CHEUNG KWONG YUEN v. SUN HUI FANG

CACV 112/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 112 OF 2015

(ON APPEAL FROM LDPD 1740 OF 2014)

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REASONS FOR JUDGMENT
AND
DECISION ON COSTS

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Hon Kwan JA (giving the reasons for judgment and decision on costs of the court) :

1.  This appeal was brought by Madam Sun Hui Fang (“Madam Sun”) against the judgment of Lands Tribunal Member Mr Lawrence Pang on 10 October 2014. On the application of Cheung Kwong Yuen (“the registered owner”), the registered owner of the 9^th floor and roof of No 107 Tai Nan Street, Kowloon (“the Property”), Member Pang ordered Madam Sun to deliver up vacant possession of Room A on the roof of the Property (“the Premises”) to the registered owner and to pay mesne profits for her occupation of the Premises at $1,000 per month from 8 November 2013 (the date when the registered owner took an assignment of the Property) to the date of delivery up of vacant possession.

2.  On 9 December 2014, Member Pang refused to grant leave to Madam Sun to appeal against his judgment.  Leave to appeal was granted by the Court of Appeal on 30 January 2015. 

3.  The registered owner claimed there was a relationship of landlord and tenant with Madam Sun and sought vacant possession for her non-payment of rent.  In opposition, Madam Sun advanced a case of adverse possession, premised on her claim that her brother Sun Cho Ming (孫楚明) also known as Sun Ming Fai (孫明輝) (“Mr Sun”) purchased the hut on the roof of the Property in 1992 and thereafter Mr Sun allowed members of his family including Madam Sun to live in the Premises.

4.  In support of this claim, she produced the photocopy of a handwritten note in Chinese.  The top half of the document stated that one Ng Cho Sung (吳造崇) hereby sold a hut built with metal sheets on the roof of the Property which was “about 220 ft” to Mr Sun and made the note as evidence.  It was signed by Ng and Mr Sun and witnessed by one Chan Wing (陳永) and was dated 30 September 1992.  The identity card numbers of all three individuals were given.

5.  The bottom half of the document was another note written and signed by one Cheung Kai Kwong (張啟光) who described himself as the owner and stating that one of the huts built with metal sheets on the roof of the Property was sold to Mr Sun at $23,000, and thereafter he, the owner, would have nothing to do with it.  It was witnessed by one Siu Kam Lun (邵錦麟) and dated 28 December 1992.  The identity card numbers of the persons who signed were given.

6.  No assignment was executed for the above transfer and sale of the hut on the roof.  Nor was the Chinese document registered in the Land Registry.  Further, as noted by Member Pang in §19 of his judgment, there was no assignment to Mr Sun of any undivided shares of the land on which the multi-storey building was erected.

7.  According to the records in the Land Registry, Cheung Kai Kwong was the registered owner of the Property from July 1987 to November 1995.  Thereafter, the Property was assigned to successive purchasers.  The registered owner acquired the Property by an assignment dated 31 October 2013.

8.  Member Pang rejected Madam Sun’s case on adverse possession.

9.  Three points are taken by Mr Solomon Lam for Madam Sun on appeal.  Her counsel sought a re-trial of the case.

10.  The first is a point of law.  In §20 of his judgment, Member Pang took the view that Madam Sun cannot rely on adverse possession as a matter of law on the basis that this doctrine is not available to those who claim they are tenants or purchasers of the disputed property, citing Wong Tak Yue v Kung Kwok Wai & Anr (No 2) (1997-98) 1 HKCFAR 55 at 69D to E.

11.  Whether a squatter could establish factual possession and the requisite intention for the purpose of adverse possession is a question of fact depending on the circumstances of the case.  There is no rule of law that these elements cannot be established for a person who mistakenly believes that he has good title or that he is a lawful tenant and does not realise he is trespassing on another’s land.  As stated by Lord Hope in JA Pye (Oxford) Holdings Ltd v Graham [2000] Ch 676 at §69, the use of the term “adverse” in this context is a convenient label only, in recognition simply of the fact that the possession is adverse to the interests of the paper owner.  The right of action of the paper owner is treated as accruing as soon as the land is in the possession of some other person in whose favour the limitation period can run.  In that sense, and for that purpose, the other person’s possession is adverse to his.  But the question whether that other person is in fact in possession of the land is a separate question on which the word “adverse” casts no light.

12.  Ms Pauline Leung, counsel for the registered owner, accepted on appeal that there is no principle of law by which a person who mistakenly claims to be the lawful tenant or purchaser would be precluded from invoking adverse possession and that the correct position is as stated by Saville LJ in Hughes v Cork [1994] EGCS 25:

“ The learned judge appears to have held that it is impossible for someone who believes himself to be the true owner to acquire title by adverse possession since such a person cannot, ex-hypothesi, have an intention to exclude or oust the true owner. If this were the law then only those who knew they were trespassing, that is to say doing something illegal, could acquire such a title, while those who did not realise that they were doing anything wrong would acquire no rights at all. I can see no reason why, as a matter of justice or common sense, the former but not the latter should be able to acquire title in this way. What the law requires is factual possession i.e. an exclusive dealing with the land as an occupying owner might be expected to deal with it, together with a manifested intention to treat the land as belonging to the possessor to the exclusion of everyone else.

Obviously if the possessor knows or believes someone else has the paper title to the land he must intend to exclude that person along with everyone else.  But in the absence of such knowledge or belief it is in my judgment sufficient for this part of the second requirement simply to establish a manifest intention to exclude everyone.”

13.  The law as stated in Hughes v Cork has been applied in a number of cases of first instance in Hong Kong (Wong Luen Chun & Anr v Secretary for Justice [1998] 4 HKC 122 at 129C to I; Tsun Wai Man, the sole executor of the estate of Tsang Kam Chuen v Cheung Yung & Ors, HCA 14202/1999, 9 August 2001, at §§38 to 39; Wong Kar Sue v Sun Hung Kai Properties Ltd & Anr, HCMP 1326/2005, 17 February 2006, at §6; Lau Kam Tai v Dao Kin Ming, HCA 913/2010, 13 March 2014, at §51 to 53; Yu Fung Co Ltd v Olympic City Properties Ltd & Anr, HCMP 1084/2008, 30 July 2015, at §§63 to 74).

14.  Insofar as Member Pang has held that there is a principle of law by which a person who mistakenly claims to be the lawful tenant or purchaser would be precluded from invoking adverse possession, he is wrong in law.

15.  The second and third points argued by Mr Lam on appeal relate to whether Member Pang is correct in finding that adverse possession was not established on the evidence.  The complaints are that the tribunal did not properly assess the credibility of the evidence given by Madam Sun and Mr Sun and wrongly held that the requisite intention to remain in possession of the Premises to the exclusion of the world at large was not established as it was accepted by Madam  Sun and her brother they had never paid rates for the Premises.

16.  These points may be dealt with conveniently with another point raised by Ms Leung, being the finding in §12 of the tribunal’s decision refusing leave to appeal that water and electricity charges had been paid by the occupiers of the Premises to the paper title owner all along.  Member Pang would appear to have drawn an inference from such payments that Madam Sun and her brother must have occupied the Premises with the consent of the paper title owner, albeit he made no mention of this in his first judgment.  This inference, if upheld, would undermine the case of adverse possession.

17.  The appeal court does not usually interfere with findings of fact properly made by the Lands Tribunal.  What gives us concern is whether the case of Madam Sun on adverse possession has been properly investigated and evaluated.  Although she and her brother had accepted that no rates were ever paid to the Commissioner for Rating and Valuation and they had been paying water and electricity charges to the paper title owner, it is not apparent from the judgment or the leave decision that the tribunal had gone into all the relevant circumstances.  It is not known, for instance, when the practice of paying utilities charges to the paper title owner had started, what agreement if any was reached with the latter concerning the payment of such charges, how did it come about that a sub-meter for electricity was installed to record the consumption for the Premises.  It does not appear that any demand for rates in the past was adduced in evidence.  It is not known if any separate demand for rates was issued by the Commissioner for Rating and Valuation for the structure or structures on the roof.  It does not appear that the tribunal has probed into the circumstances why no rates were paid by the occupiers of the Premises and whether the non-payment of rates was indicative of the requisite intention to possess the Premises to the exclusion of all others including the true owner.

18.  For these reasons, we do not think it right to uphold the inference drawn by the Lands Tribunal from the non-payment of rates and the payment of utilities charges.  The appropriate course is to set aside the judgment and remit the case for a re-trial.  It would be more appropriate for the case to be adjudicated in the District Court, so that proper pleadings would be in place, with discovery of documents and the exchange of witness statements before trial.

19.  We have therefore allowed the appeal, set aside the judgment, and pursuant to the powers of the appeal court under Order 59 rule   13(4)(a) and the Lands Tribunal Ordinance, Cap   17 section 8A(1)(b), we ordered the case to be remitted to the District Court for a re-trial.  The parties should take out an application in the District Court to seek appropriate directions for the further conduct of the proceedings.

20.  The parties were not legally represented in the trial below and no order for costs was made for the trial.  Both were represented by counsel in the leave application before Member Pang, which he refused and costs of $22,780 were awarded to the registered owner.  We would set aside that costs order.

21.  Mr Lam sought the costs of the leave application before Member Pang, the leave application in the appeal court, and the costs of this appeal.  Ms Leung submitted it would be fairer to order costs of the two leave applications and of the appeal to be in the cause of the trial, as it is not known which party will be ultimately successful on re-trial.

22.  In view of the fact that Madam Sun had to apply to court to set aside the judgment of the Lands Tribunal and we have allowed the appeal by ordering a re-trial, we would order the costs of the two leave applications and of the appeal to be the appellant’s costs in the cause of the retrial, so that if Madam Sun should succeed on re-trial she would recover all these costs but if she should fail on re-trial she would not be liable for the costs of the registered owner in respect of the leave applications and this appeal.