NG YUK PUI KELLY v. DUNG WAI MAN AND OTHERS

CACV 86/2019

[2021] HKCA 134

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 86 OF 2019

(ON APPEAL FROM HCA 1826/2011)

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J U D G M E N T

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

Introduction

1.  By a summons of 20 August 2020, the 2^nd Defendant renewed the application to stay the execution of the judgment of L Chan J ([2019] HKCFI 210).  An earlier application for stay was refused by Deputy High Court Judge Jat SC on 5 August 2020. 

2.  In the judgment dated 24 January 2019, L Chan J ordered, inter alia:

“ (1)  A declaration that the 1^st Defendant is and has been holding the following 2 properties as bare trustee on trust for the Plaintiff since 13 September 1985, namely:-

(a)  Unit B on the 1^st Floor & Portion of the Flat Roof of Winner Building of Block A, No. 37 D’Aguilar Street, Hong Kong; and

(b)  Unit C on the 1^st Floor & Portion of the Flat Roof of Winner Building of Block A, No. 37 D’Aguilar Street, Hong Kong.

(hereinafter collectively referred to as the “Subject Properties”);

(2)  A declaration that the 1^st Defendant be estopped from enforcing any proprietary interest and/or title in respect of the Subject Properties as against the Plaintiff;

(3)  An order that the 1^st Defendant do forthwith assign and transfer the title to the Subject Properties to the Plaintiff;

(4)  In the alternative to paragraphs 1 to 3 above, a declaration that the Plaintiff had by virtue of his adverse possession of the Subject Properties since 13 September 1985 extinguished the legal and beneficial title to the Subject Properties as owned by the 1^st Defendant under s 17 of the Limitation Ordinance (Cap. 347) (the “Ordinance”) and the 1^st Defendant is barred by s 7(2) of the Ordinance from bringing any action to recover the Subject Properties from the Plaintiff;

(5)  In the alternative to paragraphs 1 to 3 and further to paragraph 4 above, in the event that the beneficial interests of the Subject Properties were owned by Ng Bing Kuen (the “Deceased”) and are now vested in the 2^nd Defendant, the Plaintiff had by virtue of his adverse possession of the Subject Properties since 13 September 1985 extinguished the legal and beneficial title to the Subject Properties as owned by the Deceased under s 17 of the Ordinance and the 2^nd Defendant is barred by s 7(2) of the Ordinance from bringing any action to recover the Subject Properties from the Plaintiff;

(6)  An order that the 1^st and 2^nd Defendant, whether acting by themselves or their servants or agents, be enjoined from selling, assigning, transferring, mortgaging or otherwise dealing with the Subject Properties or any interest therein;

…

(8)  In any event, an order for costs nisi that the 1^st and 2^nd Defendants are jointly and severally liable to pay the costs of the action to the Plaintiff, to be taxed on a party and party basis, if not agreed.”

3.  The 1^st and 2^nd Defendants filed their Notice of Appeal on 21 February 2019.  Subsequently, the 1^st Defendant passed away on 15 January 2020; probate was granted in respect of the 1^st Defendant’s estate on 17 September 2020.  By an order made on 6 November 2020, the executrix of the estate (to whom probate was granted) was substituted as the 1^st Defendant.

4.  On 19 October 2020 the 2^nd Defendant filed a summons seeking leave to amend the Notice of Appeal.  By a letter dated 8 December 2020, solicitors for the 1^st Defendant confirmed that the 1^st Defendant would adopt the summons and submissions made in support of the same.

5.  The Plaintiff opposed the 2^nd Defendant’s summons for stay of execution as well as the 2^nd Defendant’s summons for leave to amend the Notice of Appeal. 

6.  This is our judgment on both applications.

Prior application for stay of execution

7.  As mentioned, DHCJ Jat SC refused to grant a stay of execution.  At [17] – [19] of his judgment ([2020] HKCFI 1838), DHCJ Jat SC was not satisfied that a refusal of say would render the appeal nugatory because:

(a)  the Flats (Unit B and Unit C) were not being used as residential premises but instead as offices by the 1^st Defendant’s children (in Unit B) and the Plaintiff (in Unit C); as such, transferring title of the Flats to the Plaintiff would not by itself upset the status quo, though the 1^st Defendant’s children may need to either pay rent or move their offices, which would not have a serious deleterious effect;

(b)  the Plaintiff was 85 years old and the litigation has taken almost 10 years to date.  He did not currently receive rent for Unit B and it would not be fair and just to keep the Plaintiff from the fruits of his success in litigation; and

(c)  the Plaintiff was prepared to give an undertaking that he will not sell the Flats until further order.  While he would not be prevented from encumbering the Flats, the likelihood of doing so is low in light of the current proceedings as well as Sino Leading Ltd’s action in HCA 2064/2011 having been registered against the Flats rendering it difficult for the Plaintiff to charge or encumber the Flats.

Renewed application for stay of execution

8.  The principles governing an application for stay pending appeal are well settled.  They were discussed in Star Play Development Ltd v Bess Fashion Management Co Ltd, [2007] 5 HKC 84.  Recently, in Bright Gold Ltd v Mega Well Development Ltd, [2019] HKCA 1440, the applicable legal principles were summarized at [13] as follows:

(a)  The applicant must show an arguable ground of appeal (viz. one with reasonable prospect of success) before the discretion to grant stay is engaged, see Star Play paragraph 9(6); Sy Chin Mong Stephen v Lo Shing Kin CACV 45/2013, 13 March 2013;

(b)  Even if arguable grounds exist, there must be other circumstances justifying the deprivation of the successful party the fruit of the judgment.  Sometimes, the applicant may do so by showing the existence of strong ground of appeal.  Sometimes, the applicant may do so by showing that the appeal would be rendered nugatory if no stay is granted.  In either case, the court must also have regard to the prejudice that could be suffered by the successful party if a stay is granted.  In all cases where the discretion is engaged, ultimately it is a balancing process with common sense; and

(c)  In assessing the strength of the appeal for the purpose of a stay application, it is impracticable and undesirable to go deeply into the merits: see Star Play paragraph 9(5).  A broad brush approach is called for.  Thus, counsel should not attempt to deploy full arguments on law and facts quoting in extenso all the relevant evidence and transcript as if the application for stay is a platform for a rehearsal of the appeal proper. Generally, with the benefit of written skeleton submissions, the court is able to assess whether an appeal has a high prospect of success without lengthy oral submissions from counsel, MKKWH v RKSH CACV 197/2012, 27 February 2013 at [3].  Application for stay of execution should not be a dry run of the appeal, see Ming Hsieh v Xu Zhe [2018] HKCA 390, at [9].

9.  The facts of the case were set out in the judgment of 24 January 2019, [2019] HKCFI 210.

10.  The grounds of appeal as set out in the original Notice of Appeal of 21 February 2019 are, in summary, that the trial judge erred in:

(1)  holding that the Plaintiff was not estopped by the mortgage dated 31 March 1987 and the further charge over the Flats dated 12 November 1990 from asserting that the 1^st Defendant was not the Flats’ beneficial owner;

(2)  holding that the Plaintiff could rely on the doctrine of common intention constructive trust and invoke the doctrine of proprietary estoppel as well as relying of s 5(2) of the Conveyancing and Property Ordinance, Cap 219; and

(3)  holding that the Plaintiff had the animus possidendi for adverse possession and had by virtue of his adverse possession extinguished the beneficial interests of the 1^st Defendant’s late husband in the Flats.

11.  In the application of 19 October 2020 to amend the Notice of Appeal, it sought to expand upon these grounds of appeal.  The new paragraph (4) also concerned the finding on adverse possession but related to lack of continuous factual possession.

12.  Some new grounds were added: pleading that the trial judge made errors in his factual findings and the assessment of the evidence regarding:

(a)  Ground 4: Kuen was the beneficial owner of the Flats, paragraphs (5) and (6);

(b)  Ground 5: Kuen had sold the Flats to Kelly, paragraphs (7) to (10); and

(c)  Ground 6: The inherent improbabilities of the Plaintiff not commencing litigation for over 25 years, paragraph (11).

13.  It is clear from the judgment that the conclusion of the Judge on adverse possession is very much a secondary one by way of alternative.  Whilst we have reservations about granting declaratory relief on an alternative basis, we do not think such reservations can assist the 2^nd Defendant in this application.  In order to succeed in the appeal, the Defendants must overcome the Judge’s primary findings on beneficial ownership of the Flats.  We shall therefore focus on the strength of the grounds of appeal relating to these primary findings and the legal analysis relating to the same in our assessment on the application for stay.

14.  Having considered the grounds of appeal (including those advanced in the proposed amendments) relating to the primary findings and the submissions of counsel on the same, we are not satisfied that any of the grounds of appeal are sufficiently strong to warrant the grant of stay without regard to other considerations.

15.  We shall discuss at greater length below on the proposed amendments.  At this stage, it suffices for us to observe that it has not been demonstrated to us that the attempt to reverse the findings on beneficial ownership of Kuen and the sale of the Flats to the Plaintiff has a good prospect of success.  The same can be said in relation to the legal arguments to challenge the effectiveness of the sale under Grounds (1) and (2).

16.  Turning then to the examination of whether the appeal would be rendered nugatory if no stay of execution is granted, the 2^nd Defendant’s argument in this respect is premised on the assumption that upon execution of the judgment the Plaintiff will be at liberty to sell or mortgage or lease or otherwise charge or encumber the Flats. 

17.  Insofar as sale, mortgage or charge are concerned, such premise is substantially weakened by the Plaintiff’s undertaking not to sell the Flats pending the determination of the appeal and the registration of the writ of summons in HCA 2064/2011 against the Flats.  In this respect, we agree with the assessment of DHCJ Jat SC when he refused the stay.

18.  Further, the relief granted pursuant to the judgment of the 24 January 2019 consisted largely of declaratory relief.  We cannot see any sound basis for suggesting that in the absence of a stay such declaratory relief would generate a state of affair which would render the appeal nugatory.

19.  The same can be said with regard to the injunctive relief enjoining the Defendants from selling, assigning, transferring, mortgaging or otherwise dealing with the Flats.

20.  There is no sound basis to suggest that vacating the 1^st Defendant’s children from Unit B (or requiring them to pay rent for occupation of the same) would render the appeal nugatory.

21.  The only other relief granted under that judgment was the assignment of the Flats to the Plaintiff. With the demise of the 1^st Defendant, even with the grant of probate, the enforcement of this part of the judgment would not be straightforward.  Given that the appeal is going to be heard in April 2021, the enforcement process might not be completed by then (even assuming that the Plaintiff would incur the costs of doing so in the meantime).  

22.  As regards the possibility of the letting of Unit B to someone else, we do not see how that would render the appeal nugatory.  If the Defendants succeed in the appeal, they could step into shoes of the Plaintiff in collecting rent from the tenant (assuming that the Plaintiff can get a tenant between now and April notwithstanding the COVID-19 pandemic).  There is no reason for suggesting that the Plaintiff would let out the unit at a suppressed rent.  

23.  The 2^nd Defendant’s argument that there would be wasted time and costs in transferring title to the Plaintiff cannot prevail.  If the Defendants succeed on appeal, those costs can be recovered.  As this Court has previously held in Bright Gold, supra at [20] – [21] and [25], the costs and incidental “price” of an appeal, including conveyancing or transactional costs that would be wasted if a transaction were to be reversed on appeal, cannot by itself be a ground for a stay to be granted.

24.  For these reasons, we do not accept that the appeal would be rendered nugatory if no stay is granted. In the absence of any sound justification for granting a stay, the Plaintiff should be entitled to the fruit of his success.  The absence of serious prejudice if a stay were to be granted is not a reason for granting such stay.

25.  In the circumstances, we dismiss the 2^nd Defendant’s application for stay of execution of the judgment of 24 January 2019. 

Application to amend Notice of Appeal

26.  We have already alluded to the nature of the proposed amendments.

27.  Relying on a passage in Hong Kong Civil Procedure 2021 Vol 1at paragraph 59/7/2, Mr Lui submitted that the usual practice is for leave to amend to be granted unless the amendments raise issues which are not open on the pleadings; the facts necessary to sustain the point of law concerned have not been established in the court below; or the grant of leave would give rise to significant prejudice to the other party.

28.  He submitted that these were the only instances where leave would be refused.  There is no added requirement of reasonable arguability for the proposed amendments.

29.  We cannot accept these submissions.  The commentary in Hong Kong Civil Procedure 2021 Vol 1 at paragraph 59/7/2 did not cite any authority for such usual practice.  It seems to be a commentary taken from old versions of the White Book, traceable perhaps to the English White Book in 1997 at paragraph 59/7/1.

30.  The guiding principle governing the court’s power in granting leave to amend is that such discretion is untrammelled.  Further, since the Civil Justice Reform, such power should be exercised with proper regard to the underlying objectives in Order 1A of the Rules of the High Court, Cap 4A, see Rule 2(1)(a). 

31.  The practice described in the 1997 White Book is no longer the practice in England.  The current English practice can be taken from paragraph 52.17.2 of Civil Procedure 2018 Vol 1 which reads as follows:

“ If the proposed amendment raises a point which was argued in the lower court, the question may arise why this was not included in the original appeal notice. Nevertheless, if the amendment is sought timeously, it may not prejudice other parties. Such an amendment may well be permitted, subject to the general principles governing amendments. See the commentary to Pt 17.”

32.  One of the general principles discussed under Pt 17 of the CPR is that prospect of success of the amendments is relevant: see paragraph 17.3.6.

33.  In the context of amendment of a notice of appeal in Hong Kong, as far as this Court is aware, the situations described in Hong Kong Civil Procedure 2021 Vol 1 at paragraph 59/7/2 are not the only instances where the court will refuse leave. Disruption to the fair and reasonably expeditious disposal of an appeal is certainly another factor to be taken into account: see To Pui Kui v Ng Kwok Piu [2014] 5 HKLRD 103 and Ng Kwok Piu Philip v To Pui Kui [2020] HKCA 724.

34.  We also see no basis for suggesting that the arguability of proposed amendments is not a relevant consideration when the court is asked to grant leave to amend a notice of appeal.  In principle, if the court is of the clear view that an amendment is wholly unarguable, it would not act in vain to grant leave to amend.

35.  At the same time, it would not be proportionate for the court to immerse too much into the examination on the merits of a proposed amendment since such merit could in any event be subject to substantive arguments in the appeal proper.  Interlocutory applications in the Court of Appeal should not be allowed to take up a disproportionate amount of time and effort thereby prolonging the time and escalating the costs of the appeal process as a whole.

36.  As a rule of thumb, unless there are exceptional circumstances, applications for amendment of notice of appeal should be resolved by way of paper applications without any oral hearing. 

37.  In many cases the court will be content with leaving the merits to be canvassed at the substantive appeal, particularly when there is no objection to the proposed amendments by the other parties in the appeal.

38.  However, it does not mean that leave would be granted even if the court can readily come to a clear view on the lack of merit of a proposed amendment.  As we have said above, the court will not act in vain and unarguable grounds wasting time and costs in the preparation of the appeal should not be allowed.

39.  Further, another important consideration is that the grounds of appeal should be prepared in a concise and focused manner pinpointing the alleged palpable errors of the court below, see Practice Direction 4.1 paragraphs 20 to 22.

40.  Thus, the court should not examine the proposed amendments as if they were skeleton submissions identifying all the relevant materials supporting the grounds.  In other words, in considering the arguability of a proposed ground, the court must not assume that an appellant has produced everything that can be advanced to support the ground in the materials provided in the application for leave to amend.  To that extent, the court will give the benefit of doubt to an appellant in assessing if leave to amend should be granted.

41.  Adopting this approach, we turn to the objections raised by Mr Ismail to the proposed amendments.

42.  In respect of Grounds 1 to 3, whilst the expansion of the same by way of proposed amendments can be arguments advanced in skeleton submissions, we do not think they are so objectionable that the same should not be allowed to be included in the notice of appeal.  Subject to what we shall say regarding paragraph (4) below, we shall allow the amendments under these Grounds.

43.  But there is a further objection to the new paragraph (4) which is also grouped under Ground 3.  As mentioned, it is a plea in respect of the discontinuity of factual possession. Mr Ismail said it was a new point which had not been run at the trial.  On the other hand, Mr Lui said the respective uses of Flat B and Flat C had been specifically pleaded in the Amended Defence and Counterclaim with the averment of the Plaintiff’s lack of continuous factual possession.

44.  We have read the pleas referred by Mr Lui.  We paid particular attention to paragraphs 9(3) and (4), 50 to 52 of the 1^st Defendant’s Amended Defence and Counterclaim and paragraphs 8(3) and (4), 28 of the 2^nd Defendant’s Amended Defence. The pleas appeared to be focusing on the Plaintiff’s occupation being licensed by the 1^st Defendant and that the occupation was by companies as opposed to the Plaintiff personally.

45.  The Plaintiff’s evidence on possession of the Flats was set out by L Chan J at [12] of the judgment and accepted by him as reliable at [445].  On such evidence, it would appear that even if the Plaintiff was not personally in occupation, the possession was by those deriving title or permission from him.

46.  On the basis of such finding, the judge discussed the issue of adverse possession at [474] to [489] without distinguishing between Flats B and C.  It also did not appear from the judgment that trial counsel for the Defendants advanced any argument on discontinuous factual possession.

47.  In the circumstances, we can see the force of Mr Ismail’s submission that the argument was a new one which is fact and evidence sensitive.  In accordance with the principles discussed in Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356, Lehmanbrown Ltd v Union Trade Holdings Inc HCMP 977/2015, 17 June 2015, Re Qin Jun [2018] HKCA 527 and Chan Chi Wai v Chan Sau Wah [2019] HKCA 584 the Defendants should not be allowed to run such new argument for the first time on appeal.

48.  Mr Lui submitted that the Defendants were entitled to challenge the judge’s findings on factual possession.  This is correct but at the moment there is no effective ground in the Notice of Appeal (even taking into account of the proposed amendments) which can pinpoint any palpable error of the judge on such finding.  Paragraph (4) in the proposed amendment simply proceeds on the basis that the facts were other than those as found by the judge without explaining why the finding should be disturbed.

49.  It is not acceptable for Mr Lui asserting in his submissions at paragraph 17(3) that the Defendants will refer to various parts of the Transcript at the appeal regarding that finding.  Such general assertion cannot satisfy the requirement of formulating proper ground of appeal to challenge a finding of fact by the trial judge.  By now, practitioners should be aware of the imperative need to identify the alleged palpable errors of the judge in the grounds of appeal. 

50.  If the Defendants were unable to plead any palpable error in their grounds of appeal to challenge a finding, the Court will not permit them to embark on the examination of the Transcript at the hearing of the appeal in contravention of the modern appellate approach discussed in China Gold Finance Ltd v CIL Holdings Ltd CACV 11/2015, 27 November 2015 and Gotland Enterprises Ltd v Kwok Chi Yau CACV 260/2014, 19 January 2016.  

51.  The same observations can be made regarding Ground 4, paragraphs (5) and (6) in the proposed amendments.  L Chan J gave detail reasons for coming to the findings that the 1^st Defendant was not a businesswoman, see [311] to [317] of the judgment.  He also gave detail consideration to the argument based on presumption of advancement, see [355] to [383].  In the proposed amendments, the Defendants only asserted that the judge erred in coming to such findings without setting out any palpable errors.  This does not satisfy the requirement under paragraph 21 of Practice Direction 4.1.  There is no reason why palpable errors cannot be identified in the grounds of appeal in a concise and succinct manner.

52.  In contrast, there are attempts to formulate palpable errors under Ground 5 (paragraphs (7) to (10) in the proposed amendments).  Whilst Mr Ismail advanced some submissions to challenge the merit of the same, we are of the view that such arguments should best be reserved for the hearing of the appeal.  We will allow such amendments.

53.  Ground 6 (paragraph (11) in the proposed amendments) is subject to the same defect as Ground 4.  L Chan J addressed the lapse of time at [341] to [343] of the judgment.  The Defendants have not begun to formulate any proper ground to challenge the same.  All that was pleaded in paragraph (11) is an averment that it was inherently improbable.  In light of the background of the case and the evidence accepted by the judge on the relationship between the parties in the past, we do not find it reasonably arguable that the finding of the judge was plainly wrong or inherently improbable.

54.  Hence, in respect of the proposed amendments, we only grant leave regarding paragraphs (1) to (3) and (7) to (10).  We refuse leave regarding the rest.  The Defendants shall file and serve the Amended Notice of Appeal with the permitted amendments within 7 days from the handing down of this judgment.

Costs

55.  As the Plaintiff successfully opposed the 2^nd Defendant’s application for a stay of execution, he is entitled to his costs of and incidental to that application. In the Plaintiff’s Statement of Costs for summary assessment, his solicitors sought $71,715, including solicitors’ fees of $36,365 and counsel fee of $35,000 plus disbursements of $350.  We find the sum very reasonable and we fix the costs payable by the 2^nd Defendant at $71,715.  Such costs are to be paid forthwith.

56.  As the Plaintiff was substantially successful in opposing the application for leave to amend the Notice of Appeal and his opposition cannot be said to be unreasonable, he is entitled to his costs of and incidental to that application as well.  We shall order the Defendants to pay the costs of the Plaintiff in the application.

57.  In the Plaintiff’s Statement of Costs for summary assessment, his solicitors sought $74,800, including solicitors’ fees of $54,250 and counsel fee of $20,000 plus disbursements of $550.  We find the same reasonable.  Thus, we order the Defendants to pay the Plaintiff $74,800 forthwith.