LIU KAM HOI AND OTHERS v. LIU PING KUEN

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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BETWEEN

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J U D G M E N T

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1.  This is an appeal against the decision of Master Ho made on 29 April 2010 refusing the Defendant’s application to further amend his Amended Defence and Counterclaim made by summons taken out on 21 October 2009.

2.  This action has a rather long history, and the underlying facts have an even longer history.

3.  The action was commenced by the Plaintiffs in April 1998 to recover a portion of Lot No 258 (“the Lot”) in Demarcation District No 52, Fu Tei Au, Sheung Shui, New Territories.  The Plaintiffs are the registered owner of the Lot.  Their claim, as pleaded in the original Statement of Claim dated 28 April 1998, was that Liu Fun Kee, Deceased (“the Deceased”), being the original Defendant named in the Writ, occupied a portion of the Lot as tenant, whose tenancy, granted in or about 1967, came to an end on 31 December 1996 consequent upon a notice to quit dated 22 March 1996.  It is right to observe that in the Statement of Claim, the precise location and area of the portion of the Lot which allegedly was leased to the Deceased was not identified or stated.

4.  In the original Defence and Counterclaim dated 9 July 1998, it was accepted that the Deceased occupied a portion of the Lot as tenant, but it was contended that there was an oral agreement to the effect that the Deceased and his family would be entitled to stay as long as they wished provided that they could pay rent each year.  It would seem that the defence was based on some form of proprietary estoppel, although that was not clearly spelt out on the pleading.  At that stage, it does not appear that there was any issue regarding the location or area of the portion of the Lot which formed the subject matter of the tenancy.

5.  Apparently, the Deceased passed away on 21 October 1998.  At some point in time, his son, Liu Ping Kuen, took over the defence of the action and became substituted as the Defendant in his capacity as the personal representative of the estate of the Deceased.

6.  By a summons dated 14 July 1999, an application was made to amend the Defence and Counterclaim. In the draft Amended Defence and Counterclaim, the location of the Lot which was allegedly leased to the Deceased was identified by reference to a plan annexed to the draft.  It can be seen from the said plan that the leased portion of the Lot, coloured yellow (“the Yellow Portion”), occupied a large part of the Lot, except two smaller parts on the southern side of the Lot which were said to have been leased to two other persons.

7.  At the time when the application was made to amend the Defence and Counterclaim in July 1999, there was also an application made for an interlocutory injunction to restrain the Plaintiffs, their family members and employees and agents from interfering with the Yellow Portion.  At the first hearing of the application for interlocutory injunction, the Plaintiffs offered an undertaking, as recorded in the order of Deputy Judge Muttrie dated 19 July 1999.  Subsequently, the Defendant got leave to amend the Defence and Counterclaim, pursuant to the order of Mr Justice Suffiad dated 12 October 1999.  At the same time, the application for interlocutory injunction was disposed of on the basis of an undertaking given by the Plaintiffs and another undertaking given by the “Defendant” (although I note that in the order of Mr Justice Suffiad the title to the action had not yet been amended).

8.  Some amendments were made to the Statement of Claim and Reply and Defence to Counterclaim in 1999, but those amendments are not material to the present appeal.

9.  Nothing much happened in this action, until June 2006, when there was an order made by Mr Registrar C Chan relating to filing of lists of documents, inspection of documents, and exchange of witness statements.  The witness statements were not in fact filed or exchanged until December 2008.

10.  By a summons dated 21 October 2009, the Defendant applied for leave to further amend the Amended Defence and Counterclaim.  In short, the case now sought to be put forward by the Defendant is that, in respect of the Yellow Portion, only two small parts of it were leased by his father, in or about 1959 and 1970 respectively.  In respect of various other parts of the rest of the Yellow Portion, the Defendant’s case is that they have been adversely possessed by his father and his family members at different times such that the Plaintiffs’ title to those parts have now been extinguished by the operation of the Limitation Ordinance.  It may also be observed that a large part of the Yellow Portion, on the right side of a road dividing the Lot into two halves, is left out of the picture altogether.

11.  In the draft Re-Amended Defence and Counterclaim now before me, there is a proposed counterclaim in respect of what is described as Portion 1B of the Lot.  The Defendant’s case is that his father and his family members commenced adverse possession of Portion 1B in or about 1970, and thus the Plaintiffs’ title in respect of that portion has now been extinguished by virtue of Section 7(2) of the Limitation Ordinance.

12.  In the 4^th Affirmation of the Defendant filed on 3 December 2009, the possibility of starting a new action claiming adverse possession in respect of what are described as Portions 1C and 1D is mentioned.  The Defendant’s case is that adverse possession of Portions 1C and 1D commenced in or about 1985 and 1986 respectively.  Since the proposed new action is not before me, I say no more about the validity of the proposed claims of adverse possession in respect of Portions 1C and 1D.

13.  The Plaintiffs object to the Defendant’s application to amend on, I understand, three main grounds.  Firstly, it is said that the Defendant’s new case is not bona fide, secondly that the Plaintiff will suffer prejudice if the amendments sought are allowed, and thirdly that the proposed amendments have no merits.

14.  On the first ground, the Plaintiffs’ argument is essentially based on the fact that the Defendant’s new case of adverse possession is inconsistent with the previous case advanced in the Amended Defence and Counterclaim, which was repeated in previous affirmations and statement filed by the Defendant and in letters written by his solicitors.  The Defendant’s explanation for the inconsistent case now put forward is contained in his 4^th Affirmation, in particular paragraphs 12 to 22 thereof. In brief, the Defendant says that the previous pleaded case was the result of a mistake.  According to the Defendant, at the time of the preparation of the original Defence and Counterclaim, he had been told by his lawyers and was given to understand that the Plaintiffs were seeking to recover land which had been leased to his father (which was in fact the case), but because there was no identification of the part of the land which the Plaintiffs alleged had been leased to his father he simply told his lawyers that it was indeed the case that some land had been let to his father without identifying the exact land that was so let and without mentioning to his lawyers about the lands adversely possessed by his father and himself.

15.  In relation to the preparation of the Amended Defence and Counterclaim, the Defendant says that he told his counsel that part of the Lot had been let to his father and part of it to others (namely, Chu To Keung and Chu Yun).  He recalled having identified on a plan those parts of the Lot which had been let to the two others, but as far as he could remember he did not identify exactly which part of the Lot had been let to his father.  The Defendant says that as a result, the plan annexed to the Amended Defence and Counterclaim (as well as to the summons for interlocutory injunction) was mistakenly coloured.  Some further explanation of the “mistake” appears in the 5^th Affirmation of the Defendant filed on 17 December 2009.

16.  Mr Ho Kim Hung, a partner of Messrs Rowdget W Young & Co (formerly of Messrs Wong & Poon) was apparently the solicitor handling this case on behalf of the Defendant in relation to the injunction and amendment applications back in July 1999. He is also currently acting for the Defendant in this action.  Mr Ho has made an affirmation on 17 December 2009 confirming the 4^th and 5^th Affirmations of the Defendant so far as their contents concern Messrs Rowdget W Young & Co and him. 

17.  Mr Ng for the Plaintiff has made a number of valid forensic points about the credibility, or incredibility, of this explanation of mistake.  In view of the conclusion that I have reached, it would not be appropriate for me to deal with these points in detail, save to say that I have some considerable doubts on the credibility of the explanation of “mistake” offered by the Defendant.  However, at the end of the day, the question that I have to decide is whether I can conclude, on the basis of the existing materials, that the explanation is not bona fide.

18.  In this regard, Mr Rimsky Yuen SC for the Defendant has made the following points.  First, the Defendant’s explanation is supported, at least to an extent, by Mr Ho, an officer of the court.  Second, it is sometimes difficult to know or draw precise boundaries of lands in the New Territories.  Third, the events relevant to this action were in fact handled by what Mr Yuen describes as the “first generation”, whereas the persons giving instructions to the lawyers and having the conduct of the action are from the “second generation”.  Lastly, Mr Yuen points out that in an affirmation filed on behalf of the 6^th Plaintiff, even the Plaintiffs appear to have made some mistakes regarding the tenants who occupied various parts of the Lot between 1979 and 1993, and the date when part of the Lot was first leased to the Deceased.

19.  I have come to the conclusion that it is not appropriate for the court to undertake, effectively, a mini trial of the issue of whether the explanation of mistake is bona fide based on affirmation evidence alone, and I do not think I can reject the explanation of mistake in a summary manner.

20.  Mr Ng has referred me to various authorities regarding the principles which the court should apply when faced with an application by a party to withdraw an admission, including Ho Wai Yin and Others v Cheng Suet Yee, HCAP 18/2003, A Cheung J (unreported); Cheung Wan Hung v Fai Wong Construction (Asia) Limited, DCPI 136/2009, District Judge S T Poon (unreported); and Hong Kong Civil Procedure 2011, Vol 1, paragraph 20/8/17.  It is clear from those authorities that the question of “bad faith” is an important consideration in the court’s exercise of discretion on whether to permit a party to withdraw an admission.  Mr Yuen does not dispute those principles, but points out that the present case does not relate to a situation where a party, faced with an application for judgment based on an admission, seeks to withdraw the admission.  Be that as it may, as mentioned above, I am not able to conclude that there has been “bad faith” on the part of the Defendant on the basis of the existing materials.

21.  On the second ground, I do not consider that the Plaintiff has made out any real case of prejudice based on delay.  There is no doubt that some delay will be occasioned by the proposed amendments.  However, I am told that no trial dates have been fixed.  Also this action has been ordered to be tried together with another action, HCA 6730/1998, and I do not know the progress of that action to be able to say whether the delay caused by the proposed amendments will have a material impact on the hearing dates of the trial.  Lastly, it is apparent from the history of this action outlined above that the Plaintiffs have not proceeded with it with any degree of urgency.

22.  Mr Ng suggests that the Plaintiffs will also suffer prejudice if the proposed amendments are allowed because they will have to face new allegations or claims.  This, however, is the inevitable consequence of any substantial amendments made to any pleading.

23.  Lastly, Mr Ng submits that the Plaintiffs has suffered prejudice in the sense that had the Defendant’s true case been advanced previously, the Defendant would have no basis to apply for the interlocutory injunction mentioned above and, presumably, the Plaintiffs would not have offered the undertaking.  This would be true so far as Portion 1C and 1D are concerned, and also that part of the Yellow Portion lying on the right side of the road dividing the Lot.  However, I am told that the Plaintiffs have applied to discharge the undertaking that they previously gave.  Whether the Plaintiffs can seek damages against the Defendant based on some cross undertaking in damages is not something that I can decide in this appeal.  In any event, there is no suggestion by the Plaintiffs that their defence of the adverse possession claim by the Defendant will be hampered as a result of the late amendments now sought to be made by the Defendant.  On the other hand, to disallow the amendments will mean that the real disputes between the parties will not be tried by the court.

24.  On the third ground, it seems to me that the Plaintiffs’ complaint, ultimately, is that the new case has no merits if judged by reference to the case as pleaded in Amended Defence and Counterclaim and as advanced in the previous affirmations and witness statement filed by the Defendant.  This would be so, but the Defendant’s case must, it seems to me, be considered in the light of the new pleading, and I do not think the Defendant’s case as now advanced in the Re-Amended Defence and Counterclaim is inherently bad or inconsistent.

25.  In all, notwithstanding some doubts, I am prepared to allow the Defendant to further amend the Defence and Counterclaim as per the draft exhibited as “LPK-11” to the 4^th Affirmation of Liu Ping Kuen. I would therefore allow the appeal against the order of Master Ho. I am not minded, however, to grant the Defendant general leave to amend.  If the Defendant requires any further amendments to the pleading, he will have to make such application as may be necessary, and the merits of the application will have to be considered as and when it is made.