WONG SHUI SANG and Others v. KUNG KWOK WAI DAVID and Another

IN THE COURT OF APPEAL

1996, No. 227
(Civil)

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J U D G M E N T

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Godfrey, J.A. :

1. This is an appeal from an order of Le Pichon, J. made on 15 March 1996 in an action for possession of land in the New Territories giving judgment for the plaintiffs on an application under Order 18 r.19 (based on the ground that the defendants had no reasonable ground of defence) and a consequential order for possession under O.14. The case comes to the Court of Appeal as a sequel to the judgment of the Privy Council in Chung Ping Kwan and Cheung Yuet Han and Lai Moon Hang v. Lam Island Development Company Limited("the Lam Island" case), given on 8 July 1996. The judge in deciding the present case on 15 March 1996 did not have the advantage of the judgment of the Privy Council in that case advising Her Majesty on 8 July 1996 that the appeal from this court in that case ought to be allowed.

2. There are two defendants still living (a third had died in 1994, a fact unknown to the judge). These defendants seek to defend the action on two grounds. First, they say, the plaintiffs' title has been extinguished by the possession of the land by the defendants or their predecessors in title for over 30 years before action brought. Alternatively, they say, their possession of the land ought be protected under the doctrine familiarly described as "proprietary estoppel". (The Lam Islandcase is material on the first ground; and this court gave the defendants leave to appeal out of time accordingly to enable the defendants to raise it.)

3. The judge was constrained to find against the defendants on the first ground by the decision of this court in the Lam Island case which the Privy Council was later to overrule. Can her decision on this ground still be supported? In my judgment it cannot.

4. The one point which Miss Audrey Eu, Q.C. for the plaintiffs, was able to assert in favour of the judge's finding on the first ground, notwithstanding the decision in the Lam Island case, was that in the present case the defendants would be unable to establish a claim by adverse possession against the plaintiffs since there had been granted to them, over the years, a succession of "modifications of tenancy" by the Crown which were inconsistent with their claim to adverse possession of the land as against the plaintiffs. These "modifications of tenancy" were granted by the Crown on the application of the defendants but in the name of the plaintiffs or their predecessors in title. They were signed on behalf of "the registered land owner"; but in fact they were not signed by the registered land owner, but by the defendants or their predecessors in title, without any authority from "the registered land owner". I am unable to see how this court at this stage can enter into any consideration of the question whether the possession of the defendants was or was not adverse to the title of the plaintiffs on these documents alone, about which, as it seems to me, much argument might be advanced.

5. Miss Audrey Eu, Q.C. in support of her submission on the first ground cited to us the case of Kung Wong Sau Hin and others v. Sze To Chun Keung and others, Civil Appeal Nos. 61, 62 & 63 of 1996 (4 July 1996, unreported). But that was a case which turned on facts very different from ours, in that there the possession of the defendants appears to have been referable to a grant mistakenly made by the Crown in favour of the defendants at a time when the land in fact belonged, not to the Crown, but to the plaintiffs in that action; the facts are a million miles away from the facts in this case.

6. For these reasons, I would hold that, based on the decision of the Privy Council in the Lam Island case, the defendants have disclosed a case of adverse possession which they may be able to establish at the trial.

7. I turn from the adverse possession defence to the second ground of defence; the "proprietary estoppel" defence. The plaintiffs' point here was that there was no plea of any active encouragement on the part of the plaintiffs to the acts on the part of the defendants (the building and improvement of substantial structures on the land) which were said to give rise to the plea of proprietary estoppel. As Miss Audrey Eu, Q.C. correctly pointed out, silence does not give rise to an estoppel unless there is a duty to warn. But the case of proprietary estoppel is the classic example of a case where there is a duty to warn. A man who stands by and allows another to build on his land may well be held to be estopped from recovering possession of it. The owner of the land, if he wishes to fend off a plea of proprietary estoppel, is indeed under a duty to warn the other man if he wants to be sure that his behaviour will not be treated as unconscionable. The equity will no doubt not arise unless the owner has encouraged the other man to build on his land. But that encouragement may be active or passive. "The equity will also arise where O merely encourages A's belief passively, as where a mortgagee stood silently by while a purchaser in ignorance of the mortgage built on the land" : see Snell's Equity, 29th edition, p.575. Silent encouragement is as capable of supporting a plea of proprietary estoppel as is active encouragement.

8. Of course it remains to be considered whether on the facts of this particular case facts sufficient to support a proprietary estoppel have been pleaded.

9. The defendants claim that they or their predecessors in title have made many improvements to the land (including a family house constructed on it). The improvements include the erection of various structures in or about March 1974, and were made, say the defendants, "either with the knowledge or consent or without objection from the plaintiffs or their predecessors-in-title." In fact, the defendants accept that they cannot prove any express consent. But the plea that the work was done with the knowledge of and without objection from the plaintiffs or their predecessors in title is maintained.

10. It is true (as the judge thought) that the case is very thinly set out, but I would not myself strike out the plea of proprietary estoppel in the defendants' defences, since it does assert the essential elements which are required to establish such a plea. If the improvements relied on were indeed made with the knowledge of and without objection from the plaintiffs, then the defendants' case may well succeed. At this stage, this court is required simply to determine whether, as the judge thought, the plea could not possibly be established. I do not find myself able to come to that conclusion.

11. For these reasons, I would allow this appeal. I would not strike out any part of the defences; and I would allow the action accordingly to go to trial.

12. There remains one other matter to deal with. The plaintiffs say the defendants set out deliberately to mislead this court because they failed to disclose, until very recently, the death of the 3rd defendant in 1994. The fact of this defendant's death can be and will be got over by an order appointing another person to represent his estate for the purposes of these proceedings under Order 15 r.15; but the criticism of the other defendants remains. Why did they not disclose the death of this defendant to the plaintiffs and to the court, long before Le Pichon, J. came to give judgment in the action? The reason, the defendants say, is that they and their legal advisers misunderstood the legal position. They thought that a power of attorney given by this defendant, under which they were acting was what is nowadays called an enduring power of attorney, that is to say, one which would continue to have effect after the death of the donor of the power. It is only recently that they were alerted to the fact that was not so.

13. In those circumstances, say the defendants, they were innocent of any conscious or deliberate wrongdoing; and their appeal ought not to be dismissed on the ground that they have attempted to mislead the court as suggested by the plaintiffs.

14. I am satisfied, on the material before us, that there is no reason to dispute the defendants' version of what happened. It is certainly most unfortunate (and might have all sorts of consequences as to costs) that the death of the 3rd defendant was not revealed to the plaintiffs, and to the court, at a much earlier stage. But to strike out this appeal when I am satisfied as I am that the defendants have not been guilty of any conscious or deliberate wrongdoing would in my opinion be wholly wrong.

15. The result, if my brethren agree with me, is that this appeal will be allowed and the action will proceed to trial accordingly. There is nothing further I would wish to add.

Liu, J.A.:

16. It was envisaged by the judge that there might be an arguable defence of adverse possession after the determination of what was described as the "Lam Island" appeal. For the 2nd defendant, the estate of the 3rd defendant and the 4th defendant, a claim of possessory title was advanced on the same facts and identical basis. The "Lam Island" appeal reversed the decision of this court, differently constituted, on which the judge relied. It is therefore encumbent upon us to confirm the judge's view taken on the defence of adverse possession.

17. For the reasons given by my Lord Godfrey, an arguable case has also been shown on proprietary or equitable estoppel. This is not a case which involved banking transactions. The plaintiffs/respondents are owners of large parcels of land, on which substantial structures had been erected and maintained. Owners in that position would be expected to be vigilant. These structures could well be said, on the facts alleged and on the pleadings, to have been so encouraged by the owners as would feed the plea of proprietary estoppel.

18. The erroneous statements, deliberate or otherwise, presented to the court at different stages are not, on the balance, sufficient to deflect us from making the proposed orders in this appeal. Virtually affirming the judge's view, I, too, would allow the appeal.

Nazareth, V.-P.:

19. I agree with my Lords.

20. I would only add with respect to the judgment of this Court in Civil Appeal Nos. 61, 62 and 63 of 1996, upon which Miss Eu has sought to rely and which judgment I gave, that I do not think it assists the respondents. Not only has there been the dramatic change in the law referred to by my Lords, but the facts seem to me to be materially different.

21. The appeal is accordingly allowed.