CHAN MEI LIN AND OTHERS v. LEE HONG

HCA 2861/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2861 OF 2001

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(BY ORIGINAL ACTION)

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(BY COUNTERCLAIM)

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DECISION

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Introduction

1.  Lee Hong (“Hong”), the defendant, now applies to amend his Defence and Counterclaim filed more than 12 years ago in two main respects by his summons dated 26 March 2014 (“the Summons”). The first group of proposed amendments effectively aims to withdraw an admission and the second group aims to add new complaints for the purpose of his counterclaim. The plaintiffs oppose this application.

2.  All the parties are related. The 1^st plaintiff is the natural mother (“Madam Chan”) of the 2^nd plaintiff (“Hok”) and 5^th plaintiff (“Tsun”) and Hong. Their father Mr Lee (“the late Father”) passed away in 1992. Madam Chan and the late Father (collectively “the Parents”) were the natural parents of one Lee Kin (“Kin”) too and indeed they had other children in the wedlock. As to the 3^rd plaintiff (“Hung”) and the 4^th plaintiff (“Chuen”), they are respectively the daughter and the son of the late Father’s brother. There is a debate as to whether they were adopted by the Parents. For ease of reference, all the parties except Madam Chan are in this Decision referred to as the Children.  

3.  The principal disputes in these proceedings concern the ownership and the use of three pieces of agricultural land known as Lot Nos. 560 RP, 561 RP (collectively “the Lots”) and No. 814 (“the Land”) all in DD 107,  New Territories. Other adjacent pieces of agricultural land in the same DD 107 are involved and they are known as Lot Nos. 808, 809, 812, 813 and 814 (“Other Lots”).

4.  Each of the pleadings filed by both parties discloses a convoluted story. For the purpose of setting the backdrop for Hong’s application, the following summary of the parties’ contentions would suffice.  

The Disputes

5.  The pleaded case of the plaintiffs is that the Parents first started their trespass of the Lots in 1954 and operated a farm business thereon together with other pieces of land. Since the birth of Hong in 1956, he had been brought up in the Lots as well. Madam Chan claims that the Parents acquired a possessory title to the Lots in 1974 or alternatively 1982 as a result of their adverse possession. On the other hand, the late Father acquired the Land and the Other Lots by a formal conveyance document dated 3 February 1962. On 3 February 1964, the late Father assigned the Land and the Other Lots to his late mother (“the late Grandmother”) to hold the same on trust for him.

4.   Hence, by February 1982, the Parents had acquired a joint possessory title of the Lots and the late Father had the sole beneficial ownership of the Land and the Other Lots. Underpinning the plaintiffs’ claim is a written agreement which was allegedly made among the family during a meeting held in 1982 (“the 1982 Agreement”). All the parties to these proceedings took part in the meeting.

6.  The 1982 Agreement is in writing. The pleaded express terms, in consideration of the Parents’ agreeing to procure the Land and the Other Lots to be assigned as a gift to the Children separately, included:

(a) That no part of the Land and the Other Lots or any of them may be let, sold or mortgage without first obtaining the unanimous consent of all the Children;

(b) That in the event of sale or realization of the Land and the Other Lots or any part thereof, the proceeds of sale shall be divided equally amongst the Children and Kin irrespective of the possible inequality of the areas of the individual lots to be assigned by the late Grandmother.

(c) That the following class of persons would be entitled to use and occupy the Land and the Other Lots and/or any building erected thereon as their residence for their lifetime:

(i) the sons and the grandsons of the late Grandmother and

(ii) the wives of the sons and grandsons of the late Grandmother.

7.  Pursuant to the 1982 Agreement, on 29 March 1988, upon attaining her majority, Hung was assigned Lot No.809. In addition, Hong was assigned Lot No. 811 and Hok was assigned the Land. In 1992, Hong was further assigned Lot 815 by Kin.

8.  On the other hand, the Parents gave their consent to Tsun’s occupation of the Lots as his residence in or about 1984.  Tsun built a house on the Lots and his house also straddled on Lot No. 815. Pursuant to the 1982 Agreement, Tsun is entitled to occupy Lot No. 815 for his lifetime in that his residence was built thereon partially.

9.  It was subsequently found by the Children in 1997 that the Lots did not form any part of the Land and the Other Lots. They were then registered in the name of some persons surnamed Liu (“the Lius”) and one Mr Lau. There came an agreement between Tsun and Hong in a meeting in 1997 (“the 1997 Agreement”) that Hong was to commence a legal action to claim possessory title of the Lots on behalf of Madam Chan against the Lius and Mr Lau. It was further agreed that as per the 1982 Agreement, the possessory title so acquired by Madam Chan in the wake of the intended lawsuit would also be assigned to the Children.

10.  The core complaint of the plaintiffs is that in breach of the 1997 Agreement, Hong entered into a settlement agreement with Allex Development Limited (“Allex”), which was assigned Lot Nos. 560 and 561 including the Lots by the Lius and Mr Lau. Under the settlement agreement, Allex agreed to cause the Lots to be severed from Lot Nos. 560 and 561 and thereafter assign the Lots to Hong in consideration of HK$1.00. Hong hence became the registered owner of the Lots by virtue of an assignment dated 27 January 2000.

11.  Allegedly in breach of the 1982 and 1997 Agreements and hence his fiduciary duties as the agent and/or trustee of Madam Chan, Hong now asserts full beneficial ownership of the Lots by reason of his own adverse possession of the same since his birth. He further attempted to expel Tsun from the brick house erected on the Lots by unlawful means.   

12.  On the other hand, Hong by unlawful means interfered with Hok’s reconstruction/renovation of a house erected on the Land in June 2001 purportedly in breach of the 1982 Agreement.

13.  The central contention of Hong is that Madam Chan did not adversely possesse the Lots sufficiently to acquire a possessory title (whilst he did) and in any event her interests in the Lots, if any, were extinguished when she emigrated to the United States in 1982.

14.  Hong further denies the existence of the 1982 and 1997 Agreements. As said, Hong has a long story to tell in his Defence and Counterclaim. I would merely highlight those parts relevant to his proposed amendments.

15.  Hong maintains that some time in 1998, he asked Hung to assign Lot No. 809 to him for his business as Hung would shortly afterwards emigrate to Australia.  Hung agreed but Chuen and Tsun disagreed. It is originally pleaded “Madam Chan then wrote a letter dated 22 September 1998 (“the Letter”) from the United States addressed to her children asking them to treat Lot No.809 as jointly owned by them but to be managed by Hong for his business”[1] (“the Averment”).

16.  In his counterclaim against Chuen and Tsun, Hong’s pleaded case is that sometime in 1986, Hong and Tsun agreed that he would cause to be reconstructed a holiday house (“the House”) on some part of the Lots then adversely possessed by him. It was agreed that Tsun would defray the reconstruction costs in exchange of a licence (“the Licence”) to stay at the House during weekends and holidays (“the Licence Agreement”). Hong alleges that Tsun at the end only made partial payment in the sum of HK$33,000.  Pursuant to the Licence Agreement, nevertheless, Tsun has been allowed to stay at the House during weekends.

17.  Hong alleges that despite the Licence Agreement, Tsun in the latter part of 1999 tried to reconstruct the House with the assistance of Chuen despite his oral protest and the written objection raised in his then solicitors’ letter dated 18 December 2000.  They continued the reconstruction works in the Lots and hence committed the tort of trespass. Hong seeks an injunction against both Chuen and Tsun to enjoin them from entering the Lots save that Tsun could do so on the basis of the Licence Agreement and further claims damages for their trespass. 

Proposed Amendments

18.  There are a number of proposed amendments in the draft Amended Defence and Counterclaim settled by Hong’s new legal team comprising a senior counsel and her junior counsel. Some of them are cosmetic in nature. Apart from those proposed amendments against which the plaintiffs expressly argue, I take that all other proposed amendments could be agreed upon and the defence should be given leave to amend the same as per the draft annexed to the Summons. I shall focus on the two controversial areas.

19.  The first one relates to the Letter and the second one relates to Hong’s counterclaim in trespass and breach of the Licence Agreement against Chuen and Tsun. I shall deal with them in turn.

The Letter

20.  The defence now seeks to delete the Averment in which a reference to the Letter was made by Hong. Mr Liu, Hong’s counsel, accepts that by the proposed deletion of the Averment, Hong seeks to retract the implied admission of the authenticity of the Letter. The Letter seemingly lends support to the plaintiffs’ allegation of the 1982 Agreement, as to both its existence and its enforceability. The defence now asserts that it is merely a forged document.

21.  It is necessary to find out how the Letter came to light. The Letter was first disclosed to the defence as an exhibit to a supporting affirmation filed on 23 June 2001 for the purpose of the plaintiffs’ ex-parte application for interlocutory injunctions. Hong referred to the Letter in his Defence and Counetrclaim dated 23 January 2002.

22.  The defence did not take any issue with the authenticity of the Letter until 10 March 2014 when a notice of non-admission of authenticity of documents was filed. Hong in his affirmation explained that he had not been given the original copy of the Letter until the plaintiffs filed their 3^rd Supplemental List of Documents dated 6 March 2014 to disclose the same, two days after his present solicitors made a request for its disclosure by way of their letter dated 4 March 2014.

Applicable principles relating to withdrawal of an admission

23.  Both Mr Chong (together with Ms Wong), for the plaintiffs and Mr Liu helpfully refer tome the general principles governing applications for withdrawal of admissions in the pleadings. They are not in dispute and I shall start with the following dictum of Millet LJ (as he then was) in Gale v Superdrug Stores PLC. [1996] 1 WLR 1089 at pp.1099H-1100A:

“In my judgment leave should normally be granted if the application is made in good faith, raises a triable issue with a reasonable prospect of success, and will not prejudice the plaintiff in a manner which cannot be adequately compensation.”

24.  Millet LJ continued to say this:

“It is not normally necessary for a party to justify his decision to amend his pleadings or withdraw an admission. It is enough that he wishes to do so.”

25.  Thus, it can be seen that the mere lack of satisfactory explanation for the withdrawal is not fatal. The following dictum of Waite L.J. at p.1097G in the same case is also noteworthy:

“A party withdrawing an admission is to be regarded in a more favourable light. Excuse (or lack of it) is not entitled, in my judgment, to any particular emphasis: it is just part of the overall picture and will carry no more weight than the particular circumstances require.”

25.   The Court of Appeal in Re Chung Wong Kit (a bankrupt) [1999] 1 HKLRD 410applied Gale. Rogers JA (as he then was) had this to say at pp.413J-424A:

“(it was) argued that the respondents should not have been allowed to rely upon his affirmation as it constituted a withdrawal of an admission which was being made without proper explanation. This however is not a rule of law in itself but just an example of the proposition that a party should not be permitted to resile from an admission unless it was just to allow it to do so having regard to the interests of both sides.”

26.  With these principles in mind, I turn to Hong’s application to delete the Averment.

27.  I approach this issue by first assessing the merit of the intended challenge to the authenticity of the Letter. I agree with Mr Chong that the the defence fails to show that the authenticity issue is a triable one with a reasonable prospect of success for the following reasons:

(1) The Letter was hand-written and consisted of 3 pages. There were more than two hundred characters with the signature of Madam Chan appended to the end. Alarmingly, there is no direct evidence from Madam Chan to the unequivocal effect that the handwriting did not belong to her and that the signature is a forgery. This lack of such evidence is even more inexplicable given the alleged good relationship between Hong and Madam Chan at present.

(2) Nor is this serious allegation supported by any handwriting expert evidence.  The forger must have undertaken a very high risk to imitate Madam Chan’s handwriting and produced so many characters. Such a forgery should not easily survive an expert’s scrutiny.

(3) None of the alleged suspicions about the Letter raised by Hong in his affirmation[2] (§8) causes me any concern at all. They are very petty and of little cogency. Moreover, there is no reason why there is no evidence to the effect that Madam Chan has the same suspicions and hence has concluded that the Letter is a forgery.

(4) Another supporting affirmation of this application made by Hong’s son, namely, Leo Lee does not assist Hong at all. The tape-recorded conversation between him and Madam Chan on 27 August 2013 at her home in the United States does not begin to show that the Letter is not genuine.  The 199-page transcript of the conversation produced by him is not a complete waste as I find the following exchanges of relevance:

“436. 男	咁跟住呢，當時你喺美國，你不時就同其他子女商討，避免家庭紛爭，喺98年嘅9月22號，你就出咗一封公開信，就指示佢點樣處理。其實你係有冇寫過一封信？話你要咁樣處理個事？
437. 女2	我係寫過封信返去畀佢哋呀，我［聽不懂］，我嗰陣……
438. 男	嗯。98年？
439. 女2	唔記得幾多年，唔知道幾多年。
440. 男	嗯，嗯嗯。
441. 女2	我係寫過封信返去。
442. 男	咁但係個信呢？
443. 女2	叫他們幾姐妹要和好，要慢慢……”
444. 男	嘩。我都好攰呀，哈…… 你都好攰嘛？阿嫲。 ”

This, if anything, tends to show that Madam Chan did send the Letter and she was even able to recall its main theme as stated in the opening remarks in the Letter. It should be noted that Leo Lee made the visit after Hong raised his doubt about the authenticity of the Letter. He visited Madam Chan and should be fully prepared to find out whether Madam Chan had indeed sent the Letter. When Madam Chan indicated her recollection about the Letter, I cannot understand why Leo Lee did not show a copy of the Letter to her and thoroughly investigate with her the authenticity issue. Instead, he abruptly moved to another topic by saying he was very tired. This seems to me a deliberate attempt to avoid her confirmation of her dispatch of the Letter. It is beyond me how Hong can rely on this conversation to raise the issue of authenticity when it actually shows the contrary.

(5) Further, Madam Chan in her 1^st witness statement expressly stated that she wrote the Letter on 22 September 1998. Madam Chan made a supplemental witness statement dated 21 February 2014 when she returned to Hong Kong. There, she expressed her understandable disappointment about the secretive tape-recording made by Leo Lee. She further confirmed the truth in her 1^st witness statement after reading the same by herself and her counsel explaining its contents to her. Mr Chong told this court he was the counsel referred to by Madam Chan and he submitted that his integrity should not be called into question. Mr Liu agreed. Though I understand that Madam Chan is yet to be cross-examined on the contents of her witness statements, the very fact that she agreed to make these averments shows that the allegation of forgery is groundless.

28.  In the premises, in view of the complete lack of evidence to support the grave allegation of forgery, I am also convinced that this application is not made in good faith. This is particularly so when Hong should have raised the authenticity issue as soon as the Letter was disclosed in 2002. The Letter was seriously against his interest and, as rightly pointed out by Mr Chong, curiously enough it was Hong who first mentioned the Letter in his pleading settled by his former counsel. There is no reason why the defence would first refer to the Letter when there was a bona fide authenticity issue, particularly given its contents detrimental to his own case.

29.  I cannot accept that the defence can raise the authenticity issue only after receiving the original copy of the Letter. The contents of the Letter, which allegedly caused Hong to doubt the authenticity of the Letter, were already available to Hong more than 12 years ago. The original copy would not add anything to his purported suspicions.  Under these circumstances, the delay in raising the authenticity issue cries out for a valid explanation. In the result, I am fortified in my conclusion that this application is not made in good faith.

30.  Lastly, for completeness, I make it clear that I am convinced that in the circumstances of the application, in view of the undue lengthy delay in making such a serious allegation possibly calling for additional expert evidence, the plaintiffs would be unjustly prejudiced if the defence is now allowed to take the authenticity point.

31.  For the reasons given above, I reject Hong’s application to withdraw his admission of the authenticity of the Letter by deleting the Averment.

Proposed Trespass and Breach of Licence Agreement Amendments

32.  The general principles relating to applications for amendments of pleadings are well-settled and I see no need to set them out here. Suffice it for me to remind myself that it is a guiding principle of cardinal importance that generally speaking all amendments ought to be made for the purpose of determining the real question in controversy between the parties to any proceedings: Hong Kong Civil Procedure 2015 Vol.1 §20/8/6.

33.  The opposition of the plaintiffs to the proposed amendments is mainly based on the Limitation Ordinance, Cap.347 (“the LO”). The dispute is whether by the proposed amendments the defence introduces a new claim. Mr Chong argues that the new claim introduced is time-barred and should not be allowed under section 35 of the LO.

34.  Mr Liu first argues that the proposed amendments are principally concerned with the post-2001 unlawful occupation of the House erected on the Lots by Tsun and they merely serve as additional particulars of the continuing trespass of Chuen and Tsun under complaint in the existing pleading. I cannot agree.

35.  Whilst it is true that in the Defence and Counterclaim, it is already pleaded that Chuen and Tsun committed the tort of trespass and they will continue to trespass the Lots unless restrained, the trespass under complaint in the proposed amendments is altogether a different animal and cannot be said to be mere particulars of the trespass in the existing pleading.

36.  In the existing pleading, as expressly pleaded in paragraph 18(h) thereof, the trespass under complaint is that Tsun’s unauthorized construction works carried out on the House with the assistance of Chuen despite the objection of Hong as its registered owner. The construction works were outside the ambit of the Licence Agreement and hence constituted trespass.

37.  There is no express plea that the Licence Agreement was termination by repudiation or that the Licence was revoked. I note that Hong prays for an injunction to restrain Chuen and Tsun from entering the Lot No. 561RP without his prior consent save that Tsun is allowed to do so pursuant to the Licence Agreement. It means that Hong does not seek to recover the Lots from Tsun in his existing pleading.

38.  The proposed amendments contain the following allegations of trespass by Tsun (and not Chuen):

(1) Tsun and his family have since about mid 2001 been occupying the House as his residence to the exclusion of Hong (“New Complaint 1”);

(2) The addition of 1 storey to the House was completed in about 2003 to 2004 despite Hong’s repeated protests (“New Complaint 2”);

(3) Since about September to October 2011, Tsun has fenced off an area of about 6,000 square feet of Lot No.561 RP thereby further excluding Hong from access to such land (“New Complaint 3”).

39.  It is further pleaded that the foregoing complained acts constitute continuing trespass to Lot No. 561 RP by Tsun and/or Chuen as well as breaches of the Licence Agreement by Tsun. It is contended that by the service of the Amended Defence and Counterclaim, the Licence Agreement is revoked. On that basis, Hong seeks a complete injunction against Tsun to enjoin him from entering the Lots and also damages for breaches of the Licence Agreement.

40.  I would agree that New Complaint 2 is merely a piece of update information of the original complaint about the unauthorized construction works carried out at the House by Tsun and/or Chuen. It should be allowed to be included in the pleading by way of amendment.

41.  However, New Complaints 1 and 3 suggest a very different kind of trespass and they are based on very different facts. Their legal ramifications can be very different. In case of adverse possession, the legal title to the Lots shall be extinguished altogether after the expiration of the limitation period: section 17 of the LO.

42.  In the circumstances, I cannot accept that the new complaints save New Complaint 2 are merely instances of continuous trespass under complaint in the existing pleading. In my judgment, they amount to a new claim within the meaning of section 35 of the LO and Order 20 rule 5, RHC.

43.  The new complaint of Tsun’s wrongful exclusive possession of the House and hence Lot No.561 RP started in mid 2001. The relevant cause of action against Tsun for recovery of Lot No.561 RP, if allowed to be included, was within the relevant limitation period when the Counterclaim was filed on 23 January 2002: section 351(b) of the LO.  However, the application for leave to amend to introduce this new claim was not made until 26 March 2014 and Mr Chong must be right in his submission that as at that date, the new claim was out of time.

44.  In these circumstances, the following dictum of Fok JA (as he then was) in Sun Focus Investment Ltd v Tang Shing Bor [2012] 1 HKLRD 738 at §19 is apposite:

“… the default position is for the court to refuse leave (for amendment) unless (a) the plaintiff can show that the defendant does not have a reasonably arguable case on limitation which will be prejudiced by the new claim or (b) that the new cause of action arises out of the same or substantially the same facts as a cause of action in respect of which he has already claimed relief.”

45.  This approach was followed by Kwan JA in Global Bridge Assets Ltd v Sun Hing Kai Finance Ltd [2012] 4 HKLRD 473 at §21.

46.  I have little doubt that Tsun has an arguable limitation defence to the new claim based on New Complaints 1 and 3. To start with, I do not accept Mr Liu’s submission that Hong already seeks recovery of the Lots from Tsun in the existing pleading. As discussed, there is no such plea and Tsun’s possession of the House in accordance with the Licence Agreement is not disturbed.

47.  When the allegedly wrongful exclusion possession of the House by Tsun commenced in mid-2001, the time started to run against the paper owner: section 13 of the LO. By 2013, his title would be extinguished: section 17 of the LO. Hong can no longer maintain any action for trespass and breach of the Licence Agreement arising from the alleged adverse possession of Tsun in 2014. There seems to be a clear defence available to Tsun in March 2014 under the LO: see also section 7 of the LO. I do not accept that the new allegation that the Licence Agreement has not been expressly revoked until the filing of the Amended Defence and Counterclaim can assist Hong to disprove adverse possession.

48.  To conclude, I accept Mr Chong’s submission that the plaintiffs do have a reasonably arguable case on limitation against the new claim sought to be introduced by Hong.

49.  Next I shall consider whether the new claim arises out of the same or substantially the same facts as an existing cause of action in respect of which Hong has claimed relief in his Counterclaim: section 35(6)(a) of the LO and Order 20 rule 5(5), RHC.

50.  I have already rejected the contention of Mr Liu that the new complaints are merely particulars of the continuing trespass and I need not repeat my reasons. Plainly, new Complaints 1 and 3 are based on factual allegations bearing no resemblance with those allegations in support of the claim of trespass in the existing pleading.

51.  Mr Liu submits that the plaintiffs themselves put in the state of occupation of the House by Tsun in their pleading and extensive evidence of his occupation of the House has been adduced by both parties. Be that as it may, Hong’s new complaints are based on very different factual basis and they do fall foul with section 35(6)(a) of the LO and Order 20 rule 5(5), RHC.

52.  I am therefore driven to the conclusion that I should not exercise my discretion to allow Hong to introduce his new complaints of trespass.

53.  I should clarify that the original allegations of trespass in paragraph 18 of the Defence and Counterclaim can also amount to breaches of the Licence Agreement and hence Hong is entitled to recover loss arising therefrom. I thus allow Hong his proposed amendments to include a claim for damages for those breaches of the Licence Agreement already pleaded.

Conclusion and Order

54.  Save those which are uncontroversial and/or expressly allowed in this Decision, all the proposed amendments appearing in the draft Amended Defence and Counterclaim annexed to the Summons are disallowed. In other words, I only grant leave to Hong to file and serve his Amended Defence and Counterclaim without those disallowed amendments within 28 days from the date hereof.

55.  I further direct that the plaintiffs do within 28 days thereafter to file and serve their Amended Reply and Defence to Counterclaim. For the avoidance of doubt, only those amendments consequential upon/necessitated by the defence’s amendments to the Defence and Counterclaim are allowed.   

56.  I order that costs of and occasioned by the amendments be to the plaintiffs to be taxed if not agreed. I also order Hong to pay the plaintiffs their costs of this application forthwith, to be taxed if not agreed. These are costs orders nisi subject to variations.

57.  It remains for me to thank counsel on both sides for their impressive industry and able assistance rendered to this court.

[1] §14(a)(iii) of the Defence and Counterclaim

[2] §8 of his affirmation dated 17 April 2014