CHAN KWOK CHU t/a HO KEE MOTORS SERVICE v. GOTLAND ENTERPRISES LTD

HCA 282/2015

ACTION NO 282 OF 2015

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D E C I S I O N
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1.  This is an application for an order to strike out the statement of claim and dismiss the action. The action has been brought by the plaintiff, Mr Chan Kwok-chu trading as Ho Kee Motors Service for, inter alia, a declaration that he has acquired possessory title to certain land by virtue of adverse possession.

2.  In 1981, the defendant, Gotland Enterprises Limited, became the registered legal owner of certain in Mai Po, namely sections C, D and E and Remaining Portion (with a total area of approximately 760,000 square feet) of Lot No. 76 in Demarcation District (“DD”) 101, Mai Po, Yuen Long.  As there was a sub-division subsequently of the land, I shall refer to the then remaining portion as the “original Remaining Portion”.

3.  Mr Chan alleged that he had, since August 1991, exclusively occupied a part of the original Remaining Portion for a garage business that he had acquired from someone else at the time.  According to him, the garage was situated partly on Lot No. 1889 of DD105 and partly on the original Remaining Portion of Lot No. 76 of DD101.  The present proceedings concern only that part of the original Remaining Portion said to have been occupied by Mr Chan for his garage business, which is an L‑shaped piece of land marked pink on the map annexed to the writ of summons herein (“the disputed land”).

4.  It appears that in around 2002 or 2003, Gotland became concerned about the presence of persons or objects occupying Sections C, D and E and the original Remaining Portion of Lot No. 76 of DD101.  In March 2003, it instructed solicitors to post up 25 copies of a letter in the area, addressed to the occupiers, demanding that they vacate the land.  On 15 October 2003, Gotland issued an originating summons in the High Court (HCMP 4550/2003) under the RHC Order 113 for possession of those parcels of land (“the possession action”). 

5.  It is common ground that the disputed land in the present proceedings formed part of the original Remaining Portion and was therefore, at least at that stage, included within the ambit of the possession action.

6.  The 1^st defendant in that action was Kwok Chi-yau; the 2^nd defendant was Kwok Yuen Poultry and Fisheries Company Limited; the 3^rd defendant was Leung Wai-kuen trading as Hop Shing Tyre Service and the 4^th defendant was “persons in occupation of the land”.  Subsequently, in June 2011, a 5^th defendant was added called Kwok Lau Chu who was the 1^st defendant’s father but who had set up a competing claim for adverse possession to the land.

7.  On 17 October 2003, Gotland served the originating summons and supporting affirmations on the 1^st to 3^rd defendants.  In addition, 15 copies were posted on the fences, structures and poles on the land for notice to the 4^th defendant being all the occupiers.

8.  On 10 November 2003, a Master of the High Court ordered that the originating summons in the possession action stand as the writ and directed pleadings be filed as between Gotland and the 1^st to 3^rd defendants.  The originating summons was adjourned sine die as against the 4^th defendant.

9.  The 1^st to 3^rd defendants counterclaimed on the basis of adverse possession, but their counterclaim did not appear to extend to the disputed land.

10.  The possession action took a long time to come on for trial.  In October 2012, Gotland’s solicitors said they posted up copies of a demand letter and the originating summons at five conspicuous parts of the disputed land itself, including on broken fences, containers, and cars.  On the evidence they did not however know the identity of the occupiers there. 

11.  The trial of the possession action commenced on 3 September 2013 but was adjourned.  Subsequently, Gotland and the 1^st to 3^rd defendants entered into a settlement.  Pursuant to the settlement:

(1) By consent between Gotland and the 1^st to 3^rd defendants, judgment was entered on 19 August 2014 for the 1^st to 3^rd defendants to give possession of Sections C, D and E and the original Remaining Portion to Gotland, with the exception of two specified areas which were marked on the plan attached to the consent judgment.  The disputed land in these proceedings lies outside of those two specified areas; in other words, it falls within the land possession of which was to be given to Gotland under the consent judgment.

(2) On 20 August 2014, Gotland executed a Deed Poll, subdividing the original Remaining Portion into Sections F, G and the Remaining Portion of Lot No. 76.  I shall refer to this Remaining Portion as the “new Remaining Portion”.  The disputed land falls within the North Eastern part of Section G.

(3) On 29 August 2014, Gotland assigned all its interests in Sections C, D and E and the new Remaining Portion to a company owned by the 1^st defendant called Chief Maker Limited (“Chief Maker”).

(4) On 29 September 2014, by consent between Gotland, the 1^st to 3^rd defendants, the 5^th defendant and Chief Maker, leave was granted for Gotland to cease to be a party to the proceedings except

“for the purpose of … executing the Consent Judgment dated 19^th August 2014 against the 1^st, 2^nd, and 3^rd defendants in favour of Gotland insofar as Section F and Section G both of Lot No. 76 in Demarcation District No. 101 are concerned and the taking of steps and action for the protection of Gotland’s interests and rights therein.”

12.  As stated by Anthony Chan J in his judgment in the possession action dated 25 November 2014 at paragraph 8, what was achieved by the settlement was essentially that Gotland sold to Chief Maker the part of the land which was the subject of rival adverse possession claims of the 1^st to 3^rd and 5^th defendants, leaving it to the 1^st defendant and Chief Maker to fight with the 5^th defendant.  Gotland retained that part of the land, that is Sections F and G, which was not subject to claims raised by any of those defendants. 

13.  Section F was sold by Gotland in September 2014 with completion in September 2015, but Gotland has remained the owner of Section G.

14.  On 27 October 2014, a writ of possession was issued pursuant to the consent judgment dated 19 August 2014 for the land in question. 

15.  The possession action went to trial as between Chief Maker and the 1^st and 5^th defendants in October 2014.  On 25 November 2014, judgment was given in favour of Chief Maker.

16.  On 19 January 2015, Mr Chan applied to add himself as a party in the possession action but withdrew his application on 30 January 2015.

17.  The writ of possession was executed against the disputed land on 28 January 2015 when Gotland recovered possession from Mr Chan.

18.  On 5 February 2015, Mr Chan started the present action against Gotland, claiming a declaration as to his possessory title and an order for possession.

19.  By a summons dated 28 July 2015, Gotland now seeks an order that the statement of claim be struck out and the action dismissed.

20.  There are essentially two grounds relied upon for the application.  First, it is submitted that irrespective of whether Mr Chan had knowledge of the possession action prior to the issue of writ of possession, the only way for him to assert his right is to apply to add himself as a party to that action and to set aside the writ of possession as against him.  To bring the present action is for that reason an abuse of possess. Secondly, Gotland contends that Mr Chan in fact knew of the possession action but deliberately chose not to take part in it, and the present action was brought mala fide and is therefore an even greater abuse.

21.  I need only deal with the first ground because the result is in my view clear.  The possession action was an action brought under RHC Order 113.  That Order provided for a special procedure for a plaintiff to make a claim for possession of land which he alleges is occupied solely by a person or persons (not being a tenant or tenants holding over after the termination of the tenancy) who entered into or remained in occupation without his licence or consent.  It is an especially useful procedure where the identity of the occupiers is unknown to the plaintiff. 

22.  The rules make provision for service of the originating summons including the affixing of it to the main door or other conspicuous part of the premises.  Rule 5 makes provision for any person not named as a defendant who is in occupation of the land and wishes to be heard on whether an order for possession should be made to apply at any stage of the proceedings to be joined as a defendant.  Rule 8 provides that a judge may, on terms, set aside or vary any order made in proceedings under Order 113.  Order 15, rule 10, similarly provides that the court may at any stage of the proceedings in an action for possession of land order any person not a party to the action who is in possession of the land to be added as a defendant.

23.  These provisions recognise that an action, and ultimately, an order, for possession, may affect occupiers who have not been joined as defendants in the action.  The rules seek to ensure that no adverse order will be made against them before they have had an opportunity of being heard, and prevent collusion between a plaintiff and his tenant: see Hong Kong Civil Procedure 2016, Volume 1, paragraph 15/10/1.  (That same caution is reflected in the requirements for leave for the issue of a writ of possession, contained in Order 45 rule 3(2) and (3), which however do not apply to an action brought under Order 113: see Order 113 rule 7(1), as occupiers should have had notice of the action as a result of the requirements of service under that Order.)

24.  A person in Mr Chan’s position, who is an occupier of land and finds there are proceedings for possession against his interest to which he is not a party, should apply to take part in those proceedings.  This is plain from the nature of the writ of possession.  It is a direction to the bailiff to enter the land and cause the plaintiff to have possession of it: see Form no. 66 in Appendix A to the Rules of the High Court. It is an authority under which any squatter may be turned out at once: McPhail v Persons, names unknown [1973] 1 Ch 447, 458F.  The bailiff turns out everybody he finds on the premises, even though they are not parties: R v Wandsworth County Court, ex parte Wandsworth London Borough Council [1975] 1 WLR 1314, 1319B.

25.  If an occupier does not assert his right within those proceedings, he may find himself evicted on the strength of the writ of possession, as has indeed happened to Mr Chan.  Even after the writ has been executed, however, the occupier may still apply to join in the action for possession, even though strictly speaking he no longer “is” a person in possession.  This was decided in Minet v Johnson (1890) 63 LT 507. There the plaintiff bone fide brought an action against Johnson to recover possession of certain premises.  The writ was served on Johnson only and judgment in default was obtained.  Pursuant to a writ of possession the sherriff turned out Hartley, who instead of Johnson was in possession of the premises. The Court of Appeal held that Hartley should be allowed to the defend the action.  Lord Esher MR said:

“What then is his remedy? … If he had taken his point before judgment had been signed, he would have been treated as though he were a defendant in the action; if he has done so after judgment has gone by default, without his knowing anything of the former proceedings, he must then also be allowed to defend. But the judgment must not be set aside as between the plaintiff and Johnson; it can only be set aside so far as it concerns him.”

Bowen LJ said:

“It is objected that Ord. 12, r. 25[1] cannot apply here because Hartley is not in possession; but this view is at once displaced by considering that he could not do better than he is entitled to do under the order. We must take a wider view of the meaning of the rule, and allow a person in possession to come in and defend even after execution.”

26.  In Yu Wing-kan v Lau Shuk-lan [1990] 2 HKLR 583, the Court of Appeal also held that a person claiming to be a sub-tenant, where the landlord had obtained a default order against the tenant for possession and a writ of possession on the strength of that order, had sufficient standing to be joined as a party to the suit. Indeed, giving the reasons of the court, Clough JA at p. 594C said:

“the only way in which the applicant could avoid eviction was by asserting her rights and intervening in the proceedings”.

27.  That seems to me to be what Mr Chan should have sought to do in this case, though of course I do not decide in this application whether he has proper grounds to apply to join in the possession action or to set aside the consent judgment and writ of possession as against himself.  That will have to be decided if and when Mr Chan does take that route, and may depend inter alia on whether Mr Chan did in fact have no notice of the possession action as he claims. It will be recalled that Mr Chan did apply to be joined in the possession action in January 2015, but for reasons that have not been explained the application was withdrawn before it was heard.  If it was withdrawn because the writ of possession had been executed on 28 January 2015, that would, as shown by Minet v Johnson, have been a mistaken step.

28.  What Mr Chan cannot do is to start a separate independent action, as he has now done, seeking a declaration of his own possessory title, a declaration of the extinguishment of Gotland’s title, an order for delivery of possession and an injunction to restrain Gotland from entering the disputed land or erecting any structures on it.  That would be incompatible with the writ of possession on the strength of which Mr Chan had been evicted by the bailiff of this court.  If that writ is to be challenged it is to be challenged in the possession action itself.

29.  Moreover, Mr Chan cannot try to obtain a better position under the Limitation Ordinance (Cap. 347) by bringing his own action in 2015 instead of joining in and resisting the possession action which Gotland instituted in 2003.  Ms Tsang who appeared for Mr Chan did not rule out the potential contention that in the present action Mr Chan would only need to show 12 years of adverse possession ending upon his eviction in January 2015. Under the possession action Mr Chan would need to show 12 years’ adverse possession ending in October 2003.  It would in my view be quite unfair that a squatter such as Mr Chan should be able to improve his position in that way by bypassing an action for possession that the owner had previously properly bought as long ago as in 2003.

30.  Mr Tsang argued that the consent judgment dated 19 August 2014 was only entered between Gotland and the 1^st to 3^rd defendants and does not bind Mr Chan.  She relied on paragraph 10 of Anthony Chan J’s judgment which stated, inter alia:

“The action against D4 was also discontinued given that all the occupants of the Land are before the court.”

31.  In my view it is not to point to try to construe this sentence.  The judge was not making an order there. Properly read, it is clear from paragraphs 1, 9, and 10 of the judgment that the case before the judge concerned only Sections C, D and E and the new Remaining Portion, i.e. excluding Section G within which the disputed land in these proceedings falls. 

32.  What happened was spelt out in the order itself, which is that, as stated earlier, Gotland agreed to cease to be a party to the proceedings except for the purposes of executing the consent judgment dated 19 August 2014, insofar as Sections F and G are concerned and the taking of steps and action for the protection of Gotland’s interests and rights therein.

33.  Quite plainly this does not mean Gotland gave up any right it has against any occupiers there may be on the disputed land other than the 1^st to 3^rd defendants in the possession action. By 2014, the possession action had gone on for over 10 years. Numerous notices had been placed on the premises.  No one other than 1^st to 3^rd defendants (and subsequently the 5^th defendant) had come forward to assert any right to the land. 

34.  As a “step and action for the protection of Gotland’s interests and rights” (which was expressly excepted from the order by which Gotland ceased to be a party), Gotland obtained a writ of possession which, as the authorities show, was effective against all occupiers.

35.  For these reasons I consider that the present action is impermissible.  The statement of claim will therefore be struck out and the action dismissed.  It is unnecessary to consider the factual question whether Mr Chan did in fact have notice of the possession action prior to 2015.

Submissions on cost

36.  Costs of the action and this application be to the defendant with a certificate for one counsel.