EASE KIND DEVELOPMENT LTD v. LAND SOURCE INVESTMENT LTD

HCMP 2003/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2003 OF 2012

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J U D G M E N T

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1. This is a vendor and purchaser summons. The plaintiff is the vendor and the defendant, the purchaser. The parties entered into a sale and purchase agreement on 31 July 2012 for the sale and purchase of section B of IL 2670B, RP of IL 2671, RP of IL 2672, RP of IL 2673 (also known as Nos 3, 4, 5 and 6 Kwai Fong Street respectively) and RP of IL 2670 (collectively called “the Property”). The issue between the parties is the defendant’s requisition on the plaintiff’s title to the RP of IL 2670. The plaintiff says that its title to this section is partly documentary and partly possessory.

2. IL 2670 was granted by a Government Lease dated 10 September 1931 to one Ho Shi.  Ho Shi passed away on 7 March 1947.  His executrix Ho Lo Han assigned the lot to one Ma Pak Ping on 18 June 1956.  Ma shortly thereafter assigned the same to Madam Leung Chui Ying (“Madam Leung”) on 28 July 1956. 

3. Madam Leung also owned the neighbouring IL 2671.  She developed the 2 lots together into a 6-storey residential building.  Half of the building standing on IL 2670 is named No. 3 Kwai Fong Street and the other half standing on IL 2671 is named No. 4 Kwai Fong Street. 

4. No. 3 Kwai Fong Street does not cover the whole of IL 2670.  It only covers section B of IL 2670.  There is a small strip at the back next to the scavenging lane which was unbuilt on.  This strip was surrendered to the government as section A of IL 2670 by a deed of surrendered dated 9 June 1964 and registered by memorial 445406.  This strip is irrelevant to these proceedings.

5. The last part derived from IL 2670 is RP of IL 2670.  It has a width of 4½ inches and adjoins IL 2669.

6. There is also a building standing on IL 2669 and is named No. 2 Kwai Fong Street.  The buildings Nos 2 and 3 Kwai Fong Street are separated by a 9-inch wide party wall.  Half of this wall at 4½ inches width stands on RP of IL 2670 and the other half stands on the side of IL 2699.

7. Madam Leung sold each of the 6 storeys of No. 3 Kwai Fong Street by a separate assignment.  Each of the 6 first assignments assigned to the purchaser the exclusive right to occupy one of the 6 storeys of No. 3 Kwai Fong Street.  But each of them assigned 1/6 of the rights and interests only in section B of IL 2670.  They did not involve RP of IL 2670.  The last assignment was dated 30 June 1984 and registered by memorial 2651571.  It assigned the exclusive right to occupy the 1/F to one Li Yun Kwong. 

8. There are also 2 DMCs executed by Madam Leung and the purchasers.  They contain the same covenants but again only covered section B of IL 2670 and not RP of IL 2670. 

9. Hence, Madam Leung had reserved unto herself RP of IL 2670 and half of the party wall between Nos 2 and 3 Kwai Fong Street despite having assigned all her rights and interests in section B of IL 2670 and all the rights to occupy No. 3 Kwai Fong Street by 30 June 1984. 

10. Madam Leung passed away on 1 July 1984.  No grant of probate or letters of administration had been made in respect of her estate.  Her estate thus vested in the Official Administrator and not in any of the beneficiaries of the same.

11. On 14 March 2011, the plaintiff took out an originating summons in HCMP 412 of 2011 against the estate of Madam Leung for a declaration that the plaintiff together with its predecessors had been in adverse possession of RP of IL 2670 for a continuous period of over 20 years immediately before commencing those proceedings and had defected Madam Leung’s title thereto under the Limitation Ordinance, Cap 347 prior to the commencement of those proceedings.

12. Madam Leung’s estate was represented by the Official Solicitor but only for the purpose of accepting service of the originating summons.

13. I made the declaration as sought in the originating summons on 30 May 2011.

14. On 31 July 2012, the plaintiff entered into a sale and purchase agreement with the defendant for the sale of the Property to the defendant. 

15. The agreement required the plaintiff to give title according to section 13 of the Conveyance and Property Ordinance, Cap 219.  I have already said that the only outstanding requisition is the plaintiff’s title to RP of IL 2670.  The plaintiff contends that it has shown and proved a good title to this lot.  It relies on section 7(2) of the Limitation Ordinance, which bars Madam Leung’s estate from taking action to recover this lot, and section 17 of the Ordinance, which has defeated Madam Leung’s title to this lot as confirmed by my declaration in HCMP 412 of 2011.

16. I note however that Madam Leung assigned 1/F of No. 3 Kwai Fong Street to Li Yun Kwong on 30 June 1984 and passed away on 1 July 1984.  The death certificate dated 2 July 1984 stated that she had died of bronchopneumonia, senile dementia and chronic renal failure.  Li Yun Kwong appeared to be closely related to her.  I therefore queried the parties on whether Madam Leung had the capacity to execute the assignment on 30 June 1984 and whether Li Yun Kwong was in adverse possession of IL 2670 RP or he had a licence from Madam Leung and/or the representative of her estate to occupy the same and hence not in adverse possession of the same.

17. Mr Lin, counsel for the plaintiff, submitted that there is no evidence to suggest that Madam Leung had been affected by senile dementia to the extent that she had no capacity to execute the assignment of the property to Li Yun Kwong.  Her execution of the assignment was also attested by a solicitor.  The assignment must therefore be treated as valid and effective. 

18. Regarding Li Yun Kwong’s possession of the party wall standing on IL 2670 RP, even if Madam Leung should have given him a licence to do so, it could only have been a bare licence as there is nothing in writing evidencing such licence.  Furthermore, any bare licence would have been terminated upon Madam Leung’s death (see Ho Hang-Wan v Ma Ting-Cheung as personal representative of Ma Sz-Tsang [1990] 1 HKLR 649).  There could also not have been any grant of licence after Madam Leung’s death as no grant of probate or letters of administration of the estate had been made and her estate vested in the Official Administrator. 

19. I agree with Mr Lin’s submissions.  My declaration in HCMP 412/2011 is valid and binding.

20. The plaintiff further submitted that it is in possession of all title deeds covering IL 2670 up to its assignment to Madam Leung. 

21. The demarcation of IL 2670 into IL 2670A, IL 2670B and IL 2670 RP only took place after Madam Leung had acquired IL 2670. There is no deed poll registered at the Land Registry or otherwise discovered which formally divided IL 2670 into the three sections.  However, the assignees of the 6 floors of No. 3 Kwai Fong Street were only assigned the rights and interests in IL 2670B.  They were not assigned any right or interest in either IL 2670A or IL 2670RP.  The 2 DMCs for No. 3 Kwai Fong Street also do not concern IL 2670A and IL 2670RP.  Hence, IL 2670 must have been carved into the three sections informally by assigning only section B to the purchasers, reserving section A as part of the widened scavenging lane and reserving the RP as half of the party wall adjacent to IL 2670B.  If there was a deed poll, I see no reason why it was not registered at the Land Registry.

22. Hence, I am satisfied that the plaintiff is in possession of all the title deeds and documents for IL 2670RP up to Madam Leung’s acquisition of IL 2670.  I have also declared in my judgment in HCMP 412/2011 that the plaintiff and its predecessors had been in adverse possession of IL 2670RP for long enough to have ousted the estate of Madam Leung as its owner. There is therefore nobody who can challenge the plaintiff’s title to this section.

23. Mr Lin submitted that a good title can be partly documentary and partly possessory.  He referred to re Atkinson and Horsell’s Contract [1912] 2 Ch 1 where Cozens-Hardy M R said at pp 10 to 12.

“… [I]t is said that although … the vendor has a good title to this property, it is not one which the purchaser bargained for, or was entitled to require, because one part of the title depends not upon written documents per se, but upon written documents prior to 1874, and since that date upon the fact of uninterrupted possession for the statutory period.

Now I ask myself this: Supposing the abstract had been the identical abstract which had been delivered, and that it contained a statement that Lady Colquhoun had been in uninterrupted possession since 1874, would that or would it not have been a title which could be forced upon the purchaser under this contract? It seems to me that it would. The title begins as stipulated. Every document which is contained in the abstract does relate to the land in question. It shews facts which prove that the person who was then ousted was an absolute owner, and not under any disability, and that, therefore, there is nobody who can challenge the title of the vendor. I ask myself why is there any ground for holding that you must necessarily presuppose a title going through a number of documents without any intervening application of the Statute of Limitations. I know of no authority to justify such a contention. I think that it would have a starling effect, and it would be really inconsistent with Games v. Bonnor 54 L. J. (Ch) 517 which is a very strong case, and one which I think has a great bearing upon the matter in question. … Let me assume an open contract. The vendor has been in possession, say, for twenty years; it may be, and I think it is true, that he would have to shew an absolute title for forty years, that is to say, to shew deeds and documents beginning before the period when he entered into possession. If he can do that (as the vendor in the present case can) by reason of possession under the deeds and documents, I do not see any reason why he should not be able to enforce specific performance, although in one sense of the word that which is the root of his title, namely, a document at least forty years old, will not have been one of the documents through which, and by virtue of which, he claims to be entitled to the property. He has satisfied the obligation to shew that he has a good title, and he can say ‘I shew an abstract extending back forty years’, that abstract being important, of course, as shewing dealings with the property, and negativing the right of anybody to defeat the operation of the statute.

…

 I think this is a case, therefore, in which there is no foundation for saying that the purchaser was entitled to assume that the title should begin in 1838 and go through a chain of deeds and documents.  It is sufficient if, in fact, the vendor produced an abstract beginning at that date, and having regard to the Statute of Limitations he is in a position to say 'I have a good title and I have shewn it from 1838”

Buckley LJ, further said at pp 18 to 20:

“What has happened in this. An abstract of title was delivered which traced the title down to 1874, and then traced it onwards through one Lady Colquhoun, who was in 1874 treated as being, though she was not in fact, entitled as heiress-at-law of George Cathrow. In point of fact, the person who became entitled as heir-at-law was his son James Cathrow, and the property had passed under James Cathrow’s will to James Cathrow’s widow, and Lady Colquhoun had nothing to do with it. The abstract, however, went on to trace the title as if Lady Colquboun was, as everybody at that date though she was, and as the Court in 1884 in point of fact treated her as being, entitled, and traced the title as if it were one of devolution from the will of 1838 straight onwards. The fact was that that was not so. In 1874 if the title had been traced by devolution it ought to have been traced from the widow of James Cathrow. But this difficulty having been pointed out, the vendor said ‘That does not make any difference. Lady Colquhoun went into possession and got all the deeds in 1874 — that is thirty-eight years ago — and I have a perfectly good possessory title’; to which the purchaser replied ‘I am not bound to take the possessory title; you must under these conditions shew me a title derived by devolution from the testator of 1838.’

To my mind that is not so. I do not think there was any contract that he should have a title of that kind. I will try it by two tests. The first test I apply is this. Suppose that the abstract had traced the title of 1874, and then had stated that Lady Colquhoun was not the heiress-at-law, but that from that time onwards to 1911 she had been in possession. If the abstract had been in that form could the purchaser have been compelled to take the title? I should say unquestionably, because in that case though the will of 1838 would not have been a document material in tracing the title by devolution, yet that abstract would have commenced at the agreed date and would have shewn a perfectly good title. The purchaser would, I conceive, have been bound to take it.

The second test which I will put is that of an open contract. Suppose there had been an open contract. The vendor would have been bound to shew a forty years title. But assume that he had only a possessory title say for fifteen years. Still he would have had to shew a title for forty years so as to exclude the possibility of a state of facts which might go to negative his possessory title. Suppose he had done that, could the purchaser have said ‘I will not take it, because the deeds of forty years ago have nothing to do with the title which you are shewing’? Certainly the purchaser could have been compelled to take that title.

There is another consideration, and it is this. It is not the fact that the deeds prior to the date when adverse possession commenced are irrelevant. They are relevant. They may be relevant in various ways. They may be relevant to shew that at the date when the adverse possession commenced there was not a person under disability who could defeat the title by possession. They may be material under certain circumstances to shew what was the estate of which adverse possession was taken, as, for instance, that by statute there was some right against the land which would bind everybody into whose hands it might come. Early documents may be material, and it does not at all follow because the root of title is specified as being of a date prior to that at which the title by adverse possession commences that those deeds are necessarily irrelevant. Upon principle it seems to me that the vendor shewing a good title is entitled to say to the purchaser ‘You must take that; I have done that which I contracted with you that I would do. I have begun in 1838; I have shewn all the material facts from that time to the present. The date of commencement of title is named only so as to relieve me from going to an earlier date.’ That is what is meant by the root of the title. It is not meant that the named deed or will is the root of the title in the sense that that deed or will is an essential factor in establishing the title which is ultimately to be accepted.

 … because Games v. Bonnor (1) has affirmed the principle which I have been seeking to enunciate.  It seems to me that that case necessarily involves that where as between two contracting parties a title is to  be shewn as from a defined date the purchaser can be compelled to take a possessory title commencing at a later date; in other words, though you cannot in a contract of this kind get away from the proposition that the title to be shewn is to be such as stipulated, there is nothing which entitles the purchaser to say that the contract is that he is not to have a  possessory title, but is to have some other title, namely, a title commencing with the root of title and shewing title therefrom by devolution.”

24. I am further referred to Chan Chu Hang & Ors v Man Yun Sau [1997] 2 HKC 144 where Le Pichon J said at p150:

“It is stated in Sihombing & Wilkinson’s Hong Kong Conveyancing, Vol. 1, V [176] that -

Adverse possession does not vest in the person in possession of good title, but merely a good holding title."

…

 There would appear to be two qualifications to the general statement stated above. … The second is that good title may be part documentary and part possessory. If good title could be traced down to the date of the defect, possession as from that date would cure the defect and the title could be forced on the purchaser: see Re Atkinson and Horsell's Contract [1912] 2 Ch.1; Barnsley, above at 332.”

25. In the light of the above, I agree that the plaintiff has provided a satisfactory answer to the defendant’s requisition of the plaintiff’s title to IL 2670RP pursuant to the sale and purchase agreement dated 31 July 2012 and made between the plaintiff and the defendant.  I so declare.

26. I further decree that the agreement be specifically performed.

27. In line with the wishes of the parties, I make no order as to costs.