THE INCORPORATED OWNERS OF KWAI FONG TERRACE v. CHAN LAI MEI t/a LUI KEE

DCCJ 4014/2015

[2024] HKDC 699

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4014 OF 2015

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JUDGMENT

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A.  INTRODUCTION

1.  Kwai Fong Terrace (“the Building”) is a non-industrial building constructed on Kwai Chung Town Lot No. 380 (“the Lot”) comprising a 6-storey Commercial Complex and 3 Residential Blocks. The Lot and the Building have, for the purposes of sale, been notionally divided into 16,500 equal undivided parts or shares which have been allocated to the Building in the manner described and contained in the Schedule to the Deed of Mutual Covenant (“the DMC”) of the Building dated 27 June 1984.

2.  In the present action, the plaintiff (“P”), the Incorporated Owners (“the IO”) of the Building, claims against the defendant (“D”), Ms Chan Lai Mei, trading as “LUI KEE” (“女記”), for inter alia declaratory and injunctive reliefs in the following terms:

(1)  A declaration that D is not entitled to use the area (“the Disputed Area”) now occupied by a newspaper and book stall (“the Newspaper Stall”) built or erected within the boundary of the Lot on the ground floor outside or appertaining to the main entrance of Block 1 of the Building, or any area within the non-building area (“the Non-Building Area”) on the ground floor outside or appertaining to Block 1 and Block 2 of the Building for the operation of the Newspaper Stall or any business or commercial activities;

(2)  A mandatory injunction that D should forthwith pull down and remove the Newspaper Stall; and

(3)  A prohibitory injunction restraining D, whether by herself, her servants or agents or otherwise, from re-erecting or allowing the continuous existence of the Newspaper Stall, the unauthorized structures, installations and / or any structures, installations of a like kind.

3.  D, the owner of the Newspaper Stall, resists the claim and counterclaims for adverse possession of the Disputed Area.

4.  Mr Chase Pun appears for P and Miss Hannah Tang appears for D.

B.  P’s CASE

5.  P complains that D has, without any consent of P and without first obtaining any prior licence, permit, consent or approval from the Building Authority in breach of the Buildings Ordinance (“the BO”) (Cap 123), wrongfully occupied the Disputed Area and erected structures or installations for the purposes of operating the Newspaper Stall.

6.  P also complains that the Newspaper Stall has blocked the Non-Building Area to the detriment of P:

(1)  The Non-Building Area is a common area of the Building. Under the DMC, common areas are defined to mean and include the entrances and halls, lift lobbies, staircases, corridors, landings and passages of and in the Building.

(2)  Under the BMO (or its predecessor, the Multi-Storey Buildings (Owners Incorporation) Ordinance, before 1993) common parts mean the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner; and unless so specified or designated, those parts specified in Schedule 1.

(3)  Furthermore, pursuant to the Special Condition No. 7 (“the Special Condition (7)”) of the New Grant No. 5961 (“the New Grant”) governing the Lot, written approval in writing of the Secretary for the New Territories shall be first obtained for the erection of any structure on the Non-Building Area.

(4)  On 18 June 1987, Government Notice No. 1938 was given that the Principal Government Land Agent had made an Order, under section 15(1) of the Roads (Works, Use and Compensation) Ordinance (Cap 370), directing easement (“the Easement”) to be created over portion of the Lot covering the Non-Building Area.

(5)  As such, the Non-Building Area is required to be kept free of obstruction, and it has become a pavement used by pedestrians as a means of access to Kwai Chung Road.

(6)  District Lands Office / Tsuen Wan and Kwai Tsing (“the District Lands Office”) of the Lands Department has received complaint regarding the Newspaper Stall erected on the Non-Building Area without prior written approval, thereby violating the Special Condition (7). Moreover, the Newspaper Stall has also caused obstruction to the Easement.

(7)  Since 2011, the District Lands Office has requested P, who was and is responsible for the management and maintenance of the Non-Building Area, to take appropriate actions to clear the Newspaper Stall.

7.  Despite P’s repeated warnings, D however takes no step or action to remove the structures and installations forming the Newspaper Stall.

8.  Under Section 1 of the DMC:

“3. Each equal undivided share in the Land and the sole and exclusive right and privilege to hold use occupy and enjoy any part of the Building shall be held by the person or persons from time to time entitled thereto subject to and with the benefit of the easements, rights, privileges and obligations herein contained.

4. The Owners shall at all times hereafter be bound by and shall observe and perform the covenants, provisions and restrictions herein contained and the benefit and burden thereof shall be annexed to every part of the Land and the Building and the undivided share or shares held therewith. The Law of Property (Enforcement of Covenants) Ordinance and any statutory amendments, modifications or re-enactments thereof for the time being in force shall apply to these presents.”

Under Section II of the DMC:

“A. The Owner of each undivided share (which has the exclusive right and privileges to hold use occupy and enjoy each Unit) Subject to the House Rules and subject to the payment by the Owner of his due proportion of the Manager’s Remuneration and Maintenance Expenses shall have the benefit of the following easements rights and privileges:-

1.  Full right and liberty for the Owner for the time being his tenants, servants, agents and licensees (in common with all persons having the like right) to go, pass and repass over and along the roadways, pavements, footpaths, pedestrian footbridges and use such of the entrance halls, lobbies, staircases, landings, arcade, passages, lifts and other common areas as form part of the Land and the Building for all purposes connected with the proper use and enjoyment of such Unit subject to the House Rules (if any) relating to such Common Areas.”

Under Section IV of the DMC:

“12. No part of the Common Areas of the Land and the Building shall be obstructed or incumbered nor shall any refuse or other matter or things be placed or left thereon nor shall any part of such Common Areas be used for any business or private purpose and no Owner will do or suffer or permit to be done anything in such Common Areas as may be or become a nuisance or cause annoyance to any other Owners or occupiers of the Building.”

Under Section V of the DMC:

“B. Powers and Duties of Manager

1. During the said term the Manager will manage the Land and the Building in a proper manner and in accordance with the Conditions and this Deed of Mutual Covenant and Management Agreement and, except as otherwise herein expressly provided, the Manager shall be responsible for and shall have full and unrestricted authority to do all such acts and things as may be necessary or requisite for the proper management of the Land and the Building. Without in any way limiting the generality of the foregoing the Manager shall have the following duties:-

…

(9) To prevent the obstruction of all Common Areas and to remove any article or thing causing the obstruction.

…

(14) To remove any structure, installation, signboard, sunshade, bracket, fitting or other things in or on the Building or other parts of the Land which have been erected in contravention of the terms of the Conditions and this Deed of Mutual Covenant and Management Agreement and/or without the written permission of the Manager (or if such permission has been given upon the expiration or withdrawal of the same) and to demand and recover from the person by whom such structure or other things as aforesaid was erected or installed the costs of such removal and the making good of any damages thereby caused.

…

(21) To prevent any person from occupying or using otherwise than in accordance with the written permission of the Manager or the provisions of this Deed any of the Common Areas.

(22) To take all steps necessary or expedient for complying with the Conditions and any statutory or governmental requirements concerning or relating to the Land and the Building for which no Owner, tenant or occupier of the Land and the Building is solely and directly responsible.”

9.  Other than the DMC, P also seeks to rely on section 18 of the Building Management Ordinance (“the BMO”) (Cap 344), which provides:

“(1) The incorporation 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.

…”

10.  Section 34I of the BMO further provides:

“(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 such building.”

11.  Based on the aforementioned matters, P has commenced the present proceedings claiming declaratory relief and mandatory and prohibitory injunctions, etc against D.

C.  D’s CASE

12.  On D’s case, she has exclusively occupied and possessed the Disputed Area, with the intention to possess the same against all persons including P, since 1986 (in excess of 20 years):

(1)  In 1986, D built and erected, for the purposes of running the Newspaper Stall, wooden structures and installations of (i) 10 × 6 feet (when the Newspaper Stall was open); and (ii) 4 × 6 feet (when the Newspaper Stall was closed) (“the 1^st Structure”) on the Disputed Area. D had also engaged a contractor to build and erect a canopy (“the 1^st Canopy”) over the Disputed Area to shelter the Newspaper Stall from rain.

(2)  In 1992, D replaced the 1^st Structure with a new wooden structure (“the 2^nd Structure”) of the same size for the continuous running of the Newspaper Stall on the Disputed Area.

(3)  From 1989, D has obtained and paid for supply of telephone service to the Newspaper Stall.

(4)  From 2000, D has installed lightings at the Newspaper Stall powered by electricity sourced from the Building.

(5)  In around 2001, D paid a contractor HK$6,500 to build a new canopy (“the 2^nd Canopy”) and repair the 1^st Canopy. D also caused a plastic curtain to be built or erected to shelter the two canopies from rain.

(6)  In 2002:

(a)  D replaced the 2^nd Structure with new metal and aluminum structure (“the 3^rd Structure”) of (i) 8 × 6 feet (when the Newspaper Stall was open); and (ii) 8 × 4 feet (when the Newspaper Stall was closed) for the continuous running of the Newspaper Stall on the Disputed Area.

(b)  D was given two metal boxes with wheels, which she put on the Disputed Area for storage purposes.

(7)  In 2014, D removed and replaced the 1^st Canopy with a new one for HK$2,000.

(8)  D’s daily routine involves receiving and arranging newspapers at the Newspaper Stall, packing any unsold items at the close of business and securing the storage with padlocks during night for security purposes.

(9)  From 1986 to 2015, D operated the Newspaper Stall 7 days a week between 0430 and 2000 hours.

(10)  From 2015, D has operated the Newspaper Stall 6 days a week between 0430 and 1600 hours.

13.  D alleges, further or in the alternative, that P is estopped from asserting proprietary rights over the Disputed Area against her. D submits that proprietary estoppel arises where a land owner acquiesces and leads the squatter to believe that he will acquire an interest in land, and he acts to his detriment in such a way as to make it unconscionable for the land owner to challenge his belief.

D.  ISSUES IN DISPUTE

14.  The issues in dispute, so far as identified by the parties, include:

(1)  In respect of P’s claim:

(a)  Are the structures and installations forming the Newspaper Stall unauthorized?

(b)  Is the Disputed Area on which the Newspaper Stall stands within the Non-Building Area and thus a common part of the Building under the DMC and the BMO?

(c)  If so, is P entitled to the relief sought?

(2)  On D’s counterclaim for adverse possession:

(a)  Has D been in continuous exclusive possession, occupation and control of the Disputed Area since 1986?

(b)  Does D have the requisite animus possidendi during her continuous exclusive possession, occupation and control of the Disputed Area since 1986?

(c)  Has D extinguished the title of the relevant owner over the Disputed Area pursuant to sections 7 and 17 of the Limitation Ordinance (“the LO”) (Cap 347)?

(d)  Is P estopped from asserting proprietary rights over the Disputed Area against D?

(e)  If D succeeds, the exact location, boundary and size of the Disputed Area?

15.  The parties are in disagreement regarding the sequence for resolving the above issues, and I have decided to approach them in the manner as discussed below.

16.  At the trial:

(1)  P has called Mr Fu King Wai, a member of the Management Committee of the Building from 2007 to 2018 and also a registered owner and resident of a unit in the Building since 2000 to testify.

(2)  D has testified herself without calling other witnesses.

E.  APPLICABLE LEGAL PRINCIPLES

E1.  Adverse possession

17.  The relevant sections in the LO are sections 7(2), 8(1), 13(1), 17 and 38A(1):

“7(2) No action shall be brought by any other person to recover any land after the expiration of 12 [20] years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person…

8(1) Where the person bringing an action to recover land, or some person through whom he claims, has been in possession thereof, and has while entitled thereto been dispossessed or discontinued his possession, the right of action shall be deemed to have accrued on the date of the dispossession or discontinuance.

13(1) No right of action to recover land shall be deemed to accrue unless the land is in the possession of some person in whose favour the period of limitation can run (hereafter in this section referred to as adverse possession) and where under the foregoing provisions of [the LO] any such right of action is deemed to accrue on a certain date and no person is in adverse possession on that date, the right of action shall not be deemed to accrue unless and until adverse possession is taken of the land.

17 Subject to the provisions of section 10, at the expiration of the period prescribed by [the LO] for any person to bring an action to recover land…, the title of that person to the land shall be extinguished.

38A(1) The time for bringing proceedings in respect of a cause of action –

(a) to recover any land

…

which accrued before 1 July 1991 shall, if it has not then already expired, expire at the time when it would have expired apart from the provisions of the Limitation (Amendment) Ordinance 1991.”

18.  D accepts that as the period of adverse possession in the present case began before 1 July 1991 the 20-year limitation period is applicable.

19.  A person claiming to be in adverse possession must be shown to have both factual possession and the requisite intention to possess (i.e. animus possidendi). The burden of proof is on the party claiming adverse possession.

20.  The legal principles governing adverse possession are generally well-established, as set out in Powell v McFarlane (1979) 38 P&CR 452 at 470-471 per Slade J, Wong Tak Yue v Kung Kwok Wai & Another (No 2) (1997-98) 1 HKCFAR 55 at 68E to 70B per Li CJ, J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419 at 436-437 per Lord Browne-Wilkinson, Incorporated Owners of San Po Kong Mansion v Shine Empire Ltd (2007) 10 HKCFAR 588 at §7 per Bokhary PJ, Cheung Kwong Yuen v Sun Hui Fang [2016] 1 HKLRD 464 at §11 per Kwan JA, Tsang Foo Keung v Chu Jim Mi Jimmy [2017] 3 HKC 527 at §§2.6 and 2.7 per Cheung JA, Lau Kwai Ping Joyce, the Executrix of the Estate of Tsang Fung Ying (deceased) v Fulland International Limited [2020] HKCFI 1501 at §§13-33 per M Ng J, and Jourdan & Radley-Gardner on Adverse Possession (2^nd Ed) at §§7-37, 7-39, 7-127, 9-18 to 9-19, 9-23 to 9-24, 13-04, 13-09 to 13-11, 13-23 to 13-29, 13-49 and 13-59, etc.

21.  While it is not necessary for me to reiterate these principles all over again, I wish to highlight, for present purposes, the following more material ones.

22.  Concerning factual possession, Slade J in Powell (supra) said at 470-471:

“Factual possession signifies an appropriate degree of physical control. It must be a single and conclusive possession, though there can be a single possession exercised by or on behalf of several persons jointly. Thus an owner of land and a person intruding on that land without his consent cannot both be in possession of the land at the same time. The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed… It is impossible to generalise with any precision as to what acts will or will not suffice to evidence factual possession… Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no-one else has done so.” (emphasis added)

23.  Exclusivity is of the essence of possession. Once possession has begun it is presumed to continue, but it can be lost when it is given up or discontinued and can be acquired by someone else when that happens (see J A Pye (Oxford) (supra) at §70 per Lord Browne-Wilkinson).

24.  It is not absolutely essential to have the land fenced off in order to establish exclusive occupation, but 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 (see Gotland Enterprises Limited v Kwok Chi Yau & Others, CACV 260/2014 (unreported, 19 January 2016) at §37 per Lam VP).

25.  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, so far as is reasonably practicable and so far as the process of the law will allow (see Wong Tak Yue (supra) at 68E-69A per Li CJ).

26.  The question of intention to possess is one of facts. In considering the weight of evidence, Li CJ stated in Wong Tak Yue (supra) at 69:

“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. The courts would scrutinise 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.” (emphasis added)

27.  Even though an intention to possess and objective acts of physical possession are two separate elements, such intention may be, and frequently is, deduced from the physical acts themselves (see J A Pye (Oxford) (supra) at 435 per Lord Browne-Wilkinson).

28.  If a person has not made it perfectly plain to the world at large, by his actions or words, that he has intended to exclude the owner as best he can, the courts will treat him as not having had the requisite animus possidendi and as consequently, not having dispossessed the owner (see Powell (supra) at 472 per Slade J).

29.  Where the squatter occupied the land and made full use of it in the way in which an owner would, there is no need for him to adduce additional evidence to establish the intention to possess after he has established occupation, use of the land in the manner as an owner would and the exclusion of the owner. However, this does not mean that there is any presumption of animus possidendi from the exclusive physical possession. The burden of proof remains on the squatter to establish the same. But where the acts in relation to the land of a person claiming title by adverse possession are equivocal and are open to more than one interpretation, those acts will not, of themselves, be sufficient to establish the intention to possess (see Lau Kwai Ping Joyce (supra) at §19 per M Ng J).

30.  The evidence to be adduced must be compelling (see Wu Yee Pak v Un Fong Leung & Others (2004) 7 HKCFAR 498 at §5 per Chan PJ). There is however no change in the standard of proof. What it means is that the evidence adduced must be of such a quality or nature that, if accepted on the balance of probabilities, is sufficient to establish both factual possession and intention to possess (see Lau Kwai Ping Joyce (supra) at §19 per M Ng J).

E2.  Proprietary estoppel

31.  The legal principles relevant to proprietary estoppel by standing by were summarized by Cheung JA in Mo Ying v Brillex Development Ltd & Another [2015] 2 HKLRD 985 [1] as follows:

“1) An estoppel by silence, inaction or acquiescence arises where ‘a reasonable man would expect the person against whom the estoppel is raised, acting honestly and responsibly, to bring the true facts to the attention of the other party known to him to be under a mistake as to their respective rights and obligations’ and this has been approved as the general principle underlying ‘estoppel by acquiescence’: see Spencer Bower on The Law Relating to Estoppel by Representation (4^th ed, 2004) para III 4.3, at p 48, citing Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890, 903F (per Lord Wilberforce). See also Lee Bing Cheung v Secretary for Justice [2013] 3 HKC 511 at [40]-[45] (DHCJ Marlene Ng).

2) A duty to speak, such as to found an estoppel on silence will arise in circumstances:

(1) ‘[w]here a person, having a title or right to property of any kind, perceives that another person is innocently, and ignorant, conducting himself with reference to the property in a manner inconsistent with such right or rights’: see Spencer Bower on The Law Relating to Estoppel by Representation (4^th ed, 2004), para III 4.4(1);

(2) ‘[w]here an owner becomes aware that someone is attempting to dispose of his property’, and in such circumstances ‘he is bound to assert his rights and, if he fails to do so, he may be estopped against the dispone’. ‘His silence may be a representation either that he has no title or that the person dealing with the property has his authority’: see Handley on Estoppel by Conduct and Election (2006), para 3-012; or

(3) ‘[w]hen anything in order to a purchase is publicly transacted, and a third person, knowing thereof, and of his own right to the lands intended to be purchased, does not give the purchaser notice of that right, he shall never afterwards be admitted to set up such rights to avoid the purchase; for it was an apparent fraud in him not to give notice of his title to the intended purchaser, and in such cases infancy… shall be no excuse’: see Savage v Foster (1723) 9 Mod Rep 35, 37 (see also Spiro v Lintern [1973] 1 WLR 1002, 1010F-1011D).”

32.  The usual elements for proprietary estoppel by standing by, as considered in Lee Bing Cheung (李炳章) v Secretary for Justice [2013] 3 HKC 511 at 526, are as follows:

(1)  In the first place the plaintiff must have made a mistake as to his legal rights.

(2)  Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant’s land) on the faith of his mistaken belief.

(3)  Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights.

(4)  Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff’s mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights.

(5)  Lastly, the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right.

33.  The more recent authorities are in favour of the adoption of a more holistic approach, as opposed to a rigid application of the legal rules. As observed in Lee Bing Cheung (supra):

“43. But such is the nature of the equity under the doctrine of proprietary estoppel that the true test is whether it will be unconscionable for the defendant to deny that which he has allowed or encouraged the plaintiff to assume to his detriment rather than ‘whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour’…” (emphasis added)

34.  If a claim for proprietary estoppel is made out, it is necessary for the court to look at the circumstances in each case to determine how the equity can best be satisfied. The discretion given to the court is a wide one and it is not bound to give effect to the claimant’s expectations, if the circumstances have changed and made it inappropriate or if there is a more appropriate form of relief to provide remedy for the unconscionability. The essence of the relief is to avoid an unconscionable result (see Lau Kwai Ping Joyce (supra) at §42 per M Ng J).

F.  ADVERSE POSSESSION

F1.  Factual findings

35.  I accept D’s evidence that she had started operating the Newspaper Stall in the same location from 1984, and in any event, her right of action should have started to accrue, as pleaded, from 1986 at the latest.

36.  When being asked, under cross examination, as to why she did not in that case plead her case of adverse possession since 1984, D’s answer is that she had opted to base her case on the Business Registration Certificate (“the Business Certificate”) of the Newspaper Stall under the name “LUI KEE” (“女記”) which was dated 4 September 1986. Her decision to rely, for the purposes of litigation, on documentary proof instead of her own memory is, in my view, entirely understandable. I do not therefore accept that there is, as submitted by P, discrepancy in D’s account, or such discrepancy would affect D’s overall credibility.

37.  I have also taken into account other contemporaneous evidence which generally corroborates D’s evidence. Photo 1 at [B/225] captures the existence of the Newspaper Stall. D recalls that photo, with D and her 8 / 9 years old son standing beside the Newspaper Stall, was taken on the first day of the Lunar New Year some time in the 1980s. D’s recollection is based on the age of her son, and P has provided no counter evidence or argument to challenge or dispute the truthfulness or accuracy of her evidence.

38.  D tells the Court that she had filled in the details of the Business Certificate herself and included “葵芳閣葵義路6至7號地下” as the address of her principal place of business. She had derived that address from the address of the Chinese Restaurant in the vicinity. She had only proceeded to correct it later on, after having been told by a postman that the numbers of the entire section of Kwai Yi Road (葵義路) were actually all wrong.

39.  I accept D’s evidence, notwithstanding P’s challenge of her credibility, that the location of the Newspaper Stall has been largely the same throughout and has not changed much in the past. It can be determined, with reference to the contemporaneous evidence and the fixtures on the ground, etc, that the Disputed Area, on which the Newspaper Stall was and is located, is somewhere between a stone lion statute (generally, “the Lion Statute”) outside the Chinese restaurant (generally, “the Chinese Restaurant”) and a fire escape exit (“the Fire Exit”) on the ground floor of the Building:

(1)  Photo (1) at [B/225], taken in 1980s, shows the Chinese Restaurant in the background. The space behind D and her son, who were standing beside the Newspaper Stall, was the Fire Exit.

(2)  Photo (2) at [B/224] also shows the Fire Exit, as well as the cream-coloured metal gate preventing external access to it. Photo (2) was, according to D, taken in 1992, slightly before photo (1) at [B/224] dated “8 2’92”.

(3)  As can be seen from the recent photos taken after the commencement of the present proceedings, there is a pair of stone lion statues standing at each end of the entrance to the Chinese Restaurant. One of them is the Lion Statute, beside which is the Newspaper Stall.

(4)  It is not in dispute, and in any event indisputable, that these lion statutes have been in existence at the same location over the past years. The Newspaper Stall can be seen, from the photos taken at different time periods, to be beside the Lion Statute: (i) photo (1) at [B/225] taken in the 1980s; (ii) photo (1) at [B/224] taken in 1992; (iii) the photo at [B/216] taken in the 1990s (as testified by D).

(5)  Mr Fu accepts that he has, after he moved into the Building in 2000, consistently seen D working at the Newspaper Stall on the Disputed Area. Mr Fu’s evidence is largely consistent with D’s case that she has never moved the Newspaper Stall away from the Disputed Area.

40.  It is relevant to highlight, at this juncture, that D does not seriously dispute, nor is it disputable on the basis of the evidence available before the Court, that the Newspaper Stall on the Disputed Area was at all material times and is (i) within the Non-Building Area; (ii) subject to the Easement; and (iii) a common part of the Building under the DMC and the BMO. D also accepts that the Newspaper Stall was built or erected without any licence, permit, consent or approval from the Buildings Authority and hence is an unauthorized structure or installation.

F2.  Factual possession

41.  Based on the above findings, and bearing in mind the applicable legal principles, I turn now to determine the issues in dispute as identified by the parties.

42.  First of all, I am satisfied that D has proved, with compelling evidence, exclusive possession of the Disputed Area; on the facts, D had sufficient degree of exclusive physical control, on her own and for her own benefit, over the Disputed Area.

43.  For the purposes of running her business of newspaper stall on the Disputed Area, under the trading name “女記” as indicated on the green notice displayed at the prominent location on site, D has built or erected structures consisting of a large metal cabinet (approximately 84 inches × 22 inches × 67 inches), an iron plate (approximately 24 inches × 72 inches) affixed on ground with expansion anchor bolt, two metal cabinets (approximately 36 inches × 24 inches × 36 inches), some beer boxes, a small rack and two outdoor umbrellas.

44.  While enclosure provides, generally speaking, stronger evidence of adverse possession, it is not indispensable. There is not much challenge from P that the large metal cabinet of the Newspaper Stall in the present case, affixed to the iron plate as a composite set, is not a portable one and cannot be freely moved around.

45.  D admits, under cross-examination, that there are members of the public walking over the Disputed Area, on which the Newspaper Stall stands, from time to time. However, as submitted by D, such temporary use of the Disputed Area by passers-by would not defeat her physical control of it, taking into account the nature of the land. It is important to bear in mind that the Disputed Area in question is part of the Non-Building Area designated to facilitate public access. Hence, both the presence of people and their continuous movement through such area are inherently inevitable.

46.  In contrast, the public access over the Disputed Area is, during the business hours of the Newspaper Stall, blocked by its sheer presence and is not free and unlimited. It is significant that the public use of the Disputed Area is, during the operation of D’s business, restrained, and the public access over it could only resume after she leaves the Newspaper Stall in the evening.

47.  Furthermore, in exercise of her physical control of the Newspaper Stall, D has locked and chained all metal cabinets after close of business to make sure that no one could remove them. D considers the act of removal of any part of the Newspaper Stall, without her consent, a commission of a criminal offence and thus illegal. The fact that a beer box was once stolen from D is not detrimental to her case. The crucial point is that D has exerted physical control over the ancillary structures and installations of the Newspaper Stall as her “private property” and has taken all necessary precautions to safeguard them.

48.  When being asked, under cross-examination, about the exact size and location of the individual components of the Newspaper Stall, D frankly admits, after trying her best to recall the details, that there may be variations in the measurements due to past changes occurred on multiple occasions. I do not accept P’s submissions that such variations make D’s evidence ‘inconsistent’, nor do I accept that D’s failure to provide minute figures as to the precise boundaries of the Newspaper Stall would defeat her possessory title.

49.  It is perhaps simply a matter of “common sense” that after so many years and considering all the changes implemented by D, it would be difficult for her to provide exact measurements (see Lee Theatre Realty Ltd v Tong Wah Jor and Others, CACV 279/2009 (unreported, 2 May 2013) at §36 per Cheung JA).

50.  On the other hand, I find it more reliable to turn to the contemporaneous evidence for support. Both the photos and the Lion Statutes on ground clearly demonstrate that the size of the Disputed Area, on which the Newspaper Stall stands, has remained largely unchanged throughout the years.

51.  In addition, Mr Fu also confirms having witnessed D operating at approximately the same location after he moved to reside in the Building.

52.  Hence, I am satisfied that the Disputed Area is the area occupied by D for which she now seeks adverse possession.

53.  As accepted by Mr Fu under cross-examination, P has taken no or no successful enforcement action against D over the years. P has not stopped people buying newspapers from D, removed the Newspaper Stall or prohibited her operation altogether. There was no effective entry by P onto the Disputed Area over the past years. Effectively, P has only asserted its rights, after the commencement of the present action, by taking out the writ on 1 September 2015.

F3.  Animus Possidendi

54.  I also accept, by nature of D’s case, that she has sufficiently established the intention to possess the Disputed Area. D must have, objectively construed, made it perfectly plain, by her actions, to the world at large that she has intended to exclude the owner from the Disputed Area as best she can.

55.  Most importantly, on the basis of the available evidence, D’s acts of physical occupation of the Disputed Area are not equivocal in the sense that they are capable of no more than one interpretation that she has been occupying such area for the purposes of running her business of the newspaper stall.

56.  As maintained by D, she has been running that business since at least 1986, as if she was the owner of the Disputed Area. D has made payments for business registration certificates and obtained supply of electricity and telephone services, etc for the use of the Newspaper Stall. She has also paid for rates, etc.

57.  Possession is never adverse if it is enjoyed under lawful title; if a person occupies land under licence of the paper title owner, he is not in adverse possession against the paper title owner. There is no such “permissive possession or possession as of right” in the present case; P has never given D the impression that she was being permitted, licensed or consented to operate the Newspaper Stall on the Disputed Area.

58.  On the contrary, P through solicitors issued letter to D, in November 2014, demanding the removal of the Newspaper Stall from the Non-Building Area, for the reason that the Newspaper Stall was built or erected without consent or permission. The undated anonymous letter was, as confirmed by D in her oral evidence, written by her. D indicated, in clear and unequivocal terms, that she had been operating the Newspaper Stall on the Disputed Area for approximately 30 years and invited P to resolve the dispute with her in court if required.

59.  In the premises, D has established both factual possession and the requisite intention to possess the Disputed Area continuously for more than 20 years, from 1986 to 2015.

F4.  Defence of illegality

60.  P argues, as a defence to D’s claim for adverse possession of the Disputed Area, that it is evident that the Newspaper Stall is an unauthorized building work under the BO and as a result, it should not be relied upon by D to support her claim.

61.  Implicit in P’s argument is the defence of illegality in the context of adverse possession.

62.  As stated at the outset, there is not much dispute that the Newspaper Stall has been erected without first obtaining the written approval and consent of the Building Authority under section 14 of the BO:

“14. Approval and consent required for commencement of building works, etc.

(1) Save as otherwise provided, no person shall commence or carry out any building works or street works without having first obtained from the Building Authority—

(a) his approval in writing of documents submitted to him in accordance with the regulations; and

(b) his consent in writing for the commencement of the building works or street works shown in the approved plan.”

63.  Under section 40(1AA) of the BO, any person who knowingly contravenes section 14(1) in respect of building works (other than minor works) shall be guilty of an offence.

64.  The Court of Appeal in Monat Investment v Lau Chi Kan and Another [2023] 2 HKLRD 1311 (“Monat CA”) has decided to follow the majority decision in Patel v Mirza [2017] AC 467 that the court should exercise a step by step consideration of (i) the underlying purpose of the prohibition which has been transgressed (i.e. section 14 of the BO in the present case); (ii) conversely, any other relevant public policies which may be rendered ineffective or less effective by denial of the claim (i.e. the policy considerations in the law of adverse possession and the LO in the present case); and (iii) the possibility of overkill unless the law is applied with a due sense of proportionality.

65.  First of all, the statutory purpose of the BO, as provided by the Long Title, is “to provide for the planning, design and construction of buildings and associated works, to make provision for the rendering safe of dangerous buildings and land, and to make provision for matters connected therewith”. The underlying purpose of section 14 of the BO is to ensure public safety in the construction of buildings by ensuring that plans are submitted and approved before building takes place (see Monat CA at §62.2).

66.  The second consideration to be taken into account, on the authority of Patel (supra), is the public policy underlying the law of adverse possession. As articulated by the first instance judge, DHCJ To in Monat Investment v Lau Chi Kan and Another [2020] 4 HKLRD 330 at §62 (and approved by Court of Appeal in [2023] HKCA 479 at §62.2), the overriding policy considerations of the LO are plain:

“All adverse possession cases commence with some illegality, for example, the initial trespass on land belonging to another or refusal to deliver up possession upon expiry of lease or licence, etc. The Limitation Ordinance was enacted to protect the squatters by rendering initially wrongful conduct lawful. It provides for the time when cause of action accrued, the limitation period and extinguishment of title. It is a statutory scheme which “legalises” such illegal conduct by extinguishing the title of the paper owner upon expiration of the limitation period after the cause of action has accrued. The Limitation Ordinance effectively creates a right from a wrong. The law is determinedly in favour of the trespasser against the lawful owner who is sleeping on his right and not putting his land to good use. The interest of the squatter who has been enjoying uninterrupted peaceful possession and putting idling land to good use is the public interest which the Limitation Ordinance seeks to protect. Discouraging the paper owner sleeping on his right and allowing his land to go idle is the public policy reasons behind the Limitation Ordinance. These are the overriding policy considerations in the law of adverse possession and the Limitation Ordinance. They are so important as to allow a trespasser’s illegality to override the property right of the paper owner. What the Limitation Ordinance and law of adverse possession seek to protect is very different from what the common law principle seeks to achieve by denying remedy to parties who are engaged in a joint enterprise to defraud third parties. There are no third parties in a contest between the squatter and the paper owner. The law is to protect the squatter against the paper owner and not the other way round. There is nothing in the Limitation Ordinance to prevent a squatter who had committed a criminal offence in the act of possession or the manner of possession of land from relying on the limitation provisions. If anyone is to receive a windfall under the law, it should be the squatter. There is no reason why the paper owner should be protected by receiving a windfall as result of the squatter’s illegality which is the very reason for his entitlement under the law. Illegality in the context of adverse possession has a different flavour than illegality in other context. The former illegality is to be protected; the latter is to be punished.” (emphasis added)

67.  The third aspect that I must assess is whether the law is being applied with a due sense of proportionality. It is important to recognize that D has, in the present case, successfully established the necessary requirements of factual possession and intention to possess to acquire a possessory title over the Disputed Area. However, it is also evident that D has breached section 14 of the BO.

68.  The two distinct ordinances at play are the BO and the LO.

69.  Assessing proportionality in this context involves considering factors such as the nature, magnitude and gravity of D’s breach, the potential harm caused by such breach, the legal framework in question and the overall public interest, etc. Ultimately, the decision regarding proportionality rests on a comprehensive evaluation of the specific circumstances of each individual case and striking a balance afterwards.

70.  It would require substantial persuasion for me to be convinced, on the existing facts and evidence of the present case, that it is proportionate to deprive D of the possessory title over the Disputed Area on the ground of illegality stemming from a breach of section 14 of the Ordinance.

71.  It must be acknowledged that D certainly does not have a legitimate expectation to retain an unauthorized structure under section 14 of the BO, but no enforcement action has been initiated by the Building Authority thus far. No building order has been issued, under section 24 of the Ordinance, requiring demolition and reinstatement.

72.  On the other hand, based on the correspondence disclosed by the parties, the following matters are revealed:

(1)  By letter dated 24 October 2014, P through solicitors requested the Buildings Department to provide documents and information regarding the Newspaper Stall including “(1) All letter(s) and / or Notice(s) between your department and the owner(s) and / or the occupant(s) of the said Stall in relation to the above matter; (2) Identity of the owner(s) and / or the occupant(s) of the said Stall, including but not limited to the name, address(es) of the owner(s) and / or the occupant(s) of the said Stall; (3) Colour copy of photo of the said Stall; and (4) Other relevant documents and papers.”

(2)  On 24 November 2014, the Buildings Department replied to P’s solicitors that (i) there was “no correspondence… made between this department and the owner(s) / occupant(s) of the captioned stall whose identities were unknown to this department”; and (ii) there was “no document kept by this department, including photos of the captioned stall, that this department is in a position to disclose…”.

(3)  The Buildings Department requested P’s solicitors to take their own photos of the Newspaper Stall and to contact the District Lands Office, specifically highlighting that the Buildings Department’s involvement in the matter was not initiated by itself but rather came about in response to a “department referral” of the Newspaper Stall from the District Lands Office. This suggests that the Buildings Department did not proactively seek out the issue but rather became involved as a result of the action of the District Lands Office.

(4)  In response to P’s solicitor’s further enquiry of 21 November 2014, the Buildings Department confirmed, on 11 December 2014, that “no licence / permit / written consent / written approval has been granted by this department for erection of the structure forming the said stall.”

(5)  But apart from the aforementioned confirmation, there is no evidence available to indicate that a building order has been issued, pursuant to section 24(1) of the BO, by the Building Authority demanding the IO to remove the Newspaper Stall in compliance with the BO.

73.  It is also crucial to mention that D has been openly and consistently operating, on a daily basis, the business of the Newspaper Stall on the Disputed Area. P is evidently (or ought to be) aware of this situation, yet has taken no action to address it, or at the very least, has not taken effective measures to evict or halt the activities of D from the Disputed Area. Any steps that have been taken by P have, on the evidence, been undertaken only at a very subsequent stage. These factors are all significant considerations that should not be overlooked in the current context.

74.  Taking into account the public policy reasons behind the LO, which are to discourage a paper owner sleeping on his right and allowing his land to go idle and to protect the interest of a squatter who has enjoyed uninterrupted factual possession with intention to possess, it would, in my view, be disproportionate to prevent D to rely on the limitation provisions in the LO owing to her breach of section 14 of the BO. The underlying purpose of the BO is not, as observed in Monat CA at §62.2 (supra), to penalize squatters.

75.  I am therefore not satisfied that P should be able to rely on section 14 of the BO as a defence to defeat D’s claim for adverse possession of the Disputed Area.

76.  Before I proceed further, it is necessary for me to state, for the sake of completeness, that when P argues that the building or erection of the Newspaper Stall is a breach of the Special Condition (7), I do not understand P to be suggesting that such breach is a criminal act, or a quasi-criminal act, or a non-criminal act engaging public interest, etc, and rightly so, as it is trite that a Government lease is no different from a private lease and breach of it is a civil wrong (see Hang Wah Chong Investment Co Ltd v Att-General [1981] 1 WLR 1141 (PC) at 1145).

G.  ENFORCEMENT ACTION

77.  In light of my findings above, I am satisfied that P could not recover the Disputed Area from D under sections 7(2) of the LO and P’s title over the Disputed Area is extinguished under section 17 of the LO.

78.  P however argues that notwithstanding such findings, her claim is not barred because it is not claiming to recover the Disputed Area. Essentially, P is arguing that it is only seeking relief against D in relation to the unauthorized structures comprised in the Newspaper Stall standing on the common parts of the Building under sections 18 and 34I of the BMO:

(1)  P argues that D’s possessory title over the Disputed Area is still subject to the Easement. P, the IO of the Building, is concerned here about the rights and interest of all the co-owners of the Building in relation to the Disputed Area as a common part of the Building, but not the right of the general public having easement along the Non-Building Area.

(2)  To facilitate understanding P’s argument, it is desirable for me to reiterate certain well-established principles of “ownership” of units in multi-storey buildings in Hong Kong as analyzed by the Court of Final Appeal in Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd (2008) 11 HKCFAR 403: all the owners of the units in the building are co-owners as they hold undivided parts or shares in the building as tenants in common; no owner has the exclusive possession of any unit. The common law right of each owner arising from the unity in possession is restricted by mutual covenants which regulate the exercise of their rights inter se. These mutual covenants, as are typically set out in a deed of mutual covenant, provide for the exclusive use, occupation and enjoyment of the units, the use of the common parts of the building as well as the mutual obligations of the co-owners on the management of the building. They operate on a contractual plane, underpinned by section 41 of the Conveyancing and Property Ordinance (Cap 219).

(3)  Speaking of the enforcement of the deed of mutual covenant, section 16 of the BMO provides that 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 the corporation to the exclusion of the owners, and accordingly, any proceedings in the tribunal in respect of any of the common parts of the building may be brought by the corporation.

(4)  P has emphasized the necessity of injunctive relief, as D has clearly stated that she will not comply with the request made by the District Lands Officer to remove the Newspaper Stall located on the Disputed Area being a common area of the Building.

79.  I agree, as submitted by P, that section 34I of the BMO is worded in such a way to make it applicable to any “person” and not necessarily a co-owner of a building.

80.  The Court of Appeal in Incorporated Owners of No. 27A Chatham Road, Kowloon v Lee Kai Hong [2001-2003] HKCLRT 273 held:

“19. … The word “person” under section 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.

20. The Presiding Officer cited section 34I(2) of the Ordinance, which states that:

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.

In fact, this provision does not serve to support the Presiding Officer’s interpretation of section 34I(1). The meaning of this provision cannot be simpler and clearer. Any person who contravenes section 34I(1) shall be deemed to be in breach of the deed of mutual covenant even if that person is initially not bound by it. At the same time, the provisions of section 34I are deemed to be part of the deed of mutual covenant.”

81.  P then cites Incorporated Owners of Man Hong Apartments v Kwong Yuk Ching & Others [2001] 3 HKC 116 for the proposition that even if adverse possession is established the land would still be subject to the terms and conditions contained in the DMC.

82.  In Man Hong Apartments (supra), the incorporated owners claimed against the registered owner of a shop in the building for breach of the deed of mutual covenant and section 34I of the BMO in relation to an unauthorized structure and occupation on a passageway being a common part of the building. The owner alleged to have been in adverse possession of the passageway and argued that the incorporated owners’ title had been extinguished and the incorporated owners had lost all rights to enforce the deed of mutual covenant. The Court of Appeal (Mayo VP, Keith JA and Sakhrani J) held:

“25. It would appear to be manifest that there could have been no question of D3 or its predecessor in title being sued at common law in respect of a breach of the terms of the DMC. The right to enforce the covenants in the DMC would normally be an equitable right. Here however assistance can also be derived from section 41 of the Conveyancing and Property Ordinance, Cap 219.

26. The covenants relate to Shop 1 and the benefit and burden of all of the provisions in the DMC are expressed and intended to run with the land of all the co-owners. This can be seen from section 41(2) which is in these terms:

“41. Enforcement of covenants

(1) This section applies to an express covenant and a covenant implied by or under this Ordinance or any other law.

(2) This section applies to any covenant, whether positive or restrictive in effect -

(a) which relates to the land of the covenantor;

(b) the burden of which is expressed or intended to run with the land of the covenantor; and

(c) which is expressed and intended to benefit the land of the covenantee and his successors in title or persons deriving title to that land under or through him or them.”

27. The shop and the passageway are undoubtedly subject to the terms and conditions contained in the DMC and the plaintiff as incorporated owner is able to enforce the covenants.

28. 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. The authority for this proposition is derived from p 402 of the judgment of Collins M.R. in Nisbet and Potts’ Contract [1906] 1 Ch D 386 and his conclusion at p 404:

“… What machinery is there in the Statute of Limitations affecting the right of a covenantee who has the benefit of a restrictive covenant? Nothing in the Act has been pointed out to us which touches that right at all. In fact, unless and until the right of the covenantee has been in some way infringed, so that it becomes necessary for him to enforce that right, there is no reason, either in principle or in fairness, why his right should be in any way affected. The person who stands simply with the benefit of a negative easement is certainly not put upon the assertion of his right unless and until that right has been interfered with in some way; and it is a matter of absolute indifference to him what person is the owner of the land over which that right exists until that land is used in some manner incompatible with the assertion of that right on the part of the person entitled to it. It seems to me, therefore, that the principal question before us is whether or not Sir George Jessel was right in the view that he took in London and South Western Ry Co v Gomm, that an obligation created by a restrictive covenant is in the nature of a negative easement, creating a paramount right in the person entitled to it over the land to which it relates. If that is so, then, in the present case, the squatter, by his squatting, simply acquired a right to land subject to this incident. Of course, the burden of that incident must pass to all persons who subsequently become assignees of the land, and the squatter is not entitled to hand it over freed from the obligation that was imposed on the person whose title he has ousted by his possession.”

“Therefore, it seems to me that the law is clearly established in accordance with Sir George Jessel’s view of the subject, and consequently that in this case the burden of the restrictive covenant did remain imposed on the land so as to be binding upon any person who could not shew that he had bought for value and without notice. Consequently it appears to me that the squatter’s title does not in any way assist the appellant in this case.” (emphasis added)

83.  The next question considered by the Court of Appeal in Man Hong Apartments (supra) was the consequence of delay in enforcing the terms of a DMC. P also seeks to rely on the following dicta:

“30. None of the express covenants involves the taking of possession of any part of the land comprised in the common parts. There can accordingly be no question of either section 7(2) or section 17 of the Limitation Ordinance having any application.

31. Equally section 4(7) specifically excludes actions for injunctions and other equitable relief from the operation of the section.

32. There also can be no question of the statutes of limitation having any application by analogy as the claim here for breach of the terms of the DMC are in no way equivalent to any common law right of action.

33. What next needs to be considered are the principles applicable to a claim made in equity. These principles are helpfully set out in Chapter 3 of the 30^th Edition of Snell’s Equity, Sweet & Maxwell 2000. The commentary at 3-19 is particularly relevant:

“(c) Claims outside the Statute. The principles which equity applies to cases not covered by a statutory period have been stated thus:

‘Now the doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material.’

Laches essentially consists of a substantial lapse of time coupled with the existence of circumstances which make it inequitable to enforce the claim. Delay will accordingly be fatal to a claim for equitable relief if it is evidence of an agreement by the claimant to abandon or release his right, or if it has resulted in the destruction or loss of evidence by which the claim might have been rebutted, or if the claim is to a business (for the claimant should not be allowed to wait and see if it prospers), or if the claimant has so acted as to induce the defendant to alter his position on the reasonable faith that the claim has been released or abandoned. But apart from such circumstances delay will be immaterial…” (emphasis added)

84.  P further relies on the other Court of Appeal (Cheung, Kwan and Chu JJA)’s decision in The Incorporated Owners of Mountain View Mansion v Heart Cuisine [2012] 4 HKLRD 628, applying Man Hong Apartments (supra).

85.  In Mountain View Mansion (supra), the incorporated owners sued a registered owner and his licensee for trespass of a service lane forming part of the common part of the building. The defence of adverse possession failed on the facts and the owner’s appeal to the Court of Appeal was dismissed:

“20.  As in The Incorporated Owners of Man Hong Apartments, the applicant in this case is not claiming possession of the service lane, but is seeking to enforce the rights given to the owners in relation to the service lane as part of the common parts under Section 34I. Sections 7(2) or 17 of the LO which deal with recovery of land have no application. Neither will section 4 of the LO help the 2^nd respondent, because Section 4(7) specifically excludes action for injunction from the operation of the section. Further the principle in Nisbet and Potts’ Contract is clearly applicable because once the service lane is found to be a common part then whoever occupies it, be it another owner from the building or a trespasser who acquired a possessory title by adverse possession, he is bound by the terms of the DMC. The latter cannot be in a stronger position because his paper title is still subject to the covenants in the DMC and he cannot use the service lane to the exclusion of the owners of the building. The applicant is bound to succeed in its claims.”

86.  However, as submitted by D, I should, in the present case, follow the decision of the Court of Appeal (Yuen JA, Lam JA and Au J) in Wong King Lim v The Incorporated Owners of Peony House [2013] 4 HKC 295.

87.  In Peony House (supra), similar to the present case, an action was brought by a squatter, who claimed adverse possession of a scavenger lane forming part of the common part of a building. The incorporated owners denied liability and sought a mandatory injunction to evict the plaintiff and also an injunction to retrain him from occupying the lane. The trial judge was satisfied that the incorporated owners had ceased to have any right to recover possession of the lane and found in favour of the plaintiff on the facts. On appeal, the incorporated owners contended that adverse possession was not a valid defence to the incorporated owners’ action for an injunction under section 34I of the BMO. The incorporated owners’ case was that so long as the subject property had been designated a common part, there could not be adverse possession, whether by a co-owner or a stranger to the deed of mutual covenant.

88.  In Peony House (supra), Yuen JA analyzed Man Hong Apartments (supra) as follows:

“18. This court (Mayo VP, Keith JA and Sakhrani J) held that the shop owner (and his predecessors in title) were parties to the DMC and therefore subject to obligations contained therein in respect of the property covered by it (i.e. the entire building). That included a covenant that they would only possess the passageway in common with other co-owners, and not exclusively. The right of the IO to enforce the covenants in the DMC was a right in equity, which right could only be defeated by a person who had bought the land for value and without notice. Accordingly even if the shop owner (and his predecessors) had exclusive possession of the passageway for the required period of years, he could not defeat the equitable right of the IO to enforce the DMC against him because he had not bought the land for value and without notice.

19. In my respectful view, when Man Hong Apartments is understood in the way set out above, it would be seen that it does not assist the IO in the present case. Here the plaintiff was never a party to the DMC and had never covenanted to use the Lane only in common with the owners of the Building.

20. As for the IO’s argument under s 34I(2) BMO, the purpose of that subsection in my view is simply to enable the IO to take appropriate steps to stop private conversion of common parts as that restriction has been incorporated under s 34I(1). It does not, in my view, create a new statutory cause of action which overrides a possessory title obtained by adverse possession just because the land happens to have been held by incorporated co-owners.” (emphasis added)

89.  With respect to Mountain View Mansion (supra), Yuen JA observed:

“32. I will first examine the judgment in Nisbet and Potts’ Contract on which the above passage in Mountain View Mansion was based. Nisbet and Potts’ Contract was a case where there were two neighbouring pieces of land. There was a covenant restricting the user of one piece of land A (“the covenantor’s land”), with the neighbouring land B (“the covenantee’s land”) enjoying the benefit of that covenant. A squatter dispossessed the covenantor of his land A. Subsequently on a sale of A, the issue arose whether the covenant could still be enforced by the owner of B.

33. It was held that the covenant could still be enforced by the owner of B, the covenantee’s land, against any subsequent owner of A, the covenantor’s land, as the owner of A was not a bona fide purchaser for value of the legal estate without notice of the covenant. A restrictive covenant was binding in equity upon land to which a squatter had subsequently acquired a statutory title by adverse possession against the owner and covenantor, as the statutory extinguishment of the title of the dispossessed owner of the land did not have the effect of destroying the covenant, the equitable right of the covenantee not being in any way affected by the statute of limitations which had barred the original owner from recovering his land.

33.2 It is important not to confuse land with title. Land A remained subject to the covenant in favour of land B, even though the title of the owner of land A had been extinguished by the squatter’s adverse possession. Thus Collins MR held at p 402 that the whole (meaning the entirety of the) right the squatter acquires under the statute of limitations is the extinguishment of a title adverse to his own, and nothing else. Put another way, the statute of limitations affects the right of the original owner and covenantor to sue the squatter to recover possession of land A. However the statute does not affect the right of the covenantee (the owner of land B), unless and until his right to enforce the covenant has been infringed. Unless and until that happens, “it is a matter of absolute indifference to him [the covenantee, owner of land B] what person is the owner of the land over which that right exists [land A] until that land is used in some way incompatible with the assertion of that right [the covenant] on the part of the person entitled to it [the covenantee, owner of B]”.

34. When Nisbet and Potts’s Contract is so understood, I do not see how it assists the IO in this case. The owners of the Building had covenanted only with one another to possess the Lane in common and not exclusively. The plaintiff was not a party to the DMC. The learned judge found that as far as possession of the Lane was concerned, the plaintiff’[s] intention was to exclude all the owners (and the IO) of the Building. Accordingly at the end of the relevant period under the Limitation Ordinance, the plaintiff extinguished the title to the Lane which was adverse to his own, i.e. the title of all the owners of the Building (and the IO). By then it did not matter what were the restrictions imposed on the use of the Lane by the owners under the express provisions in a deed of mutual covenant, or by the IO under the incorporated provisions of s 34I BMO. Once their title to the Lane was extinguished, the owners (and the IO) no longer had any right to it which they could enforce against the plaintiff, unlike in Nisbet v Potts where the statute of limitations had no effect on the covenantee (the owner of land B) who therefore retained his right to enforce the covenant binding land A, which was separate and distinct from the original owner and covenantor’s adverse title against the squatter. It is important to note that in LLC v Allen [1914] 3 KB 642, at 660 the English Court of Appeal held: “the doctrine in Tulk v Moxhay does not extend to the case where the covenantee has no land capable of enjoying, as against the land of the covenantor, the benefit of the restrictive covenant.” (emphasis added)

90.  Lam VP, agreeing with Yuen JA, explained in his own clear terms in Peony House (supra) as follows:

“37. Under common law, a squatter does not succeed to nor take over the title of the paper owner whom he has dispossessed, see Fairweather v St Marylebone Property [1963] AC 510. As observed by Keith J in Chung Ping Kwan v Lam Island Development [1995] 2 HKLRD 228 at p 235, “the squatter’s possessory title was an independent title…” The title of the squatter stems from his possession of the land and it was defeasible by the paper owner’s title until the right of the paper owner against him has been extinguished under the Limitation Ordinance by dispossession for the requisite period of time. In Fairweather, the majority of the House of Lords held that the paper owner’s title was only extinguished vis-à-vis the squatter. It remains as a title as between the paper owner and his lessor and it could be surrendered, and upon such surrender the lessor’s right of possession started to accrue and basing on that right the lessor could recover the land from the squatter. This outcome vividly demonstrates the proposition that a squatter does not acquire the title of the paper owner and the Limitation Ordinance does not operate as a statutory conveyance of that title to the squatter.

38. Thus, a squatter is a total stranger to the parties to the deed of mutual covenants. But there are instances where persons other than immediate parties to a deed of covenants will be bound by the covenants.

39. By reason of the equitable doctrine of Tulk v Moxhay (1848) 2 Ph 774, restrictive covenants which relates to use or enjoyment of land can “run with the land”. The doctrine was explained by Farwell J in Re Nisbet and Potts Contract [1905] 1 Ch 391 at p 396-7,

“Covenants restricting the enjoyment of land, except of course as between the contracting parties and those privy to the contract, are not enforceable by anything in the nature of action or suit founded on contract. Such actions and suits alike depend on privity of contract, and no possession of the land coupled with notice of the covenants can avail to create such privity: Cox v Bishop. But if the covenant be negative, so as to restrict the mode of use and enjoyment of the land, then there is called into existence an equity attached to the property of such a nature that it is annexed to and runs with it in equity: Tulk v Moxhay. This equity, although created by covenant or contract, cannot be sued on as such, but stands on the same footing with and is completely analogous to an equitable charge on real estate created by some predecessor in title of the present owner of the land charged ...”

40. This doctrine has been extended by section 41 of the Conveyancing and Property Ordinance Cap 219…

41. Section 41 and Re Nisbet and Potts Contract [1906] Ch D 386 (CA) was relied upon by Mayo VP in Incorporated Owners of Man Hong Apartments v Kwong Yuk Ching [2001] 3 HKC 116. As my Lady pointed out, that was a case concerning encroachment of common parts by parties who owned a shop unit in the building. We are dealing with a different situation.

42. The scope of s 41 was examined by Lord Hoffmann NPJ in Sky Heart v Lee Hysan Co Ltd (1997-98) 1 HKCFAR 318 at p 341‑2. Referring to the principle that a restrictive covenant in gross will not run with the land and the rule in London Country Council v Allen [1914] 3 KB 642, Lord Hoffmann NPJ held that ‘covenantee’ in s 41(3) means a covenantee who still has an interest in the land for the benefit of which the covenant was taken. Thus, whether for the purpose of s 41 or the equitable doctrine of Tulk v Moxhay, a covenant cannot be enforced by a person having no land to be protected by it.

43. Applying that in the present context, upon adverse possession by the Plaintiff being established over the Lane, the Defendant IO ceased to have any interest over the dispossessed land to be protected by the covenants in the DMC. In this connection, I respectfully agree with the analysis of my Lady that the DMC was made to govern how the co-owners of the Building were to exercise their right of possession (as an incidence of their co-ownership), including the possession of the common parts. Unlike what happened in Re Nisbet and Potts Contract, the covenants in the DMC was not made by an owner of an adjoining piece of land in favour of his neighbour. The land intended to be affected by the DMC is the land subject to co-ownership. The Plaintiff has never been a co-owner. As explained, upon dispossession for the requisite period of time, the Plaintiff acquired an independent title whilst the Defendant IO ceased to have any right to enforce any claims, including claims based on the covenants, in respect of that portion of land.

44. My Lady has already explained the rationale of Re Nisbet and Potts Contract. I would only add that in contrast with the position of the covenantee in that case, the Defendant IO’s right under the DMC (and the deemed obligation under the DMC created by Section 34I) has been infringed from the very beginning of the dispossession by the Plaintiff over the portion of the land in question. Thus, the basis of the judgment of Collins MR in that case (viz time should not start to run until the right of the covenantee is affected) has no application to our case. The extinguishment of the title to the land under section 17 of the Limitation Ordinance Cap 347 encompasses the title to enforce the DMC in respect of that portion of the land.

45. Section 34I of the BMO has to be construed against such common law background. Section 34I(2) stipulates the legal consequence for a contravention of sub-section (1): the person in contravention shall be deemed to be in breach of an obligation imposed on him by the DMC in respect of the building. If the DMC cannot be enforced against a squatter (by reason of the extinguishment of title on the part of the IO), Section 34I does not confer upon the IO any additional right of action.

46. Insofar as the dicta at para 20 in the judgment of IO of Mountain View Mansion v Heart Cuisine [2012] 5 HKC 361 suggests otherwise, I respectfully beg to differ. That paragraph fails to take account of the different nature of the covenants in Re Nisbet and Potts Contract and the covenants in a DMC. It also fails to take account of the independent nature of the title of a squatter. Further, as explained by Yuen JA, that was a case of encroachment by a co-owner as opposed to dispossession by a squatter.” (emphasis added)

91.  For present purposes, there is no “conflict” between the two lines of authorities. As explained by Chu JA in The Incorporated Owners of Po Hang Building v Sam Woo Marine Works Ltd, HCMP 415/2014 (unreported, 6 August 2015):

“28. We agree with the Judge that the above passages should be considered in its proper context. Yuen JA was addressing the part of Cheung JA’s obiter remark in the Mountain View Mansion case that a trespasser who acquired a possessory title by adverse possession would be bound by the terms of the deed of mutual covenant by reason of the principle in Nisbet and Potts’ Contract. Her Ladyship pointed out that the ratio in Nisbet and Potts’ Contract is that the statute of limitations only affects the right of the original owner to sue the squatter to recover possession; where the original owner is at the same time the covenantor to a covenant that runs with the land, the statute of limitations will not affect the right of the covenantee to enforce the covenant, unless and until his right to do so has been infringed. Yuen JA concluded that in the Peony House case, unlike the facts in Nisbet and Potts’ Contract, the co-owners (represented by the incorporated owners) have lost their right to enforce the covenant against the squatter because the squatter has extinguished their title to the lane by being in adverse possession.

29. Reading the judgment in its proper context, it is clear that Yuen JA was only referring to the position of a squatter who has trespassed the common part of a building, and the issue being considered is whether a stranger to a deed of mutual covenant can establish possessory title to the common part of a building by reason of being in adverse possession. The judgment and the discussion on Nisbet and Potts’ Contract do not affect the legal basis of the Man Hong Apartments case.

30. This is clearly set out in the judgment of Lam JA (as the Vice-President then was) at §§43-46.

31. The preceding part of Lam JA’s judgment (at §§36 to 41) has also made it abundantly clear that the Peony House case and the legal discussions are in relation to the position of a squatter, who has never been an owner and a party to the deed of mutual covenant vis-à-vis incorporated owners.” (emphasis added)

92.  It follows that, upon possession of the Disputed Area for 20 years, D has acquired an independent title and P ceased to have any right to enforce any claims in respect of such area. The extinguishment of P’s title over the Disputed Area under section 17 of the LO encompasses P’s title to enforce the DMC in respect of the same. Section 34I of the BMO does not confer any additional right of action on P against D herein.

93.  To avoid any confusion, I see it necessary to state the obvious that a squatter can only acquire the title of the owner whom he has dispossessed. By the operation of the LO in giving D the possessory title over the Disputed Area, it is ‘negative’ in the sense by extinguishing P’s right or title over it, and leaving D with a title obtained by the fact of possession (see Nam Ching Wun v Tsun Un Pawn Shop & Others, HCA 2151/2008 (unreported, 22 November 2016) at §172 per Marlene Ng J). It does not mean that D has, as a result of occupying the Disputed Area forming part of the Non-Building Area, brought an end to the public’s right of passage over it.

94.  It is a separate matter whether or not the Government takes enforcement action as it sees fit against D for causing a state of affairs, as a result of her business operation on the Non-Building Area, which endangers the comfort of the public or obstructs the public in the exercise or enjoyment of the right of passage which is common to the members of the public.

95.  In light of my conclusion above, it is not necessary for me to consider D’s alternative argument of proprietary estoppel.

H.  CONCLUSION

96.  For the above reasons, I dismiss P’s claim and grant D the following declarations on her counterclaim:

(1)  A declaration that P’s title, interest and/or rights in and/or over the Disputed Area has been extinguished by virtue of section 17 of the LO; and

(2)  A declaration that D has been in adverse possession of the Disputed Area for a period of no less than 20 years before the commencement of the present action, and has thereby acquired and is entitled to the possessory title, interest and/or rights on and/or over the Disputed Area.

97.  There is no reason why costs should not follow event. I grant a costs order nisi that P shall pay D costs of the action (including all costs reserved if any) to be taxed if not agreed.