GAINFIELD INVESTMENT LTD AND ANOTHER v. LAM YI LAI AND OTHERS

DCCJ 3736/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3736 OF 2014

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JUDGMENT

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Introduction

1.  All too often, the end of a relationship may mark the beginning of a series of legal battles.  The ripple effect is far-reaching.  This case is one of the kind. 

The property

2.  The property in question, known as 4th Floor, No 2B Tak Shing Street, Kowloon (“the property”), used to be owned by Mr Chau Shek Leung (“Chau”) solely.

3.  Since 2001, the interest in the property has evolved through a convoluted course.

4.  By the judgment of Deputy High Court Judge Woolley in HCA4639/1996 and 5661/1996 (collectively as “HCA5661/1996”) dated 25 May 2001, it was ordered, inter alia, that each of Chau and Madam Lam Yi Lai, the 1^st defendant in this action, would have half beneficial interest of the property.

5.  The 1^st defendant assigned the property to Chan Sui Ting (“Chan ST”) in consideration of $1,000,000 on 26 May 2001.

6.  The 1^st defendant was adjudged bankrupt on 29 January 2003 under HCB24473/2002. 

7.  By an assignment dated 15 December 2011, the Financial Secretary Incorporated assigned, and Chan ST together with the Official Receiver as trustee of the property of the 1^st defendant confirmed, the property to Public Bank (Hong Kong) Limited (formerly known as Asia Commercial Bank Ltd) and Chau as tenants-in-common in equal shares.

8.  On 20 April 2012, Public Bank (Hong Kong) Limited sold its half share interest in the property (“D1’s share”) to the 1^st plaintiff in consideration of $5,600,000.

9.  On 26 April 2012, Chau entered into an agreement for sale and purchase with the 2^nd plaintiff for the sale of his half share interest in the property (“Chau’s share”) in consideration of $5,600,000.

10.  On 23 May 2012, the 1^st defendant obtained an order under FCMP107 of 2011 restraining Chau from disposing of or dealing with any part of the proceeds of sale of Chau’s share.

11.  On 24 May 2012, an injunction order was issued under FCMP107 of 2011, inter alia, restraining Chau from disposing of his assets, in particular, the net proceeds arising from the sale of Chau’s share up to the value of $5,600,000.

12.  By a consent order dated 14 February 2013 under FCMP107 of 2011, the injunction order was discharged on condition, inter alia, that $2,200,000 out of the proceeds of sale be paid into court pending the resolution of the 1^st defendant’s claim against Chau.

13.  As a result, the sale and purchase of Chau’s share was completed on 21 February 2013.

The plaintiffs’ case

14.  The plaintiffs’ case is simple.  They say by reason of the facts under paragraphs 8 and 13 above, they became the co-owners of the property as tenants-in-common in equal shares since 21 February 2013.  No permission and/or consent was given by the plaintiffs to the defendants to occupy the property.  Therefore, the defendants are in wrongful occupation of the property.

15.  It is also the plaintiffs’ case that the occupation of the property by the defendants was under the express or implied permission or licence of Chau.

The defendants’ case

16.  The 1^st defendant and Chau were lovers and cohabited at the property since May 1992.  Both the 2^nd and 3^rd defendants were their sons.  Their relationship came to an end in March 1996 when Chau moved out of the property.  Chau was denied access of the property ever since.

17.  The 1^st defendant said she was responsible for all outgoings of the property since May 1992.  It is the defendants’ case that they have been in adverse possession of Chau’s share since March 1996.  Alternatively, the defendants say that they have been in adverse possession of Chau's share after the handing down of the judgment in HCA5661/2001 in May 2001.

18.  The defendants say that by reason of their adverse possession of Chau’s share and the 1^st plaintiff’s waiver of obtaining vacant possession of D1’s share, they have the right to continue to reside and live at the property and a right not to be evicted by the 1^st plaintiff.

The case against the 4^th and 5^th defendants

19.  By a notice of discontinuance dated 14 July 2014, the 1^st and 2^nd plaintiffs had discontinued their claim against the 4^thdefendant. 

20.  Default judgment was entered against the 5^thdefendant on 31 December 2014. 

Issues

21.  The following issues are for the determination by this trial:-

(1)  whether, as a matter of law, there exists a separate possessory title attributable to Chau’s share which is liable to be acquired by adverse possession;

(2)  by reason of the conduct of the 1^st defendant in FCMP107 of 2011, is the 1^st defendant estopped from asserting any proprietary and/or possessory claim over the property or Chau’s share;

(3)  if the answer to issue (1) is positive and to issue (2) is negative, whether the 1^st, 2^nd and 3^rd defendants have been in adverse possession of Chau’s share;

(4)  whether the defendantsoccupied the property with the express or implied permission or licence of Chau;

(5)  whether the 1^st plaintiff has lost its right to recover possession of the D1’s share in the property by reason of the defendants’ claim of adverse possession of Chau’s share;

(6)  are the plaintiffs entitled to claim damages for trespass; and

(7)  if so, how much.

Whether, as a matter of law, there exists a separate possessory title attributable to Chau’s share which is liable to be acquired by adverse possession?

22.  The argument of Mr Paul Lam SC, leading Mr Anthony Chow, for the plaintiffs runs in this way.  Due to the fact that the 1^st defendant ceased to hold any beneficial interest in the property since 26 May 2001 (upon transfer of D1’s share to Chan ST), it was only possible in theory for her to assert adverse possession over Chau’s share, but not the whole, of the property if and only if she was and remained to be a co-owner of the property. As tenants-in-common are owners of distinct shares but their shares are not divided in land physically.  Therefore, it is impossible to point to one parcel or area of the co-owned land rather than any other as belonging to a particular tenant-in-common.  It is submitted that tenants-in-common own specific, but undivided, shares in the land.  No co-tenant may physically demarcate any part of the land as his to the exclusion of his brethren.  Since Chau’s share is not a physical area which can demarcated, or has a boundary within the property, the 1^stdefendant is unable to explain what is meant by having adverse possession of Chau’s share since the time she ceased to be one of the equitable co-owners, and over which part in the property she is claiming adverse possession.

23.  Unity of possession is the essential characteristic of co-ownership of land.  In the instance of tenants-in-common, each owner is entitled to exert rights of possession to every part of the land, in common with his co-owners: see Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279 at 290E-F. 

24.  At the time after the 1^st defendant ceased to hold any interest in the property, the subsequent owners of D1’s share became a tenant-in-common of the property with Chau.  Both of them were entitled to exert rights of possession to every part of the property. 

25.  It is the defendants’ case that they had adversely possessed Chau’s share.  As far as factual possession is concerned, it must mean Chau’s rights of possession to every part of the property.  In my view, such claim can be made by any squatter. It matters not if the squatter is a predecessor-in-title or a former co-owner of the property in question. 

By reason of the conduct of the 1^stdefendant in FCMP107 of 2011, is the 1^stdefendant estopped from asserting any proprietary and/or possessory claim over the property or Chau’s share?  

26.  The facts the plaintiffs are relying on to establish estoppels on the part of the 1^stdefendant are largely based on documents which are not disputable. 

Consent Order

27.  Soon after Chau entered into an agreement with the 2^nd plaintiff for the sale of Chau’s share, the 1^stdefendant applied and on 24 May 2012 obtained an injunction order under FCMP107 of 2011 restraining Chau from disposing of or dealing with any part of the proceeds of sale of Chau’s share.

28.  Thereafter, Yam & Company (“Yam & Co”), the firm of solicitors acting for the 2^nd plaintiff in the purchase of Chau’s share, wrote a series of letters to Wilson Yeung & Co (“Wilson Yeung & Co”), the solicitors acting for the 1^st defendant in FCMP107 of 2011, enquiring whether or not the 1^st defendant had any objection to the completion of the sale and purchase.  Those letters were not responded to at all. 

29.  On 24 January 2013, Yam & Company wrote to Wilson Yeung & Co proposing that the balance of the proceeds of sale after discharging the then existing encumbrances (estimated over 3 million dollars) be paid into court pending the determination of her claim against Chau.  In the final paragraph of the letter, it was stated that in default of agreement from the 1^st defendant, the 2^nd plaintiff would consider joining in the proceedings between the 1^st defendant and Chau.

30.  Shortly afterwards, on 14 February 2013, the injunction order was discharged by consent. The following terms of the order are relevant:-

“1.  The Injunction Order dated 23rd May 2012 and subsequently extended restraining the Respondent from disposing of or dealing with any part of the proceeds of sale of all that one equal undivided half share of and in all that one equal undivided 9th share of and in Kowloon Inland Lot No.11016 and the building, erection and messages there on (one half of 4th Floor, No.2B Tak Shing Street, Kowloon) (hereinafter be referred as “the Property”) be discharged.

2.  About HK$1.55M of the proceeds of sale of the Property be applied to pay off:-

(a)  The tax due and payable by the Respondent to the Inland Revenue Department;

(b)  Charging Order(s) obtained by Legal Aid Department registered against the Property;

(c)  Charging Orders obtained by Public Bank (Hong Kong) Limited (formerly known as Asia Commercial Bank Limited) registered against the Property and the legal costs of discharging such Charging Orders;

(d)  Conveyancing legal costs in connection with the sale of the Property.

3.  A sum of HK$2.2M out of the proceeds of sale of the Property be paid into Court pending resolution of the Applicant's claim against the Respondent.

4.  The remaining balance of the proceeds of sale of the Property be paid into the Respondent's solicitors, namely Messrs. Joseph C.T. Lee & Co., and after discharging the legal aid’s first charge, be released to the Respondent.”

31.  It can immediately be seen that at no time the 1^st defendant was alleging to have a claim on the interest in Chau’s share.  What was at stake was the proceeds of sale deriving from the sale of Chau's share.  Although there is no document before me as to the nature of the proceedings in FCMP107 of 2011, in a letter dated 14 January 2013 written by Joseph CT Lee & Co, the firm of solicitors acting for Chau in the sale of Chau’s share, it was stated that the basis of the 1^st defendant’s claim was for the maintenance of the 2^nd and 3^rd defendants.  I see no reason to believe otherwise.

32.  Hence, by the consent order dated 14 February 2013, the 1^st defendant’s claim on the proceeds of sale of Chau’s share was fully satisfied by the payment in of the sum of $2,200,000 from the proceeds of sale.  To my mind, this is the clearest manifestation of the 1^st defendant’s stand as far as Chau’s share is concerned.

33.  Mr Paul Lam SC submitted that the consent order has created an issue estoppel, or res judicata, between the parties.  Further, having regard to the circumstances leading to the consent order, it was a compromise agreement, reached with the assistance of solicitors, whose purpose was to resolve one of the disputes between Chau and the 1^st defendant in FCMP107/2011, in particular, whether Chau had the right to complete the sale of Chau’s share to the 2^nd plaintiff.  Finally, it is submitted that the consent order gave rise to an estoppel by representation.

34.  In Lee Yun Sau v DH Shuttlecocks Ltd, HCA1459/91, 21 December 2001, unreported, the court was asked to decide the question of whether the plaintiff, having entered into a Deed of Compromise with a non-party, was estopped from raising an allegation that the various loans made by the non-party as an unlicensed money lender in the action against the defendant.  The Deed of Compromise came into existence for the purpose of settling 2 actions between the plaintiff and the non-party.  Lam J (as he then was), applying the principle in Binder v Alachouzos [1972] 2 QB 151, held that it was important to determine what was the dispute that was settled by the Deed of Compromise.  The issue that has been settled by the Deed of Compromise cannot be reopened in subsequent proceedings.  There is no material distinction as to whether the conclusion of the previous proceedings was achieved by way of a compromise or by way of a judgment of the court obtained after trial.  His Lordship also held that by reason that the defendant was the corporate embodiment of the non-party and therefore they have a privity of interest in relation to the dispute as to whether the non-party was an unlicensed money lender, the defendant was entitled to the benefit of the settlement of the dispute.

35.  It should be noted that the concept of privity of interest was further refined by Stock JA (as he then was) in China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1 at 30 as “the required commonality is a direct interest in the subject matter of the litigation, a parallel or corresponding interest in that subject matter and not simply a financial interest in the result of the action”, citing Genesee Enterprises Ltd v Abou-Rached (2001) 84 BCLR (3rd) 277. 

36.  In my judgment, the dispute that was settled by the consent order was the 1^st defendant’s claim against Chau for the maintenance of the 2^nd and 3^rd defendants.  The injunction order was applied for and issued for the purpose of preserving the proceeds of sale of Chau’s share.  Eventually, it was discharged with the consent of the 1^st defendant upon payment in of the sum of $2,200,000 out of the proceeds of sale.  Therefore, I do not regard the consent order as having resolved a dispute in relation to the right to sell Chau's share by him.

37.  Mr Paul Lam SC argued that having regard to the circumstances leading to the consent order as evidenced by the correspondence between Yam & Co and Wilson Yeung & Co, the consent order was a compromise agreement, reached with the assistance of solicitors, whose purpose was to resolve one of the disputes between Chau and the 1^st defendant in FCMP107/2011, in particular, whether Chau had the right to complete the sale of Chau’s share to the 2^nd plaintiff.  Colchester Borough Council v Smith [1991] Ch 448; [1992] Ch 421 were relied on.

38.  In Colchester (supra), the claimant of possessory title initially through his solicitors maintained that he had acquired the freehold title to the land by adverse possession.  After a year’s correspondence exchange between the solicitors for the council and the claimant and the threat of proceedings by the council for possession, the claimant entered into an agreement with the council whereby the claimant acknowledged the council’s title to the land.  The trial judge held that the claimant was estopped by contract and also by convention from asserting title to the land or from relying on the limitation defence.  On appeal, the Court of Appeal held that whether it be labelled estoppel by agreement or estoppel by convention, from the correspondence leading up to the making of the agreement, the agreement was a bona fide compromise of a dispute and the claimant, who had the advice of his solicitors and to prevent court proceedings, was bound by the agreement and was estopped from going behind it and litigating the antecedent dispute.

39.  I think Colchester (supra) is distinguishable from the present case. Here, although the 1^st defendant was represented by solicitors during the time before the consent order was made, the issue in question was the preservation of the proceeds of sale of Chau's share up to the value of $5,600,000.  The issue was subsequently settled between the 1^st defendant and Chau by the payment in condition in the consent order short of a written agreement.  More importantly, as evidenced by the injunction order dated 24 May 2012, it was never the position of the 1^st defendant that Chau did not have the right to sell his share.  Quite to the contrary, the stand taken by the 1^st defendant was that there was no challenge to Chau’s right to sell his share so long that the net proceeds arising from the sale of Chau’s share were preserved.  The fact that the sale was completed only after the consent order is made is not proof that the 1^st defendant was challenging Chau’s right to sell his share.  As can be seen from Yam & Co’s letter dated 24 May 2012 to Edward Lau, Wong & Lou, the then solicitors acting for Chau, the sale could not be completed because no part of the balance of purchase price could be used to discharge the existing encumbrances due to the force of the injunction order.  With all due respect, therefore, I am unable to accept Mr Lam SC’s submission.

40.  Finally, Mr Lam SC submitted that the consent order contained a representation by the 1^st defendant that she accepted that Chau was the lawful owner of, and held the interest in Chau’s share.  The consent order, which the 1^st defendant clearly knew that it would have to be made known to the 2^nd plaintiff, was a representation made by her to the 2^nd plaintiff.  In completing the purchase, the 2^nd plaintiff had relied on the representation to its detriment by paying the balance of the purchase price pursuant to the terms of the consent order.  The English case of St Pancreas and Humanist Housing Association Ltd v Leonard [2008] EWC Civ 1442 was cited in support.

41.  In St Pancreas (supra), the defendant claimed possessory title to a garage.  However, in the minutes of meeting of the management committee of the Co-op of which the defendant was a member, he had created the impression that he accepted the garage was communal property.  By that, he had encouraged the Co-op to enter into negotiation with the owner for a long lease.  The trial judge held that the defendant was estopped from asserting possessory title after the acquisition of the lease of the garage by the Co-op.  On appeal, the Court of Appeal held that as the defendant did believe that he had the right to use the garage as against the other residents of the houses which would continue after the acquisition during the negotiation, it was immaterial that he had no knowledge of his right to ownership due to the law on adverse possession.

42.  The general principle of proprietary estoppel involving encouragement has been concisely stated as:-

“If A, under an expectation created or encouraged by B that A shall have a certain interest in land thereafter, on the faith of such expectation and with the knowledge of B and without objection from him, acts to his detriment in connection with such land, a Court of Equity will compel B to give effect to such expectation.”

See Spencer Bower, The Law Relating to Estoppel by Representation, 4^th Ed, XII.1.4 at p328-329.

43.  The completion of the sale of Chau’s share was postponed due to the injunction order obtained by the 1^st defendant.  Thereafter, Yam & Co wrote to Wilson Yeung & Co from time to time enquiring whether or not the 1^st defendant had any objection to the completion of the sale.  Eventually, the sale was only completed after the discharge of the injunction order with the consent of the 1^st defendant.  Without doubt, it was the intention of the 1^st defendant to block the completion of the sale and purchase of Chau’s share.  To that end, she applied for an injunction order under FCMP107 of 2011.  By consenting to discharge the injunction order, she must know that she was sending the message to the 2^nd plaintiff and Chau that she did not have objection to the completion of the sale and purchase anymore.  In my view, the conduct of the 1^st defendant as such was encouraging or creating an expectation on the part of the 2^nd plaintiff that she was not objecting 2^nd plaintiff to become the owner of Chau’s share.  On the other hand, on the faith of such expectation, the 2^nd plaintiff did proceed to completion by paying the total price of $5,600,000 and thereby agreed to be bound by the Government Lease and the Deed of Mutual Covenant, to its detriment. 

44.  Furthermore, from the time when the 1^st defendant knew that the 2^nd plaintiff was about to purchase Chau’s share, she must know that the 2^nd plaintiff was going to have a right of possession of the property.  Yet, she was contented to give her consent for the discharge of the injunction order.  In doing so, she was giving the impression that she was not objectionable to the 2^nd plaintiff’s right of possession of the property after the purchase.  I am satisfied that the holdings of the English Courts in St Pancreas (supra) are applicable to the circumstances of this case. 

45.  In my judgment, it is a clear case of proprietary estoppel created by the conduct of the 1^st defendant.  The 1^st defendant should be estopped from asserting a possessory title to Chau’s share.

Equity

46.  It is the 1^st defendant’s case that she had denied Chau’s access to the property since 1996 although Chau was at that time the owner.  She continued to use the property as her residence even after her share was assigned to Chan ST in May 2001.  That being so, her right to reside in the property depended very much on the validity of her claim on the possessory title of Chau’s share.  This must be a matter of concern of the 1^st defendant.

47.  However, when she came to know that Chau had sold his share to the 2^nd plaintiff, her only response was to apply for an injunction order for the purpose of preserving the proceeds of sale.  At no time prior to the discharge of the injunction order (with her consent) did she put either the 2^nd plaintiff or Chau on notice that she had a claim on the possessory title of Chau’s share.  She only did so in less than 3 months’ time after the completion.  On 14 May 2013, the 1^st defendant instructed Paul Kwong & Co to send a letter to the 2^nd plaintiff giving notice that she would oppose an application by it for possession of the property on ground of adverse possession.  Following that, both the 2^nd and 3^rd defendants on 27 July 2013 wrote 2 separate personal letters to the 2^nd plaintiff also alleging adverse possession of the property.

48.  In her witness statement, the 1^st defendant said that she agreed to the terms of the consent order because the money to be held by court would be used to pay for her maintenance.  When she gave her consent, she had never thought of giving up her interest in the property as an adverse possessor.  She was not waiving her proprietary claim on the property. 

49.  Under cross-examination, the 1^st defendant said that in 1996, after she drove Chau out of the property, she was advised by her lawyer Mr Wilson Yeung not to move out of the property herself and she would be entitled to claim adverse possession of the property after 12 years.  When asked why she did not inform the 2^nd plaintiff that she objected to the sale of Chau’s share on the ground of adverse possession by her.  She said there was no need to say so as she had already adversely possessed the property in 2008.  When it was put to her that she agreed to the completion of the sale.  She said it was not her concern, her concern was the money. 

50.  From the evidence of the 1^st defendant, it is clear that her main concern was the money that would be generated from the sale of Chau’s share.  Nevertheless, her claim on the possessory title of the property was certainly deterring the 2^nd plaintiff from putting through the transaction.  In my view, that was the reason why she said nothing of her claim on the possessory title of the property.  Quite the opposite, she encouraged the 2^nd plaintiff to proceed to completion by consenting to the discharge of the injunction order upon securing the payment in condition.  That was also the reason why she only made known of her claim of possessory title of the property to the 2^nd plaintiff in less than 3 months’ time after completion.  I have no doubt in my mind that the 1^st defendant did so purposely for gain of both the money and the possessory title.  However, the two cannot mingle together as with oil and water.

51.  In equity, “he who comes into equity must come with clean hands”.  The 1^st defendant had not been frank in dealing with the 2^nd plaintiff as far as the sale and purchase of Chau’s share is concerned.  She willfully withheld her intended claim on the possessory title of the property in order to induce the 2^nd plaintiff to complete the purchase.  In such circumstances, equity would not come to her aid. 

Defence counsel’s submission on estoppel

52.  Before leaving this topic, I should also deal with the submission of Mr Lawrence Ng who is appearing with Mr Kim McCoy, counsel for the defendants.

53.  In short, Mr Ng rested his counter argument on the doctrine of equitable or promissory estoppel, citing Dixie Engineering Co Ltd v Vernaltex Co Ltd, CACV343/2002, 11/2/2003, unreported, in support. 

54.  Nevertheless, as can be seen from the facts of the case and the submission of Mr Lam SC, promissory estoppel is neither applicable nor relied on by the 2^nd plaintiff.

55.  Liu JA in Bestkey Development Ltd v Incorporated Owners of Fine Mansion & Another [1999] 2 HKLRD 662 delivered an instructive speech on the difference between proprietary estoppel and promissory estoppel.  Promissory estoppel is a new creature introduced by Denning J (as he then was) in 1946 in Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130.  It depends on a promise, less than a contractual binding promise, intended to be acted upon and in fact, acted upon to the detriment of the prospective plaintiff: see 667F-H of the judgment.

56.  As can be seen from the analysis in relation to the consent order above, it is never the case of the 2^nd plaintiff that the 1^st defendant had ever made a promise to it.  The 2^nd plaintiff is relying on the doctrine of proprietary estoppel, particularly in reliance on the case of St Pancreas (supra), rather than the doctrine of promissory estoppel.  With due respect, therefore, I must say that the counter argument of Mr Ng is a red herring.

Whether the 1^st, 2^ndand 3^rddefendants have been in adverse possession of Chau’s share?

57.  In relation to the 1^st defendant, my findings on the issue of estoppel above are sufficient to resolve the case between her and the 2^nd plaintiff. 

58.  For completeness sake, however, I shall proceed to consider this issue.

Legal principles on adverse possession

59.  To establish adverse possession, the plaintiff must show to have both possession and the requisite intention to possess: see Wong Tak Yue v Kung Kwok Wai (No.2) (1997-98) 1 HKCFAR 55.

60.  Section 7(2) of the Limitation (Amendment) Ordinance 1991 (“LO”) provides:

“(2) No action shall be brought by any other person to recover any land after the expiration of 12 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 ...”

61.  Section 8(1) of LO provides:

“(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.”

62.  Where the cause of action accrued before 1 July 1991, if it has not then already expired, the old limitation period of 20 years should apply: see Section 38A of LO and the judgment of Mr Recorder A Ho in Law Bing Kee v Persons in occupation of RP, HCMP 2270/2009, 8/3/2013, unreported, at paras 32 and 33.

63.  Section 17 of LO provides for the legal consequence of not bringing an action within the limitation period:

“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.”

64.  Slade J in the leading case of Powell v McFarlane (1977) 38 P & CR 452 at 470-471 usefully summarized the principles on possession:

“Factual possession signifies an appropriate degree of physical control.  It must be a single and conclusive possession, though there can be a single possession exercised by or on behalf of several persons jointly.  Thus an owner of land and a person intruding on that land without his consent cannot both be in possession of the land at the same time.  The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed.  In the case of open land, absolute physical control is normally impracticable, if only because it is generally impossible to secure every part of a boundary so as to prevent intrusion.  “What is a sufficient degree of sole possession and user must be measured according to an objective standard, related to no doubt to the nature and situation of the land involved but not subject to variation according to the resources or status of the claimants”: West Bank Estates Ltd v Arthur, per Lord Wilberforce. It is clearly settled that acts of possession done on parts of land to which a possessory title is sought may be evidence of possession of the whole.  Whether or not acts of possession done on parts of an area establish title to the whole area must, however, be a matter of degree.  It is impossible to generalise with any precision as to what acts will or will not suffice to evidence factual possession ... Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no-one else has done so.”

65.  Likewise, His Lordship usefully summarized the principles on intention to possess, in its Latin tag, animus possidendi, in the following passage at 471-476:

“... What is really meant, in my judgment, is that the animus possidendi involves the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as is reasonably practicable and so far as the processes of the law will allow ... The position, however, is quite different from a case where the question is whether a trespasser has acquired possession. In such a situation the courts will, in my judgment, require clear and affirmative evidence that the trespasser, claiming that he has acquired possession, not only had the requisite intention to possess, but made such intention clear to the world. If his acts are open to more than one interpretation and he has not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will treat him as not having had the requisite animus possidendi and consequently as not having dispossessed the owner ... A number of cases illustrate the principle just stated and show how heavy an onus of proof falls on the person whose alleged possession originated in a trespass ... In my judgment it is consistent with principle as well as authority that a person who originally entered another’s land as a trespasser, but later seeks to show that he has dispossessed the owner, should be required to adduce compelling evidence that he had the requisite animus possidendi in any case where his use of the land was equivocal, in the sense that it did not necessarily, by itself, betoken an intention on his part to claim the land as his own and exclude the true owner ... I would add one further observation in relation to animus possidendi. Though past or present declarations as to his intentions, made by a person claiming that he had possession of land on a particular date, may provide compelling evidence that he did not have the requisite animus possidendi, in my judgment statements made by such a person, on giving oral evidence in court, to the effect that at a particular time he intended to take exclusive possession of the land, are of very little evidential value, because they are obviously easily capable of being merely self-serving, while at the same time they may be very difficult for the paper owner positively to refute.”

66.  Where a co-owner is claiming adverse possession against the other co-owner, proof of actual ouster or dispossession is required.  In respect of possession by the paper title owner, the slightest acts done by him will be found to negative discontinuance of possession: see Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286. 

Factual possession

67.  The 1^st defendant said her relationship with Chau came to an end in or about March 1996.  She then “barred” Chau from living in the property.  After Chau moved out, she immediately changed the locks of the wooden door and iron gate to the main entrance of the property thereby denying Chau access thereto ever since.  She said she was responsible for all the outgoings of the property since 1992.  Since 1996, she used the property as the residence for herself, the 2 sons and their domestic helper.

68.  Chau was not called to give evidence.  However, according to the 2^nd affidavit of Chau dated 7 July 2001 filed in HCMP3243/2001 at para 17 thereof, Chau described that “he was driven out of the property in 1996”.  He further said the 1^st defendant had “taken away and/or refused to return to him any of his money and/or other valuables placed in her or in the property”.  It seems that despite the fact that in 1996, Chau was the sole registered owner of the property, he was still driven out of the property by the 1^st defendant.  Not only that he was denied access, he was also not allowed to retrieve his own money and valuables that were left in the property.  That was the situation 5 years later in 2001. 

69.  I find that the allegation of the 1^st defendant in relation to factual possession is proven.  I am satisfied that by the act of the 1^st defendant, actual ouster or dispossession of Chau is established. 

Animus possidendi

70.  To establish animus possidendi, the 1^st defendant must show that she had, in her own name and on her behalf, the intention to exclude the world at large, including the paper owner, ie Chau, so far as is reasonably practicable and so far as the processes of the law will allow. 

71.  To my mind, the act of the 1^st defendant in driving Chau out of the property while he was the sole registered owner, and the change of locks which served to deny Chau access, are compelling evidence of her intention to possess the property, to the exclusion of world at large including Chau. 

72.  Mr Lam SC made it a point that the management fees and rates of the property were only settled after they had been overdue for a long period of time and there is no evidence that they were paid by the 1^st defendant.  It was also the position of the 1^st defendant that Chau should be the one responsible for those charges.  It is submitted that the 1^st defendant was lacking the requisite animus possidendi.

73.  There is no dispute that those charges were eventually settled albeit after they were due for a long time.  There is however no evidence that they were in fact paid by Chau.  As the 1^st defendant and her two sons used the property as their residence, it is more probable that those charges were settled by the 1^st defendant.  Due to the fact that the 1^st defendant was always having a claim against Chau for the maintenance of the two sons, I am not surprised that she was maintaining the position that Chau should be the person responsible for those charges.  Therefore, I am unable to accept Mr Lam SC’s submission in this regard.

“Slightest acts”

74.  However, that is not the end of the matter. 

75.  Slade J (as he then was) in Powell v McFarlane and another (1979) P & CR 452 at 472 had this to say:

“An owner or other person with the right to possession of land will be readily assumed to have the requisite intention to possess, unless the contrary is clearly proved. This, in my judgment, is why the slightest acts done by or on behalf of an owner in possession will be found to negative discontinuance of possession.”

The principle was adopted by the Court of Appeal in Tang Tak Sum (supra).

76.  Mr Paul Lam SC pointed out that after the delivery of the judgment of Deputy High Court Judge Woolley in HCA5661/1996, Chau asked in a draft minutes of order attached to a letter from Chau’s solicitors dated 8 June 2001 that the 1^st defendant do pay half the market rent in respect of the occupation of the property from 14 March 1996 until she parts occupation thereof.  Mr Lam SC submitted that this amounts to the slightest act on the part of Chau and is sufficient to negate discontinuance of possession. 

77.  Slade J (as he then was) in Powell (supra) at 468 explained that “discontinuance of possession” refers to the case where the person in possession abandons possession and another then takes it.  And in law, in the absence of evidence to the contrary, the owner of land with the paper title is deemed to be in possession of the land, as being the person with the prima facie right to possession: see Powell (supra) at 470.

78.  Hence, if Chau has shown to have done some act, however slight, in relation to the property, he cannot be regarded to have abandoned possession thereof.

79.  Upon the judgment of Deputy High Court Judge Woolley in HCA5661/1996, Chau wasted no time in asserting his entitlement to half of the market rent of the property since the time he was driven out of it in March 1996.  He was obviously conscious of his legal title to the property and was not prepared to abandon it.  Further than that, he entered into an agreement with the 2^nd plaintiff for the sale of his share in the property 11 years later in April 2012.  This is clear evidence that Chau had neither forgotten nor abandoned his share in the property. 

80.  That being the case, I have to find that the 1^st defendant’s claim of adverse possession of Chau’s share should fail.

The 2^nd and 3^rd defendants

81.  Both the 2^nd and 3^rd defendants are the sons of the 1^st defendant and Chau.  They were respectively born in 1988 and 1992. 

82.  Under cross-examination, both of them agreed that since they pursued their studies in the United States in 2004, they spent most of their time in the States except holidays.

83.  Owing to their young age, they could not have adversely possessed the property in their own right.  All they are able to say is that they did reside in the property during a certain period of time.  They cannot say that their occupation of the property was adverse to their father.  As a matter of fact, their residence in the property must be dependent on the 1^st defendant as their mother.  In any event, they spent most of their time in the States since 2004 when the limitation period had not yet expired.

84.  For the above reasons, I am not inclined to find that the 2^nd and 3^rd defendants can maintain a claim of adverse possession of the property.

Whether the defendantsoccupied the property with the express or implied permission or licence of Chau?

85.  It is also the plaintiffs’ case that the occupation of the property by the defendants was under the express or implied permission or licence of Chau.

86.  To start with, Smith J in Regina (Beresford) v Sunderland City Council [2001] WLR 1327 held that an implied licence is recognized by law.  In the absence of express licence there had been user as of right, the question was whether a reasonable person would have appreciated that the use was by permission or only with acquiescence; that factors relevant to that issue would include any overt actions on the part of the landowner or demonstrable circumstances from which inferences could be drawn, even though possibly unknown to the users.

87.  The decision was however reversed by the House of Lords in its subsequent appeal.

88.  Eleven years later, the case was revisited by the Supreme Court in R (Barkas) v North Yorkshire CC [2015] AC 195.  Their Lordships unanimously held that the decision of the House of Lords in Beresford (supra) was wrongly decided and should no longer be relied on.  Lord Carnwath JSC at 221F approved the approach of Smith J in the first instance as “unimpeachable in common sense and in law”.

89.  Mr Paul Lam SC submitted that Chau, after the delivery of judgment in HCA5661/1996, asked the 1^st defendant to pay half of the market rent of the property, was an overt act which showed that he allowed the 1^st defendant to stay in the property on payment of a fair sum.  The fact that he did not pursue the claim for rent subsequently was an indication that permission to occupy the property was given by Chau.

90.  In my view, the act of Chau as aforesaid only tends to show that he was conscious of his interest in the property.  The request for rent was made after it was adjudged that he was co-owning the property with the 1^st defendant in equal shares.  It also explains why he was back-dating the claim of rent to the time when he was driven out of the property by the 1^st defendant.  It does not amount to an act of giving permission to the 1^st defendant to stay in the property. 

91.  Having said that, however, I am convinced that the circumstances are such that an implied licence can be inferred.

92.  One must not forget that Chau was the father of the 2^nd and 3^rd defendants.  In 1996, they were aged 8 and 4 respectively.  Although he was driven out of the property by the 1^st defendant due to the breakdown of their relationship, it does not follow that his love for the 2 children was thereby affected.  At the material time, the property was under his name only.  However, he took no action at all to recover possession of the property.  HCA5661/1996 was initiated by the 1^st defendant.  In my view, the fact that the 2 children were living in the property together with their mother (ie the 1^st defendant) was an important factor which accounts for his inaction.  It seems that to allow the 2 children and their mother to reside in the property was the consistent decision of Chau because even after the determination of Deputy High Court Judge Woolley in HCA 5661/1996, which held that he was co-owing the property with the 1^st defendant in equal shares, he made no attempt to seek possession of the property.  Had it not been his decision, he could have taken step to enforce his legal entitlement as far as possession is concerned. 

93.  For the above reasons, I am of the view that the 1^st, 2^nd and 3^rd defendants stayed in the property since March 1996 with the implied permission of Chau.  This was so even though the 3 defendants as users of the property might not have known about the decision of Chau.  This finding also defeats the defendants’ claim of Chau’s share by way of adverse possession. 

Whether the 1^st plaintiff has lost its right to recover possession of the D1’s share in the property by reason of the defendants’ claim of adverse possession of Chau’s share?

94.  D1’s share was sold to the 1^st plaintiff in April 2012.  No claim was made by the 1^st defendant on D1’s share.  In relation to D1’s share, Mr Lawrence Ng’s submission is that by reason of the claim of Chau’s share by the defendants and the 1^st plaintiff's waiver of obtaining vacant possession of D1’s share, they have the right to continue to reside and live at the property and a right not to be evicted by the 1^st plaintiff.

95.  With respect, I think Mr Ng’s submission has ignored the fact that the 1^st plaintiff, as one of the co-owners of the property, is entitled to exert rights of possession to every part of it by reason of unity of possession.  By reason that the property is held by the plaintiffs as tenants-in-common in equal shares, the 1^st plaintiff’s interest in the property is separate and distinct from that of the 2^nd plaintiff. 

96.  Therefore, even if (which is not the case as I find) the defendants were successful in their claim on Chau’s share, D1’s share would not and should not be thereby affected.  The 1^st plaintiff is entitled to possession of the property in any event. Indeed, there is no basis in saying that the 1^st plaintiff has ever waived its right of possession to D1’s share.

Are the plaintiffs entitled to claim damages for trespass?

97.  Due to my findings above, I am satisfied that the plaintiffs are entitled to claim damages for trespass against the 3 defendants. 

What are the damages payable by the 3 defendants?

98.  The plaintiffs have not adduced any evidence as to the market rent of the property.  The parties have agreed to adopt the rateable values of the property assessed by the Ratings and Valuation Department. 

99.  I hold that the 3 defendants are liable to pay the plaintiffs damages for trespass in the following manner:-

(1)  to the 1^st plaintiff at half market rent of the property from 20 April 2012 until the date of delivery of possession; and

(2)  to the 2^nd plaintiff at half market rent of the property from 21 February 2013 until the date of delivery of possession.

Conclusion and order

100.  By reasons of the foregoing, I give judgment in favour of the 1^st and 2^nd plaintiffs for possession of the property.  The counterclaim of the defendants is dismissed.   I also give judgment in favour of the 1^st and 2^nd plaintiffs as mentioned in paragraph 99 hereof.  Interest on the damages shall be calculated at commercial rate (ie 1% above the prevailing prime rate of HSBC). 

101.  In the unlikely event that the parties are unable to agree upon the quantum of damages, I give the parties liberty to apply. 

Costs

102.  Costs should follow the event.  I make an order nisi that the defendants shall pay the plaintiffs costs of this action, to be taxed if not agreed, with certificate for 2 counsel.

103.  In the absence of any application by summons to vary the same within 14 days from the date of this judgment, the order nisi shall become absolute.