LOYAL SAIL INTERNATIONAL LTD v. THE INCORPORATED OWNERS OF WAI LUN BUILDING

DCCJ 706/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 706 OF 2014

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JUDGMENT

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Introduction

1.  This is an action for trespass. The plaintiff is the registered owner of a shop (the “Shop”) which occupies the Ground Floor and an Open Yard at Wai Lun Building (“the Building”), 78 Hennessy Road, Wanchai, Hong Kong. 

2.  By an assignment dated 26 April 2011, the plaintiff acquired paper title to the Shop (the “Assignment”).  The plaintiff was duly registered in the Land Registry as the owner. 

3.  On 9 November 2011, the plaintiff commenced the present action in the Lands Tribunal (LDBM 314 of 2011).  In February 2014, it was transferred to the District Court.

4.  The Assignment expressly gave the plaintiff “the full right and privilege to the use occupation and enjoyment of the whole of the GROUND FLOOR and its OPEN YARD on the GROUND FLOOR of the said No 78 Hennessy Road as shown on the said Plan thereon marked ‘Floor Plan’ and coloured Pink”.

5.  Unusually for a case of this kind, the trespasser is neither a neighbour nor a casual intruder.  It is the Incorporated Owners of the Building (“IO”).  Even more remarkably, the IO has defended the case, and indeed, counterclaimed, on the basis of adverse possession of the space in dispute.

6.  To understand how the dispute arose it is first necessary to describe the location and usage of the space in question.

The Space in dispute

7.  The space in dispute consists of three small, discrete areas located in the Open Yard.  It is clear, and it is not disputed, that the space has been used for some years to house several pumps and ancillary facilities such as pipes and tanks.  For the sake of simplicity I will refer to all the equipment in question as pumps.

8.  In the Statement of Claim the plaintiff describes the pumps in the following terms:-

“Communal facilities inside the Property

8. On a date unknown to the Plaintiff but in any event prior to the date of the Assignment, the Defendant and/or its servants, agents, licensees or otherwise installed or allowed it to be installed various equipment and facilities in, on or near the Open Yard, which equipment and facilities include:-

(a) Group (1)

Two water pumps connected with a stainless steel water tank within and at the entrance of the lavatory adjacent to the scavenging lane. I crave leave to refer to the Plan annexed to the Notice of Application herein with marking (1) and coloured Pink for the location.

(b) Group (2)

A water pump connected with the flushing water tank in the Open Yard adjacent to the doorway that opens to the Open Yard. I crave leave to refer to the annexed Plan with marking (2) and coloured Pink for the location.

(c) Group (3)

A water pump connected with the fire services water tank in the Open Yard adjacent to the rear exit of the Property that opens onto the scavenging lane. I crave leave to refer to the annexed Plan with marking (3) and coloured Pink for the location.

(collectively called “the said Facilities”)”

9.  Despite being situated in “private” territory, namely, the Open Yard at the back of the Shop, the pumps in fact serve all the units in the Building.  However, the date of the installation of each of the various pumps is the subject of controversy.

10.  In the course of final submissions, the parties agreed on a revised drawing marked “A” for the purpose of identifying the present locations of the pumps.  A copy of the drawing is annexed to this Judgment (“Drawing A”).

11.  According to the Statement of Claim, the existence of the pumps has rendered the Open Yard practically unusable.  They obstruct the two toilets originally constructed and access to the rear exit of the Shop.

12.  In practice, the pumps have only been accessed via a separate rear door which opens onto a scavenging lane (being government land).  A key is required to open this door.  For many years the key has been in the possession of the management, but not the owner of the Shop.

13.  On 5 May 2011, the plaintiff sent a demand letter to the manager of the Building appointed by the IO.  It demanded that the pumps be removed as soon as possible.  The manager refused.

14.  On 18 May 2011, the plaintiff entered into a tenancy agreement with a retailer selling dry goods.  It claims that the rental value that it was able to fetch is reduced by the fact that the fire exit is blocked by the presence of the pumps, and that there is no toilet available inside the Shop. 

Common area or common parts?

15.  Before I turn to the defence, I would briefly mention several arguments originally raised by the parties in their pleadings.  As they were no longer maintained by counsel in the course of oral submissions, I do not propose to deal with them at length.

16.  In its Defence, the defendant refers to several provisions in the Deed of Mutual Covenant (“DMC”) such as Clauses 3(e) and 4(m).  These commonly found provisions define the common parts of the Building and give the Building manager certain powers to access common facilities for the purpose of repair and maintenance.

17.  In reliance on such provisions, Ms Tam, Counsel for the Defendant initially sought to persuade me that the plaintiff holds its interest subject to the defendant’s right and duty to access the disputed area for the purpose of maintaining and repairing the pumps.

18.  In my judgment, the argument does not assist the defendant in the context of a counterclaim for possession. Nothing in the cited provisions of the DMC purports to diminish or alter the title of the owner to the Open Yard.  At best they enable or require the IO to maintain or repair common parts of the Building wherever situated.  There is nothing in the provisions which gives the IO the right to install or maintain the pumps in any privately owned area in perpetuity.

19.  In its Amended Reply the plaintiff put forward an interesting legal argument.  Essentially, it was contended that the IO was a statutory corporation charged with responsibilities for looking after common parts of the Building.  It was said that the IO was an agent or trustee for all the owners including the plaintiff.  Thus it did not have any power, capacity or authority to make a claim for adverse possession against an individual owner for its own benefit.

20.  Mr Wu who appeared for the plaintiff, did not pursue the argument at all in his submissions.  In any event, the suggestion appears to be contrary to the weight of authority as shown by the dicta of the Court of Appeal in Shine Empire Ltd v Incorporated Owners of San Po Kong Mansion [2006] 4 HKLRD 1 at [35, 36].  I shall come back to this case below.

21.  The action (and defence) therefore stands or falls with the issue of adverse possession.  To this I now turn.

Adverse possession – the law

22.  The starting point of any discussion on the law of adverse possession must be the relevant provisions of the Limitation Ordinance, Cap 347.  The two key provisions are sections 13 and 17. 

23.  Section 13(1) reads as follows:-

“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.”

24.  Further, section 17 of the Limitation Ordinance provides:-

“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.”

25.  The basic principles for the application of these provisions are well-established.  A person claiming to be in adverse possession must be shown to have both physical possession (“factual possession”) and the requisite intention to possess (“animus possidendi”): Wong Tak Yue v Kung Kwok Wai & another (No.2) (1997-98) 1 HKCFAR 55 at 68E-F, per Li CJ.

26.  I turn to the first element, namely, physical possession.  In JA Pye (Oxford) Ltd v Graham [2003] 1 AC, Lord Brown-Wilkinson stated, quoting from the classic judgment of Slade J in Powell v McFarlane 38 P&CR 470 at pp 470-471:-

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

27.  Equally it is well-established that possession cannot be adverse unless it is without the licence or consent of the registered owner.  See the judgment of J Lam J (as he then was) at first instance in Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd, HCA 15824 of 1999, 11 October 2007, at [65], and Pye, sup cit, at [36].

28.  Such a conclusion follows ineluctably from the wording of section 13(1) of the Ordinance.  This is because a squatter who with the licence or consent of the paper owner has a valid defence to a claim for trespass so time does not run in favour of the squatter against the owner.

29.  Furthermore, the burden of proving the lack of licence or consent rests with the squatter.  He must discharge his burden by adducing compelling evidence: Wu Yee Pak v Un Fong Leung (2004) 7 HKCFAR 498, at [5], per Chan PJ.

30.  Turning to the second element, namely, intention to possess, its meaning has been elucidated as follows:-

“First, although the occupier must intend to exercise exclusive control for his own benefit, he need not have a conscious intention to exclude the true owner. It is enough that the occupier intends to exclude the owner “as best as he can” or ‘so far as reasonably practicable and so far as the process of the law allows’. Secondly, an intention to own the land or even an intention to acquire ownership is not required for establishing animus possidendi. Thirdly, the animus possidendi can be established even if the occupier mistakenly believes himself to be the owner of the land.”

See Civic Ltd v 余綺妙 and others, HCA 225 of 2011, 28 March 2014, at [22], per DHCJ M Ng.

31.  In Wong v Kung, sup cit, the Chief Justice characterised the requisite intention to possess as an intention on the part of the squatter to possess “as of wrong”.  On the facts of that case, the defendant intended to pay rent if the owners had requested payment.  The Court of Final Appeal considered that he was therefore not intending to exclude the owner with the paper title, but was treating himself as enjoying possession under a lawful title from the owners.  His intention to possess was “as of right”: sup cit, at 69E-G.

32.  This part of the Court of Final Appeal’s reasoning has given rise to sharp controversy.  In Pye v Graham, sup cit, Lord Browne-Wilkinson also considered the position of a squatter who was willing to pay if asked.  He held, at [46], that such a state of mind was not inconsistent with an intention to possess.

33.  Therefore, there is a clear divergence between Hong Kong law and English law on this point.  The conflict has been highlighted in a number of local decisions.  They include the judgment of J Lam J at first instance in Hong Kong Kam Lan Koon, sup cit, at [87-89], and the judgment of Recorder McCoy SC in Lau Wing Hong & others v Wong Wor Hung and another [2006] 4 HKLRD 671, at [33-34].

Factual possession

34.  I turn now to the evidence on factual possession.  It is necessary to trace the origins and, in some cases, subsequent relocation(s) of the three pumps one by one.  I shall start with the pump identified as Group (2) in the Statement of Claim since it is the least controversial.

Group (2)

35.  On 24 October 1967 the Occupation Permit of the Building was issued.  The developer of the Building was Mee Lun Investment Co Ltd (“Mee Lun”).

36.  By an assignment dated 24 September 1969, Mee Lun conveyed the shop at No 80, Ground Floor to two purchasers.  In the plan annexed to the assignment none of the three pumps was shown.  The plan, however, reveals the existence of a number of communal facilities, such as lifts, common areas and a common wall outsides the areas in dispute.

37.  On 4 May 1972 the IO was registered under the Multi-Storey Buildings (Owners Incorporation) Ordinance 1970.

38.  By an assignment dated 24 September 1974, Mee Lun conveyed the shop at No 78, Ground Floor to one Madam Tan Whai Lan (“Tan”).  Likewise, the assignment plan does not disclose any of the pumps in issue.  I further note that the assignment does not contain any exception or reservation in respect of the Open Yard, or any part of it.

39.  The earliest documented evidence of the existence of any of the pumps is in an assignment dated 13 October 1987.  The subject-matter of the assignment was, inter alia, the First and Second Floors of Nos 78, 78A, 80, 82, 84 and 84A Hennessy Road.  Three plans are annexed to the assignment (the “1987 Plans”). 

40.  In the first plan, a rectangular feature is shown marked “PH” (meaning pump house) within the Open Yard on the Ground Floor.  It is roughly situated at the current location of Group (2).

41.  The second plan shows the layout of the 1^st and 2^nd Floors.  It discloses two further features, namely, (a) a “common water sump tank”, approximately at the location of the current Group (1), albeit on the floor above, and (b) a “common PH” located between the “common water sump tank” and the wall adjoining the Open Yard and the back wall of the Shop.

42.  Finally in the assignment the property conveyed was identified by reference to the plan annexed to the earlier assignment dated 24 September 1974.  No separate plan was shown.

43.  From these conveyancing documents, and the current locations of the pumps as shown in Drawing A, Mr Wu deduced that sometime between 1974 and 1987, a pump house was installed on the Ground Floor.  On this basis, he accepted that Group (2) has been in existence at the location of Group (2) today since 1987, at the latest.

44.  In the light of Mr Wu’s concession, and given that the action was commenced in November 2011, I am able to conclude that the 12-year limitation period under section 7 of the Limitation Ordinance would have elapsed before the commencement of this action.

45.  There is also no dispute regarding the access to the Open Yard as set out in paragraphs 11 and 12 above.  In other words, the IO has practically enjoyed exclusive possession to the Open Yard for over 12 years before the commencement of this action.

46.  Therefore, I further find that the IO has established a sufficient degree of exclusive physical control in relation to Group (2).

Group (1)

47.  As discussed above, the 1987 Plans show the existence of a “common water sump tank” at the current location of Group (1), but one floor above. 

48.  At trial, Mr Yip Sung Kit gave evidence for the IO.  Mr Yip is an elderly gentleman in his seventies or eighties.  He has been the secretary of the IO since 1978.

49.  Mr Yip is the owner of a residential unit in the Building.  He purchased his unit in 1968 and has lived there since 1976.

50.  Before Mr Yip purchased his unit, he was shown around the Building by a representative of Mee Lun.  He was assured that the water supply and installations were fine.  During the visit he noticed a fire services installation on the wall just outside the door to the Open Yard.  He also noticed a pump which was placed at the top of the lavatory within the Open Yard at the location of the Group (1).

51.  According to Mr Yip’s oral evidence, but not in his witness statements, in or around 1980, the ceiling of the lavatory was on the verge of collapse.  The chairman of the IO called a meeting.  At the meeting it was decided to move the pump down to the ground floor to avoid imminent collapse of the structure. 

52.  If Mr Yip’s assertion is correct, it might well explain the difference in location of the “common water sump tank” as shown in the 1987 Plans and the current situation of Group (1).  It is also consistent with the rather unusual location of the pump in Group (1), namely, within a structure which was once a lavatory.

53.  Having said that, I am not sure if Mr Yip was right about the date of the relocation.  As at the date of the 1987 Plans, the common water sump tank was still located on the First Floor.  Given the formal and important nature of the assignment of which they formed part, there is no reason to doubt the accuracy of the Plans.  Hence, it may be deduced that the move described by Mr Yip must have occurred some time after 1987, not in 1980 as he asserted.

54.  Beyond making this deduction, however, I am afraid I am unable to go further and pinpoint the date of the relocation of Group (1). 

55.  For the purposes of limitation the critical date is November 1999.  If the relocation of Group (1) occurred before November 1999, the action would be barred by the lapse of time.  Otherwise, the plaintiff would still be within time to bring an action for trespass in relation to this pump.

56.  At paragraph 15 of his witness statement, Mr Yip stated:-

“15. 本人居於該大樓超過35年，該大樓一直以來皆有食水､自來水或咸水供應，由於該些供水系統有喉管連接至該大樓各單位及/或各樓層，安裝需要一定時間，而安裝喉管的工程定必會對該舖後位置造成影響，如該供水系統是於該大樓落成後才裝設的，本人相信裝設的行動必定會對該大樓的各業戶構成一定程度的影響，尤其是該單位的前業主，惟以本人記憶所及，自本人入住該大樓超過35年以來，除了該改動以外，並未有這麼大型的裝設工程進行過，因此本人相信該供水系統是由發展商而並非由答辯人設置於該舖後位置的，而本人亦深信該供水系統必定是在該大樓建成以前由發展商裝設或在該大樓建成初期（即答辯人成立以前）發展商在獲得該單位的前業主批准及同意的情況下於該單位內裝設的，所以該供水系統當年所存在的位置與現時所存在的位置應完全相同。＂(Underline supplied)

57.  Even on his own account, Mr Yip must be wrong in asserting in the last sentence (underlined) that the pumps have remained in the same positions as they were when they were first installed by the developer when the Building was completed. 

58.  It is not clear to me why Mr Yip had not referred to the relocation of Group (1) in his witness statement or his supplemental witness statement.  His failure to do so casts a serious doubt on the sweeping conclusion contained in the last sentence of paragraph 15 of his witness statement.  But, as I shall explain below, this is not the only palpable omission or error in the statement.

59.  For the avoidance of doubt, I have considered the reports of both experts on the issue of the history of the pumps.  By agreement of the parties the experts were not called to testify. This is no doubt because in their reports, they gave no opinion beyond describing what is clearly shown in the drawings which I have discussed above.

60.  For these reasons, I find that the IO has failed to discharge its burden of proving that it has enjoyed factual possession of Group (1) for a period of 12 years or more before action. 

Group (3)

61.  Apart from the general assertion made by Mr Yip in paragraph 15 of his witness statement, there is no evidence at all to show when Group (3) was installed at its present location. 

62.  As mentioned above, Mr Yip said in his oral testimony that the fire services installation was located outside the rear door when he was shown around the Building in 1968.  This means that, contrary to his written statement, the location must have changed between 1968 and 2011.  The question is “when?”

63.  I have seen a number of photographs which disclose the current state and location of the pump.  The pump shows some sign of ageing but I am unable to determine its age for the purpose of limitation.

64.  For these reasons I find that the IO has failed to prove that it has enjoyed physical possession of Group (3) for the requisite period.

Intention to possess

65.  In the light of my findings in relation to Group (1) and Group (3), it only remains for me to consider whether the IO has demonstrated the requisite intention in relation to Group (2).  At the same time, I will consider the issue of consent, although strictly speaking, it should be form part of the analysis on factual possession.

66.  In this regard there are three main possibilities.  For the sake of analysis, and based on the discussion with Counsel of the issue during final submissions, I will list them out as follows:-

A. The IO possessed the disputed space by installing the pump in Group (2) knowing it was owned by the successive owners of the Shop but without obtaining their consent;

B. The IO possessed the disputed space only by consent of the successive owners;

C. The IO mistakenly believed that the disputed space was a common area and possessed it accordingly without submitting to the paper owner’s title.

67.  As a convenient shorthand, I shall refer to these possibilities as Scenarios A, B and C respectively.  Clearly a finding on the basis of Scenario B would be fatal to the claim of adverse possession; whereas Scenario A or C would enable the IO to succeed.

Scenario A

68.  Earlier on I have alluded to the case of Shine Empire.  In that case, the Court of Appeal accepted that an act consistent with the normal activity of an owners incorporation is not necessarily inconsistent with an unequivocal act of dispossession.  An example given is that of the building of a management office on the roof: ibid, at [36].  The decision was upheld on appeal to the Court of Final Appeal: (2007) 10 HKCFAR 588.

69.  In her judgment, Yuen JA (with whom the other members of the Court agreed) pointed out that a court would not lightly find that an owners incorporation, whose statutory remit is to manage common parts and ensure compliance with the DMC, would intend to occupy private property as its own, in breach of the DMC.  It is unlikely that the IO would have intended to act outside its statutory powers and duties: ibid, at [35].

70.  I would respectfully agree with observations of Yuen JA.  It is unrealistic and improbable in the extreme to say that the IO set out knowingly to invade some private space for its use, albeit for the “common good”.  Indeed, Ms Tam for the IO, correctly in my view, invited me to reject this possibility.  So I do.

Scenario B

71.  This leaves me with two other competing theories.  Not surprisingly Counsel for the plaintiff argued in favour of Scenario B, while Counsel for the defendant advocated Scenario C.  In essence, their submissions are as follows.

72.  For the plaintiff Mr Wu relied on several matters.  First, he referred to the admission made by Mr Yip in paragraph 15 of his witness statement.  I have already quoted and examined the statement above.  There, he made an unequivocal admission that the pumps were installed by or with the approval and consent of the previous owner, namely, the developer.

73.  Further in paragraph 12 of the same statement Mr Yip said:-

“12. 由於該改動涉及該舖後位置的咸水喉管及/或其固定裝置，必然會對該單位及/或其舖後位置構成影響，因此在該改動工程進行以前麥先生曾向當時各管理委員會匯報表示已取得當時該單位的前業主（即譚惠蘭）的同意進行該改動，而麥先生亦表示譚惠蘭同意拆除設於該舖後位置之厠所以供該大樓安裝咸水喉管或固定裝置，從而把該大樓咸水系統鋪設至灣仔咸水主喉，以供該大樓的各業戶接駁使用。由於拆除該舖後位置之厠所及/或加裝喉管仍大型工程，加上該改動工程需在該舖後位置進行，根本無可能在未獲得當時業主同意的情況下進行，因此本人相信在進行該改改動以前答辯人必定已事先獲得該單位的前業主的同意。”

74.  In this paragraph Mr Yip was referring to the plumbing works carried out with a view to connecting the Building to the flushing water mains in 1995 to 1996.  There are detailed records of the works.  They were approved by, and carried out pursuant to the requirement of, the Water Authority.

75.  He further confirmed that Tan’s consent was obtained by Mr Mak, the then Chairman of the IO.  Thus, Mr Yip clearly and expressly acknowledged, as the secretary of the IO, that it was necessary to obtain the consent of the then owner of the Shop before such works could commence as they affected the Open Yard. 

76.  In Wong v Kung, sup cit, at page 69B-C, Li CJ said, “… where the occupier has made statements as to what was his intention and such statements are against his interest, the courts would usually accord to them considerable weight.”

77.  In the present context, the question is partly whether the consent was obtained from the successive owners of the Shop, but it is also partly whether the IO intended to possess the disputed space regardless of the absence of any such consent.  In my view, the same approach to declarations against interest should apply to both questions.

78.  Under cross-examination, Mr Yip sought to change the words “previous owners” in paragraph 15 to “all owners”. Clearly his attempt is entirely self-serving.  It probably stems from a belated realisation that his admission would undermine the IO’s case.

79.  In his Supplemental Witness Statement, Mr Yip sought to retract from the admission made in his earlier statement by playing down the need for consent being obtained for any works or repairs to be carried out in the Open Yard. 

80.  In paragraph 6 of his Supplemental Witness Statement, Mr Yip advanced two hypotheses.  First, he postulated that the pumps had already been built by the developer before the Shop was assigned by Mee Lun to Tan in September 1974.  It follows that the developer did not require anyone’s consent to install the equipment in question.

81.  Alternatively, Mr Yip postulated that the IO, together with the owners of all the units including the Shop, had all along mistakenly believed that the Open Yard belonged to the IO.  I will examine this hypothesis under my discussion of Scenario C below.

82.  Regrettably I am unable to attach any weight to this part of Mr Yip’s Supplemental Witness Statement.  It consists of speculation, not evidence of fact.  It also bears the hallmarks of a belated afterthought.  I am further unimpressed by his contrived attempt to alter his written statement in the witness box.

83.  Next, Mr Wu referred to the Notice of Opposition filed in the proceedings by the IO dated 19 January 2012 at the Lands Tribunal.  In that Notice, which was prepared by the IO’s solicitors, it was stated:-

“In view of the nature and size of the said Facilities and the associated alterations made to the said Unit for the purpose of accommodating the Facilities, the said Facilities could only be installed by and/or with the consent of the owner of the said Unit (who was the developer of the Building before the first assignment).”

84.  When pressed about the apparent change of stance on the part of the IO, Mr Yip replied that the matter was for all the owners of the Building, not just for the owner of the Shop.  In my judgment his answer is both evasive and unsatisfactory.

85.  Whilst I can readily understand that any major project for the renovation or repair of common facilities had to be approved by the IO, the consent of any private owners affected by the works is, obviously, a separate matter.  It is clear from paragraph 12 of his statement that Mr Yip (and the IO) understood the need to obtain the latter’s consent.

86.  Apart from the IO’s own admission, Mr Wu also relied on the following matters as evidence of consent.  First, in 1972, when the IO was established, Mee Lun, the then owner of the Shop, gave the only key to the rear entrance to the IO thus giving the IO (and its agents such as the management company) exclusive access the Open Yard. 

87.  On the face of it, the handing over the key would be a very strong indication of consent given by Mee Lun, the then owner of the Shop.  But the matter does not end here.  This is because in 1974, the Shop was assigned to Tan.  From then on, it was Tan’s consent that was relevant, for the previous owner’s consent is deemed to have determined upon conveyance of the land: see Jourdan, “Adverse Possession”, 2^nd ed, at para 35-49. 

88.  In other words, the key question is: assuming that the pumps (or any of them) had been installed before 1974, did Tan, as the new owner, give her consent for them to remain there, and for any subsequent installations and relocations?

89.  With one exception, there is no evidence that Tan gave any express consent for the pumps to remain or to be installed in the Open Yard after 1974.  As mentioned above, according to Mr Yip, she was consulted by the IO before the changes to the flushing water system were carried out in 1995-1996.  As part of the works the lavatory in the Open Yard had to be dismantled, and Tan agreed to this.

90.  In R (Beresford) v Sunderland CC [2004] 1 AC 889, Lord Walker of Gestingthorpe (with whom Lords Bingham, Rodger and Hutton agreed) emphasised that passive acquiescence cannot be equated to consent.  For consent to be implied there must be a communication by some overt act which is intended to be understood, and is understood, as permission to do something which would otherwise be an act of trespass: see ibid, at [75].  Such permission can be communicated in writing, by spoken words, or by overt and unequivocal conduct (at [75, 79]). 

91.  In Hong Kong Lord Walker’s formulation in Beresford was adopted by Lam J in Hong Kong Kam Lan Koon, sup cit, at [127].

92.  Can it be said that Tan gave her consent impliedly by conduct?  In this regard, Mr Wu relied on two matters.  First, he submitted that even on the IO’s own case, Tan must have allowed the IO to keep the key to the rear entrance when she bought the Shop in 1974.  Secondly, Mr Yip gave evidence that in the 1980s the owners held a meeting to discuss the proposed relocation of the fresh water pump, ie Group (1).  He testified that Tan attended the meeting and voted in favour of the proposal.

93.  However, I am unable to regard either of those two matters as evidence of equivocal and overt conduct intended to communicate the relevant permission on the part of Tan.  First, allowing the IO to retain the key is wholly consistent with passive acquiescence in an existing state of affairs.  It does not amount to an overt or positive act indicating implied permission in the sense explained by Lord Walker.

94.  Secondly, I accept that on the face of it, Tan’s conduct in voting the way that she (allegedly) did may be taken as an overt and unequivocal act showing her consent.  However, in the present context, the competing theories are Scenario B and Scenario C.   The vote given by Tan at the meeting is equally consistent with a mistaken and shared belief that the Open Yard was a common area, i.e. Scenario C. 

Scenario C

95.  It is the main submission of the IO that Scenario C is inherently more probable than Scenario B.  Before examining the soundness of this submission, I need to dispose of a potential hurdle standing in the way of the analysis posed by the dicta in Wong v Kung.

96.  It will be recalled that in Wong v Kung, the Chief Justice characterised the intention of the squatter as one to possess “as of right”.  Such an intention disqualified him from having the requisite animus possidendi.

97.  If applied literally the label would attach to any squatter who mistakenly assumed that the land he possessed belonged to him.  His intention would, using the expression of the Chief Justice, to possess the land “as of right”, in contradistinction to “as of wrong”. 

98.  If this is the correct interpretation of the Chief Justice’s dicta, it would mean that any claim for adverse possession by an honest but mistaken squatter, such as an adjoining landowner in a boundary dispute, is doomed to fail.  But this is clearly not the case.

99.  There are numerous cases, both in Hong Kong and in England, in which the true owner and squatter both acted under the erroneous belief that the squatter owned the property.  It has been consistently held that such a squatter possessed the requisite intention: see Civic Ltd, sup cit, at [22], per DHCJ M Ng, Wong Luen Chun & anor v Secretary for Justice [1988] 4 HKC 122, at 129C-I, per Barnett J, Wong Lai Man v Wong Tat Kwong & anor, DCCJ 206 of 2005, unreported, 18 January 2010, at [11], per Judge Yung, JA Pye (Oxford) Ltd v Graham [2001] Ch 804 at [41(5)], per Mummery LJ, and Jourdan, sup cit, at §§9-38 to 9-43.

100.  In a subtle and inspired submission, Ms Tam urged me to confine the expression “as of right” to a state of mind in which the squatter relies on a right to possess derived from or under the paper owner’s title.  Thus, if the squatter honestly believes that his possession is justified by a title independent of that of the true owner, so she contended, his intention would still be characterised as one “as of wrong”.

101.  I agree with this submission. Certainly, I see nothing in the Court of Final Appeal’s judgment that is intended to upset the well-settled law in mistaken boundary cases. Consistently with the decision of the CFA, I believe that the real question is whether the squatter intended to possess the land adversely to the title of the true owner.  The labels “as of right” and “as of wrong” are nothing more than shorthands which must be applied, if necessary, with this question in mind.

102.  Turning to the facts of this case, Ms Tam cited three matters which militate in favour of Scenario C:-

(1) First, she pointed out that the pumps have been used as part of the communal facilities of the Building for a long time without question.  It would have been natural for all concerned to assume that the space they occupied was a common area.

(2) Secondly, the only practical access to the Open Yard was via the rear door from the scavenging lane, not via the Shop.  The Open Yard is also physically separated from the main body of the Shop by another door which exists only for fire escape purposes.

(3) Thirdly, the Open Yard is a small but valuable piece of land (in the context of a crowded urban area on Hong Kong Island).  If Tan had been aware of her legal title in it, she would have asserted her ownership in some way, eg by charging a licence fee for its use.

103.  In response, Mr Wu’s counter-argument ran as follows:-

(1) Scenario C requires a mistaken assumption as to the ownership of the Open Yard.  Not only was it a serious mistake, but for it to be operative, it must have been shared by successive IO committee members, the developer as well as Tan.

(2) The assignment plans and the plans approved by the Buildings Authority are clear.  There is no room for anyone looking at the plans to make any mistake about the ownership of the Open Yard.

(3) The layout of the Shop does not lend itself to the supposed existence of a communal area within the private premises.  The Open Yard contains a lavatory, though now dysfunctional.  To access the yard one needs to go through a locked door from the scavenging lane. 

Discussion and analysis

104.  So which is the more likely scenario?  I have not found this an easy question to decide.  It is made more difficult by the paucity of any contemporaneous records, such as minutes of meetings of the IO. 

105.  According to Mr Wong Ting Him, a director of the plaintiff, Tan had left Hong Kong after she assigned the Shop to the plaintiff.  Soon after the present dispute arose, Mr Wong tried to contact her through her solicitors, but to no avail.

106.  In terms of witness evidence, the only person who gave any relevant evidence regarding the history of the use of the pumps is Mr Yip.  To my mind, Mr Yip was clearly driven by what he perceived to be a duty to act for the common good of the owners.  However, in parts of his evidence he was plainly mistaken (see paragraphs 58 and 62 above), and in others he was eager to tailor his testimony in order to patch up the IO’s case (see paragraphs 78, 79 and 84 above).  Accordingly I must approach his evidence with considerable caution and scepticism.

107.  Having considered all the evidence and arguments advanced by Counsel, I find that Scenario B is more probable than Scenario C.  My reasons are as follows.

108.  First and foremost, I propose to follow the exhortation of the Chief Justice in Wong v Kung (see paragraph 76 above), and attach the greatest possible weight to the declarations against interest made by Mr Yip.  In paragraph 12 of his witness statement, Mr Yip refers to the works carried out in 1995-1996 in relation to the flushing water system.  In that instance, the IO clearly recognised the need to obtain the consent of the owner of the Open Yard, and acted accordingly.

109.  In my judgment, such recognition must stem from a realisation that the Open Yard was the private property of the Shop owner.  I ask rhetorically, why else would the IO need to consult Tan? Plainly, such a realisation is incompatible with any suggested mistaken assumption about the ownership of the Open Yard under Scenario C.

110.  Given that the IO did not entertain such an erroneous assumption, it is most probable that it would have sought and obtained Tan’s consent for the installation of any equipment or the carrying out of any works in the Open Yard after 1974.  For the same reason it must have sought and obtained Tan’s consent for any existing pumps to remain in place after she acquired the Shop in 1974.

111.  I am fortified in my conclusion by Mr Wu’s analysis as to the inherent improbability of Scenario C as compared to Scenario B, for the reasons given by him and set out in paragraph 103 above. Whilst I do not need to rest my decision on this ground, it does provide additional support for the conclusion that I have reached.  I will briefly explain why I prefer Mr Wu’s counter-argument in this regard. 

112.  Of the arguments adumbrated by Ms Tam (see paragraph 102 above), the first one is premised on a long and undisturbed existence of the pumps.  However as I sought to demonstrate elsewhere in this judgment, the history of the pumps is anything but clear.  In particular, the IO has failed to prove that Group (1) and Group (3) had been present in their respective locations for at least 12 years before action.

113.  To my mind, the second point raised by Ms Tam is not particularly weighty, especially when one takes into account the undisputed existence of one or more lavatories within the Open Yard sometime in the past. 

114.  I was initially attracted by the third point mentioned by Ms Tam.  The Shop consists of valuable commercial premises.  Hitherto it had been rented out for profit by Tan after she had bought it for $200,000 in 1974.  In 2011 the plaintiff bought it for $52,800,000.  It seems unlikely that the owner of such premises would voluntarily forgo the use of a not insubstantial part of it in favour of the IO without exacting any financial compensation.  Yet there is no evidence that the IO had paid anything to Tan.

115.  The argument assumes, of course, that Tan was a commercially shrewd landlady.  But this is where the IO’s argument falls apart.  The IO would have the Court believe that Tan was, on the one hand, a financially astute landlady who wished to maximise her rental return.  On the other hand, she was, under Scenario C, so foolish (or forgetful) that she did not even know (or remember) that she owned the Open Yard.  More than that, on the IO’s case, she would have persisted in this state of ignorance (or amnesia) for the entire period of ownership spanning a total of 37 years.

116.  For these reasons I find that the IO’s counterclaim fails, and that the plaintiff is entitled to judgment for possession and damages. 

Conclusion and relief

117.  In the Statement of Claim the plaintiff seeks a prohibitory injunction (see paragraph 11(a)), and a mandatory injunction (paragraph 11(b), (c)).  The latter is intended to compel the IO to remove the pumps and reinstate the relevant parts of the Open Yard to their original states.

118.  It is agreed by the parties and their respective experts (both architects) that, subject to approval being obtained from the relevant authorities (such as the Buildings Authority), there is no technical difficulty in the proposed removal.  If any unforeseen difficulty should arise in the execution of the order, the parties may apply to the Court, failing agreement.  It is certainly not a reason for refusing the injunctions sought.

119.  I therefore propose to make an order in terms of paragraph 11(a) and (b).  For the sake of clarity the facilities in question are those shown on the agreed Drawing A.  Assuming as I do that the IO will abide by the order of this court, I do not find it necessary to make an order in terms of paragraph 11(c) or (d).

120.  Next, I turn to the question of damages.  Subject to one qualification, there is no reason why the IO should not pay damages or mense profits for its period of unlicensed occupation. 

121.  The qualification is this.  It is trite that a licensee whose licence has been revoked is entitled to a reasonable time for packing up, in which to leave and to remove his goods: Robson v Hallett [1967] 2 QB 939, Minister of Health v Bellotti [1944] KB 298.  Mr Wu for the plaintiff did not dispute this principle.

122.  In the present case, I have found that the IO have possessed the disputed space in the Open Yard by the consent of Madam Tan after 1974.  As the new owner, the plaintiff is entitled to revoke the licence but must give reasonable notice to the IO to relocate the pumps. 

123.  Given the complexity of the pumps and their history of use, I should afford the IO a generous period for “packing up” and relocating the equipment.  The parties agreed that a period of nine months represents reasonable notice to the IO for this purpose.

124.  As a result I shall award damages (or mesne profits) against the IO from the end of nine months after the issuance of the plaintiff’s letter of demand dated 5 May 2011.  Hence damages will be payable from 4 February 2012.

125.  Each of the parties has tendered an expert valuation report based on the loss of rental value.  Before me, however, they were able to agree on the basis for calculating the quantum of damages which I shall apply as follows:-

(1) From 4 February 2012 to 17 May 2013, at the rate of $2618.40 per month;

(2) From 18 May 2013 to 17 May 2014, at the rate of $2800.40 per month;

(3) From 18 May 2014 until full compliance with the mandatory injunction, at the rate of $2998.65 per month.

126.  I shall leave it to the parties to work out the precise figures for insertion into the final order, subject to my approval.

127.  There will be interest on damages from 4 February 2012 until judgment at the rate of 1% per annum above prime rate, assuming that such damages are payable on a monthly basis, and thereafter at judgment rate.

128.  The defendant will pay the plaintiff the costs of this action and the counterclaim, with certificate for counsel, to be taxed if not agreed.