LIU KAM HOI AND OTHERS v. LIU PING KUEN, THE PERSONAL REPRESENTATIVE OF THE ESTATE OF LIU FUN KEE

HCA 6728/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 6728 OF 1998

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R U L I N G

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1. This is a case about certain land in the New Territories, known as Lot No 285 in Demarcation District No 52, Fu Tei Au, Sheung Shui (“the Lot”).

2. By a Writ of Summons and Statement of Claim, dated 29 April 1998, the plaintiffs allege that, in about 1967, portion of the Lot was let by one Liu Kut Siu (deceased), a relative of the plaintiffs and former owner of the Lot, to the then defendant, Liu Feng Ki (who died shortly after the institution of these proceedings), and the lettingwas on a yearly basis.  By way of clarification, the carriage of the defence now is in the hands of Liu Feng Ki’s personal representative.

3. On 22 March 1996, the plaintiffs’ then solicitors served on Liu a Notice to Quit but Liu refused to quit and deliver up the Lot.

4. The plaintiffs seek an order for delivery of vacant possession of the Lot, arrears of rent and mesne profits.

5. In his Amended Defence, dated 9 July 1998, the defendant alleged that there was an oral express agreement made between Liu Kut Sui and another, on the one hand, with Liu Feng Ki and his family, on the other hand, to the effect that, so long as Liu Feng Ki and his family paid rent they could stay on the property as long as they wished.  Hence, the Notice to Quit was invalid and ineffective because it was in breach of the express agreement.  The defendant also counterclaimed damages to be assessed.

6. Also in the Amended Defence and by reference to an attached “Lot Index Plan”, the defendant alleged that part of the Lot (Portion 1) was let to Liu Feng Ki and his family and the remaining parts of the Lot (Portion 2 and Portion 3) were let to two others.

7. On 4 January 2011, the defendant was given leave to file a Re‑Amended Defence and Counterclaim, which amendments “drastically amended the Defendant’s case” as noted by Suffiad J in a Ruling, dated 26 January 2011, which ruling concerned the plaintiffs’ application to be released from a certain undertaking.

8. As a result of the amendments and by reference to an amended attached “Lot Index Plan” the defendant’s case became:

(1) In about 1959, Liu Kut Sui let a part of the Lot (Portion 1) to the defendant and his family with the oral express agreement that, so long as the defendant and his family paid rent, they could remain on the property for as long as they wished.

(2) In about 1970, Liu Kut Sui let another part of the Lot (Portion 1A) to the defendant and his family “reassuring”, it is said, the express agreement that, so long as the defendant and his family paid rent, they could remain on the property for as long as they wished.

(3) In about 1970, the defendant and his family began exclusive use, possession and control of another part of the Lot (Portion 1B), which use continued openly and uninterrupted for 20 years, giving rise to a claim for adverse possession.

9. So, whereas the defence originally was that the defendant and his family occupied the entire subject property under a tenancy agreement with an express term that they could remain for as long as they wished provided they paid rent, in 2011 the defence changed to an allegation that part of the subject property was occupied under a tenancy agreement with the express term and an adjacent part of the property was subject to the defendant’s claim for adverse possession.

10. On 20 May 2011, the defendant filed a Re‑Re‑Amended Defence and Counterclaim, raising proprietary estoppel, aside from recording this change nothing more needs to be said.

11. By a summons, dated 23 December 2014, the defendant applied for leave to re‑amend this Re‑Re‑Amended Defence and Counterclaim and leave to file and serve a second Supplemental Witness Statement.

12. Certain consequential orders were sought, including leave to the plaintiffs to file and serve a Re‑Re‑Re‑Amended Reply and Defence to Counterclaim and further Supplemental Witness Statements.

13. The amendment pleaded that, on three occasions in 1970 and 1972, Liu Feng Ki asked Liu Kut Sui to let the northern part of Portion 1B to him but Liu Kut Sui refused. Thereafter, it is alleged, in 1973, Liu Feng Ki and his family started taking possession and control of the whole of Portion 1B.

14. The second Supplemental Witness Statement deals with two topics:

(1) The three occasions in 1970 and 1972 when, it is alleged that, Liu Feng Ki asked Liu Kut Sui to let the northern part of Portion 1B to him, Liu Kut Sui’s refusal and Liu Feng Ki and his family taking possession and control of the whole of Portion 1B in 1973.

(2) The amount of money the defendant and his family allegedly spent on erecting certain structures on Portions 1, 1A and 1B.

15. The application was heard on the first day of trial, 13 January 2014, and submissions occupied the entire day.  I reserved my decision overnight.

16. I was told by Mr Chan Chi Hung SC, leading counsel for the defendant, that he was instructed somewhat late and that during conference he advised the defendant to apply to amend and file and serve a supplemental witness statement in order to deal with a perceived risk that the plaintiffs might raise the presumption of encroachment against the defendant’s claim of adverse possession.

17. Mr Chan asserted that it was by no means clear that the plaintiffs had pleaded the presumption of encroachment and that his advice had been given out of a sense of caution.  He further asserted that, in any event, the plaintiffs should not be permitted to rely on the presumption because it had not been pleaded.

18. It followed, Mr Chan submitted, that if I did not allow the plaintiffs to rely on the presumption, he would not need to pursue this application but, if I did allow the plaintiff to rely on the presumption then, of course, he would pursue the application.

19. Mr Chan submitted that the plaintiffs should have pleaded the presumption and the facts in support thereof as part of their case or, at any rate, in their Reply but have not done so; they have not put forward the factual basis for the presumption, he says.  Mr Chan also submits that the plaintiffs cannot put the defendant to the burden of proving possession of Portion 1B because in the plaintiffs’ case Portion 1B was let to the defendant.

20. Mr Chan also submits that it is not open to the plaintiffs to rely on the presumption because from the outset the plaintiffs’ case was that Portion 1B was the subject of a tenancy agreement and no issue of the presumption was raised.

21. I pause here to set out the nature of the presumption and in this regard I refer to Headnotes (1) and (2) of Secretary for Justice v Chau Ka Chik Tso (2011) 14 HKCFAR 889:

“(1) The principle of ‘encroachment’ was that if a tenant went into, and remains in, occupation of land belonging to his landlord, it was to be presumed, particularly if the encroached-upon land was adjoining the demised land, that the tenant’s encroachment was intended by him to annex the encroached-upon land to his demised land so as to enable him to occupy and use the encroached-upon land as if it were part and parcel of the demised land. The presumption was a rebuttable one and could be rebutted by evidence that the tenant intended to occupy the encroached-upon land not simply as tenant but as owner. …

(2) As the landlord was not bound by the presumption and was entitled to treat the encroacher, his tenant of the demised land, as a trespasser vis‑à‑vis the encroached‑upon land, the trespasser’s possession was “adverse” to the landlord for limitation purposes. However, the effect of the tenant’s trespass depended on the trespasser’s intentions. If the lessee’s intention, presumed and unrebutted or simply proved, was to treat the encroached‑upon land as annexed to the demised land, it was a limited adverse possession, for it did not deny, and indeed accepted, the right of the lessor to recover possession on the termination of the demise. In such a case, if the possession continued uninterrupted for the requisite limitation period, the encroacher obtained, in effect, a leasehold title to the encroached‑upon land for a period commensurate with the term for which he held the demised land. And on the expiry of that term, the lessor was entitled to recover possession of the demised as well as the encroached‑upon land. Section 9(1) of the Limitation Ordinance (Cap.347) applied. …”

22. On the other hand, Mr Ambrose Ho, the plaintiffs’ leading counsel, submits that the burden of proving adverse possession rests with the defendant to the extent of proving the elements which establish adverse possession of Portion 1B in the context of an admitted subsisting landlord and tenant relationship between the parties in respect of Portion 1 and Portion 1A.

23. Mr Ho also submits that the plaintiffs do not have to prove the presumption because if the defendant fails to prove adverse possession, then the presumption is that the defendant occupies the subject land as part of the demised premises by way of encroachment.  It is a question of legal principle and the plaintiffs are entitled to rely on the facts adduced by the defendant, he says.

24. Mr Ho argues that the defendant has to prove he is claiming the land to the exclusion of the landlord and, if the presumption is against him, it is for the defendant to deal with the question as to whether the presumption applies, especially given that an element necessary to establish the presumption is the tenant’s intention concerning whether he is occupying the land to deny the landlord’s proprietary right.

25. All that has been claimed, says Mr Ho, is exclusive use, possession and control, which does not make out a case for adverse possession in the context of landlord and tenant relationship without evidence of an intention to deny the landlord’s proprietary right.  The defendant’s pleaded case establishes only an encroachment, he says.

26. Indeed, Mr Ho says that the defendant’s pleaded facts set out in paragraphs 5(e) to (i) of the Re‑Re‑Amended Defence and Counterclaim, the pre‑existing relationship of landlord and tenant and the proximity of Portion 1B to Portion 1 and Portion 1A are facts upon which the plaintiffs can rely to say that adverse possession has not been made out.  In support of this proposition, Mr Ho relies on Drane v Evangelou & ors [1978] 1 WLR 455 at p458B–G, in particular:

“… As we said in In re Vandervell’s Trusts (No. 2) [1974] Ch. 269, 321‑322:

  ‘It is sufficient for the pleader to state material facts.  He need not state the legal result.  If, for convenience, he does so, he is not bound by, or limited to, what he has stated.  He can present, in argument, any legal consequence of which the facts permit.’”

27. I shall deal first with this pleading point.

28. I do not agree with Mr Chan’s submission that the plaintiffs should have pleaded the presumption in the Statement of Claim.  The plaintiffs’ case was simply that there was a tenancy agreement in respect of the entire subject property; the issue of the presumption arose when the defendant pleaded adverse possession.

29. Nor were the plaintiffs obliged to plead the presumption in the Reply.  If the defendant fails to prove adverse possession in the context of an existing landlord and tenant relationship in respect of the adjacent Portions 1 and 1A and encroachment on Portion 1B, it is to be presumed “that the tenant’s encroachment was intended by him to annex the encroached‑upon land to his demised land so as to enable him to occupy and use the encroached‑upon land as if it were part and parcel of the demised land.” (See Chau Ka Chik Tso, supra.)

30. In my view, the plaintiffs are entitled to rely on the presumption.

31. Mr Ho relies also on, estoppel, citing a number of authorities for the proposition that the presumption is a specie of estoppel.  See: Elements of Land Law, 5^th edn, Gray & Gray, para 9.1.61; Chau Ka Chik Tso, §§21, 31, and 36, per Ribeiro PJ.  Mr Ho says that estoppel has been pleaded in paragraph 14 of the Re‑Re‑Amended Reply and Defence to Counterclaim.

32. Mr Chan submits that the proposition that the presumption is a specie of estoppel should be treated with caution and seeks to contrast Ribeiro PJ’s judgment with Lord Scott’s judgment.  Given that I have already decided that the plaintiffs are entitled to rely on the presumption, agreeing with Mr Ho’s submissions, I do not need to resolve this point.

33. So much for the pleading point, I now turn to the application itself.

34. Mr Ho objects to the application on the basis of delay alone, referring me to Luan Gang v Simpson Marine Limited, unreported, HCAJ 171/11, 2 September 2013, for the proposition that, unless there are exceptional circumstances and there are good reasons for the delay, one should not expect the courts to grant any late applications.  He also submits there is prejudice, which I shall deal with shortly.

35. Mr Chan counters with the following arguments:

(1) that the plaintiffs have had the proposed amendments and the draft supplementary statement for four weeks and could have taken instructions;

(2) the plaintiffs have given no details of prejudice and the new evidence is a short point; and

(3) the proceedings have been delayed since 1998.

36. As to Mr Chan’s first point, in my view the plaintiffs were not obliged to take instructions before any decision by the court as to whether the application would be allowed.  To decide otherwise would mean that a party could avoid the consequences of its own delay by simply providing drafts to the other side, thereby putting the onus on the other side to deal with the matter.

37. As to the second point, Mr Ho submitted that his clients would require time to consider the amendments and new evidence.  I accept this.

38. Mr Ho does submit that prejudice arises from the fact that the new allegations concern alleged conversations with a man who is deceased (Liu Kut Sui) and which took place 40 years ago. I appreciate Mr Ho’s point but I think that questions of prejudice in respect of this application are more concerned with making the application on the first day because, given that Liu Kut Sui died in 1995 and the alleged conversations took place so long ago, this element of prejudice has not changed materially since 2011, when adverse possession was first pleaded.

39. As to Mr Chan’s third point, I do think that this is a matter of context that weighs in the defendant’s favour.  I take into account that this application has been made on the first day of trial and to allow the application will likely result in an adjournment of the trial, which will result, in turn, in the plaintiffs waiting longer for a resolution of their claim but I have heard no submissions and there is no evidence that the matter is urgent or even that the plaintiffs have some particular matter pending the resolution of this action.  Moreover, this matter has had long periods of inactivity since 1998, with neither the plaintiffs nor the defendant pursuing progress.  I am told that it was only after Mr Chan was briefed that the presumption was considered and advised on.  As to why the presumption had not been dealt with before and as to the reason for delay in making the application, the defendant, in essence, blames his legal team.  He says, in his 9^th affirmation, paragraph 3:

“… When I had my earlier statements prepared, I had not been asked to provide information on or details of these 2 areas and as a result, those statements do not contain the appropriate level of details. …”

In this regard, Mr Ho submits that the new evidence of the conversations appears to be recent invention but I cannot resolve that issue simply on affirmation.  There is, of course, disruption to the court caused by delay, but, again, the defendant places the blame for delay on his legal team.  I have kept in mind the underlying objective of Order 1A, rule 1(d).  On balance, I shall give the defendant, reluctantly, this opportunity to put his case in order and I allow the application.

40. I have tended to focus on the evidence and amendments concerning the alleged conversations in 1970 and 1972 but my reasons apply also to the new evidence concerning the costs allegedly expended on the structures.

41. I will hear counsel on the form of the Orders and costs.