A. KING SLIPWAY CO. LTD. v. LEUNG CHAK KWUN

HCMP4732/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.4732 OF 1998

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REASONS FOR JUDGMENT

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PROCEEDINGS

1. The plaintiff is and was at all material times the registered owner of the Remaining Portion of Inland Lot No.8407 ("the Property"). By an originating summons dated 14 September 1998, the plaintiff commenced the present proceedings against the defendant, claiming for vacant possession of the Property. While not disputing the plaintiff's paper title, the defendant alleged in his Defence and Counterclaim that he was entitled to occupy the Property by virtue of adverse possession since either 1 January 1969 or alternatively 11 September 1978 and that the plaintiff's cause of action was time-barred. He thus counterclaimed for declarations that the plaintiff's title had extinguished and that he was entitled to occupy the Property.

2. Pursuant to an order of the Registrar dated 16 October 1998, the action was to continue as though commenced by writ. The defendant was legally represented on legal aid but at the trial before me acted in person. The parties agreed that the bundles of documents prepared by the plaintiff were to be adduced and used for the purpose of this trial. The defendant raised no objection to the admissibility of a witness statement of Mr Francesca Ha ("Mr Ha") dated 21 June 1999. Mr Ha was a material witness but could not attend trial because of medical reasons. A hearsay notice had already been served in respect of his statement and no counter notice had been filed.

3. In the course of his oral testimony, the defendant referred to certain documents not disclosed before and sought to adduce them as evidence. I allowed the application and directed him to prepare copy of those documents for use at the resumed hearing on 13 December 2001. However, at the resumed hearing, the defendant brought to court a large amount of some other documents (over 1,000 pages) not previously disclosed or referred to and intended to adduce them. Mr Ng, counsel for the plaintiff, strongly opposed his attempt to enlarge the documentary evidence. I took the view that it was too late for the defendant to adduce those documents. If relevant, they ought to have been produced in the course of discovery. (The defendant was then legally represented.) No satisfactory reasons had been given why these documents were not disclosed before. Trials should not be conducted by ambush. I therefore only allowed the defendant to adduce those copy documents already referred to in the course of his oral testimony. This resulted in the defendant's bundle of documents. On 18 October 2001, the defendant for the first time indicated that he wished to call his daughter to give evidence. No witness statement of hers had been filed previously. Mr Ng would like to know what evidence she would give, if she were to be called. Thus, her witness statement was allowed to be filed on 5 November 2001 without prejudice to the plaintiff's objection to calling her. The defendant explained that he had not advised his solicitors of her evidence because he did not understand the law. Mr Ng complained that the defendant had not advanced any reason why he intended to call her now when previously, the defendant and his solicitors had made a deliberate decision of not making her a witness. I agreed. Given the alleged importance of her evidence, I failed to see any reason why the defendant did not mention it to his solicitors. Further, it was apparent from her witness statement that her proposed evidence would be a mere repetition of a substantial part of the defendant's evidence. Mr Ng submitted that even if she was not called, the defendant's evidence was before the court and he would not be deprived of a proper determination of the issues. I also agreed. I therefore refused his leave to call her daughter.

4. After trial, I entered judgment for the plaintiff for vacant possession of the Property and mesne profit from 17 September 1993 to the date of delivery up of vacant possession to be assessed with costs. I also dismissed the defendant's counterclaim. I reserved the reasons for judgment and indicated that they would be given later, which I now do.

5. In this Reasons for Judgment, I first set out the background facts as gathered from the documentary evidence. The defendant either did not or was not in a position to dispute them. I next consider the plaintiff's evidence, in particular, its dealings with the Property over the years. Most of the evidence in this respect is supported by contemporaneous documentary evidence, most of which the defendant did not seek to dispute. I then set out the defendant's evidence. Finally, I state the applicable legal principles, which are well established, apply them to the evidence and explain why in my judgment the defendant's claim for adverse possession failed.

BACKGROUND FACTS

(1) The plaintiff's interest in the Property

6. Inland Lot No.8407 ("the Lot"), formerly known as Inland Lot No.6675, was situated in Causeway Bay, Hong Kong. The plaintiff was the grantee of the Lot pursuant to the Particulars and Conditions of Grant by private treaty dated 9 December 1975 ("the Grant") for a term of 21 years from 1 January 1969. In 1979, part of the Lot was resumed and designated as Section A of the Lot. In 1988, the Government attempted another resumption, which prompted the plaintiff to commence legal proceedings, namely, HCA1037/1989, against the Government ("the 1989 action"). The 1989 action was eventually settled resulting in a consent order dated 8 December 1992 ("the Consent Order"). In the end, the Government only resumed part of the Lot for the purpose of building a fire station. The remaining portion was then known as the Remaining Portion of the Lot. After negotiations, the Government granted a Crown lease ("the Lease") to the plaintiff in respect of the Property dated 6 October 1993 for a term of 21 years from 1 January 1990.

(2) Acquisition of the plaintiff by Mr Ha and his associates

7. The plaintiff was incorporated on 4 September 1973 to acquire and take over the business carried on the Lot under the style or firm of "A. King Slipway". The nominal capital was $1 million divided into 10,000 shares of $100 each. One of the two founders was Mr Leung Kwai Wing alias Leung Hoi ("Mr H Leung"). By the latter part of 1977, all the issued capital of the plaintiff was fully paid up. Mr H Leung held 9,600 shares and his brother, Mr Leung Chak To held the remaining 400 shares.

8. In October 1978, Mr Ha and his associates were interested in buying the Lot with a view to developing it into a hotel. However, owing to a non-alienation provision in the Grant, it was impossible to purchase the Lot from the plaintiff directly. As a result, Mr Ha and his associates acquired the majority shareholdings of the plaintiff. That is evidenced by an agreement dated 5 November 1977 whereby Mr H Leung and Mr Leung Chak To agreed to sell to Otford Enterprises Limited ("Otford") their respective 9,100 and 400 shares at the price of $546.8 per share. Otford was then owned by Mr Ha's associates. Completion of the sale and purchase of the shares took place in March 1978. On 11 March 1978, Mr Ha and two of his associates were appointed as directors. On 30 March 1978, out of the 9,100 shares he held, Mr H Leung transferred 8,900 shares to Otford and divided the remaining 200 shares equally among Mr Ha and three of his associates. Mr Leung Chak To transferred his 400 shares to Otford on the same day. After the transfer, Otford became the majority shareholder. Mr H Leung remained as a director and a minority shareholder holding 500 shares until November 1979 when he transferred them to Amplitude Limited and resigned as a director. The above changes in shareholding and directorship are all documented in the contemporaneous documents filed by the plaintiff with the Companies Registry.

(3) Management Agreement

9. By an agreement dated 11 March 1978 ("the Management Agreement"), the plaintiff appointed Mr H Leung as a manager of the plaintiff to manage its ship repair business conducted at the Lot. Under Clause 13 of the Management Agreement, it was expressly agreed and declared that the right and interest of Mr H Leung under the agreement were those of the plaintiff only and that nothing thereunder (1) should be deemed to constitute a partnership between the parties thereto and (2) should constitute or be deemed to constitute a transfer or assignment or sub-tenancy or parting with the possession of the Lot to Mr H Leung. Mr H Leung also agreed and undertook on the expiration or sooner determination of the Management Agreement to vacate the Lot.

10. The Management Agreement was terminated by a cancellation agreement on 9 September 1993 ("the Cancellation Agreement"). Under Clause 3 of the Cancellation Agreement, Mr H Leung should vacate the Lot on or before 16 September 1993. Eventually Mr H Leung did move out. But the defendant, who was one of his sons, refused to leave.

THE PLAINTIFF'S EVIDENCE

11. The plaintiff called three witnesses to support its claim : Ms Florence Chow Yuen Yee ("Ms Chow"), Mr Chan Choy Kwan ("Mr Chan"), Mr Paul Yuen Chi Wai, ("Mr Yuen"). Before turning to their evidence, I will first summarize the effect of the evidence in Mr Ha's witness statement.

(1) Mr Ha's evidence

12. As noted, Mr Ha was first appointed a director of the plaintiff on 11 March 1978. His directorship ceased on 23 January 1996. In his written statement, Mr Ha first described the history pertaining to the Property and the acquisition of ownership of the plaintiff in 1977 and 1978 as outlined above. He went to say that ever since the acquisition, the plaintiff has been paying the premium instalments to the Government pursuant to the Grant. The plaintiff has been paying rates to the Government as well. These payments are evidenced by the contemporaneous documents produced.

13. Mr Ha explained why the Management Agreement was entered into with Mr H Leung. He pointed out that there were special conditions in the Grant which restricted the user of the Lot to that of boat building, repairing yard and slipways. In order to comply with those conditions, and as Mr Ha and his associates (the new shareholders and directors of the plaintiff) were unfamiliar with that business, they caused the plaintiff to enter into the Management Agreement with Mr H Leung.

14. Ever since Mr Ha became a director and shareholder of the plaintiff, he frequently went to the Lot and to visit Mr H Leung. Shortly after the Management Agreement had been entered into, he visited the Lot when Mr H Leung introduced his two sons, including the defendant, to him. Mr H Leung said his two sons were there to assist him in the business. The plaintiff did not object to that. After all, they were Mr H Leung's family members and Mr H Leung was managing the business for the plaintiff.

15. Mr Ha visited the Lot on average about once in a month or two. Sometimes, he went there to chat with Mr H Leung and asked him for assistance in dealing with the Government's request for information in connection with the plaintiff's application for change of user of the Lot. Mr H Leung sometimes asked Mr Ha about the progress of the plaintiff's application as he was understandably interested in knowing when his appointment would be terminated. Both Mr Ha and other employees to the plaintiff had always had free access to the Lot. Mr H Leung and indeed the defendant had never refused them entry to it.

16. Mr Ha then described how the plaintiff applied for permission to change the user of the Lot under section 16 of the Town Planning Ordinance for a hotel to be built thereon. The application was first made in about 1979. However, it was turned down by the Town Planning Board ("the Board") in March 1979. In or about mid-1979, the Board published a draft Causeway Bay Outline Zoning Plan No.LH6/24A which designated the Lot for government, institutional or community use. The plaintiff considered that the draft Plan would affect its plan to develop the Lot into a hotel and therefore instructed its solicitors to raise objections. In spite of that, no amendment to the plan was made to meet the plaintiff's objection. From 1980 to 1987, the plaintiff made several more applications for permission to build a hotel on the Lot, and they were all rejected by the Board or the Government. In early 1992, the plaintiff again applied for permission for commercial/residential development of the Lot. In the course of preparing for the plaintiff's applications for change of user and/or redevelopment permission, the plaintiff has instructed consultancy firms to draw up proposals, plans and reports for submission to the Board. From time to time, representatives of the firms, sometimes together with the plaintiff's staff, went to the Lot for observation and survey. Mr H Leung would usually be notified of these visits in advance. Mr Ha was not aware of any incidents in which Mr H Leung or the defendant refused these people entry to the Lot or obstruct these people from carrying out their work. The applications for change of user are well documented by the relevant correspondence between the plaintiff's solicitors who handled the matter and the Board in 1979, 1982, 1986 and 1992.

17. By a letter dated 10 March 1988, the Architectural Services Department ("ASD") requested the plaintiff to give access to its contractor to carry out site investigation work on the Lot in connection with the proposed construction of a fire station. The request was sent to the Lot by hand and marked for the attention of Mr H Leung. Mr Ha remembered that Mr H Leung told him about the letter and asked him whether permission should be given to the ASD. Subsequently, Mr Ha told Mr H Leung to give access to the ASD's contractor. As far as he knew, Mr H Leung did allow the ASD contractor and/or staff to enter the Lot and carry out site investigation work. On 31 March 1993, the ASD made a similar request by letter to the plaintiff to carry out ground investigation works in connection with the proposed construction of a fire station. Similarly, the plaintiff acceded to the request in writing on 1 April 1993 and Mr H Leung was notified accordingly.

18. Mr Ha then dealt with the resumption in 1988, the 1989 action, how it was settled and the events thereafter. On 17 March 1988, the Government issued a resumption notice with plan to the plaintiff purporting to resume part of the Lot for the purpose of building a fire station. On 24 February 1989, the plaintiff issued the 1989 action to challenge the validity of the said resumption notice. The 1989 action was settled in December 1992 upon terms, inter alia, that the Government would resume only a portion of the Lot required for the purpose of the fire station. The terms of the settlement were recorded in the Consent Order.

19. Pursuant to the terms of settlement, the plaintiff was required to hand over part of the Lot ("the Resumed Land") to the Government upon two months' notice. Furthermore, pursuant to the Consent Order, the plaintiff was required to pay to the Government Crown rent in the sum of HK$794.52 in respect of the plaintiff's occupation of the Lot up to 31 December 1989; a further sum of HK$160,000.00 per month in respect of the plaintiff's occupation of the Lot from 1 January 1990 to the date of the Consent Order; and interest and agreed costs. By a letter dated 5 January 1993 from the then Attorney General's Chambers to the plaintiff's solicitors, the Government set out the computation of the sum of HK$6,869,675.50 payable by the plaintiff pursuant to the Consent Order. A sum of HK$6,910,563.00 was in fact paid by the plaintiff, the difference being additional interest accrued. After negotiations, the Government granted the Lease to the plaintiff.

20. By two letters dated 24 August 1993, the Government gave notice to the plaintiff and its solicitors pursuant to the Consent Order that it intended to repossess the Resumed Land on 25 October 1993. There were some structures on the Lot which stood partly on the Resumed Land and partly on the Property. As a result, the Government required the entire structure to be demolished, as confirmed in a letter from the Lands Department dated 16 September 1993. The plaintiff consented to the demolition and Mr Ha, on behalf of it, instructed one Ho Chung Ming ("Mr Ho") to carry it out. The demolition was duly completed and the Resumed Land handed over to the Government in or about October 1993. The plaintiff paid to the Government HK$590,182.26, being rent in respect of the plaintiff's occupation of the Resumed Land from 9 December 1992 to 25 October 1993 and the sum of HK$501,873.77 being rent for the Property from 9 December 1992 to 31 December 1993.

21. By letter dated 25 May 1993, the District Lands Office requested the plaintiff's consent to in effect their "encroachment" on the Property by one metre to enable them to construct a solid boundary wall along its proposed boundary of the Resumed Land and for the erection of hoarding. The plaintiff consented to the request. A site meeting was subsequently held between the plaintiff, represented by Mr Ha, and the Government officials on the Property in May 1994 to discuss the actual setting out of the one metre distance from the proposed boundary. The hoarding was subsequently erected and, indeed the entire fire station including the boundary wall, was completed sometime in 1996.

22. Following receipt of the Government's notice to repossess the Resumed Land dated 24 August 1993 and in anticipation of the grant of the Lease, the plaintiff decided to clear the Property. By then, Learic Limited and Mr Ha had agreed to acquire the entire shareholdings in the plaintiff from the existing shareholders. Mr Ha was contemplating redevelopment of the Property for service apartments and/or commercial purposes. Hence, the plaintiff requested Mr Lau Pok Chiu ("Mr Lau"), who had been employed by the plaintiff since 1 December 1973 as a bookkeeper on the Lot, to resign. He did on 7 October 1993 by way of a resignation letter.

23. Further, by virtue of the Cancellation Agreement, the plaintiff and Mr H Leung agreed and declared that the Management Agreement was thereby cancelled and of no further effect. Clause 3 of the Cancellation Agreement stipulated that Mr H Leung should vacate from the Lot within seven days i.e. on or before 16 September 1993. Mr H Leung failed to vacate the Lot on 16 September 1993. By a letter dated 28 September 1993 from the plaintiff's solicitors, Mr H Leung was asked to vacate the Lot and to remove all his articles and belongings and to order all his employees, agents and licencees to do so. By a letter dated 5 October 1993, Mr H Leung requested the plaintiff to allow him to store his belongings in a shed on the Property and to allow his son, Leung Chak Ping, to live in it until the end of February 1994. Since the shed was not situated on the Resumed Land, the plaintiff had not positively replied to Mr H Leung's letter. Mr H Leung however cooperated in removing all the articles and belongings in so far as they were on the Resumed Land so as to facilitate the handing over to the Government. The defendant, on the other hand, began to be difficult. He resisted their attempts to evict him from the Resumed Land and demolish the structure which, as he said, partly stood on it. The plaintiff finally succeeded. Thereafter, the defendant stayed on the Property despite the plaintiff's objections.

24. By a Chinese agreement dated 25 November 1993 between Learic Limited which had become a shareholder of the plaintiff by then and Mr Ho, Learic Limited appointed Mr Ho to manage and provide security to the Property for a term of two years at a monthly management and security fee of HK$20,000.00. The main reason for the appointment of Mr Ho was to evict the defendant from the property. During the term of the agreement, Mr Ho did occupy and exercise some control over the Property but he was unsuccessful in evicting the defendant. For this reason, the agreement was terminated with effect from 25 November 1994 by a Chinese Cancellation Agreement dated 25 August 1994.

25. Finally, Mr Ha stressed that during the entire period when he was a director of the plaintiff, the plaintiff intended to redevelop the Lot and later the Property and has never discontinued or intended to discontinue its possession of it. Nor has the plaintiff ever been dispossessed by the defendant of the Lot or the Property. At all times the plaintiff maintained its possession of and exercised control over the Lot, including the Property, in the numerous ways that he mentioned earlier in this statement. In particular, during the term of the Management Agreement, Mr H Leung, as manager, occupied and carried on business there for and on behalf of the plaintiff. Throughout all these years and even up to the time of his witness statement, that is, June 1999, the defendant has never even purported to exclude him, as a representative of the plaintiff, from the Property.

(2) Ms Chow's evidence

26. Ms Chow was at all material times a director of Harriman Realty Company Limited ("Harriman Realty") which has been the management agent of the plaintiff since 23 February 1996. She had been responsible for the management of the Property ever since Harriman Realty was appointed as the plaintiff's management agent.

27. On 12 January 1998, the plaintiff received a letter from the Lands Department dated 8 January 1998 in which the Lands Department requested the plaintiff's decision on an offer made by the Lands Department in its letter to the plaintiff dated 20 November 1995 in respect of the payment of compensation to the plaintiff pursuant to the Consent Order and Special Condition (10) of the Grant. By a letter dated 15 January 1998, the plaintiff, through its agent, Wheelock Properties Limited ("Wheelock Properties"), indicated its acceptance of the offer from the Lands Department and invited the Lands Department to re-open its offer. Thereafter, Wheelock Properties has continued to liaise with the Government on the plaintiff's behalf on matters pertaining to the finalisation of the agreement with the Government. Such matters include the payment of interest on the compensation, proof of title to the Property by the plaintiff and negotiations about the terms of the formal agreement. Ms Chow and her colleague had been responsible for such liaison with the Government on behalf of Wheelock Properties.

28. In May 1998, the plaintiff decided to carry out site formation works on the Property with a view to clearing any rubbish and structures on the Property. On behalf of the plaintiff, Ms Chow appointed Grand Tech Construction Company Limited ("Grand Tech") to proceed with the works and Grand Tech in turn has appointed a Ming Fai Decoration and Engineering Company ("Ming Fai") as its sub-contractor. Mr Bill Wong ("Mr Wong") of Ming Fai subsequently reported back to her that he carried out a site inspection on 6 May 1998 and discovered that a person who claimed to be Mr Leung was in occupation of the Property. The said Mr Leung refused to disclose his full name and despite demands by Mr Wong, he refused to vacate the Property.

29. Upon Ms Chow's instruction, Ming Fai issued a letter dated 1 June 1998 addressed to a Mr Leung Chak Ping requiring him to vacate the Property. In the letter, Ming Fai even offered to pay the addressee a sum of $80,000.00. The said letter was addressed to Mr Leung Chak Ping since Mr Wong assumed from the letter from Mr H Leung dated 5 October 1993 that Mr Leung Chak Ping was the man he found on the Property. There was no response to the said letter of Ming Fai. In view of that, Ms Chow instructed the plaintiff's solicitors to take steps to evict the occupant of the Property. By a letter dated 22 June 1998, the occupant was demanded to vacate the Property.

30. On or about 20 July 1998, a Mr Chris Choy ("Mr Choy") telephoned Ms Chow. He claimed to be the agent of the occupant of the Property, one Mr Leung, whom he also addressed as "Uncle Kwan". Mr Choy told Ms Chow that Mr Leung had to find alternative accommodation and required compensation from the plaintiff. He told Ms Chow that Mr Leung required payment of the sum of HK$50,000,000.00 before he was prepared to vacate the Property. This was rejected by Ms Chow outright. Ms Chow also required proof that Mr Choy was authorised by Mr Leung. Mr Choy said he had a written authority from Mr Leung and he suggested to have a meeting to show the authority to her. Ms Chow replied that a meeting was not necessary since the said proposal would not be acceptable and in any case, she could not verify the genuineness of the authority. She suggested to Mr Choy that he faxed the authority to her for her reference but he declined. On 3 August 1998, the said Mr Choy telephoned Ms Chow again and told her that Mr H Leung's offer had gone down to HK$20,000,000.00. Again, she rejected the said offer.

31. Ever since Harriman Realty became the management agent of the plaintiff, Ms Chow had been responsible for arranging payment of rates and the annual rent of HK$472,200.00 reserved under the said Crown Lease on behalf of the plaintiff. As from the time when Harriman Realty became the plaintiff's management agent and Ms Chow began to have personal knowledge of its affairs and until the date hereof, the plaintiff has never discontinued or intended to discontinue its possession of the Property.

(3) Mr Chan's evidence

32. Mr Chan was the chief accountant of the Accounts Department of Lee On Investment (Holdings) Company Limited (formerly known as Lee On Construction Co. Ltd), which is the holding company within the Lee On group of companies ("Lee On"). He joined Lee On on 1 June 1969. His principal duties in Lee On had been to undertake accounting work for the associated and subsidiary companies. Since he first joined Lee On, Lee On group had been carrying on the business of, inter alia, the sale and purchase of land, the management and development of properties. He had also been responsible for arranging finance for the purchase of and/or development of properties by Lee On. These projects were sometimes joint venture investments between Lee On and other parties. The owners of Lee On at the time when he joined them were Mr Chan Ching Pow and Mr Fong Hin Yeung, who were Mr Ha's associates in acquiring the plaintiff.

33. In or about November 1977, Lee On entered into a joint venture investment to purchase the Lot through the acquisition of the plaintiff. Mr Chan set out the details of how the shares in the plaintiff were acquired. It was he who (1) prepared written records of the amount collected from each joint venture partners on that occasion as well as all subsequent collections of funds in relation to this investment and the requisite transfer documents in relation to the aforesaid transfers of shares, namely, the relevant instruments of transfer and bought and sold notes; and (2) changed the authorised signatories for the plaintiff's bank accounts consequent upon the change in directorship of the plaintiff.

34. Ever since the acquisition, the plaintiff has been paying the premium instalments to the Government pursuant to the Grant. The plaintiff has also been paying rates to the Government. It was Mr Chan's responsibility to arrange for payment of premium instalments and rates. Every time a premium instalment or rates was due for payment, he would arrange to collect funds from the joint venture partners which would be lent to the plaintiff to enable it to meet such payment.

35. Mr Chan then described in similar terms why the Management Agreement was made with Mr H Leung. Pursuant to the Management Agreement, Mr H Leung was required to pay to the plaintiff a monthly sum of HK$400.00 being the guaranteed profits. Such payments were in fact made to Otford. Mr Chan was responsible for receiving the said monthly sums of HK$400.00 from Mr H Leung.

36. Mr Chan was also responsible for preparing the accounts of the plaintiff. The plaintiff employed a part-time book keeper, Mr Lau, who was stationed at the Lot to prepare records of daily incomes and expenses in respect of the businesses of the plaintiff in the Lot. Mr Lau's duties were to prepare an income and expenditure statement in respect of the plaintiff's businesses in the Lot on a monthly basis and submitted such statements to Mr Chan, together with supporting documents including receipts, invoices and vouchers etc. prepared by Mr Lau for Mr Chan's review. According to such supporting documents, the incomes of the plaintiff were essentially ship repairing charges and the expenditures relating to the purchase of materials and payment of wages to employees. Upon receipt of the said statement from Mr Lau each month, Mr Chan would check it against the supporting documents. Mr Lau would also submit to Mr Chan cheques to be issued by the plaintiff in respect of the expenditures of the plaintiff for signatures. After verifying that the cheques were in order, Mr Chan would arrange for their signature by the authorised signatories. In addition, every year, Mr Lau would prepare a draft profit and loss account in respect of the plaintiff's business in the Lot for his review. Again Mr Chan would check the draft account prepared by Mr Lau against the supporting documents and the statements previously prepared by Mr Lau. Once the draft account was found to be in order, Mr Chan would submit it to the auditors of the plaintiff to enable them to prepare the plaintiff's audited report and tax returns. Audited reports of the plaintiff for the years from 1984 to 1993 both inclusive had been produced.

37. Mr Chan was aware that the intention of the joint venture partners was to apply to change the user of the Lot so that it could eventually be developed into a hotel. One of his duties in Lee On was to oversee the development of properties. Hence, he had discussions with Mr Fong Hin Yeung from time to time regarding the progress of the intended development of the Lot. He was also aware of the resumption in 1988 and the 1989 action. Referring to payment of HK$6,910,563.00 in about January 1993 pursuant to the Consent Order, Mr Chan said he was responsible for collecting the funds from the joint venture partners which were then lent to the plaintiff to enable it to meet this payment. The collection of funds was also recorded in the accounting documents produced.

38. In or about August 1993, the shareholders of the plaintiff agreed to transfer their entire shareholdings in the plaintiff to Mr Ha and his company, Learic Limited. The actual transfer of the shares was registered with the Companies Registry in October 1993. As a result, Mr Ha, Mr Chan and one of his colleagues personally attended the Lot and discussed with Mr H Leung there the arrangement for Mr H Leung to hand over the Lot to Mr Ha. Their meeting took place inside an enclosed office within the Lot.

39. During the entire period from November 1977 when the joint venture partners acquired the shareholdings of the plaintiff until August 1993 when the shares in the plaintiff were sold to Mr Ha and Learic Limited, Mr Chan was responsible for overseeing the accounts of the plaintiff in respect of its businesses on the Lot and for the renewal of the business registration of the plaintiff in respect of its business on the Lot. During this period, Mr H Leung attended the office of Lee On from time to time to discuss matters concerning the Lot with Mr Fong and himself. Mr Chan told by Mr H Leung that he worked in the Lot every day. It is therefore within Mr Chan's knowledge that throughout the said period, the plaintiff had been carrying on businesses at the Lot.

40. Under cross-examination, Mr Chan was asked if he could produce the supporting document for the auditor's reports. Mr Chan said since the lapse of time, the plaintiff no longer kept them. After he ceased to have any responsibility of keeping accounts for the plaintiff offer the transfer of shares by Otford to Mr Ha and his company, such documents would not be submitted to him any more.

(4) Mr Yuen's evidence

41. Mr Yuen is the assistant property development manager of Wharf Limited. He took photographs on the Property on 18 January 1999. His evidence is uncontroversial. The photographs he took and a plan he made for the purposes of explaining the photographs are all adduced as exhibits P3 to 12 respectively.

THE DEFENDANT'S EVIDENCE

42. In his witness statement filed on 9 September 1999, the defendant said that he had been in continuous occupation of the Property since he was a child. His father and his family moved to the Property not later than 1 January 1969 and had operated a ship repair business there. The defendant assisted his father in his work on regular, if not daily, basis ever since he was a child and still in school. He had thereby acquired considerable knowledge, expertise and experience in the trade.

43. However, in his oral testimony, the defendant said that he was originally an apprentice and then an employee of the Mr H Leung's business. He left his father's business in 1964 and did not return until 1973 upon his father's request. He further said that he had no control over Mr H Leung's business on the Lot. The business was left to his mother and not him. In Mr H Leung's eyes, the defendant was obedient and dutiful and worked like a donkey. He did all the work and received a salary. Between 1973 and September 1978, the defendant was working as an employee of his father. He did not consider himself qualified to occupy the Lot. In light of the above, any claim for adverse possession starting in 1969 must fail. As I understand his evidence, the defendant's claim for adverse possession really started in 1978. His evidence in this respect can be summarised thus.

44. In around September 1978, his father ceased to carry on any meaningful repair business. The customers turned to him. He therefore started his own sole-proprietor business under the trade name of A. King Marine on the Property. He paid all the employees and caused improvement to the Property for the purpose of carrying on the business. In this connection, he relied on his documents including an application for the business registration certificate dated September 1978, various invoices and tax returns since 1978.

45. He said he had continuously operated his business on the Property without any interruption since September 1978 to the exclusion of the plaintiff. The plaintiff had never occupied or carried on any operation and/or business at the Property or any part thereof. But he accepted that after September 1978, his father did come back to the Lot/Property and allowed Mr Ha or his friends into the shipyard. He did not consider himself to be in a position to intervene, although he stressed that he did not know Mr Ha was a representative of the plaintiff. Further, the defendant said that between 1978 and 1983, there were about 7 or 8 occasions when his father hit him and he had to drive away. There were also numerous occasions when his father told him to leave, which he did. He only returned to the shipyard after his father had left. Finally, the defendant accepted that it was his father who gave consent to ASD's staff to enter the Lot for survey in about March 1988 and that it was probably his father who let "a whole team of people" go into the Property in 1993 for the purposes of demolishing the structure in the Resumed Land as referred to by Mr Ha in his witness statement. The defendant however did not pay much attention to them. He was not aware of the resumption in 1979 but he knew about the resumption in 1993.

46. Before the commencement of these proceedings, the defendant had never seen the Management Agreement or the Cancellation Agreement. He had no knowledge of these at all. He said that in any extent, his father had no authority to allow him to operate his business at the Property and/or grant any licence or sub-licence to him. Thus, his possession of the Property was at all material time adverse to the interest of the plaintiff. No had he seen (1) the letter dated 28 September 1993 from the plaintiff's solicitors to Mr H Leung to vacate the Property; (2) the letter dated 5 October 1993 from Mr H Leung to the plaintiff requesting the plaintiff's permission to store his belongings and for his son Leung Chak Ping to live on the Property until the end of February 1994; (3) the Management and Security Agreement dated 25 November 1993 entered between Learic Limited and Mr Ho; or (4) the written termination agreement in Chinese dated 25 November 1994 between the same parties. He could not recall if he had in fact received the letter dated 18 October 1996 from the solicitors acting for Learic Limited demanding him to vacate the Property. He said in any event, no action was taken after the date of the said alleged letter and he continued to be in possession of the Property.

47. The defendant denied that he knew Mr Choy referred to by Ms Chow. He had never instructed him to be his agent to demand payments from the plaintiff as alleged.

48. This concludes the parties' evidence. I now set out the applicable legal principles.

LEGAL PRINCIPLES

49. The relevant provisions of the Limitation Ordinance are :

"Section 7(2) :

No action shall be brought by any other person to recover any land after the expiration of 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.

Section 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.

Section 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 this Ordinance 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.

Section 17 :

Subject to the provisions of section 10, at the expiration of the period prescribed by this Ordinance for any person to bring an action to recover land (including a redemption action), the title of that person to the land shall be extinguished."

50. The relevant legal principles on adverse possession are well established. In Wong Tak Yue v. Kung Kwok Wai David [1998] 1 HKC 1, the Court of Final Appeal has succinctly summarised the principles thus. A person claiming to be in adverse possession must have both possession and the requisite intention to possess. The question of intention to possess, as with any other question of intention, was one of fact. Whether the intention could be established depended on an assessment of all the circumstances in a particular case. 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 courts should approach them with some scepticism. The courts would scrutinise the circumstances in which they were made and would give them such weight as they deserved. Conversely, where the occupier had made statements which were against his interest, the courts would usually accord to them considerable weight. The burden is on the person claiming to be in adverse possession to establish his intention to exclude the whole world including the owner of the land.

51. With these principles in mind, I now examine if the defendant's claim is made out.

NO ADVERSE POSSESSION

52. In my view, the main issue which falls for determination in this case is : Was the defendant in adverse possession of the Property to the exclusion of the plaintiff continuously for 20 years prior to the commencement of the present proceedings on 14 September 1998? The burden of proof as noted rests squarely on the defendant.

53. In his Defence and Counterclaim, the defendant contended that his adverse possession of the Property commenced as from (i) 1 January 1969; alternatively (ii) 11 September 1978. As noted in paragraph 43 above, the first limb of his claim must fail.

54. Mr Ng contended that the defendant had failed to prove :

(a) factual possession of the Property as from 11 September 1978 in the sense of a sufficient degree of exclusive physical control over the Property; or

(b) intention to possess the Property as from 11 September 1978 in the sense of a manifest intention, in one's own name and on one's own behalf, to exclude the world at large, including the owner.

With respect, I entirely agree. Indeed, the evidence against the defendant's contention is overwhelming. Hereinbelow, I will explain why.

55. First, the evidence clearly shows that the plaintiff occupied the Property via Mr H Leung as its manager between 11 March 1978 (the date of the Management Agreement) and 9 September 1993 (the date of the Cancellation Agreement). Both agreements were signed by Mr H Leung. He continued to occupy the Lot/Property despite the termination. This is evidenced by the letter from the plaintiff's solicitors dated 28 September 1993 asking him to vacate the Property and his letter in reply dated 5 October 1993, whereby he asked for the plaintiff's permission to store his belongings on the Property and to allow his son Leung Chak Ping to live on the Property till February 1994.

56. Secondly, even the defendant accepted that after September 1978, Mr H Leung remained to certain extent in control of the Lot/Property. He let Mr Ha and his friends into the shipyard and it was beyond the defendant to intervene. He gave consent to the ASD's staff to enter the Lot/Property for survey in about March 1988. He probably let "a whole team of people" into the Lot/Property in 1993 for demolition work to be carried out.

57. Thirdly, the defendant was clearly not in a position to exclude Mr H Leung from the Lot/Property. The reverse is true. According to his oral testimony, between 1978 and 1983, there were 7 or 8 occasions when Mr H Leung hit him and he had to drive away. There were also numerous occasions after 1978 when Mr H Leung told him to go away. The defendant had to leave and only came back to the Lot/Property after Mr H Leung had left.

58. Fourthly, the defendant had never intended or purported to exclude anyone from the Lot/Property. This was so even though some of the entrants, like Mr Ha who went to the Lot/Property on a regular basis after September 1978, were representing the plaintiff. I reject his evidence that he did not know Mr Ha's capacity. The defendant simply minded his own business - he did not care whether Mr Ha or those who went onto the Lot/Property in 1993 (for the purpose of demolishing some structures on the Resumed Land and the Property) represented the plaintiff or not and would not turn them away. He showed a distinct lack of concern when a large group of people went to the Lot/Property in 1993 to see how to carry out some demolition works.

59. Fifthly, the documentary evidence clearly supports the plaintiff's case that that it had carried on business on the Lot/Property continuously (and hence in possession of the Lot/Property) since 1973 up to 1993. Its memorandum of association showed that it was incorporated in September 1973 to take over as a going concern their ship repairing business already on the Lot. The plaintiff's audited reports for the years 1977 and 1984-1993 recorded details of the plaintiff's business operations including its turnover, stock in trade, staff wages, expenditure on utilities, etc. They clearly showed that the plaintiff was actively operating the ship repair business at the Lot/Property.

60. Sixthly, the unchallenged evidence shows that the plaintiff has retained control over and access to the Lot/Property continuously and has not lost possession of the Lot/Property. The plaintiff's representatives (including in particular Mr Ha) had always had free access to the Lot/Property. The plaintiff has from time to time given the Government access to the Lot/Property at the latter's request. Pursuant to the Government's resumption notices, the plaintiff handed over part of the Lot to the Government first in or about 1979 and then in 1993. The evidence also negatives any discontinuance of possession or any intention on the part of the plaintiff to discontinue its possession of the Lot/Property. Since 1979, the plaintiff has made several attempts to apply for planning permission to change the user of the Lot/Property (which necessitated preparatory work, including survey and site investigation on the Property itself). It has kept up (and still keeps up) with regular payments of all land premiums, Crown rent and rates in respect of the Lot/Property. It has taken the 1989 action to challenge the validity of a resumption notice issued by the Government over the Lot/Property, which was subsequently settled in December 1992. According to the defendant's own evidence, Mr H Leung who was the plaintiff's manager has orally demanded the defendant to leave the Lot/Property numerous times since 1978. The plaintiff itself has in writing demanded the defendant to leave at least four times - in 1991, 1993, 1996 and 1998 : see the letters from the plaintiff's solicitors to Mr H Leung dated 14 May 1991 and 28 September 1993; the letter from the solicitors acting for Learic Limited to the defendant dated 18 October 1996, and the letter before action dated 22 June 1998. The letter of 14 May 1991 is in particular telling. There the plaintiff told Mr H Leung to ask the defendant to leave the Property within one month because of his inappropriate association with certain people.

61. Finally, on the defendant's evidence, I am prepared to accept that he had been in occupation of part of the Property for the purpose of carrying on his own business there since 1978. But in my judgment such occupation was not adverse to the plaintiff. Prior to September 1978, his occupation was, on the defendant's own evidence, undoubtedly pursuant to permission by Mr H Leung. After September 1978 his occupation was consistent with its being tolerated or acquiesced in by Mr H Leung. Further, such occupation since September 1978 did not amount to dispossession of the plaintiff as there was no exclusive physical control over the Lot/Property by the defendant and the evidence shows that the defendant had manifested no intention to exclude the plaintiff's owner. In this resepct, I agree with Mr Ng's submission that his occupation was "shared" with the plaintiff and hence not adverse since the plaintiff, via Mr H Leung, was also occupying and carrying on business on the Lot/Property after September 1978.

62. Mr Ng further submitted and I agree that the defendant's occupation was in accordance with the plaintiff's then purpose for the land i.e. the maintenance of some ship repairing business on the Lot/Property pending its application for permission to change the user of the Lot/Property, and hence did not suffice to amount to dispossession of the plaintiff : see Pulleyn v. Hall Aggregates (Thames Valley) Ltd (1992) 65 P & CR 276, CA.

CONCLUSION

63. For the foregoing reasons, I hold that the defendant has failed to discharge the burden of establishing adverse possession of the Lot/Property to the exclusion of the plaintiff for the requisite period. I therefore enter judgment for the plaintiff and dismiss the defendant's counterclaim as aforesaid in paragraph 4 above. The date for mesne profit to be assessed began on 17 September 1993 because it was the date when the licence granted to Mr H Leung (and through him, his family including the defendant) to occupy the Property under the Management Agreement ceased.

Finally, I would record my thanks to counsel who had handled the matter with care and competence.