TSANG FOO KEUNG AND ANOTHER v. CHU JIM MI JIMMY AND OTHERS

HCA 7140/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 7140 OF 1995

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DECISION

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The application

1. The plaintiffs apply for leave to file and serve the Re-Amended Reply to the Amended Defence of the 2^nd defendant and the 3^rd defendant, raising the issue of illegality by reason of the 2^nd and 3^rd defendants’ breaches of the relevant provisions in the hawking licence under the Hawker (Urban Council) By-laws (Cap.132AI) (now renamed as the Hawker Regulations).

2. The 1^st defendant has raised no objection to the plaintiffs’ application and is absent today.  The 2^nd and 3^rd defendants oppose this application.

3. Mr. J. Lee, counsel acts for the plaintiffs and Mr. A. Yau, counsel acts for the 2^nd and 3^rd defendants, (collectively called “the defendants”).

The factual background

4. It is common ground that this is a case of recovery of possession from the defendants of the stairway, which is consisted of two flights of steps and one intermediate landing, of which the plaintiffs are the registered owners.  The 1^st defendant is being sued as the personal representative of the estate of Yu Lai Ying, deceased and the personal representative of the estate of Chu Kwok Chung, deceased, the successive possessors of the upper pitch on the steps (on the landing).  The 2^nd defendant (mother) and the 3^rd defendant (daughter) are occupying the lower pitch on the steps (on the lower flight).[1]  The defendants have advanced the defence of adverse possession of the steps in question, relying upon section 7(2) of the Limitation Ordinance, Cap. 347.[2]

Grounds of objection

5. The defendants have raised the following grounds of opposition:

a. The illegality issue was not raised in the main text of the proposed Re-Amended Reply, but in the schedule to it, which serves the function as a Reply[3];

b. The plaintiffs have not set out the effect of the alleged breaches of the relevant provisions in the Hawker (Urban Council) By-laws (Cap 132AI) (now renamed as the Hawker Regulations) may have on the defendants’ claim for adverse possession of the disputed lands[4];

c. Delay in the application and it has caused the defendants irreparable prejudice which cannot be compensated by costs[5]; and

d. If the application is allowed, a fair trial will not be possible, an assumption by Mr. Justice G. Lam in the striking-out application.[6]

e. Today, I have had Mr. Yau’s assistance to clarify his grounds of objection. He further says that he will not oppose the proposed re-amendments which arose out of the defendants’ amendments to the Amended Defence or the witness statements of the defence.  However, he will oppose to paragraph 7 and paragraph 8 of the proposed Re-Amended Reply[7], in which the plaintiffs allege that the defendants had sublet the fixed pitch or part thereof to Lo Ming, Tsui Ling Mui, Lau Bo Chunand/or Lee Kin Ming for hawking, in contravention of the hawking licence.

f. Mr. Yau also says that if the proposed amendments were allowed, the defendants would be prejudiced because of the 2^nd defendant’s advanced age and there would not be witnesses for the defendants’ defence.

Applicable legal principles

6. The legal principles relevant to this application are as follows:

a. The guiding principle for an application under O.20 r.8 is that the amendments ought to be allowed for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings.  It can be made at any stage of the proceedings, subject to O.20 r.8(1A), which requires that the order is necessary either for disposing fairly of the cause or matter or for saving costs.  See §20/8/6 of Hong Kong Civil Procedure 2013, Vol.1.

b. It has been held by the Court of Appeal in Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455, at §§45, 48, 50, that an amendment will survive objection provided it cannot be demonstrated that it is bound to fail.  In effect, an opposition to the application for amendment is a mirror image of an application to strike out a pleading on the basis that it discloses no cause of action pursuant to RHC, O.18 r.19: see also Global Bridge Assets Ltd & ors v Sun Hung Kai Securities Ltd [2011] 4 HKC 9, §§37, 53, 59. Therefore, unless it is a clear case that the proposed amendments will not succeed at trial, I should give leave to the plaintiffs to re-amend, leaving this issue to the trial for determination.

c. The court will look at the merit of the amendment and more importantly, whether there is any real prejudice to the other party, bearing in mind that the court is to adjudicate on the real issues and disputes between the parties, technical and procedural rules are of lesser importance. VSC Building Products Company Limited v. Kono Insurance Limited HCA947/2005, 9 September 2009, (unreported) by Mr. Justice A. Cheung(as he then was) at §§ 19 & 22;

d. If the proposed amendments are bound to fail, no leave should be given to the plaintiffs to amend.  In deciding the matter, the Court should take the plaintiffs’ pleaded case at its highest. See §3 of Bank of China (Hong Kong) Limited v Leigh Hardwick HCA1110/2006 (unrep. A. Chan J) 28 August 2013.

e. It is trite law that the pleadings must identify all the issues in dispute.  Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co Ltd [1994] 2 HKC 264 at pp.269-270 and Wing Hang Bank Limited v Crystal Jet International Limited & Others CACV255/2002 [2005] 2 HKLRD 795 at §§6-8; §30 of Sinoearn International Limited v Hyundai-CCECC Joint Venture (a firm) FACV22/2012 delivered on 30 September 2013 by Ribeiro PJ and Kwok Chin Wing v 21 Holdings Limited (formerly known as Gft Holdings Limited, Capital Prosper Limited and Rockapetta Holdings Limited) & Another FACV 9/2012 delivered on 30 September 2013 by the CJ at §§21-23.  It follows that any proposed amendment, which is not relevant to the issues in dispute, should not be allowed;

Discussion

7. The ground of objection under paragraph 5(a) does not require detailed discussion because a Reply can have a schedule, which will form part of the Reply itself.  This ground fails.

8. The ground under paragraph 5(b) is central for the discussion.  I have, for this purpose, requested counsel of respective parties to make written submissions to me on why the issue of illegality under the Hawker Regulations is relevant to the defendants’ right of adverse possession under section 7 of the Limitation Ordinance, Cap. 347.  I shall discuss this issue separately below.

9. For paragraph 5(c), Mr. Yau has not, in his written submissions, disclosed the reasons why the delay cannot be compensated by costs.  I shall simply say that this ground will not assist the defendants as demonstrated in VSC Building Products Company Ltd .

10. In respect of paragraph 5(d), Mr. Yau has clarified that the learned Judge in his judgment said that the plaintiffs had not pleaded the issue of illegality in the pleadings and if they did so, the defendants would have the opportunity of opposing the application.  The learned judge therefore held that, for consideration of the application of striking out before him, that factor alone would not cause prejudice to the defendants.  Mr. Yau submits that if the plaintiffs’ application is allowed, then this point could not be taken back to the learned judge and the defendants would be prejudiced.  I would simply say that it should be for Mr. Yau to make his submissions to the learned judge at the striking out application for his decision as to whether he should take that issue into consideration or simply determine whether leave should be given to the plaintiffs to re-amend the reply.  Now the plaintiffs have taken out the application to amend the pleadings to plead illegality and the defendants are opposing it.  They are having their fair chance of arguing their case today.

11. As to paragraph 5(e), Mr. Lee explains that the proposed Re-Amended Reply is in response to the defendants’ assertion of adverse possession and the plaintiffs will say that the time during which the defendants were in possession of the property, they were also hawking in breach of the hawking licence and this period should not count.  The knowledge that they were in breach of the hawking licence only came to light last year when the defendants sent to the plaintiffs a copy of the fixed-pitch hawking licence, with the conditions of it overleaf.  The plaintiffs took up this point and added paragraphs 7 and 8 in the proposed Re-Amended Reply.  This issue will be raised at the trial in any event as the 1^st defendant has raised no objection to the plaintiffs’ re-amendment to the Amended Reply.

12. As to paragraph 5(f), Mr. Lee submits that the key witnesses are available to tell the facts of the case.  The main evidence came from the defendants.  This issue had already been canvassed in the striking out application by the defendants.

13. I shall now return to the legal issue under paragraph 5(b).

14. Before the hearing today, I had requested assistance from counsel of respective parties to address me on the legal issue as to why the proposed amendments of illegal hawking by the defendants during the period of their possession of the property in question are relevant to the defendants’ statutory rights under the Limitation Ordinance. Following this request, I had also specifically referred counsel of respective parties to consider the following authorities, without restricting their reference to other authorities as well:

a.  Chung Man Yau v Sihon Co Ltd C.A. [1997] HKLRD 1221 at 1227 – 1230;

b.  Wan Hok Taoist Association v The Incorporated Owners of No. 88-90 Pan Hoi Street & Anr. HCA2384/2008 (16.12.11) by Deputy Judge Carlson;

c. Wong Kwok Learn Baldwin & Another v International Trading Company Limited [2010] 2 HKLRD 334, §§9 and 11-14; &

d.  Ryder Industries Ltd (formerly Saitek Ltd) v Timely Electronics Co Ltd HCA2358/2007 & HCA109/2009, Recorder A. Houghton SC 11 July 2013 §73.

15. I am grateful for counsel’s discussions on those cases.  I shall now summarize the main issues of our discussions here.

16. In Chung Man Yau, the Court of Appeal, having considered the authorities on whether the court should award future loss of damage to the plaintiff, who was conducting illegal hawking, decided that the court should take all circumstances into consideration, including the causation of the injury and the illegal activity and the criminality of the conduct.  The Court of Appeal finally held that it would not affront the public conscience or offend the ordinary right-thinking citizen if compensation for the loss concerned was awarded.

17. The Wan Hok Taoist Association case concerned the illegal structure on a rooftop, which the learned Deputy Judge held to be illegal means of possession, should not prevent the period of adverse possession from running.  This case has been considered by G. Lam J. in the striking out proceedings.  As seen below, the learned judge did not attach much weight to this authority.

18. In Wong Kwok Learn Baldwin & Another, the Court of Appeal held that if the claimant only had to found his right on the illegal contract, but did not have to rely upon the illegal contract, he was entitled to claim his right under the illegal contract.  The right in question was the plaintiff’s right of ownership of the shares of his company by way of a resulting trust, which was not dependent upon the illegal contract.

19. In Ryder Industries Ltd (formerly Saitek Ltd), the learned Recorder found illegal performance of the contract in the course of years between the plaintiff and the defendant, such illegal performance being of administrative nature, he applied the proportionality test and exercised his discretion not to set aside the contract.  Such approach seems to be consistent with the approach adopted by the Court of Appeal in Chung Man Yau.

20. However, I have also considered that this issue was considered by G. Lam J. in the striking out application and the learned judge had this to say at paragraph 119 of his judgment:

“Assuming it is open on the pleadings to the plaintiffs to run it, it seems to me that there is an arguable point here. The law is not entirely clear. Mr Wong relies on R (Smith) v Land Registry [2009] EWHC 328 (Admin) but that case concerns a public highway and the illegality in question stemmed from the fact that it was a criminal offence under s 137 of the (UK) Highways Act 1980 for any person without lawful authority wilfully to obstruct a highway. In other words, the criminality is in the breach of a statute the very object of which is to prevent occupation of the land to which the squatter asserts possessory title. Further, although in that case the judge held that such illegality precluded adverse possession, the Court of Appeal did not hear argument on that point and expressed no view on it: see [2011] QB 413, paras 17 and 45. Mr Wong also relies on Wan Hok Taoist Association v The Incorporated Owners of Nos. 88-90 Pan Hoi Street, HCA 2384/2008, 16 December 2011, but that is no more than a brief decision on an undefended claim.”

Conclusion

21. In accordance with Natamon Protpakorn, I have to allow the proposed re-amendments for the determination by the trial judge.  As to paragraphs 7 and 8 of the proposed Re-amended Reply, I accept Mr. Lee’s explanation that this issue relates to the defendants’ defence of adverse possession.  This point forms part of the plaintiffs’ argument on whether breach of the hawking licence will render the time under section 7 of the Limitation Ordinance stop running, which has to be considered by the trial judge at trial.  As Mr. Yau does not dispute that copy of the fixed pitch licence was given to the plaintiffs last year, the defendants’ complaint against the late application does not carry any weight. For these reasons, I allow the proposed Re-amended Reply as a whole.

22. Leave is therefore granted to the plaintiffs to re-amend the Amended Reply as per the draft.

23. On the question of costs, as agreed by the plaintiffs, the costs of and occasioned by the application for re-amendment of the Amended Reply be to the defendants in any event.  Mr. Yau argues that today’s costs should be no order as to costs as the defendants have good reason to argue.  However, this is not a valid reason for the principle that the costs should follow the event and the costs of today’s hearing (with counsel’s certificate) be to the plaintiffs, to be assessed, on a broad-brush approach, under Order 62 rule 9A at $100,000 to be paid by the defendants to the plaintiffs within 14 days from the date hereof.