CHAN MEI LIN AND OTHERS v. LEE HONG

CACV 44/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 44 OF 2015

(ON APPEAL FROM HCA NO. 2861 of 2001)

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REASONS FOR JUDGMENT
AND
DECISION ON COSTS
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Hon Chu JA (giving the Reasons for Judgment and Decision on costs of the Court):

1.  This is the appeal of the defendant by original action (“defendant”) against the decision of Deputy High Court Judge Yee disallowing part of the proposed amendment to the Defence and Counterclaim. After hearing submissions, we allowed the appeal and granted leave to amend, and reserved the decision on costs of the hearing below and in this appeal.  We now give our reasons for the judgment and the decision on costs.

Background

2.  The 1^st plaintiff by original action (“1^st plaintiff’) was married to Mr Lee Cho Hing (“Mr Lee”), who passed away in 1992.  The 2^nd and 5^th plaintiffs by original action (respectively “2^nd plaintiff” and “5^th plaintiffs”) and the defendant are their children.  The 3^rd and 4^th plaintiffs by original action (respectively “3^rd plaintiff’ and “4^th plaintiffs”) are the children of Mr Lee’s brother, and the cousins of the 2^nd and 5^th plaintiffs and the defendant. 

3.  The dispute between the parties relates to several lots of land in DD 107 in the New Territories, namely, Lot nos. 808, 809, 811, 812, 814 and 815 (“the Other Lots”), and Lot nos. 560 RP and 561 RP (“the Land”). For the purpose of this appeal, we are only concerned with the dispute over the Land.

4.  On the plaintiffs’ case, since 1954, Mr Lee and the 1^st plaintiff operated a farm on the Other Lots.  In 1962, Mr Lee purchased the Other Lots and later assigned to his mother to hold on trust for him.  Unknown to Mr Lee and the 1^st plaintiff, the farm had encroached upon the Land.  The plaintiffs say that the 1^st plaintiff and Mr Lee had acquired an adverse possessory title to the Land by 31 December 1974 or latest by 2 February 1982.

5.  On 26 February 1982, at the direction of Mr Lee and the 1^st plaintiff, the land in the Other Lots was assigned by Mr Lee’s mother to the 2^nd to 5^th plaintiffs, the defendant and their cousins separately.  It is the plaintiffs’ case that their rights over the Other Lots are regulated by a Chinese written agreement dated 24 February 1982 entered into by the 2^nd to 5^th plaintiffs, the defendant and other parties.

6.  Sometime in 1997, the plaintiffs and the defendant discovered the encroachment on the Land.  The defendant was instructed and authorised by the plaintiffs to assert the 1^st plaintiff’s possessory title in the Land with a view to eventually assigning the Land to the 2^nd to 5^th plaintiffs and the defendant.  Sometime before 27 January 2000, the defendant reached a settlement with the then owner of Lot nos. 560 and 561, Allex Development Limited.  Consequently, Allex severed the Land from Lot nos. 560 and 561 and assigned it to the defendant at a nominal consideration.

The claim

7.  In the Statement of Claim, the 1^st plaintiff seeks a declaration that the defendant holds the Land as her agent and/or trustee and an order directing the defendant to assign and transfer the Land to her or at her direction.   

8.  The plaintiffs also claim that, between 1984 and 1985, the 5^th plaintiff had, with the 1^st plaintiff’s licence, constructed a brick house on the Land (“the House”, also referred to as the “H2 Holiday House” in the proposed Amended Defence and Counterclaim), which he has been occupying and using as a residence.  Between February and June 2000, the defendant, however, committed acts that interfered with the 5^th plaintiff’s occupation and enjoyment of the House.  Accordingly, the plaintiffs seek declaratory and injunctive relief to stop the defendant from interfering with the 5^th plaintiff’s use and occupation of the House. 

The counterclaim

9.  The defendant denies holding the Land as the 1^st plaintiff’s agent or trustee.  He claims that by reason of his continuous use and occupation, he has by 1977 acquired an adverse possessory title over the Land.  

10.  The defendant further says that in 1986, he rebuilt the House from existing structures on the Land in pursuance of an agreement he reached with the 5^th plaintiff, who had contributed to part of the costs.  As part of the said agreement, the 5^th plaintiff was given a licence by the defendant to stay at the House during weekends and holidays.  Thereafter, the 5^th plaintiff had used the House for weekend stays for less than 20 times a year, while the defendant had the use of the House for the rest of the time.

11.  In between mid to end of 1999, however, the 5^th plaintiff, acting through the 4^th plaintiff, tried to rebuild the House into a two-storey structure, despite the defendant’s protest.  In June 2001, the defendant noticed construction work was again being carried out on Lot no. 561RP, and therefore took action to stop it.  Despite the defendant’s protest, the 4^th and 5^th plaintiffs continued to trespass upon Lot no. 561RP to carry out the construction work. 

12.  By way of counterclaim, the defendant seeks an injunction restraining the 4^th and 5^th plaintiffs from entering Lot no. 561RP without his consent and also damages for trespass.

Application to amend the Defence and Counterclaim

13.  By summons filed on 26 March 2014, the defendant applied to amend the Defence and Counterclaim.  

14.  The amendments, broadly speaking, fall into three groups.  The first consists of clerical and cosmetic amendments, which are not controversial and was allowed by the Judge.  The second relates to the deletion of paragraph 14(a)(iii), which effectively is to withdraw an admission of the authenticity of a letter dated 22 September 1998 from the 1^st plaintiff to her children.  This part of the amendment was disallowed by the Judge, from which there is no appeal.

15.  The third group of amendment covers:

(1) The addition of three sub-paragraphs to paragraph 23, which read:

“(a) The 5^th Plaintiff and his family have since about mid 2001 been occupying the H2 holiday house as his residence to the exclusion of the Defendant.

(b) The addition of 1 storey to the H2 holiday was completed in about 2003 to 2004 despite the Defendant’s repeated protests.

(c) Since about September to October 2011, the 5^th Plaintiff has fenced off an area of about 6,000 square feet of Lot No. 561RP, thereby further excluding the Defendant from access to such land.”

(2) The addition of a new paragraph 23A, which reads:

“The acts pleaded in paragraphs 18 and 23 above constitute continuing trespass to Lot No. 561RP by the 5^th Plaintiff and/or the 4^th Plaintiff as well as breaches by the 5^th Plaintiff of the 5^th Plaintiff’s licence agreement which is, by the service of this Amended Defence and Counterclaim, revoked.” (Emphasis added)

(3) The deletion of the last part of paragraph 24(c)(i) and paragraph 1 of the prayer as follows:

“24. In the premises,

…

(c) the Defendant claims against the 4^th Plaintiff and the 5^th Plaintiff for:-

(i) An injunction restraining them whether by they themselves, singly or jointly or by their servants or agents or otherwise howsoever from entering onto Lot no. 561RP without the prior consent of the Defendant save that in the case of the 5^th Plaintiff he is allowed to enter onto Lot no. 561RP in pursuance of the 5^th Plaintiff agreement.”  

“AND THE DEFENDANT COUNTERCLAIMS: AGAINST THE 4^TH PLAINTIFF AND THE 5^TH PLAINTIFF

1. An injunction restraining the 4^th Plaintiff and the 5^th Plaintiff whether by they themselves, singly or jointly or by their servants or agents of [sic] otherwise howsoever from entering onto Lot no. 561RP without the prior consent of the Defendant save that in the case of the 5^th Plaintiff he is allowed to enter onto Lot no. 561RP in pursuance of the 5^th Plaintiff agreement.”

The Judge’s decision

16.  The Judge considered the proposed paragraph 23(b) is a piece of update information of the original complaint about the unauthorised construction works carried out at the House by the 4^th and/or 5^th plaintiffs  (see paragraph 11 above) and allowed it to be added to the pleading.^[1]

17.  The Judge, however, did not accept that the proposed paragraph 23(a) and (c) are instances of continuous trespass.  He was of the view that the two sub-paragraphs raise a very different kind of trespass based on very different facts, and constitute a new claim within the meaning of section 35(2) of Limitation Ordinance, Cap. 347, which is already time-barred under section 7 of the same Ordinance.^[2] He was further of the view that the new claim does not arise out of the same or substantially the same facts as a cause of action in respect of which relief has already been claimed in the counterclaim.^[3] 

18.  The Judge therefore disallowed the proposed paragraph 23(a) and (c).  He also disallowed the last part of the new paragraph 23A which pleads the revocation of the licence granted to the 5^th plaintiff (see the italicised part in paragraph 15(2) above), and the respective deletions in paragraph 24(c)(i) and paragraph 1 of the prayer.  These disallowed amendments are the subject matter of this appeal.

Reasons for judgment

19.  Order 20 rule 5(5) of The Rules of the High Court, Cap. 4A provides that an amendment to add or substitute a new cause of action may be allowed if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the applying party.

20.  The defendant’s grounds of appeal are twofold.  Firstly, it is said that the Judge was wrong to conclude that under the proposed paragraph 23(b) and (c), the defendant is seeking to add a new claim which was already time-barred.  Secondly, it is said that the Judge was wrong to hold that the proposed amendments in paragraphs 23(b) and (c) do not arise from the same facts or substantially the same facts as the existing cause of action in the counterclaim.

21.  On the first ground, Ms Wong SC, who appeared together with Mr Lui for the defendant, submitted that the injunction sought under paragraph 1 of the prayer in the existing counterclaim amounts to an assertion of title by the defendant and the relief, if granted, would necessarily require the recognition of the defendant’s title to Lot no. 561RP, and this would have stopped time from running against the defendant for the purpose of limitation.  Reliance was placed on Higgs v. Leshel Maryas Investment Co Ltd [2009] UKPC 47, in particular the judgment of Lord Scott (at §47) that:

“The commencement by a documentary title holder of judicial proceedings against a person in adverse possession, the success of which proceedings requires the recognition of the documentary title, constitutes, if the proceedings are successful, an interruption of the period of adverse possession.”

22.  In response, Mr Chong argued that the injunction sought in the existing counterclaim is not an assertion of title, but an enforcement of the defendant’s contractual right under the licence agreement, which is contractual in nature.

23.  In our view, the counterclaim must be read together with the defence.  In the defence, the defendant disputes the 1^st plaintiff’s claim to beneficial interest in the Land and asserts his beneficial interest in the Land.  The counterclaim has adopted the entire defence[4].  It goes on to plead a claim in trespass to land on the basis that the unauthorised construction work to the House has gone beyond the use of Lot no. 561RP permitted by the licence granted to him.  The claim of trespass and the injunctive relief sought in the counterclaim is therefore closely related to the defendant’s claim of beneficial interest in the Land in the defence.  It is not a mere enforcement of contractual rights under the licence agreement because the defendant’s case on the grant (and breach) of licence is interwoven with his assertion of title in the Land.

24.  On the second ground of appeal, Ms Wong’s submission is that the proposed amendments in paragraphs 23(b) and (c) should be regarded as further acts in a continuous course of breach of the licence agreement and trespass upon Lot no. 561 RP by the 5^th defendant. 

25.  Mr Chong, on the other hand, argued that the claim of trespass in the existing counterclaim is not a claim for continuous trespass to land in that the act complained of, namely, the unauthorised construction work to the House, was said to take place from mid to end of 1999.

26.  As observed above, the defendant’s counterclaim is for trespass to land in the form of construction work to the House, which goes beyond the use permitted by the licence.  The acts alleged against the 5^th plaintiff in the proposed paragraph 23(a) are occupying the House with his family to the exclusion of the defendant since mid-2001, and in paragraph 23(c), fencing off part of Lot no. 561RP since September to October 2011 thereby denying the defendant’s access to it.  These acts are in their nature use and occupation of Lot no. 561RP in excess of what is permitted by the licence granted to the 5^th plaintiff, and interferences with the defendant’s right over the lot amounting to trespass to land.  Thus viewed, they can be regarded as further acts of a continuous breach of licence and trespass to land.

27.  Although the defence pleads that the unauthorised construction work to the House took place from mid to end of 1999, it does not mean the trespass complained of in the existing defence and counterclaim is not a continuous one.  Importantly, the injunction sought under paragraph 1 of the prayer has no temporal restriction and is prospective in nature.   

28.  In his written submission, Mr Chong also argued that the proposed amendment of revocation of licence is impermissible in that it is based on acts that occurred since the date of the writ, relying on Eshelby v. Federated European Bank Ltd [1932] 1 KB 254 at 268.[5] Although this argument had been made in the court below, the Judge did not refer to it in his Decision.  No Respondent’s Notice has been filed to raise this argument.  At the hearing before us, Mr Chong, correctly in our view, did not seek to advance this argument.  We would additionally observe that the court’s discretion under Order 20 rule 5(1) is a wide one.[6]  The decision in Eshelby does not create an inflexible rule and the case has to be considered together with the discussions in subsequent decisions of the English Court of Appeal: see, for example, Vax Appliances Limited v. Hoover Plc [1990] RPC 656 at 661, and Hendry v. Chartsearch Ltd [1998] EWCA Civ 1276, at §§19-23; see also the discussions in Wing Siu Co Ltd v. Goldquest International Ltd [2003] 2 HKC 64 at §§9-18.   

29.  For the above reasons, we allowed the appeal and gave leave to the defendant to amend the Defence and Counterclaim to include also the parts highlighted in yellow in the draft annexed to the Notice of Appeal.  There is also leave to the plaintiff to make consequential amendments to the Reply and Defence and Counterclaim within 28 days thereafter.

Decision on costs

30.  Applying the normal rule of costs follow event, the costs of this appeal should be to the defendant against the plaintiffs to be taxed if not agreed.  Although it was said on behalf of the defendant that the claim of possession was of immense importance to him, we are not persuaded that this appeal justifies the attendance by two counsel, having regard to the issues and complexity involved.  We will not certify the appeal fit for two counsel to appear.

31.  As for the costs before the Judge, the normal rule is that the party seeking the court’s indulgence to amend should bear the costs of and occasioned by the application to amend.  In this case, the plaintiffs have successfully opposed the amendment to paragraph 14(a)(iii), which was the more contentious of the two areas of dispute before the Judge.  We consider that the appropriate costs order is for the defendant to pay the plaintiffs the costs of and occasioned by the application to amend the Defence and Counterclaim, including two-third of the costs of the hearing before the Judge. And we so order.