LIU KAM HOI AND OTHERS v. LIU PING KUEN the personal representative of the estate of LIU FUN KEE

CACV 209/2017

[2019] HKCA 194

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 209 OF 2017

(ON APPEAL FROM HIGH COURT ACTION NO 6728 OF 1998)

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REASONS FOR JUDGMENT
AND
COSTS ORDER

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Hon Cheung JA:

1.  I agree with the reasons for judgment of Yuen JA and the costs order.

Hon Yuen JA:

2.  This is the defendant’s appeal from a Judgment of Recorder Stewart Wong SC given on 16 August 2017 (“the Judgment”) following the trial of a dispute between the plaintiffs and the defendant¹ over certain portions of land in Lot 285, DD52, Sheung Shui, New Territories (“the said Lot”).  At the conclusion of the hearing, we dismissed the appeal with costs, but reserved our decision as to whether the plaintiffs should be given certificate for two counsel.  My reasons for dismissing the appeal are as follows.

Background

3.  It is not disputed that the plaintiffs are the registered owners of the whole of the said Lot (as successors of the original owners).  The defendant’s acknowledgment that the plaintiffs are the registered owners had certain consequences at trial, as discussed below.

Notice to Quit

4.1.   On 22 March 1996, the plaintiffs’ solicitors sent a Notice to Quit (“NTQ”)² to Mr Liu Fun Kee (“LFK”), the defendant³.

4.2.   The caption was “Your Tenancy of Portion of Lot No.285 in DD No.52”, etc.  There was no identification of the defendant’s portion, but it is common ground that it was differentiated from two portions of the said Lot at the South which were leased to third parties (the Chus) who are not involved in these proceedings.  

4.3.   In the NTQ, the plaintiffs’ solicitors gave notice to the defendant “to quit and deliver up to it [the Landlord] ... on the 31^st day of December, 1996 ... vacant possession of the said premises held by you of it as tenant thereof”⁴.

4.4.   It is not disputed that the defendant did not query, or reply to, the NTQ, nor did he deliver up vacant possession of any land on or before the deadline. 

HCA6728/1998

5.1.   On 29 April 1998, the plaintiffs issued legal proceedings in HCA6728/1998 against the defendant.

5.2.   The pleadings, in particular the changes in the defendant’s case regarding the portions which he said were leased to him, are important to the resolution of this case. 

Statement of Claim 

6.1.   The following was pleaded in the Statement of Claim (emphasis added):

“4. In or about 1967, portion of the said Lot (hereinafter called ‘the said property’) were let by Liu Kut Sui on behalf of the then registered owners of the said Lot to the Defendant for agricultural purposes on a yearly basis ...

5. The plaintiffs through their solicitors ... served a Notice to Quit dated 22^nd March 1996 on the defendant requiring the defendant to quit and deliver up vacant possession of the suit property to the plaintiffs on 31^st December 1996.

6. Despite the said Notice, the Defendant has failed and/or refused to quit and deliver up vacant possession of the suit property to the Plaintiffs on 31^st December 1996 and is still in wrongful occupation thereof.

...

8. The Defendant did pay up the rent to the 31^st December 1993.

9. By reason of the matter aforesaid, the Plaintiff is entitled to an order for vacant possession of the suit property”.

The reliefs sought included the following:

“(a) an order for delivery of vacant possession of the suit property;

(b) arrears of rent at the yearly rate of HK$500.00 from the 1^st defendant of January 1994 to 31^st December 1996 and mesne profits at such rate as this Honourable Court may deem just from 1^st January 1997 until vacant possession of the said property is delivered to the Plaintiffs”.

6.2.   The defendant did not ask for identification⁵ of which portion of Lot No.285 was being referred to as “the said property” in the Statement of Claim.

Defence Version 1 - Express Agreement 

7.1.   The defendant filed a Defence on 9 July 1998 (“Defence Version 1”).  The defence pleaded was as follows (emphasis added):

-   Liu Kut Sui (“LKS”)⁶ was the owner of “the said Lot”⁷,

-   LKS and one Liu Chung Sing (“LCS”) had in or about 1959 allowed the defendant to live at “the said property”, and at the time, there was an express oral agreement that so long as the defendant could pay the rent every year, he could stay at “the said property” as long as he wished (“the Express Agreement”)⁸;

-   in or about 1959, LKS had given consent to him to build a house on “the said property” for residential purposes, and the defendant had thereafter paid rent, which after being revised in 1978, was then revised in 1995 to $500 pa⁹;

-   in about 1970, LKS gave consent for the defendant to build more houses on “the said property”¹⁰;

-   in reliance on the Express Agreement, in 1980 the defendant commenced his business of landscape gardening on “the said property” at substantial expense¹¹;

-   there were 7 houses built on “the said property” at substantial expense¹²;

-   the defendant and many family members have been living at “the said property” since 1959¹³;

-   “the purported [NTQ] ... is invalid and ineffective by virtue of the Express Agreement”¹⁴;

-   “by virtue of the matters pleaded in paragraphs 5 and 7 hereof, the defendant is not required to quit and/or deliver vacant possession of the said property to the Plaintiffs ...”¹⁵.

7.2.   The counterclaim pleaded as follows:

“In breach of the Express Agreement, the Plaintiffs issued an invalid and ineffective [NTQ] to the defendant on 22^nd March, 1996 with a view to evicting the Defendant and his employees from ‘the said property’ and depriving the Defendant [of] his existing interest and benefit on ‘the said property’. As a result, the Defendant has suffered loss and damages which the Defendant could not quantify at this stage but would be assessed by independent valuation company at a later stage of these proceedings”.

8.  Pausing there, it is clear from Defence Version 1 that:

(1)   the defendant apparently had no doubt about the location in the said Lot of the portion let to him (the nomenclature “the said property” being adopted from the Statement of Claim without query); and 

(2)   the only defence to the claim was that there was an Express Agreement and reliance on it.

9.  On 1 September 1998, the plaintiffs filed a Reply and Defence to Counterclaim denying Defence Version 1 and the Counterclaim.

10.  On 21 October 1998, the defendant LFK died.  By a consent order made on 20 January 1999, LPK became the defendant as representative of LFK’s estate.  

Defendant’s application for interlocutory injunction

11.1.   Apparently as a result of pressure exerted by the Planning Department¹⁶, on 5 July 1999, the plaintiffs sent bulldozers onto some land on the East side of the road within the said Lot.  This land on the East side was referred to in the Judgment as “the Site” and I shall adopt this term for convenience. 

11.2.   On 14 July 1999, the defendant applied for an interlocutory injunction to prevent the bull-dozing.

Defendant’s identification of the leased area (“Portion X”) - Defence Version 1 clarified

12.1.   LPK made an affirmation in support (“LPK I”), in which he referred to a draft Amended Defence and Counterclaim (as it was later filed, I shall refer to it as the “AmDCC”).  For the purposes of this appeal, it is significant to note that in both the affirmation and the AmDCC, he identified the portion of Lot No.285 which had been leased to him as that coloured yellow on a plan which was exhibited as “LPK-5" to the affirmation and was also annexed to the draft pleading (the plan and its coloured contents are referred to as “the LPK-5 plan”)¹⁷.

12.2.   LPK referred to the leased portion in the LPK-5 plan as “Portion 1”.  However because he later referred to a different portion of land also by the same nomenclature (“Portion 1"), to avoid confusion I will refer to the portion coloured yellow –  which on the defendant’s own case¹⁸ was leased to him – as “Portion X”.

13.  Portion X was the whole of the said Lot (save and except the portions which had been leased to the Chus).  In other words, the defendant’s case was that the land leased to him comprised the Site and all the portions on the West side (later referred to as Portions 1, 1A, 1B, 1C and 1D, which will appear later in this Judgment).  This is significant to the proceedings and this appeal.

14.  Apart from identifying the land which had been leased, the material parts of the defence remained the same, i.e. that the lease was subject to the Express Agreement (ie Defence Version 1).  

15.  For completeness, I would add that:

-   on 16 August 1999, LPK made a second affirmation (“LPK II”) in which he exhibited the same plan with Portion X identified as the leased portion;

-   on 12 October 1999, the plaintiffs (who disputed that the Site had been leased to the defendant) gave an undertaking to the court in the injunction proceedings not to interfere with the whole of Portion X;

-   on 26 October 1999, the defendant filed the AmDCC, referring to Portion X as the leased land. 

Defence Version 2 - Hillside excluded from leased area

16.1.   On 8 December 2008, LPK made his witness statement which contained a change from Defence Version 1.  He now asserted that the portion leased was smaller than that he had previously asserted.  He annexed a plan¹⁹ showing that within the Site, a part (which he identified in his own handwriting as “Hillside”) was no longer coloured yellow (thereby being excluded from what he said was the leased land).

16.2.   Put another way, he confirmed that the whole of Portion X (with the only exception being the Hillside) was the leased land.  I shall call this “Defence Version 2”.  At this stage, he did not apply to further amend the AmDCC. 

Defence Version 3 - More areas excluded from leased area, but claim adversely possessed

17.1.   In October 2009, the defendant changed his case again, seeking leave to amend the AmDCC. 

17.2.   On 3 December 2009, LPK made his 4^th affirmation (“LPK IV”) in support of his application for leave to amend.   His case was now as follows:

Out of Portion X,

(i)   only two small parts (which he called “Portion 1"²⁰ and “Portion 1A”²¹) were now said to be the leased land, to which the alleged Express Agreement applied;

(ii)   three parts (which he called “Portion 1B”, “Portion 1C” and “Portion 1D”) were now said to have never been leased²², but had been adversely possessed by his father and his family (including himself) since 1970, 1985 and 1986 respectively.  These Portions 1 to 1D were marked on a plan annexed to the draft pleading²³;

(iii)   (contrary to Defence Version 2), no part of the Site was coloured yellow.

17.3.   I shall call this “Defence Version 3”.

Defendant’s explanation for change of case

18.1.   LPK sought to explain this drastic change in his case by saying that he had previously made a mistake when giving instructions to his previous solicitors²⁴.  He said he did not identify to the solicitor the exact land which was leased, he did not mention adverse possession to the solicitor, and the site plan in the AmDCC was “mistakenly coloured”²⁵.

18.2.   As for his witness statement, he said he signed it without being aware of the mistake in the AmDCC (Defence Version 1).  He did not explain Defence Version 2 (the exclusion of the Hillside) which had appeared in his witness statement. 

19.  On 4 January 2011, he filed a Re-Amended Defence and Counterclaim incorporating (i) to (iii) in §17.2 above, which included a counterclaim for adverse possession in respect of Portion 1B only.

Plaintiffs’ response

20.1.   The plaintiffs applied to be released from the undertaking they had given to the court in the injunction proceedings.  The matter was heard by Suffiad J on 14 January 2011. For reasons given in his Ruling given on 26 January 2011, the judge ordered that the plaintiffs be released from their undertaking.

20.2.   In his Ruling, the judge mentioned that one day before the hearing, the defendant had issued a writ (HCA73/2011) claiming adverse possession of Portions 1C and 1D andthe Site.  I shall refer to this below. 

21.  In their Re-Amended Reply and Defence to Counterclaim, the plaintiffs annexed a plan which showed that the area leased was the whole of Portion X as per Defence Version 1 (as shown in “the LPK-5 plan”) less the Site only, or put another way, Portions 1, 1A, 1B, 1C and 1D.

Portions 1C and 1D dealt with

22.  On 7 December 2011, Au J (now Au JA) struck out HCA73/2011, ordered those parts regarding Portions 1C and 1D in the defendant’s Re-Re-Amended Defence and Counterclaim filed on 20 May 2011 to be struck-out, and gave partial judgment to the plaintiffs for vacant possession of Portions 1C and 1D. 

23.  As a matter of completeness, I should add that:

-   in the Re-Re-Amended Defence and Counterclaim, a new para. 5A pleads in respect of Portions 1 and Portion 1A, not only the Express Agreement, but also proprietary estoppel;

-   on 14 January 2015, the defendant filed a Re-Re-Re Amended Defence and Counterclaim but the amendments are not material to this appeal;

-   on 11 February 2015, the plaintiff filed a Re-Re-Re Amended Reply and Defence to Counterclaim.  

Battle lines drawn

24.  The battle lines were drawn very clearly when trial began.  They can be summarized as follows:

-   Portions 1C and 1D were no longer occupied by the defendant and were not in issue in the proceedings²⁶; and

-   the Site was not in issue in the proceedings²⁷.

-   As for Portions 1 and 1A, the parties were agreed that these had been leased, and the NTQ had been served.  The only issue was whether the lease was subject to the Express Agreement and proprietary estoppel alleged by the defendant. 

-   As for Portion 1B, the plaintiffs’ case was that it had been leased, which lease was terminated by the NTQ; alternatively, if only Portions 1 and 1A were leased, then Portion 1B was annexed to the demised portions under the doctrine of encroachment²⁸, so that it was also covered by the NTQ.  There was no rejoinder from the defendant to plead any specific denial of annexure by encroachment. The defendant’s defence was that Portion 1B had been adversely possessed.

Trial

25.1.   That was the state of the case when the trial commenced before the learned Recorder.  It is notable that the defendant’s then leading counsel²⁹, having acknowledged that the plaintiffs were the registered owners of the said Lot, accepted that the defendant had the burden of proving his case.  He accepted the legal principle set out by the English Court of Appeal in Portland Managements Ltd v Harte and Others³⁰, in which Scarman LJ held:

“ ... the law is perfectly clear. If a stranger to the title is seeking, by reliance on some lesser or derivative interest, to obtain possession from someone who is in possession, then the defendant can rely on his possession to defeat that sort of claim. But if the absolute owner is suing, and if the absolute owner has shown by his conduct an intention to recover possession, then it is not enough for the defendant merely to assert or give evidence that he is in possession: he has got to show that he is there on the basis of some title which is consistent with the ownership of the premises being vested in the plaintiff”.

“ ... the proposition ... appears to me to be clear law, that when an owner of land is making a case of trespass against a person alleged to be in possession, all that the owner has to prove is his title and an intention to regain possession. If the defendant to the action either admits his ownership, or is faced with evidence, which the court accepts, that the plaintiff is in fact the owner, then the burden is upon the defendant to confess and avoid: that is to say, to set up a title or right to possession consistent with the fact of ownership vested in the plaintiff”.

25.2.   In line with the defendant’s approach, his leading counsel opened the case.  The trial took 6 days, during which LPK gave oral evidence and was cross-examined.

Judgment of the Recorder

26.1.   In his thorough and very detailed Judgment, the Recorder described the Defence and Counterclaim as “complicated”, and noted that it had gone through a number of “very substantial changes, with later versions being totally inconsistent with earlier versions in a number of important aspects”³¹.

26.2.   The Recorder went through the different versions of the defence (as set out in the defendant’s pleadings, affirmations and witness statement) in detail, and noted that under cross-examination, the defendant admitted that there was no miscommunication with his solicitor³².  Pertinently, the Recorder held³³:  

“I simply cannot accept that, in such circumstances, the case pleaded in the [AmDCC], and at the time supported by an affirmation of [LPK], was not based on clear express instructions from him ...”.

26.3.   The Recorder rejected the defendant’s explanation as to why the case he pleaded in the AmDCC, and asserted in his affirmations and witness statement, was mistaken. The Recorder said “I cannot accept as credible his current case which is totally inconsistent with the aforesaid”³⁴.  Pausing there, it would be noted that the case in the AmDCC, the affirmations and witness statement (which incorporated the LPK-5 plan) was that³⁵ all of the said Lot had been leased.  That clearly included the portions still at issue in the trial, viz Portions 1, 1A and 1B.

27.  It is not necessary for me to go through all the Recorder’s reasons for rejecting the defendant’s case (including the defence of Express Agreement and proprietary estoppel).  Suffice it to say that he did not find the defendant a credible witness, ordered him to deliver up vacant possession of Portions 1, 1A and 1B to the plaintiffs, and dismissed the counterclaim.

Appeal

28.1.   On appeal, Mr Paul Leung for the defendant has confined his submissions to Portion 1B only.  His submission was as follows.  The plaintiffs’ only pleaded case was that they had leased Portion 1B³⁶ to the defendant, and the only basis for requiring the defendant to deliver up vacant possession was the termination of the lease by the NTQ. Hence the burden was on the plaintiffs to prove that Portion 1B had been let. Accordingly the Recorder was wrong when he said³⁷:

“The burden is on the defendant to prove that the leased areas were only Portion 1 (and later also) Portion 1A, and not Portion 1B. ... If he cannot prove that Portion 1B has not been leased, it must also follow that he has simply failed to prove that Portion 1B was adversely possessed by [LFK] and his family, and the plaintiffs must succeed entirely”.

28.2.   Mr Leung drew our attention to that part of the Judgment where the judge said that the plaintiffs’ witnesses had no personal knowledge of the areas leased³⁸, and there was no acceptable evidence before him from the defendant regarding the extent of the land leased at any time³⁹.

29.  Mr Leung also submitted that the Recorder had failed to deal with certain evidence regarding the defendant’s allegation that he had tried three times to rent Portion 1B.  

Discussion

30.  In my view, the way the Recorder expressed himself in the challenged passages of the Judgment must be considered in the light of the particular circumstances of this case. 

31.  First, the defendant’s leading counsel had accepted that the defendant had the burden of proof, hence he opened his case first.  The Recorder cannot be criticized for approaching the case in the way put forward by the defendant’s own leading counsel at trial.

32.1.   More importantly, apart from the Site (which was no longer in issue), the parties’ cases on what was the leased land were identical, as per Defence Version 1 (with the leased land clearly set out in the AmDCC and the LPK-5 plan). Plaintiffs are not required to prove a fact which is admitted.  This is not mere procedure.  The defendant’s affirmations and witness statement are matters of substance which the Recorder was entitled to take into account when deciding the case.  With respect to the Recorder, he need not have looked further for direct evidence as it was there in the defendant’s affirmations LPK I and LPK II and his witness statement.

32.2.   It is true that in subsequent versions, the defendant then tried to back away from what he had earlier said in his pleadings, affirmations and witness statement. However, the Recorder had found his explanations to be simply not credible.  Mr Leung has not attempted to argue that the Recorder was wrong in his findings of fact.  As the Site was not in issue, one is left with the original ad idem situation⁴⁰ i.e. that Portions 1, 1A, 1B, 1C and 1D had all been leased.

33.  The defendant’s case of adverse possession of Portion 1B was advanced on the basis that that portion had never been leased to him.  There was no alternative case advanced by the defendant to support his counterclaim of adverse possession. Once it is held that Portion 1B was possessed under lease, its status was no different from that of Portions 1 and 1A, and there is no appeal from the order affecting those portions.

34.  Finally, regarding the evidence of the three attempts to rent Portion 1B, the Recorder was aware of this evidence as he referred to it in §20, and dealt with it in §44(1) holding that he was not satisfied that the defendant had proved that allegation.  The Recorder noted that there was only a bare assertion of the defendant, introduced very late in 2015, with no real explanation, and which differed from his earlier case.  These cannot be disputed and disposes of the submission.  

35.  For the reasons set out above, I dismissed the appeal with costs.  Having given the matter some more thought, and in light of the fact that Mr Ambrose Ho SC had also appeared below, I am inclined to certify the appeal as fit for two counsel.  

Hon Kwan JA:

36.  I agree with the reasons for judgment of Yuen JA and the costs order.

Annex 1

Annex 2

Annex 3