FUNG YUK LUEN v. WONG FUNG LAN AND OTHERS

CACV 398/2021

[2023] HKCA 184

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 398 OF 2021

(ON APPEAL FROM DCCJ NO 447 OF 2017)

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J U D G M E N T

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Hon Chow JA (giving Judgment of the Court):

INTRODUCTION

1.  This is the Plaintiff’s appeal against the judgment of His Honour Judge Harold Leong dated 22 April 2021 dismissing the Plaintiff’s claim against the Defendants for adverse possession of two lots of land, namely, the Remaining Portion of Lot No 365 (“Lot 365RP”) and Lot No 371 (“Lot 371”) in DD 326, Lantau Island, New Territories, Hong Kong.

BASIC FACTS

(i)  The parties

2.  The Plaintiff and the Defendants are relatives living in Shui Hau Village in Lantau Island.

3.  The Plaintiff is the cousin of the late Fung Shek Lam (“Shek Lam”) and the uncle of Shek Lam’s son, the late Fung Wing Fuk (“Wing Fuk”).

4.  The 1^st Defendant is the widow of Wing Fuk, and the 2^nd to 4^th Defendants are the children of Wing Fuk/the 1^st Defendant.

(ii)  The lots

5.  The Plaintiff has been the registered owner of (inter alia) Lot No 372 in DD 326 (“Lot 372”), which he inherited from his father, since 16 August 1978.

6.  Shek Lam was formerly the registered owner of Lot 365RP and Lot 371. On 15 December 1987, Shek Lam gifted them to Wing Fuk. On 12 July 2010, Wing Fuk passed away. The 1^st to 4^th Defendants inherited Lot 365RP and Lot 371 from Wing Fuk, and became the registered owners of those 2 lots in 2014.

7.  The Plaintiff’s Lot 372 is sandwiched between the Defendants’ Lot 365RP (on the western side) and Lot 371 (on the eastern side).

8.  As mentioned in the single joint expert report of Joseph Wong Yiu-cho dated 20 December 2018:

(1)  Lot 365RP, Lot 372 and Lot 371 are located right next to South Lantau Road, which went gradually downhill from east to west.

(2)  An area encompassing Lot 372, the bulk of Lot 365RP and Lot 371 (save 2 small areas), and some Government land is fully enclosed by fences with four gates (referred to as Gate 1, Gate 2, Gate 3 and Gate 4) (“the Occupied Land”).

(3)  The Occupied Land used to be a vacant open area covered by farmland/vegetation before a house on Lot 372 was built. The house was first seen from an aerial photo taken in 1983. In the same photo, linear features were seen with the shape of the Occupied Land, and those linear features were confirmed to be fences by a Survey Sheet produced in the same year. Since 1983, the Occupied Land has been fully enclosed by fences. Other than a minor realignment of the fences at the northeast corner, the Occupied Land remained in a similar shape enclosed by fences up to the date of survey and inspection by Mr Wong in November/December 2018.

(4)  Lot 365PR: other than being fenced off within the Occupied Land, Lot 365PR was isolated up on the slope away from the South Lantau Road. Access to Lot 365PR could only be made through a gate (Gate 3) or through an extended structure of the house at Lot 372. According to Mr Wong’s observation, the lot is used as a gardening area, and from aerial photos, it has been used as a gardening area since it was formed in 1983. Throughout the years the lot has always been covered under trees/shadows. Fences around the lot could be seen since 1983 save that they were hidden under trees in later years, and the retaining wall bounding the lot at the east was first clearly seen in 1985. The trees started to be cleared in 2015 and the layout of the garden was similar to what was observed at the date of Mr Wong’s survey/inspection.

(5)  Lot 371 & Lot 372: the two lots are fenced off within the Occupied Land and access to them could be made through various gates (Gate 1, Gate 2 and Gate 4). Gate 1 is the main entrance. According to Mr Wong’s observation, Lot 371 is used for running a store business, and Lot 372 is mainly occupied by a house. Access to the main door of the house was from Lot 371. A temporary structure on Lot 371 could be observed from aerial photos taken since 1996. A shelter above the temporary structure was first seen in 2011. It was later renovated to become a larger one in 2013. Fences at the north and east could be seen since 1983. A retaining wall bounding the south of the lot could be seen clearly in 2002. A footpath with access from South Lantau Road could be seen in 1993, and Gate 1, being the entrance connecting the footpath, could be seen in 1998. The fences at the northeast were once realigned.

(iii)  The Plaintiff’s occupation of the Disputed Land

9.  According to the Plaintiff, in around 1980, he built a house on Lot 372 and thereafter began to live in the house with his family. He also put up a fence (with gates) around the Occupied Land, and has since been occupying the enclosed area without ever seeking or obtaining any permission or license from the Defendants or their predecessor-in-title. The portions of Lot 365RP and Lot 371 so occupied by the Plaintiff, which form the subject matter of this adverse possession claim, shall hereinafter be referred to as the “Disputed Land”.

(iv)  The Defendants’ case of licence

10.  On the other hand, according to the Defendants:

(1)  In 1994, upon the Plaintiff’s request, Wing Fuk (through the 1^st Defendant) granted an oral licence (“the Licence”) to the Plaintiff to use the Disputed Land on condition that the Licence was revocable upon notice whereby the Plaintiff would be required to return possession of the Disputed Land to him (“the 1994 oral agreement”).

(2)  In around 2008-2009, the Plaintiff started to operate a cafeteria business on the Disputed Land, and the Defendants informed the Plaintiff of Wing Fuk’s intention to revoke the Licence, to which the Plaintiff and his family members acknowledged Wing Fuk’s title and proposed to continue using the Disputed Land for consideration. Since then, until around 2015, the Plaintiff and his family members had made various proposals and offers to rent, purchase and/or exchange the Disputed Land, but those proposals were all rejected by Wing Fuk and/or the Defendants.

(3)  After the death of Wing Fuk on 12 July 2010, the Licence was renewed on the same terms by the Defendants by conduct, and the Plaintiff continued to use the Disputed Lands with the consent and permission of the Defendants, who were then engaged in negotiating with the Plaintiff and his family members over their proposals to rent, purchase and/or exchange the Disputed Land until 2015.

(4)  In around May 2015, the Defendants orally revoked the Licence, and withdrew their consent or permission to the Plaintiff to use the Disputed Land. The Defendants also requested the Plaintiff to return vacant possession of the Disputed Land within a year.

(5)  Despite the termination of the Licence and repeated requests or demands, including 2 letters written by the Defendants’ lawyers (C W Heung & Partners) dated 21 November 2016 and 19 December 2016 respectively, the Plaintiff failed and/or refused to cease using the Disputed Land or deliver up vacant possession thereof to the Defendants.

(v)  The action

11.  On 26 January 2017, the Plaintiff commenced the action below (DCCJ 447/2017) against the Defendants claiming a possessory title to Lot 365RP and Lot 371 by way of adverse possession. At the trial, the Plaintiff clarified that his claim related only to the Disputed Area (ie Lot 365RP and Lot 371 less the 2 small areas outside the Occupied Land), and the Statement of Claim was amended accordingly with leave granted by the Judge.

12.  In their Defence and Counterclaim, the Defendants contended that the Plaintiff occupied the Disputed Land under the Licence which had been revoked but the Plaintiff had continued to occupy the Disputed Land as trespassers since June 2016. The Defendants counterclaimed against the Plaintiff for an order for possession of the Disputed Land.

THE JUDGMENT

13.  The action was tried by the Judge in February 2021. The Plaintiff, the 1^st Defendant, the 2^nd Defendant and Fung Chun Wah (“Chun Wah”), amongst others, gave oral evidence at the trial. Chun Wah was the younger brother of Wing Fuk. The Judge also had before him the single joint expert report of Mr Wong.

14.  The Judge gave a written judgment on 22 April 2021 (“the Judgment”) dismissing the Plaintiff’s claim ([2021] HKDC 487). In the Judgment, the Judge made the following material findings:

(1)  The Survey Sheet dated November 1983 (being closest in time to the occupation of the Disputed Land by the Plaintiff in 1980) showed that all three lots were “fully enclosed by fences” (§9 of the Judgment).

(2)  The fences (and gates) were recorded in a similar way in the Survey Sheets up to the last one (19 November 2018) in the report with the exception of some realignment of the fences in Lot 371 in May 2007 (§10 of the Judgment).

(3)  The fencing of the land served as strong evidence that the Plaintiff did have factual possession of the Disputed Land since around 1980 (§14 of the Judgment).

(4)  There was no documentary evidence of the 1994 oral agreement (§19 the Judgment).

(5)  The 1^st Defendant’s evidence of the 1994 oral agreement was not credible (§27 of the Judgment).

(6)  It was, however, a common practice of villagers in Shui Hau Village to “‘borrow land’ and to return the land on request as an oral agreement” (§§30-31 of the Judgment).

(7)  There were negotiations concerning the selling or swapping of the Disputed Land between the Plaintiff’s side and the Defendants’ side in 2012-2013 and also in April 2016 (§§33-36 of the Judgment).

(8)  The 2^nd Defendant engaged a surveyor (Cody Pang Chi-wing) to survey the Disputed Land in about April 2016. The 2^nd Defendant did so because, during the aforesaid negotiations, he was told that the Disputed Land was very small but he did not believe in what he was told (§§37-38 of the Judgment). Mr Pang’s access to the Disputed Land to conduct the survey was with the Plaintiff’s permission or consent (§§42-46 of the Judgment).

(9)  The only reasonable explanation why the Plaintiff would negotiate with the Defendants to purchase or swap the Disputed Land and allowed Mr Pang to enter the Disputed Land to carry out a survey was that “there was a ‘land borrow’ arrangement” (§64 the Judgment).

(10)  It was more likely than not that there was a “‘land borrow’ arrangement according to the local practice between relatives in the village”, and “[t]his would have likely been in [the] form of a licence granted by oral agreement between the plaintiff and whoever the title owner was at the time” (§67 the Judgment).

(11)  The Licence was formally revoked by written notice by 2 letters dated 21 November 2016 and 19 December 2016 from the Defendants’ lawyers, but the Plaintiff failed to comply with the notices (§68 the Judgment).

15.  Accordingly, the Judge dismissed the Plaintiff’s claim for adverse possession of the Disputed Land, and made an order for possession of the Disputed Land against the Plaintiff.

THE PRESENT APPEAL

16.  The Plaintiff was not satisfied with the Judgment. By a summons dated 20 May 2021 filed in the court below, the Plaintiff applied for leave to appeal. On 13 August 2021, the Judge granted the Plaintiff leave to appeal ([2021] HKDC 990).

17.  In the Plaintiff’s Notice of Appeal dated 19 August 2021, the Plaintiff raises 4 grounds of appeal:

(1)  Having found that the 1^st Defendant’s evidence in support of the case of licence granted in 1994 to be not credible, the Judge erred in making an inconsistent finding that the Plaintiff had been in possession of the Disputed Land under a “land borrow” arrangement with the owner in the form of a licence.

(2)  Further or alternatively, the Judge erred in finding the existence of the land borrowing arrangement when there was no supporting evidence of the same, relying instead on the following irrelevant matters to make such finding:

(a)  the general practice of land borrowing said to be common in the village concerned;

(b)  when the Plaintiff built his house on Lot 327 in 1980, he did not extend the house into the Disputed Land or build any permanent structure on it;

(c)  the Defendants’ side had paid the Government rent for the Disputed Land over the years;

(d)  the Plaintiff started a cafeteria business in the Disputed Land in around 2008-2010; and

(e)  the Plaintiff allowed the 2^nd Defendant’s surveyor to enter the Disputed Land to do a survey in 2016.

(3)  Further or alternatively, the Judge erred in failing to take into account the fact that the Defendants’ proposal to enter into a tenancy agreement with the Plaintiff in respect of the Disputed Land was refused by the Plaintiff, and the Plaintiff’s evidence that the negotiations for the purchase or swapping of the Dispute Land were pre-action matters to avoid litigation between relatives.

(4)  The Judge erred in law in failing to hold that once the limitation period had expired, the paper owner would lose the right to claim possession of the disputed land even if the trespasser were to subsequently acknowledge the title of the paper owner.

GROUNDS (1) AND (2) - THE “LAND BORROWING” ARRANGEMENT

18.  Grounds (1) and (2), which both concern the alleged “land borrowing” arrangement, can be considered together.

19.  The Judge accepted that the Plaintiff had factual possession of the Disputed Land for a continuous period of more than 20 years since around 1980. He did not make any express finding on whether the Plaintiff had the requisite intention to possess (animus possidendi) the Disputed Land, but held against the Plaintiff because of his finding of the existence of a land borrowing arrangement between the Plaintiff and “whoever the title owner was at the time”.

20.  On the Defendants’ case, the land borrowing arrangement was based on an express oral agreement made in 1994 between the Plaintiff and the 1^st Defendant (acting on behalf of Wing Fuk). Of the 3 factual witnesses (the 1^st Defendant, the 2^nd Defendant and Chun Wah) called on the Defendants’ side to give oral evidence at the trial, the only person who could give direct evidence of the alleged oral agreement was the 1^st Defendant. However, the Judge had “serious doubts” about her evidence on this issue for the reasons given at §§22-26 of the Judgment, and found her evidence regarding the alleged oral agreement to be “not credible”.

21.  So far as the 2^nd Defendant is concerned, he was born in 1983 and would have been around 11 years old in 1994. His knowledge of the alleged land borrowing arrangement was based on what he had been told by his grandfather and/or his parents. The Judge did not place any reliance on the hearsay evidence of the 2^nd Defendant to find the existence of the land borrowing arrangement.

22.  That leaves the evidence of Chun Wah, whom the Judge considered to have no interest in the Disputed Land. Chun Wah’s evidence, accepted by the Judge, was to the effect that it was a common practice in Shui Hau Village between relatives to make land borrowing arrangements orally. However, the mere fact that there was such common practice within the village plainly cannot lead to a conclusion that a land borrowing arrangement in fact existed between the Plaintiff and Wing Fuk/the Defendants.

23.  In reaching his conclusion that a land borrowing arrangement existed in the present case, the Judge also placed reliance on the following matters: (i) the Plaintiff and the Defendants were relatives living in the same village, (ii) the Plaintiff was clearly aware of the boundary of his own land, as shown by the fact that he built his house exactly on the boundary of Lot 372, (iii) the Defendants (and their predecessor-in-title) had been paying the Government rent for the Disputed Land over the years, (iv) problems started when the Plaintiff started a cafeteria business on the Disputed Land in 2008/2009 (or 2010 as claimed by the Plaintiff), (v) the Plaintiff negotiated with Defendants for the purchase or swapping of the Dispute Land in 2012-2013 and April 2016, and (vi) the Plaintiff allowed the 2^nd Defendant’s surveyor to enter the Disputed Land in 2016 to conduct a survey.

24.  None of these matters can begin to show that a land borrowing arrangement in fact existed as between the Plaintiff and Wing Fuk/Defendants, or that the Plaintiff occupied the Disputed Land pursuant to a licence granted by Wing Fuk/Defendants. The fact that the Plaintiff negotiated with Defendants for the purchase or swapping of the Dispute Land was equivocal. It could be because he wished to avoid dispute or litigation with his relatives (as the Plaintiff said), or because he thought or believed that the Defendants were the legal owners of the Disputed Land. The fact that the Plaintiff gave the 2^nd Defendant’s surveyor access to the Disputed Land to conduct a survey in 2016 was readily explicable in view of the fact that the Plaintiff and the Defendants were then negotiating for a possible purchase or swapping of the Disputed Land. In our view, the Plaintiff’s conduct could not shed any light on whether he occupied and used the Disputed Land pursuant to any agreement or arrangement with Wing Fuk/Defendants.

25.  There was also no finding by the Judge about the details of the alleged land borrowing arrangement, eg the persons who actually made the land borrowing arrangement, or the date that the land borrowing arrangement was made.

26.  In our view, the Judge’s finding of the existence of a land borrowing arrangement between the Plaintiff and the owner of the Disputed Land, or that the Plaintiff occupied the Disputed Land pursuant to a licence granted by the owner, cannot be supported on the evidence before him.

THE ISSUE OF ANIMUS POSSIDENDI

27.  As earlier mentioned, the Judge did not make any express finding on the issue of animus possidendi. However, at §59 of the Judgment, the Judge stated the following:

“It is trite that having the property surrounded by a fence (as in this case) is good evidence to show an intention to exclude the world at large, but this only holds true if it can be shown that no tenancy or licensee agreement existed because under those circumstances, the existence of a surrounding fence shows no more than the title owners granting the usual ‘quiet enjoyment’ to the tenant or licensee.”

28.  In view of the Judge’s finding of the existence of a land borrowing arrangement between the Plaintiff and the owner of the Disputed Land, he must implicitly have found against the Plaintiff on the issue of animus possidendi.

29.  The above conclusion that the Judge’s finding of the existence of a land borrowing arrangement between the Plaintiff and the owner of the Disputed Land was erroneous takes away the underlying basis of his implicit finding against the Plaintiff on the issue of animus possidendi. It is thus open to the Court of Appeal to reach a fresh view on this issue on the basis of the existing evidence, and we should do so instead of remitting the matter back to the court below for a fresh determination unless there are insufficient materials before us to enable a proper conclusion to be drawn or there is/are some other good reason(s) why the case should be remitted to the District Court for fresh consideration.

30.  As rightly observed by the Judge at §59 of the Judgment, enclosing land by a fence is good evidence to show an intention to exclude the world at large. The Survey Sheets from 1983 to 2018 consistently show that the Occupied Land was fully enclosed by fences throughout that period. The Plaintiff’s evidence that it was he who erected the fences around the Occupied Land was not disputed, and was accepted by the Judge. It was also not in dispute that the Plaintiff had occupied the Disputed Land and made full use of it since around 1980. As observed by Lord Hope of Craighead in J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419, at §76:

“Where the evidence establishes that the person claiming title under the Limitation Act 1980 has occupied the land and made full use of it in the way in which an owner would, I consider that in the normal case he will not have to adduce additional evidence to establish that he had the intention to possess. It is in cases where the acts in relation to the land of a person claiming title by adverse possession are equivocal and are open to more than one interpretation that those acts will be insufficient to establish the intention to possess. But it is different if the actions of the occupier make it clear that he is using the land in the way in which a full owner would and in such a way that the owner is excluded.”

31.  In our view, the Plaintiff’s acts of enclosing and using the Disputed Land were not equivocal, and clearly pointed to an intention to possess the Disputed Land on his own to the exclusion of the world at large, including the paper title owner, as far as was reasonably necessary. We consider it to be clear that the Plaintiff has established the requisite intention to possess the Disputed Land for himself for a continuous period of not less than 20 years prior to the commencement of the action in 2017. We see no good reason to remit the issue of animus possidendi to the District Court for fresh consideration.

32.  Having reached the above conclusions, it is not necessary for us to consider Grounds (3) and (4) of the Notice of Appeal.

THE RESPONDENTS’ NOTICE

33.  The Defendants have filed a Respondents’ Notice dated 21 September 2021 seeking to affirm the Judgment on various additional and/or alternative grounds. The Respondents’ Notice can be disposed of briefly.

34.  §1 of the Respondents’ Notice contends that the Judge was entitled to take into account the Plaintiff’s actions after the expiration of the limitation period in deciding whether the Plaintiff was able to establish the requisite animus possidendi, and in any event the Judge’s conclusion that the Plaintiff lacked the requisite animus possidendi was reached after considering all relevant matters at all material times and not merely events after the expiration of the limitation period. As mentioned above, for the purpose of disposing of the Plaintiff’s appeal, it has not been necessary for us to deal with Ground (4) of the Notice of Appeal, which raises the issue of whether the Judge was entitled to rely on post-limitation conduct of the Plaintiff in determining the issue of animus possidendi. For the sake of completeness, we would merely state that we consider the Judge to be correct, as a matter of principle, that a squatter’s conduct after the expiration of the relevant limitation period may be relevant to a proper determination of whether the squatter had the requisite intention to possess during the limitation period. We do not, however, consider that the post-limitation conduct of the Plaintiff in the present case can assist the Defendants to show that the Plaintiff lacked the requisite animus possidendi.

35.  §2 of the Respondents’ Notice contends that given the Plaintiff’s own pleaded and factual case was that he and his family members were, at all material times, in joint adverse possession of the Disputed Land to the exclusion of everyone else, the claim for adverse possession made by the Plaintiff himself as the one and only plaintiff falls to be dismissed. While it is the Plaintiff’s case that the Disputed Land was at the material times physically used or occupied by the Plaintiff and his family members, we do not read the Plaintiff’s statement of claim or witness statement to mean that he took possession of the Disputed Land jointly with his family members, or that he was in joint possession of the Disputed Land with his family members. The present action was between the Plaintiff and the Defendants only. The question of whether the Plaintiff and his family members was in joint possession of the Disputed Land was never raised by the Defendants as an issue for determination by the Judge, and it was not necessary for the Judge to deal with this hypothetical issue. The case relied by the Defendants, namely, Leung Chi Cheong v Liu Che Wun [2022] 4 HKLRD 633, is plainly distinguishable because it concerned a claim for possessory title to land by a family member (the second wife) against the estate of the deceased husband (represented by a son from his first marriage), and both the husband and the second wife were in physical occupation of the land during a portion of the relevant limitation period vis-à-vis the paper title owner. For the same reasons, §5 of the Respondents’ Notice has no substance.

36.  §§3, 4 and 6 of the Respondents’ Notice raise various minor factual matters in support of the contention that the Plaintiff has failed to establish the necessary animus possidendi. The Judge placed no reliance on those matters, and they are, in our view, far from sufficient to show that the Plaintiff lacked the requisite animus possidendi.

DISPOSITION

37.  The Plaintiff’s appeal is allowed, and the judgment dated 22 April 2021 is set aside. The following declarations shall be granted:

(1)  the Plaintiff had been in adverse possession of the Disputed Land for a continuous period of over 20 years prior to the commencement of the action on 26 January 2017;

(2)  the Defendants’ title to the Disputed Land has been extinguished under section 17 of the Limitation Ordinance; and

(3)  the Plaintiff has acquired a possessory title of the Disputed Land under the Limitation Ordinance.

38.  Both the Defendants’ counterclaim and the Respondents’ Notice are dismissed.

39.  The Defendants shall pay the Plaintiff his costs of the appeal (including the costs of resisting the Respondents’ Notice) and also the costs of the action below, to be taxed if not agreed.