DIAMOND TREASURE LTD v. MAN KAM LEUNG AND ANOTHER

DCCJ 4419/2014

[2024] HKDC 1192

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4419 OF 2014

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JUDGMENT

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Introduction

1.  This is the trial between the plaintiff and the 2^nd defendant in respect of a part of Section C of Lot 89 in Demarcation District 98, Yuen Long, New Territories, Hong Kong (“the land”) where Kwan Hing Metal and Timber Factory was situated with an area of about 2,500 square feet (“the subject land”).

The plaintiff’s case

2.  By 4 assignments dated 7 April 2014, the plaintiff became the registered owner of the land.

3.  By a tenancy agreement dated 1 January 2010 (“the tenancy agreement”), the subject land was rented by the former co-owner to the 1^st defendant through Mr Man Man Shek (“Man MS”). The 1^st defendant then entered into another tenancy agreement (“the sub-tenancy agreement”) on the same day (ie 1 January 2010) subletting the same to the 2^nd defendant.

4.  When the plaintiff acquired the land, it became the head landlord of the subject land.

5.  The sub-tenancy tenancy expired on 31 December 2014 by effluxion of time.

The 2^nd defendant’s case

6.  The 2^nd defendant says that the tenancy agreement was a sham.

7.  The 2^nd defendant further says that the 2^nd defendant purchased Lot No 88 in DD 98 on 4 January 2013 (“Lot 88”), which is adjacent to a portion of the subject land. When the 2^nd defendant purchased Lot 88, there were existing structures erected thereon since 1980 by the former owners, which covered and enclosed not only the subject land, but also part of Lot 88 and which was leased out by the predecessors-in-title to one Kwan Hing Wood Factory (transliteration of 均興木廠, hereinafter referred to as “Kwan Hing factory”). The predecessors-in-title of Lot 88 had therefore continuously occupied the subject land for their own use to the exclusion of all others for 34 years. The purchase price paid by the 2^nd defendant included the subject land.

Legal principles on adverse possession

8.  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 & Another (No 2) (1997‑98) 1 HKCFAR 55 at 68E.

9.  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 ...”

10.  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.”

11.  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.

12.  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.”

13.  Slade J in the leading case of Powell v McFarlane (1979) 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.”

14.  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.”

Factual possession

15.  As far as factual possession is concerned, the 2^nd defendant is relying on the possession of the subject land by the tenant of the predecessors-in-title of Lot 88 since 1980.

16.  Mr Chan Wai Leung Jacky (“Chan”), the director of the 2^nd defendant, testified that Kwan Hing factory was situated on 5 plots of land in DD 98, namely, Lots 88, 87, 86, 34 and the subject land (collectively as “Kwan Hing plots of land”). When the 2^nd defendant purchased Lot 87 in 2012, he was told by Mr Man Fuk Yee (transliteration of 文福宜), who collected rents on behalf of the owners of Lots 87 and 86 from Mr Fung Chi Kin (transliteration of 馮自堅, hereinafter referred to as “Fung”), the proprietor of Kwan Hing factory, that Fung had been paying rents to the then owners of Lots 88 and 34.

17.  When the 2^nd defendant purchased ¾ share of Lot 88 in January 2013, he was told by Mr Man Kin Hon Kenneth (“Man KH”), who was the then owner of ¼ share of Lot 88, that Lot 88 together with the subject land was leased by the former owners to Fung in or around 1980. Fung also took up the tenancies of Lots 87, 86 and 34 around the same time. Fung then erected Kwan Hing factory in the southern part of the Kwan Hing plots of land and placed timber outside including the subject land. Throughout the years, Fung expanded Kwan Hing factory by extending into the northern part (ie the subject land). Kwan Hing factory was always fenced off with mesh wire and corrugated metal sheet. Man KH also told Chan that since 1980, all former owners of Lot 88 and Fung had used an access road on the eastern part of the subject land for egressing and ingressing Kwu Tung Road until 2002 or 2003 when the access road was blocked by Kwan Hing factory.

18.  Chan was told by Man MS, one of the then owners of the land, that the then owners of the land were not aware that the subject land was part of the land and that they had not dealt with the subject land nor received any rent for more than 30 years.

19.  Chan said that since the acquisition of the Kwan Hing plots of land (except the subject land) by the 2^nd defendant, Kwan Hing Factory continued to occupy the Kwan Hing plots of land including the subject land. Since Fung’s moving out of Kwan Hing factory in June 2013, the 2^nd defendant used it as storage of old furniture. In 2016, it was let to one Wan Shing Waste Disposal Company (transliteration and translation of 運城廢料處理公司).

20.  It is immediately apparent that the 2^nd defendant’s case of factual possession is built on double hearsay evidence. Not only the actual possessor was not called to testify, the persons who had allegedly given information to Chan on the occupation of the subject land by either Kwan Hing factory or Fung were also not called.

21.  Harris J in the Court of Appeal case of Tsang Foo Keung v Chu Jim Mi Jimmy [2017] 3 HKC 527 at para 22, in citing Wu Yee Pak v Un Fong Leung (2004) 7 HKCFAR 498, Chan PJ at para 5, has the following to say on the burden of proof of the squatter:

“(4) The person claiming adverse possession has the burden of proving both exclusive physical control and the requisite intention. Although the standard of proof is still the normal civil standard, ie on the balance of probabilities, commensurate with the serious consequences of finding that the holder of the paper title has been disposed the evidence of exclusive possession and intention must be compelling. It cannot be lightly assumed that the paper title holder has foregone his interest in land.”

22.  Accordingly, the burden of proof on the 2^nd defendant is a high one.

23.  In the absence of evidence from the actual possessor, it is unlikely if not impossible that the 2^nd defendant could overcome the high burden of proof.

24.  For reasons that will be apparent, the 2^nd defendant’s case is bound to fail.

25.  Taking its case to the highest, the 2^nd defendant is saying that Lot 88 was let to Fung together with the subject land by the former owners in or about 1980 whereon (together with Lots 86, 87 and 34 Fung also rented) he built Kwan Hing factory and then timber were placed outside the factory including the subject land. Fung was said to have extended Kwan Hing factory northward over the years to include the subject land. Kwan Hing factory was always fenced off.

26.  It should be noted that merely placing timber on the subject land short of excluding others from entering the land is insufficient to establish adverse possession. Though not absolutely essential, fencing off the land is the classic way of establishing exclusive occupation: see the Court of Appeal case of Gotland Enterprises Ltd v Kwok Chi Yau and others, CACV 260/2014, 19/1/2016, unreported, at paras 36-37.

27.  According to the agreed observations of the parties’ experts of the survey sheets and aerial photographs between 1980 and 2020, the subject land was not fenced off all the time.

28.  The survey sheets show the following:

(a)  about half of the subject land was inside a fence and a gate in 1980;

(b)  the subject land was an open area between 1/1988 and 5/1990;

(c)  the majority of the subject land and a large piece of surrounding areas at the south were inside a large temporary structure with a gate but a small piece of the subject land at northeast was an open area outside the gate between 11/1999 and 7/2001;

(d)  the gate of the large temporary structure disappeared; the temporary structure expanded up to the northern boundary of the subject land but without a gate between 10/2003 and 5/2006;

(e)  the northern half of the temporary structure was shown as a canopy covering the subject land in 5/2006;

(f)  the canopy disappeared and the area formed part of the temporary structure again covering the subject land between 8/2007 and 7/2013; and

(g)  2 new gates were shown outside the northeast of the subject land between 11/2013 and 1/2020.

29.  The aerial photographs show, among other features, the following:

(a)  a small structure and sundry items were identified inside the subject land in 1980;

(b)  fence was identified at the north of the subject land in 1981;

(c)  various structures, timber, fence and access road at the east of the subject land were identified in the subject land in 1983;

(d)  a small structure was identified in the subject land in 1984;

(e)  timber and fence were identified in the subject land in 4/1985;

(f)  a rectangular structure was identified at the west edge of the subject land with unidentified items next to the structure in 9/1985;

(g)  a structure and a small rectangular structure were identified in the subject land in 1986;

(h)  sundry items and 2 trucks believed to be abandoned were identified in the subject land in 1987 and 1988;

(i)  2 trucks believed to be abandoned were identified in the subject land in 1989 and 7/1990;

(j)  a pile of rectangular-shape sundry items were identified in the subject land in 9/1990;

(k)  2 trucks covered with vegetation were in the subject land in 1991;

(l)  1 truck remained in the subject land. A temporary structure was identified in the south-western edge of the subject land in 1992;

(m)  the southern half of the subject land formed part of a new temporary structure. The majority of the northern half was identified with a fenced area between 5/1993 and 1996;

(n)  the temporary structure slightly expanded with a new roof over the fenced area at the west of the subject land between 2/1997 and 5/2002;

(o)  the temporary structure further expanded towards the north-east of the subject land between 9/2002 and 12/2015; and

(p)  part of the roof of the temporary structure at the north of the subject land was removed between 2016 and 2018.

30.  It can be seen that the entirety of the subject land did not become part of the temporary structure (and presumably fenced off) until August 2007. Although the temporary structure was expanded up to the northern boundary of the subject land between October 2003 and May 2006, it was without a gate during that period of time. Also, the northern half of the temporary structure covering the subject land was a canopy in May 2006.

31.  That being the case, even if Fung is called to give evidence, it is unlikely that his evidence would be supportive of the 2^nd defendant’s case.

32.  In my judgment, Kwan Hing factory only came into factual possession of the subject land in August 2007, which is less than the requisite 12 years before the commencement of the 2^nd defendant’s counterclaim. The 2^nd defendant’s case on factual possession must fail.

Animus possidendi

33.  In the light of my findings on factual possession, the 2^nd defendant’s counterclaim should fail.

34.  For the sake of completeness, I shall deal with the question of animus possidendi (ie intention to possess).

35.  Since the 2^nd defendant is to a large extent relying on the adverse possession of Kwan Hing factory or Fung before it became the owner of Lot 88, the proof of intention must come from Fung.

36.  In my view, the absence of evidence from Fung is fatal to the 2^nd defendant’s case.

37.  Furthermore, it is my view that the subject land was not fenced off until August 2007, the 2^nd defendant cannot rely on the fencing off of the subject land as evidence of the intention to possess for the requisite 12 years.

38.  For the above reasons, the 2^nd defendant offered no sufficient evidence on animus possidendi.

39.  In his evidence, Chan attempted to portray the 1^st defendant as a dishonest person. As the 2^nd defendant bears the burden of proof on the key issues of adverse possession, the attack on the credibility of the 1^st defendant adds nothing to the strength of the 2^nd defendant’s claim. In my view, it is useless and irrelevant.

40.  Lastly, from the undisputed fact that Chan negotiated with Man MS in late 2013 or early 2014 for the purchase of the subject land and eventually entered into a preliminary sale and purchase agreement on 12 February 2014 at the price of HK$1.25 million, it is undoubtedly clear that to Chan’s mind, the subject land was never adversely possessed.

Conclusion

41.  For the foregoing reasons, I find that the 2^nd defendant has failed to discharge the burden of proof on the 2 issues of adverse possession. The 2^nd defendant’s counterclaim must be dismissed. The plaintiff is entitled to vacant possession of the subject land.

Reliefs

42.  Apart from asking for vacant possession of the subject land, the plaintiff also asked for an injunction and damages for trespass and/or mesne profits.

43.  In relation to mesne profits, Albert So Surveyors Ltd, the valuation expert opined that the market rent of the subject land as at 1 January 2015 was HK$14,500 per month and as at 1 January 2020 was HK$15,200 per month. There is no challenge to the valuation.

44.  In the written and oral closing submission, Mr Jenkin Suen, SC leading Mr Tommy Cheung, counsel for the plaintiff, in line with Woo Sai Mui v Lam Island Development Co Ltd [2022] HKCFI 39 and City Success Ltd v Melofield Nursery and Landscape Contractor Ltd [2021] HKDC 128, proposed the following reliefs to be granted:

(1)  The 2^nd defendant doth deliver vacant possession of the subject land to the plaintiff within 28 days from the date of the order of this court;

(2)  The 2^nd defendant doth demolish and remove the structures, fixtures, chattels and objects, if any, on the subject land at its own expenses and costs within 28 days from the date of the order of this court;

(3)  In the event of the 2^nd defendant failing to deliver vacant possession of the subject land and/or demolish and remove the structures, fixtures, chattels and objects from the subject land within the time prescribed, the plaintiff be entitled and at liberty to take all steps to demolish and remove the same at the expenses and costs of the 2^nd defendant and to recover such sums from the 2^nd defendant in full to be assessed by the court if such expenses and costs are disputed;

(4)  Subject to paragraph (2) above, an injunction restraining the 2^nd defendant, whether by itself, its tenants, licensees, employees, servants or agents whosoever and howsoever, from entering into or placing any structures, fixtures, chattels or objects on or trespassing any part of the subject land;

(5)  Mesne profits at the rate of $14,500 per month for the period between 1 January 2015 and 31 December 2019 and $15,200 per month from 1 January 2020 to the date when the 2^nd defendant delivers vacant possession of the subject land to the plaintiff;

(6)  Interest on the sums payable by the 2^nd defendant to the plaintiff (i) at commercial rate of 1% above the best lending rates from time to time quoted by the Hongkong and Shanghai Banking Corporation Limited and from the respective dates of accrual until the date of judgment and (ii) at judgment rate from the date of judgment until payment; and

(7)  There be liberty to apply.

45.  In the light of my findings above, the plaintiff is entitled to the proposed reliefs and I so grant.

Costs

46.  On the question of costs, Mr Suen, SC submitted what the 2^nd defendant raised was not merely unarguable but unmeritorious case of adverse possession. The 2^nd defendant through Chan has gone miles further, by putting forward lies and fabrications to confuse the issues and to mislead the court. Substantial legal costs and delay were caused by the 2^nd defendant’s and Chan’s unreasonable dragging along the legal proceedings. Mr Suen, SC therefore asked for indemnity costs against the 2^nd defendant.

47.  I make a costs order nisi that the 2^nd defendant shall pay the plaintiff the costs of this action, including all costs reserved, on an indemnity basis, with certificate for two counsel, to be taxed if not agreed.

48.  In the absence of any application for variation by letter within 14 days from the date of this judgment, the costs order nisi shall become absolute.