards the reactional use, no submission was made by Mr Lau that such use could in and of itself amount to exclusive possession.

7.10  It must be emphasized that the part of 2^nd defendant’s statement §15 relied upon by Mr Lau is, at best, evidence of use and not evidence of exclusive possession. As Lam VP (as he then was) said at Gotland Enterprises Ltd v Kwok Chi Yau, CACV 260 of 2014, 19 Jan 2016 §§36 to 37:-

“36. One must not lose sight of the exclusive character of the occupation in order to establish factual possession. Not every use or occupation of land can satisfy this requirement. The Judge gave the example of growing of fruits on a piece of open land. If a person only plants fruit trees without excluding others from entering the land, he is only using the land instead of occupying the same exclusively. It is akin to leaving some articles on some private property (where the owner is at liberty to take steps to remove the articles as abatement of trespass) and no matter how long the articles were left there (and not removed by the owner of the land), it would not constitute adverse possession.

37. Though it is not absolutely essential to have the land fenced off in order to establish exclusive occupation, this is the classic way of doing so. In the absence of any physical barriers set up to exclude others from entering the land, one must examine what steps were taken by the person claiming exclusive occupation to exclude others.”

7.11  Where, as here, the evidence is conceded by Mr Lau to demonstrate that fencing was only erected at the southern end of the Green Area in 1992 or 1994,[13] I do not believe that there is any or any sufficient evidence of the steps that were taken by the Relevant Defendants to exclude the world at large for the requisite duration.

7.12  In view of the findings made above, I do not find it necessary to draw any adverse inference against the Relevant Defendants for their failure to call any of the 2^nd defendant’s siblings to come forward to give evidence.

7.13  For completeness, I also deal with Mr Chan’s argument that the occupation by the Relevant Defendants of the Occupied Areas was more likely than not pursuant to a licence granted by KF Lam prior to the acquisition of the Land by the plaintiff in April 1990. By reason of how the Relevant Defendants have put their case, I do not regard this issue as relevant. As the writs were issued In November 2017, the relevant limitation period of 20 years began to run in November 1997. This is not a case where the Relevant Defendants require the alleged “licence period” (ie pre April 1990) to make up sufficient time for the 20-year limitation period.

7.14  For the reasons stated in this section, I reject the Relevant Defendants’ case on adverse possession, and as a result, also their case on encroachment in respect of the Green Area.

8.  Relief claimed by the plaintiff

8.1  The plaintiff claims mesne profits, demolition costs and possession of the Occupied Areas. Mr Lau did not dispute that the plaintiff is entitled to the claimed relief should the Relevant Defendants fail to establish their case on estoppel and encroachment.

8.2  As a general observation, as I understand Mr Lau, his cross-examination and submissions made in closing sought to raise a number of queries in relation to the correctness of the plaintiff’s expert evidence, and flowing from the foregoing, the Relevant Defendants invited me to decline to award any damages or to award only nominal damages to the plaintiff. In this process, as the Relevant Defendants did not adduce any of their own expert evidence, they have not proffered an alternative assessment on the basis that the query raised by them were valid. With respect, it seems to me that the line taken by the Relevant Respondents is not the most attractive approach.

Mesne profits

8.3  The plaintiff relies on the expert opinion of YH Chan. It will be recalled that he was unable to attend the trial: §1.11 above.

8.4  The methodology employed by YH Chan was direct comparison which involved identification and analysis of rental transactions that are of similar nature as the Occupied Areas. Mr Lau did not argue that this an inappropriate methodology.

8.5  As YH Chan was of the view that the existing use of the Occupied Areas seemed to be garden or storage use of the House,[14] he therefore gathered relevant short term tenancies for garden use entered into between occupiers and the government in the Yuen Long District as comparables. After the assemble of comparables, he made necessary adjustments in respect of time, quantum and location so as to derive an appropriate unit rent of the Red Area and the Green Area.

8.6  Mr Lau criticized YH Chan’s opinion on the following aspects.

(1) It was said that Mr Chan was erroneous in assessing the Red Area and the Green Area separately, as there should be a downward adjustment for larger pieces of land (ie for the whole Occupied Areas).

(2) The adoption of Government leases was inappropriate as it was unclear whether there is any meaningful comparison between Government leases and private leases. In particular, Mr Lau pointed out that the plaintiff was the owner of a lot in the vicinity which was not used as a comparable.

8.7  I do not regard Mr Lau’s criticisms as well-founded.

8.8  In relation to Mr Lau’s first complaint, as pointed out by Mr Chan, the Green Area and the Red Area were treated largely as distinct by the Relevant Defendants themselves. They were fenced off at different times[15] and their uses were also different: §2.3 above.

8.9  Even if there should be an adjustment by reference to land size, every 1,000 ft² difference would, according to YH Chan, cause only 1% upward or downward adjustment depending on whether the comparable is larger or smaller in area.[16] Mr Lau did not attempt to show that his criticism, even if valid, cannot be dealt with by a small adjustment (say 1 or 2%) to the figures assessed by YH Chan. None of the 10 comparables[17] (ranging from 102 to 872 ft²) were larger or smaller than the Green Area (580 ft²) and the Red Area (821 ft²) by 1,000 ft².

8.10  In relation to Mr Lau’s second complaint, there is no evidence that the neighbouring lot owned by the plaintiff has been rented out. I am unable to accept Mr Lau’s submission that, as the neighbouring lot was left vacant, it tended to show that the Occupied Areas might not have an available market at all, as there was simply no evidence that the plaintiff had attempted to rent out the neighbouring lot but failed.

8.11  Further, as Mr Lau accepted that direct comparison (with adjustments for factors such as location) was an appropriate methodology, I fail to see why the non-inclusion of the plaintiff’s neighbouring lot as a comparable is relevant. If it is the Relevant Defendants’ case that the Occupied Areas were not (or less) marketable, one would have thought that this may be demonstrated by comparing the features of the Occupied Areas with the comparables selected by YH Chan. Mr Lau did not attempt to do so.

8.12  I further do not accept Mr Lau’s criticism of YH Chan’s choice of using Government leases as comparables. As pointed out at Fan Chun Keung v The Secretary for the Environment, Transport and Works, LDMR 5 of 2004, 2 November 2005 §10, in valuation exercises, the comparables chosen are bound to differ in certain aspects from the subject site. Apart from raising a query, there is no evidence proffered, and no submissions made, by the Relevant Defendants that rents for private leases are habitually lower than those for Government leases and therefore YH Chan’s assessment represented an inflated claim.

8.13  I therefore accept the YH Chan’s valuation of the monthly rent of the Red Area and the Green Area.

8.14  In relation to the duration for which mesne profits should be awarded, the plaintiff submitted as follows (to which the Relevant Defendants did not submit to the contrary).

(1) In relation to the Green Area, although it was completely fenced off in 2008, as the plaintiff’s claim is subject to a six-year limitation period, the commencement date should, for convenience, be taken to start on 1 December 2011.

(2) In relation to the Red Area, it is clear from the aerial photographs that construction thereon started and effectively completed sometime between June 2013 and March 2014 and a starting date of 1 January 2014 should be adopted.

(3) Since the valuation report was prepared in 2019, the monthly rent figures were provided only up to June 2019 and the June 2019 figure should be adopted for the period thereafter.

8.15  I will assess the plaintiff’s claim in accordance with the preceding paragraph.

8.16  Mesne profits for the Green Area from 1 December 2011 to 31 May 2022 are therefore assessed as follows.

	Monthly Rent (HKD)	Rent Payable (HKD)
Dec 2011	487.00	487.00
2012	516.00	6,192.00
2013	580.00	6,960.00
2014	597.00	7,164.00
2015	644.00	7,728.00
2016	650.00	7,800.00
2017	679.00	8,148.00
2018	719.00	8,628.00
2019	742.00	8,904.00
2020	742.00	8,904.00
2021	742.00	8,904.00
Jan-May 2022	742.00	3,710.00
	Total	83,529.00

8.17  Mesne profits for the Red Area from 1 January 2014 to 31 May 2022 are therefore assessed as follows.

	Monthly Rent (HKD)	Rent Payable (HKD)
2014	846.00	10,152.00
2015	911.00	10,932.00
2016	920.00	11,040.00
2017	961.00	11,532.00
2018	1,018.00	12,216.00
2019	1,051.00	12,612.00
2020	1,051.00	12,612.00
2021	1,051.00	12,612.00
Jan-May 2022	1,051.00	5,255.00
	Total	98,963.00

8.18  For the period after 31 May 2022, mesne profits are to continue at the 2022 monthly rent until possession of the of the Green Area and the Red Area is delivered by the Relevant Defendants to the plaintiff.

Demolition costs

8.19  There is no dispute between the parties on the scope of the demolition works. According to KP Wong, the works entailed the demolition of four temporary structures (totaling 59.9 m²) and a canopy (16 m²). At §4.7 of his Report, KP Wong estimated that the costs of the demolition works were in the sum of HK$311,985.20.

8.20  Mr Lau challenged KP Wong’s evidence on two aspects. First, it was said that KP Wong had over-estimated the resources required to carry out the demolition works. Secondly, he complained that the profit margin built into KP Wong’s assessment was excessive.

8.21  KP Wong estimated that 106 man-days are required to demolish the five unauthorized structures and to clear all debris from site. The Relevant Defendants did not adduce any evidence on what instead should be a reasonable estimate. Instead, Mr Lau made a number of forensic observations.

8.22  First, Mr Lau submitted that it was KP Wong’s own evidence that the demolition works were simple. I do not see how that assists the Relevant Defendants, as time is still required carry out simple works.

8.23  Secondly, Mr Lau submitted that as the insurance premium was only HK$12,000, it is improbable that an insurer would be willing to accept a premium for as low as around HK$100 per man day. I am not in a position to assess the correctness of that submission, as there is simply no evidence before me as to how insurance premiums are calculated or how its amount can shed light on the number of man-days required for a particular task. One would have thought that even if a job required one man-day, the associated risks (such as working in an inherently risky environment involving the use of hazardous tools) would have a significant bearing on the insurance premium.

8.24  Thirdly, Mr Lau referred to the Lands Department’s demand that the unauthorized structure had to be demolished within 28 days and submitted an estimate of 106 man-days would make it impossible to comply with the demand. In my view, Mr Lau’s submission is not a cogent one. First, it ignores KP Wong’s evidence that four workers would be on site to carry out the demolition works. The 26.5 days (106 man-days divided by four) therefore required is within the 28 day period stated in the Lands Department’s demand, even if it were a real or hard deadline. There is however no evidence before the court that the time period imposed by the Lands Department was as a result of assessment of time required carried out by it (as opposed to a standard demand) or that time extensions are not ordinarily given by the Lands Department.

8.25  Mr Lau next submitted that the 30% profit margin estimated by KP Wong is excessive. I note that this is a gross profit margin as no overhead was built into any of the costs item (namely Items 1 to 10 of KP Wong’s table at §4.7 of his report). I am unable to say that this is unreasonable and the Relevant Defendants have certainly not adduced any evidence to suggest that it is.

8.26  For the reasons stated above, I do not regard any of the tangential criticisms made by Mr Lau to be valid and I accept KP Wong’s estimate (ie HKD 311,985.20 (“Assessed Demolition Costs”)). The Red Area should be apportioned a greater portion of the Assessed Demolition Costs, as the bulk of the unauthorized structures are situated in the Red Area. Doing the best I can, it seems to me that 60% of the Assessed Demolition Costs should be attributed to the Red Area.

8.27  As a further general observation, where, as set out in the paragraph following, the Relevant Defendants made an open counter-offer at the trial to carrying out the demolition works, one would have expected that they would have looked into the costs to do so. Even if the Relevant Defendants were not minded to engage expert witness, evidence of quotations obtained by them would have been the direct evidence to challenge KP Wong’s estimate. There is no evidence adduced by them that the demolition works can be carried out at lower costs.

8.28  The Relevant Defendants made a counter-offer to undertake to demolish the unauthorized structures and to indemnify the plaintiff should the they fail to do so within the time period ordered by the court. Similar submissions were made at the hearing before Master Maurice Lam on 30 October 2020[18] to (unsuccessfully) resist the plaintiff’s application to adduce expert evidence on demolition costs. In addition to the observation made in the preceding paragraph (namely there is no evidence that the Relevant Defendants would benefit financially from the counter-offer), I consider the following matters set out by the Master in his Decision and repeated by Mr Chan in closing are cogent reasons for not acceding to the counter-offer.

(1) Given the Government’s threat of re-entry, the plaintiff must carry out the demolition of the subject structures expeditiously once the proceedings have been finally determined.

(2) There is no reason why the plaintiff should be forced to wait for the Relevant Defendants’ attempt to dismantle the structures particularly when it is not known whether such efforts would comply with the Government’s requirements.

(3) A “full indemnity” for the plaintiff in the event that it has to carry out its own demolitions after the Relevant Defendants’ attempts would simply generate satellite litigation as to whether the Relevant Defendants’ attempts are satisfactory and if not, what costs should be allowed as part of the “full indemnity”.

Order for possession

8.29  In the event that the Relevant Defendants are not required or given the opportunity to demolish the unauthorized structures themselves, they asked for 14 days for them to deliver possession of the Occupied Areas to the plaintiff. I do not regard this to be an unreasonable period.

9.  Conclusion

9.1  For the reasons stated above, I reject the Relevant Defendants’ defence and enter judgment in favour of the plaintiff.

(1) The 1^st defendant do deliver possession[19] of the Green Area identified in the Plan within 14 days hereof.

(2) The 1^st defendant do pay mesne profits to the plaintiff in respect of the Green Area assessed at HKD83,529 for the period commencing on 1 December 2011 and ending on 31 May 2022, and thereafter at a monthly rent of HKD742 until possession of the Green Area is delivered to the plaintiff.

(3) The 1^st defendant do pay to the plaintiff 40% of the Assessed Demolition Costs within 14 days hereof.[20]

(4) The 2^nd and 3^rd defendants do deliver possession of the Red Area identified in the Plan within 14 days hereof.

(5) The 2^nd and 3^rd defendants do pay mesne profits to the plaintiff in respect of the Red Area assessed at HKD98,963 for the period commencing on 1 January 2014 and ending on 31 May 2022, and thereafter at a monthly rent of HKD1,051 until possession of the Red Area is delivered to the plaintiff.

(6) The 2^nd and 3^rd defendants do pay to the plaintiff 60% of the Assessed Demolition Costs within 14 days hereof.

9.2  The plaintiff does not seek pre-judgment interest. Interest on §§9.1(2), (3), (5) and (6) above will therefore run at the judgment rate until payment.

9.3  The Relevant Defendants’ counterclaims are dismissed.

9.4  I also make a costs order nisi that the Relevant Defendants do pay to the plaintiff the costs of the consolidated action and the counterclaims (including any costs reserved), to be taxed if not agreed with a certificate for counsel.

9.5  I thank both counsel for their helpful assistance.