CHAN SAN v. HANS LI, the person appointed to represent the estate of KAM SHUI MAN, the Deceased AND OTHERS

CACV 189/2019

[2020] HKCA 501

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 189 OF 2019

(ON APPEAL FROM HCA 840/2012)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

Introduction

1.  We handed down our judgment allowing in part the 1^st Defendant’s appeal on 19 March 2020 (“the Main Judgment”).

2.  There are two consequential matters on which we shall give our determination in this judgment, namely (i) future conduct in relation to the claim on Area B and (ii) costs.

3.  Counsel have lodged written submissions on these matters. After reading the same, concerns were expressed by two members of the Court about references to a sanctioned offer when the Court had yet to finally dispose of the appeal.  The relevant common law principles are set out in Tse Tsz Chong v Law Sze Man [2015] 1 HKLRD 1120.  Whilst the Court is capable of disregarding and will disregard the sanctioned offer in dealing with (i), by directions given on 7 May 2020 comments were invited from the parties.  On 12 May 2020, solicitors for both parties replied in a joint letter indicating that the parties did not regard the Court as presently constituted as prejudiced in dealing with (i) by virtue of the information on sanctioned offer.

4.  The Court therefore proceed accordingly.  As mentioned, we will disregard the sanctioned offer in considering whether the claim on Area B should be remitted.  

5.  We are of the view that the two matters can be processed on the papers without any oral hearing.  This is our decision.

The Parties’ Submissions on Area B

6.  Mr Alan Leong SC, counsel for the Plaintiff, submitted that the claim on Area B should be remitted to the Judge.  His submissions can be summarised as follows:

(a)  The 1^st Defendant never sought to challenge the Judge’s finding that “Area B had changed from rural land to predominantly a driveway leading to Lot 1213 and Area A”, whether at trial or on appeal.  The Court should remit Area B to the Judge so that the parties can properly address the relevant issues and the Judge can supply the inadequate factual findings.

(b)  There is no deficiency in the Plaintiff’s pleadings.  The Plaintiff has pleaded that he has exclusively occupied Area B. Further, the Judge’s conclusion on Area B was supported by the principle that enclosure and total exclusion are not prerequisites to adverse possession, and that what is important is how someone in the position of an occupying owner would ordinarily use the land in question.

(c)  The Plaintiff constructed the road for the purpose of allowing vehicles to enter his land.  He singlehandedly built it and there is no evidence of users other than him.  One does not clear trees, flatten uneven land and create a dirt road which eventually became paved on land that is not his.

(d)  The remaining parts of Area B (i.e. the parts not covered by the road/path), consisting of a fence on the southern side and a river stream on the northern side, are insubstantial in size.

(e)  There is evidence to show (but no finding by the Judge on whether) the Plaintiff was in adverse possession of Lot 1213 before 2014.

7.  Mr Samuel Wong, counsel for the 1^st Defendant, invited the Court to dismiss the claim on Area B.  He submitted that:

(a)  The present action was commenced in 2012 and the Plaintiff has already amended his Statement of Claim 5 times.  In these circumstances, it would be contrary to the underlying objectives to permit a remittance.  There is no reason to allow the Plaintiff a second chance to better his threadbare case.

(b)  The Plaintiff’s pleaded case was that he had exclusively occupied Area B through conducting farming activities and planting fruit trees and vegetables thereon.  This allegation is contradicted by the 1^st Defendant’s expert, who concluded that there had been no sustainable agricultural activities in Area B since 1980s.

(c)  Even in the Plaintiff’s opening submissions, he continued to rely on the alleged agricultural activities to justify his claim in respect of Area B.  It was only in his closing submissions that the Plaintiff floated for the first time the unpleaded argument of a “private driveway”.

(d)  The Judge did not commit any factual or procedural error.  On the contrary, the Judge had adopted the Plaintiff’s written submissions in a wholesale manner.  The Plaintiff has suffered no miscarriage of justice.  In any event, the Court of Appeal is in as good a position as the Court of First Instance to reach a decision on Area B.

Our Decision on the Area B claim

8.  The Court of Appeal has the power and discretion to order a retrial pursuant to Order 59 rule 11.  Both parties have referred us to the case of Ku Chiu Chung Woody v Tang Tin Sung (unrep., CACV 429/2002, 13 June 2003) where Ma JA (as he then was) said at [24]:

“ The Court of Appeal will not order a retrial (which inevitably involves further costs) unless some substantial wrong or miscarriage of justice has taken place. This usually involves two facets:- identifying some error that has taken place (for example the wrongful rejection of evidence) and next, determining whether the error so identified has deprived the party complaining of a substantial and realistic chance of success in the case. In other words, however serious the error, if the Court of Appeal takes the view that ultimately it would have made no difference to the outcome of the case, a new trial will not be ordered. There is a third facet to the exercise:- the Court of Appeal’s discretion. A retrial will be ordered not only where it is just to do so (see above), but where it is right to do so. If the Court of Appeal is in as good a position as the Court of First Instance to take a fresh view of the facts, a new trial will not be ordered. One sees the Court of Appeal operate in this way on a regular basis. It is only where the Court of Appeal is somehow disadvantaged in looking at and determining questions of fact that an order for a new trial will be seriously countenanced.”

9.  In [47] to [62] of the Main Judgment, we held that the Judge erred in reaching the conclusion that the Plaintiff had exclusive enjoyment of Area B as he had overlooked or misunderstood several relevant matters set out at [47] to [51], [53] and [54].  Further, in view of the unsatisfactory way in which the judgment was given (see [59] to [61] of the Main Judgment), the findings of the Judge regarding Area B cannot be permitted to stand.  Thus, the first two facets of the test in the judgment of Ma JA were satisfied.

10.  We shall therefore focus on considering if the third facet of the test is met.  In our judgment, it boils down to one question: can we sitting as the appellate court conclude that the Plaintiff’s claim on Area B is bound to fail? If yes, there is no reason to (and we should not) remit the claim back to the lower court.  In the context of this question, we should take into account the pleaded case and the case as run at the trial and whether the Plaintiff should be allowed to adduce further evidence to supplement his case.

11.  For the following reasons, we are unable to say that the Plaintiff’s claim on Area B is hopelessly bad.  Accordingly, we will remit the claim on Area B back to the Judge.

12.  First, as a matter of pleadings, it is open to the Plaintiff to argue at the remitted trial that he had adversely possessed Area B by reason of the construction of the road and its usage:

(a)  The Plaintiff has pleaded the construction of the road at paragraph 8 of the Re-re-re-re-amended Statement of Claim as an act of possession.

(b)  Mr Wong submitted that the Plaintiff did not however plead exclusive possession of Area B arising from the construction of the road.  We think it is a matter of evidence and submissions rather than pleadings.

13.  Second, there is evidence relating to the Plaintiff’s effort in the construction of road which may be accepted at the remitted trial.  Such evidence included (i) the road was opened up by the Plaintiff for his use, namely to transport construction materials for reselling and containers for storage purposes; (ii) the Plaintiff had begun clearing Area B and Lot 1213 sometime between 1995 and 1997; and (iii) by 2000 a large section of the road from Lot 1212RP to Lot 1213 had been paved.  Though for reasons given in the Main Judgment, the Judge’s findings in these regards (copied as it were from the Plaintiff’s submissions) cannot stand, it is still open to the Judge hearing the remitted trial to consider if such evidence can be accepted and if accepted, the legal implications thereof in light of subsequent usage of the road. 

14.  Third, the Plaintiff’s factual assertions, if believed, are capable of establishing the requisite factual possession and animus possidendi:

(a)  There is no rule that the construction of road, coupled with other ancillary acts such as clearing the land and paving the road, can never give rise to adverse possession as matter of law.

(b)  On the contrary, it is well established the question of factual possession is a matter of fact to be resolved in light of all the circumstances, in particular the nature of the land and the manner in which such land is commonly enjoyed: Powell v McFarlene (1977) 38 P&CR 452 at 471 (Slade J).  Similarly, the question of animus possidendi must turn on the facts of each case: Chapman v Godinn Properties Ltd [2005] EWCA Civ 941 at [28] (Chadwick LJ).

(c)  Lord Hagan put it this way in The Lord Advocate v Lord Lovat (1880) 5 App Cas 273 (at 288):

“ As to possession, it must be considered in every case with reference to the peculiar circumstances. The acts, implying possession in one case, may be wholly inadequate to prove it in another. The character and value of the property, the suitable and natural mode of using it, the course of conduct which the proprietor might reasonably be expected to follow with a due regard to his own interests—all these things, greatly varying as they must, under various conditions, are to be taken into account in determining the sufficiency of a possession”

(d)  Mr Wong submitted that since various vehicles (none of which belonged to the Plaintiff) had been found parked along the road, the Plaintiff did not have factual possession of Area B.  However, as a matter of law the mere fact that trespassers had parked their cars on the land in question is not necessarily fatal to the squatter’s case: Gayadeen v AG of Trinidad & Tobago [2014] UKPC 16 at [24].  Again, much depends on the facts of each case.

(e)  On the facts of the present case, the actual use of the road after it was constructed can be material in determining if animus possidendi on the part of the Plaintiff is established.  If the road was not exclusively used by the Plaintiff but frequently used by those in the adjoining lots without complaints by the Plaintiff, the Plaintiff would have difficulty in showing animus possidendi.  Though the survey plans seem to suggest that other lots were served by the road, we do not know in reality how the road had been used over the years and how frequently had it been used by those seeking access to those other lots.

(f)    Whilst it can be said that there is thus an evidential lacuna, the defence did not plead any positive case in response to the reliance by the Plaintiff on the construction of the road as an act of possession.  Now that the point has assumed greater significance than previously contemplated, it would be just to allow the Plaintiff (and the 1^st Defendant, if he so wishes) to adduce supplementary evidence at the remitted trial in that regard.  

15.  Fourth, the judge at the remitted trial will be in a better position than us to resolve the parties’ disputes on Area B:

(a)  There is a factual dispute as to what had been done to Area B during the material period.  As we said in [58] of the Main Judgment, the 1^st Defendant have made submissions on this point in his closing submissions which the Judge had failed to address.

(b)  There is also a dispute as to whether whatever the Plaintiff had done on or to Area B was sufficient to establish factual possession and animus possidendi.[1] The relevant plea in the Re-re-re-re-amended Statement of Claim was denied by the 1^st Defendant: see [11] of the Re-Amended Defence and Counterclaim.

(c)  On the matters canvassed at [14](d) and (e) above, further evidence has to be adduced.

16.  Lastly, we take account of the fact that the Plaintiff had been given (and had taken) many chances to refine and present his case.  We can therefore understand Mr Wong’s protestation against remitting the claim for a retrial.  However, the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties: RHC Order 1A rule 2(2).  In the present case, we are of the view that the prejudice occasioned to the 1^st Defendant by repeated changes of the Plaintiff’s case on adverse possession could be adequately compensated by an appropriate costs order to be made at the end of the remitted trial.  That being so, for the reasons given above, we will remit the claim on Area B for a retrial.

17.  As for the identity of the judge to hear the remitted trial, we think it is appropriate to order the case be remitted to Wilson Chan J for the determination of the claim over Area B. 

The Parties’ Submissions on Costs

18.  On the issue of costs, Mr Leong submitted that:

(a)  the costs of the trial should be awarded to the Plaintiff on an indemnity basis, since the 1^st Defendant has failed to beat the sanctioned offer made by the Plaintiff on 20 June 2018 (“the Sanctioned Offer”).  By the Sanctioned Offer, which was open for acceptance without leave of the Court for 28 days (i.e. until 18 July 2018), the Plaintiff essentially proposed to give up Area B in exchange for getting Area A;

(b)  the costs of the appeal should also be awarded to the Plaintiff on an indemnity basis, or alternatively on a common fund basis, since (i) the appeal in respect of Area A was hopeless and (ii) the 1^st Defendant should have known from the Sanctioned Offer that the Plaintiff did not intend to insist on claiming Area B.

19.  Mr Wong submitted that:

(a)  there should be no order as to costs, for both the appeal and the trial below, since the Plaintiff was successful on Area A while the 1^st Defendant was successful on Area B;

(b)  the Plaintiff had amended his pleadings 5 times and he had also alleged that his former solicitors had made him sign various court documents without explaining their content to him;

(c)  the Plaintiff has not done better than what he proposed in the Sanctioned Offer.

Our Decision on Costs

20.  The general principles on the exercise of discretion as to costs were set out in YBL v LWC (No 2) [2017] 2 HKLRD 783 at [9]-[10] and Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd [2019] HKCA 1345 at [12]-[18].  In the former case, at [10], the following principles were set out:

“ (a) whilst the courts often start with the proposition of costs following event, it is no longer a general rule but a starting point, see Hung Fung Enterprises v Agricultural Bank of China [2012] 3 HKLRD 679;

(b) there have to be some justifications for depriving a successful party of his costs;

(c) in measuring who is the successful party and the extent of his success, the court must examine the reality and justice of the case. Thus, in Hysan Development Co Ltd v Town Planning Board (No 2) (2016) 19 HKCFAR 635, the Court of Final Appeal made no order as to costs notwithstanding the success of the appellants in reversing the Court of Appeal’s decision because they did not achieve the full objects of their appeals;

(d) in addition, under Order 62 Rule 5, the court in exercising its discretion shall take into account the matters set out in Rule 5(1) as may be appropriate in the circumstances;

(e) Rule 5(2) highlights some conduct which the court may take into account including whether it is reasonable for a party to take an issue, the manner in which the matter was pursued or defended, the extent of success, and conduct before, as well as during the proceedings;

(f) if a successful party has brought the litigation upon himself or has done some wrongful act in the course of the transaction, he could be deprived of his costs.”

21.  At [16] and [18] of Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd, supra, the Court held:

“ 16.    Ritter v Godfrey, supra, was decided in 1919.   In those days, there was no Order 62 Rule 5 which was added to our rules in 2008.   Rule 5(1) directs the court in appropriate circumstances to take account of the conduct of the parties in exercising its discretion as to costs.   Rule 5(2) provides that such conduct includes whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue and the manner in which it has been pursued or defended.   The litigation culture and the court’s approach to costs is indeed, as observed by the Recorder, very different from the situation in England in 1919.

17.   In light of Rule 5, there is no longer any room for contending for a rigid application of Ritter v Godfrey, supra.   As held by Kwan JA in Pfeiffer v Cheung Hay Kit, supra, it is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed.

18.   But it is still necessary to have justification for depriving a successful party of his costs (see YBL v LWC (No 2) [2017] 2 HKLRD 783 at [10]) and it is not the law that whenever a successful party fails on some issues the court must assess the costs of each issue separately to deprive him of some costs (see Poon Ching Man v Lam Hoi Pun [2016] 3 HKLRD 815 at [37].”

22.  We would first deal with the costs of the appeal. For the purpose of the appeal, the Sanctioned Offer is not directly relevant as the offer was not repeated in the context of the appeal.  The regime in Order 22 is not applicable for appeal, see CEP Ltd v Wuxi Jiacheng Solar Energy Technology Co Ltd [2016] 2 HKC 264.  Whilst there were cases where a sanctioned offer made in the first instance was taken into account in determining the costs of the appeal, it would not be relevant in cases where the appellant did achieve some success in the appeal even though the overall result is not better than the terms in the sanctioned offer: see Ryder Industries Ltd v Chan Shui Woo [2015] 2 HKC 582; Lam Yin Pok Bosco v Dr Chan Yee Shing (No 2) CACV 276/2012, 9 July 2015; Hung Sau Fung v Lai Ping Wai (No 2) CACV 240/2011, 1 March 2016.   

23.  In the appeal, the 1^st Defendant was successful in having the judgment on Area B set aside, something he could not achieve without appealing.  Whilst the claim is remitted to the court below, as we held in the Main Judgment, there are serious issues raised by the defence and it is by no means certain that the Plaintiff would succeed with his claim in the remitted trial.

24.  However, having regard to the reality and justice of the case, the 1^st Defendant is not successful in the context of the whole appeal.  The 1^st Defendant had advanced 7 grounds of appeal in his Amended Notice of Appeal, 6 of which were either rejected or not pursued at the hearing.  His appeal in respect of Area A fails.  More time and costs were spent on Area A and those issues which he failed.  He must pay for such failure.

25.  Whilst the appeal in respect of Area A is not successful, we do not take the view that it is so without merit that we should award costs on a higher basis.

26.  Taking everything in the round, giving due regard to the setting aside of the judgment on Area B, we would order the 1^st Defendant to pay 50% of the costs of the Plaintiff in the appeal (including the costs on the submissions for costs and remitter), such costs are to be taxed if not agreed on a party to party basis.   

27.  Coming now to the costs below, it does not appear that the Sanctioned Offer had been brought to the attention of Wilson Chan J. 

28.  In view of the fact that there will be a remitted trial, instead of this Court exercising a discretion which should have been exercised by the trial judge, the better course is for the costs below to be dealt with by Wilson Chan J after he handed down his judgment in the remitted trial.  By then, the operation of the Sanctioned Offer under the Order 22 regime will be clearer and the Judge can consider the overall justice of the case in light of the Sanctioned Offer.

29.  At this stage, we would only set aside the order for costs made by Wilson Chan J and leave it open.

30.  Since the remitted trial will take place before Wilson Chan J, the Sanctioned Offer should not be communicated to him before he handed down judgment on the claim on Area B in the remitted trial.  We also direct that this judgment shall not be published until after judgment is handed down by Wilson Chan J on the substantive claim under Area B in the remitted trial.

31.  Notwithstanding the withholding of the publication of this judgment as directed at [30], parties may bring to the attention of Wilson Chan J our reasons for remitting the claim on Area B as set out at [6] to [17]. But parties must not refer to [3] and [4] where there was reference to sanctioned offer.