WONG CHEE SING (OR WONG CHE SING) v. HUNG WAH t/a TAK HING LUNG MEDICINE CO. AND ANOTHER

DCMP 1988/2018

[2020] HKDC 1032

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 1988 OF 2018

________________

___________________

_________________________

JUDGMENT

_________________________

1.  The plaintiff (“Mr. Wong”) is suing by his next friend, his daughter Wong Tak Kwan Lilian (“Ms. Wong”) for possession of the property known as G/F Rear, 50 Battery Street, Kowloon, situated at Kowloon Inland Lot No. 8768, Hong Kong (“the Property”). The 1^st defendant (“Mr. Hung”) counterclaims, inter alia, for a declaration of an indefeasible possessory title by way of adverse possession.

Background

2.  It is not disputed that Mr. Wong was the registered owner of the building known as No. 50-52 Battery Street (“the Building”) at Kowloon Inland Lot No. 8768 (“the Lot”) by a Government Lease dated 18 March 1968. The Building and the Lot have never been divided into shares.

3.  The Property was one of the ground floor shop spaces in the Building which had first been leased by Mr. Wong to a Liu Shu Ming by way of a tenancy agreement dated 25 May 1966.

4.  However, for whatever reasons not explained, Mr. Wong has been rather idle in running his rental affairs and, at some point in the early 1990s, Mr. Hung began occupying the Property setting up a shop selling various herbal medicine etc. and trading as Tak Hing Lung Medicine Co. (“THL”).

5.  It is not disputed that there was never any lease or license agreement between Mr. Hung and Mr. Wong and no rent was ever paid despite Mr. Hung’s continual occupation of the Property up to this day.

6.  Nevertheless, Mr. Wong has all along continued to pay the rates as well as, as he claimed, arranging and paying for various maintenance for the Building.

7.  Mr. Wong instructed his solicitors to serve a pre-action letters on Mr. Hung on 25 January 2018 seeking him to quit and deliver up possession of the Property.

The legal principles

8.  The legal principles of adverse possession are trite. Putting it simply, the following elements must be satisfied (Fung Sau Mui Janne v Fung Wing Tong HCMP798/2016 and Wong Tak Yue v Kung Kwok Wai David and Anor [1998] 1 HKLRD 241):

a.  Factual possession: “The adverse possessor must show a sufficient degree of physical control of the land” and “enclosure is probably the strongest possible evidence of adverse possession”.

b.  Animus possidendi: “an intention to possess the land to the exclusion of all other persons including the paper owner. Clear and affirmative evidence is required to show that such an intention to dispossess had been sufficiently clear to the world, and particularly to the attention of the paper owner”.

c.  Requisite time period: For privately held (i.e. non-Government) land, the relevant period is 12 years’ adverse possession (section 7(2) of the Limitation Ordinance (Cap 347) (“LO”)).

9.  The combined effect of the common law, together with sections 7, 8, 13 and 17 of the LO, is that for non-Government lands, the paper owner’s title to the land would be extinguished vis-à-vis the adverse possessor after 12 years of continuous possession with the requisite animus possidendi (Fung Sau Mui Janne v Fung Wing Tong HCMP798/2016).

10.  With regard to what constitutes “factual possession”, quoting Deputy High Court Judge Anthony To in Chan Mei Lin v Lee Hong [2018] HKCFI 2441:

“Factual possession signifies an appropriate degree of physical control. It must be a single and conclusive possession. What acts constitute a sufficient degree of exclusive physical control depend on the circumstances, in particular the nature of the land in question and the manner in which land of that nature is commonly used or enjoyed. Everything depends on particular circumstances. Broadly speaking, 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 expected to deal with it and that no one else has done so.: Powell v McFarlane.”

11.  The CFA case of Wong Tak Yue v Kwok Wai & Anor [1998] 1 HKLRD 241 provided how the court should approach the issue of animus possidendi:

“Where the occupier had made self-serving statements as to what was his intention, whether during the period of occupation or when challenged in legal proceedings, the court should approach them with some scepticism. The court should scrutinize the circumstances in which they were made and would give them such if any as they might deserve. Conversely, where the occupier had made statements as to what his intention and such statements were against his interest, the court would usually accord to them considerable weight.”

Analysis of the parties’ cases

The circumstances that Mr. Hung allegedly came to occupy the Property

12.  Mr. Hung’s case is that around March 1992, he was recommended by an introducer called “六嬸” (“Luk Sum”) to carry on the retail business for sale of herbal medicine etc. He claimed that he paid Luk Sum HK$135,000 for the purchase of the stuff inside the Property and obtained exclusive possession of the Property.

13.   Mr. Hung claimed, as stated in paragraph 5 of his witness statement (p. 53 of the Trial Bundle), that, as I translate, “All along…I have believed deeply without doubt that this is my property.”

14.  On cross-examination, Mr. Hung claimed that:

a.  Luk Sum did not tell him (and he did not know) that she was the owner or that she was a tenant of the Property.

b.  He accepted that Luk Sum had possession because she held the key of the Property.

c.  He never requested Luk Sum to give him any title deeds (because he had only been in Hong Kong for a few years so he did not know the legal procedure of transfer of ownership of a property), but yet, in absence of his request, Luk Sum also told him that she could not giving anything “in writing” to him.

d.  As such, he handed over HK$135,000 and accepted this as a “risk in investment” because “any investment has risks”.

e.  He further elaborated that by “risk in investment”, he meant taking the risk regarding the title of the Property, and not just about the general risk of running a business.

f.  Further, Luk Sum also told him that “the owner has disappeared since establishment of ICAC”.

15.  Mr. Cheung, counsel for the 1^st defendant, suggested that Mr. Hung had a mistaken belief that he had successfully bought the Property from Luk Sum in 1992.

16.  I do not think that there was any mistaken belief. Mr. Hung’s case was not that Luk Sum lied to him that she was the owner and that he believed that he could acquire legal title of the Property by simply paying Luk Sum and took over the key. Instead, Mr. Hung claimed that he was told that, in effect, “the owner had run away” and that Luk Sum did not tell him that she was the owner. More importantly, he admitted that he was taking “a risk in investment”, which must mean that, even by his own case, he must be aware right from the beginning that the transaction could not be an entirely proper and legal acquirement of the title.

17.  As such, his claim that “All along…I have believed deeply without doubt that this is my property” cannot be true.

18.  It must therefore follow that it is not open for Mr. Hung to argue that he had a mistaken belief that he had successfully bought the Property.

19.  To put it another way, Mr. Hung’s case, taken to the highest, must be that, by way of paying the sum and knowing that the transaction was not entirely legally proper, he was taking a risk in this transaction in the hope that he might acquire the Property by dispossessing the paper owner.

20.  This begs the question: despite Mr. Hung’s claim of not knowing about the basic legal requirement of transfer of title deeds in conveyancing, yet, at the same time, he was aware of the legal doctrine of adverse possession and was willing to part with HK$135,000 to invest in trying to achieve that. I find that unconvincing.

21.  Further, Mr. Hung admitted that he only came to Hong Kong a few years previously and could not afford to buy any property. As such, HK$135,000 must have been quite a substantial and significant sum for him to “take an investment risk”. Yet, Mr. Hung has failed to produce any document to support this transaction and payment: there was no written agreement and not even a handwritten receipt by Luk Sum on a piece of scrap paper.

22.  By contrast, Mr. Hung was able to produce a receipt from “Lap Sang Decoration Co.” to THL for a sum of HK$200,000 which, Mr. Hung alleged, was for the decoration works for THL. This was dated 20 March 1992 which was around 6 months after Mr. Hung allegedly paid Luk Sum.

23.  However naïve regarding legal procedures that Mr. Hung claimed to be at the time, I simply cannot accept that he would have handed over HK$135,000 to an “introducer” who did not tell him whether she was the owner or a tenant but only that “the owner has disappeared”, all done without any document records of such a transaction or payment, and accepted paying that as a “risk in investment”.

24.  This alleged payment to Luk Sum was a bare assertion. Given the circumstances, I have serious doubt as to whether Mr. Hung had made any payment in this manner to Luk Sum or anyone as alleged.

25.  All these are important issues in the court’s assessment of Mr. Hung’s intention at the time: whether he “intended to possess the land to the exclusion of all other persons including the paper owner” or whether, as the plaintiff’s case is, that he had all along simply wanted to lie low to get away with not paying the rent and other relevant payments for as long as he could get away with.

26.  I do not think that Mr. Hung has adduced sufficient evidence to support a finding that he had animus possidendi at the time he came to possess the Property. His evidence regarding the transaction with “Luk Sum” and his “belief” are self-serving. I would find that, by whatever way he came to occupy the Property in 1992, his intention at the time was simply to lie low and see how long he could get away with not paying rent and other payments and did not “intend to possess the land to the exclusion of all other persons including the paper owner”. If he did pay any sum of money to Luk Sum (or anyone else), it was more likely that it was only paid to take over the business (or a share of the business) of the shop, and not for buying the Property under a mistaken belief or otherwise.

Mr. Wong’s note book

27.  The plaintiff produced this notebook as exhibit during the trial.

28.  There was a handwritten entry on one page which appeared to record a meeting with someone at the ground floor entrance on 22 May 2005. This entry appeared to be made with a pencil. There were further handwritings on the same page by what appeared to be entries made by a ballpoint pen of black ink and a ballpoint pen of blue ink: “Now called Tak Hing Lung, owner surname Hung” (in black ink) … “Wah 27711310” (in blue ink) … “together with wife of Lui Shu Ming (¼  share), dealt with by Mr. Lui’s nephew (surname Lee), admit rent account” (in black ink) … “10,000 dollars, one year contract (12.7.95)” (in blue ink).

29.  Mr. Wong is now an elderly gentleman. He recognised the notebook and confirmed that this was his contemporaneous handwriting. He thought that he “should have” met Mr. Hung on that occasion (12 July 1995) and interpreted the meaning of the writing as Mr. Hung and the wife of Mr. Lui were jointly renting the Property at the time, with the wife of Mr. Hung owing ¼ share.

30.  I note that the name “Lui Shu Ming” also appeared in two tenancy agreements produced by the plaintiff in respect of the Property dated 25 May 1966 and 19 March 1974. Mr. Wong said that he vaguely remembered the name as one of his tenants.

31.  On the whole, I find these entries in the notebook genuine and contemporaneous. If anything, these also support the disorganized and “idle” nature of how Mr. Wong has been running the rental business of the Property.

32.  Mr. Hung denied ever seeing Mr. Wong on this occasion. Mr. Wong admitted that his memory was vague: I think he could not be recalling the details of that alleged meeting or meetings in 1995 but rather interpreting from what he wrote at the time. The records did not specify whether he actually met Mr. Hung. So it might be possible that they did not meet but Mr. Wong was only told about Mr. Hung’s telephone number by either Mr. Lui’s wife or her nephew.

33.  What was very specific, however, was that the recording that the business of THL was shared between Mr. Hung and Mr. Lui’s wife (with the latter having a ¼ share). 

34.  I would accept this as an accurate record of the situation of the Property at the time: some form of meeting or meetings must have taken place and even if Mr. Wong did not meet Mr. Hung at that time, on balance, I would accept the contemporaneous writings showed that at the very least, there must have been some discussions with Mr. Lui’s wife (who owned ¼ share of THL at the time) and that Mr. Wong must have believed that some form of rental agreement was reached.

35.  As such, however disorganized and “idle” that Mr. Wong had been, he had made it clear to whoever attended those meetings (which included Mr. Lui’s wife who owned ¼ share of THL) that he had not abandoned the Building.

36.  Further, this record would put further doubt on Mr. Hung’s own evidence of the transaction with “Luk Sum”: at the very least, by 1995, he was still not the sole proprietor of THL, so he could not have bought the business and the Property in 1992 in the manner he now alleged.

Payment of rates

37.  There is no dispute that Mr. Hung never pay any rates and government rent of the Property. It was Mr. Wong who had been paying such for the Building.

38.  Mr. Hung’s explanation was that he thought that the Building was “frozen” because the owner “ran off” to evade ICAC since 1970s, so there was no need to pay rates etc. for all this time.

39.  Mr. Cheung submitted that this was also a mistaken belief and that there was no rule of law the elements of adverse possession that “cannot be established for a person who mistakenly believes that he has good title” (Cheung Kwong Yuen v Sun Hui Fang [2016] 1 HKLRD 464) and an adverse possessor “may still validly establish a claim of adverse possession even though he acted in the honest but mistaken belief that the subject property was in fact his” (Topwell Corp Ltd v Kwan Kam Kee [2014] 5 HKLRD 1).

40.  As such, it was not Mr. Hung’s case that he was totally unaware that the owner of a property would be required to pay rates and government rents, but that he honestly believed that he did not need to do so for decades. Despite the rather nonsensical basis of this belief, Mr. Hung also admitted that he never enquired with the Government to verify whether his belief was true. I would think that any reasonable person who honestly believe that he was the owner of a property would have done so.

41.  Further, if one takes this argument logically forward, I cannot see how this alleged honest belief can be compatible with Mr. Hung’s other alleged honest belief that he was the owner of the Property.

42.  Putting it simply, if Mr. Hung honestly believed that the Building was somehow “frozen” (or perhaps “confiscated”) by the government due to some criminal activities of the owner, that would logically suggest that the government was now the owner. As such, Mr. Hung could not have also honestly believed that he could also own the Property as alleged.

43.  In other words, Mr. Hung had failed to provide any explanation to his belief as to why a building “frozen” by the government due to criminal activities of the owner would somehow become a “free for all” for its occupants to grab.

44.  In providing this “frozen asset” argument, Mr. Hung was clearly trying to provide a self-serving explanation as to why he thought he need not pay rates and government rent for decades, but in doing so, he was clearly discrediting his own case regarding his belief that he owned the Property all along.

45.  Rather, all these again support the plaintiff’s case that Mr. Hung never believed that he was the owner of the Property or that he had the requisite animus possidendi, but that he was simply trying to lie low to avoid paying rent and other payments for as long as possible.

The 3 Canopy Orders

46.  There were three Orders by the Building Authority against the illegal canopy structure attached to the external wall of the Building facing Sai Kung Street. All three were addressed to Mr. Wong as the owner of the Building.

47.  The first order was dated 29 August 2002 (page 495 of the Trial Bundle).

48.   The plaintiff has produced a letter from a Benjamin Yip (“Mr. Yip”) of N.Y. Workshop, an “Architect Authorised Person”, to the Buildings Department dated 14 April 2006 (page 508 of the Trial Bundle) explaining the efforts taken by Mr. Wong to attempt to comply with the said order. In particular, the letter documented how Mr. Yip had approached the concerned tenant, THL, on 10 April 2006 and had offered to remove the illegal structure at the owner’s expense but “the tenant has denied responsibility…as it has neither clearly specified which ground floor unit(s) it referred to, nor does it address directly to that unit(s)” and also that “the tenant claimed that a similar building order had previously been served directly to him and that the order had been fully discharged…”

49.  The second order was dated 4 April 2007 (Exhibit P3) which enclosed a “Mezz Floor Part Plan” which provided a clear identification of the illegal canopy structure concerned, and which stated that this order would supersede the first order, presumably in response to the issues raised in Mr. Yip’s letter.

50.  Mr. Hung claimed that he was not aware of these two orders or learned of Mr. Wong’s existence until he received the third order dated 14 December 2015. The covering letter from the Buildings Department (page 120 of the Trial Bundle) clearly stated “At the request of the agent of the landlord, this department now enclose…” and that Mr. Wong was named as the landlord.

51.  Mr. Hung argued that if letters were not addressed to “Rear”, “Rear Portion”, “R/P” of the ground floor or to THL, he would not receive them, and if any neighbours received such, they would not pass the letters to him. However, Mr. Hung himself produced as his own document a building order dated 31 March 2009 concerning the “Ground Floor” of the Building without reference to “Rear” etc. in the address. This building order was not related the canopy in question, but this clearly demonstrated that Mr. Hung was able to receive letters addressed in such a manner. Further, if it was true that there was such a specific address for a premises, a reasonable occupier would have alerted the neighbours and even the postman so that he would not be missing any “misdirected” mail.

52.  Further, on balance, I find that Mr. Yip must have approached THL to attempt to deal with the illegal canopy structure in the manner stated in his letter. It would be unlikely that Mr. Hung was not aware of the existence of the landlord.

53.  The plaintiff’s case, as stated by Ms. Wong in her witness statement (page 70 of the Trial Bundle) was that Mr. Wong sent a registered post to THL to give notice of his intention to demolish various illegal structures in early September 2015. Soon after, Mr. Wong, various people from his contractor, Diploma Construction Engineering (Holdings) Limited (“Diploma”), and 2 representatives from the Buildings Department attended the Property and demanded Mr. Hung for access to the Property to demolish the canopy. Mr. Hung initially was reluctant but finally agreed.

54.  According to Mr. Hung, he himself replaced the canopy with an aluminum-framed one. He produced a receipt to purport for such dated 16 March 2016.

55.  The plaintiff did not call any witness from Diploma and Ms. Wong herself was not present at the time the canopy was demolished. As such, much of her evidence on this would be at best hearsay. In any case, whenever and in whatever way the canopy was finally demolished, it was well over 10 years since the first canopy order. This may suggest again that Mr. Hung was less interested in “dealing with the land in question as an occupying owner might have expected to deal with it” and more interested in getting away without paying for anything for as long as possible.

56.  Further, these evidence show that Mr. Wong has not abandoned the Property and I did not accept Mr. Hung’s claim that he only become aware of the presence of Mr. Wong as the landlord in 2015.

Management and maintenance of the Building

57.  Despite the apparent “idleness” in running the rental side of the Building, the plaintiff was able to produce various documents to show that Mr. Wong has done much to the managing and maintenance of the Building.

58.  I will give a few examples of such documents:

a.  a letter dated 23 February 2000 from the Water Authority concerning maintenance requirements of the Building (page 480 of the Trial Bundle) and a quotation from Wah Tung Electric Co. regarding the costs of various remedial works “to be done to Water Authority specification including certification”. This quotation was addressed to Mr. Wong (or his agent) who obviously obtained this in response to the letter from the Water Authority.

b.  A 1^st Batch of certificate of Increase in Rent (Form TR9As) issued by the Commissioner of Rating and Valuation dated 27 January 29176 and 2^nd Batch of similar certificates dated 12 July 1995.

c.  Fire Hazards Abatement Notices dated 8 September 2000 regarding the installation of a Dry Riser System at the Building.

d.  A quotation from Cheung Kee Interior Decorating dated 6 September 2004 concerning various work.

e.  Mr. Yip’s reporting letter to Mr. Wong regarding various works needed for complying with various building orders and the estimated costs of repair.

f.  Another quotation concerning the Building’s renovation work dated 22 July 2005.

59.  I need not go into details of all the documents but, needless to say, there is a trail of similar documents that goes all the way up to 2017. None of these are disputed by Mr. Hung.

Conclusion

60.  In summing this up, this is a rather unusual case in that the paper owner of the Property, Mr. Wong, seems to performing the necessary work for the managing and maintenance the Building but was rather “idle” in managing his rental business concerning the Property which resulted in Mr. Hung occupying the Property running his business either solely or in partnership since perhaps 1992 without paying rents.

61.  With regard to the question of factual possession, the question is simply this: taking into account all the circumstances of this case, does Mr. Hung’s behavior showed that he “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”?

62.  The answer to this must be “no”. In this situation, merely occupying the Property without paying rent to the paper owner is clearly not enough: the owner is expected to pay rates and government rents (I have already addressed above why I do not accept Mr. Hung’s “mistaken belief” argument), deal with various building orders and maintenance issues etc. The statement “when no one else has done so” also does not apply in this case: Mr. Wong has been “in the picture” all along regarding these payments and maintenance works and Mr. Hung was simply taking advantage of Mr. Wong’s rather unusual and generous attitude.

63.  As for the question regarding whether Mr. Hung has the requisite animus possidendi. I have already found that he could not have possess such intention at the time he alleged he paid for the business and the Property. One may argue that he may have shown some intention to possess the Property in his own name when he attempted to pay for the rates of the Property on 25 July 2018, but that was after he received a copy of the demand note from Mr. Wong’s solicitors.

Order

64.  As such, I will dismiss the 1^st defendant’s counterclaim and order for:

a.  A declaration that the plaintiff is the legal and beneficial owner of the Property;

b.  The 1^st and 2^nd defendants do deliver vacant possession of the Property within a period as demanded by the plaintiff in writing but no less than 28 days from the date of this Order;

c.  The 1^st and 2^nd defendants do pay the plaintiff’s costs of this action to be taxed if not agreed with certificate for Counsel.