POON CHI HANG v. LAI HO SUN

HCMP 1020/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1020 OF 2013

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JUDGMENT

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1.  This action concerns a claim for a declaration as to possessory title arising out of the allegedly adverse possession of a residential flat in Ho Man Tin, Kowloon. This flat will be referred to as “the Premises” in this judgment. The defendant is the registered owner of the Premises, having been such since at least 1976. The defendant brings a counterclaim against the plaintiff and his family who presently live in the Premises. The plaintiff has been resident in the property since 1997, and has lived there rent-free throughout. The defendant contends that this occupation was with his permission. The defendant’s case is that there was a licence allowing “the Poon family” (including the defendants to the counter-claim) to occupy the Premises. That is said to have been revoked, and by the counterclaim brought against the plaintiff and members of his family, the defendant seeks an order for the return of vacant possession of the Premises and the payment of mesne profits for the period of occupation since the revocation of the licence.

Background

2.  To elaborate on the above, the Premises were purchased in 1972 by two gentlemen, Lai Yu (“Lai Senior”) and Poon Wing Chung (“Poon Senior”) who were, at that time business partners.  The purchase was made jointly, but for reasons that are immaterial, the decision was taken to register the property in the name of the defendant.  The plaintiff is the son of Poon Senior.  The defendant is the son of Lai Senior.

3.  In or about 1976 the business relationship between Lai Senior and Poon Senior turned sour and the partnership was dissolved.  It appears from the evidence that this was a rather informal (but acrimonious) split, with no formal agreement reached as to the division of assets and liabilities.  Lai Senior seems to have felt he was cheated by Poon Senior and treated Poon Senior’s share of the property as being his, in compensation for this.  For his part Poon Senior (who gave evidence at trial) also felt hard done by, but, it seems, simply abandoned his claim to a share of the property.

4.  Thus, following those events Lai Senior told the defendant (Lai Ho Sun) that the property was his, both legally and beneficially.  The defendant has understood the property to be owned by him legally and beneficially since that date, and the trial was conducted (indeed the plaintiff’s claim is premised) on that being the true position.

5.  There are, in effect three periods of occupation of the Premises that are of relevance.  When the Premises were first acquired by Poon Senior and Lai Senior, they were rented out to a tenant.  That gives rise to no difficulty.  However, in or about December 1975 the then current tenancy was terminated and the elder brother of Poon Senior, Poon Yiu Chung (“PYC”) was allowed to occupy the Premises with his family.  There seems to have been no formal written agreement for this, but the plaintiff contends that this amounted to a tenancy at will, with a rental of $1,400 per month having been agreed.

6.  Poon Senior may have waived the payment of rent by his brother, but it appears from the evidence of the defendant that, initially at least, Lai Senior did not, and he was paid his share of the rent from the commencement of the occupation to about the time that the partnership was terminated (February 1976), at which time rent payment ceased.  This ‘tenancy’ period of occupation by PYC represents the first relevant period.

7.  The continued occupation by PYC and family, without the payment of rent is the second relevant period.  The plaintiff contends that, by the cessation of payment of rent, the tenancy at will was terminated, but nevertheless PYC remained in occupation of the Premises, an occupation that continued until 1988 when he passed away.  The whole of this period of occupation was rent free, and it is contended that possession of the Premises by PYC became adverse when he ceased to pay rent.  As far as the evidence shows neither Lai Senior nor the defendant chased PYC for rent, and the defendant says that this was a conscious decision by his father to continue to honour an understanding with Poon Senior to allow the Poon family to occupy the Premises.  In other words, and as expanded on below, although the Premises were occupied, with no rent paid, that occupation was not adverse in nature.

8.  Following the death of PYC in 1988 his wife (Li Yung Yau) and son remained in occupation of the Premises on the same (rent-free) basis.  Lai Yung Yau moved out of the Premises in April 1997 and she passed the keys to the plaintiff, who moved in with his family following a renovation of the Premises.  As part of the renovation the plaintiff changed the locks and doors to the Premises.  The period of occupation by the plaintiff and his family I take as the third relevant period.

The central dispute between the parties

9.  Since April 1997, the plaintiff has remained living in the Premises without any demand being made to him for the payment of rent, at least until these proceedings commenced.  The plaintiff has paid for the maintenance of the Premises and of the common parts of the building, and has paid utility and management charges.  The defendant has paid government rent and rates but has not visited or lived in the Premises during this period.

10.  There has been no contact between the plaintiff and the defendant in the intervening years although the defendant was aware of the plaintiff’s occupation of the Premises.

11.  Thus far there is little dispute on the facts. However, the plaintiff claims to have been in adverse possession since at least 1997, in fact contending that possession by PYC and family before him was also ‘adverse’ in nature.  The defendant says that the Poon family have been in possession with the permission of the Lai family throughout.  He explains the position in regard to the first relevant period (occupancy by PYC and family) in the following way.  He says that the occupation by PYC was not as a tenant but, before and after the termination of the partnership in 1976, was with the consent and approval of Lai Senior and the defendant himself.  It is contended that this amounted to a licence.  The occupation is admitted, but the defendant denies that it was adverse in nature.  It almost goes without saying given the nature of the case that there are no documents evidencing any agreement between the parties as to the nature or terms of the occupancy.

The counterclaim

12.  Following commencement of these proceedings the defendant says that he withdrew his permission for the Poon family to remain in the Premises.  The defendant brings a counterclaim against the plaintiff and his family, including Poon Senior, which reflects his rejection of the plaintiff’s claim, and which is premised upon his termination of the licence said to have been given to the plaintiff to occupy the Premises.  Notification of the revocation of the licence is said to have taken place through the service on the plaintiff of the defendant’s affirmation dated 5 July 2013.

13.  By the counterclaim the defendant seeks an order for the return of vacant possession of the Premises and the payment of mesne profits for the period of occupation since the revocation of the licence.  It was accepted by all parties that this counterclaim was in real terms the mirror of the claim, and the defence of the defendants to the counterclaim was dependent on the success of the plaintiff in his claim.   

14.  Before considering further the implications of the above, and before considering the nature of the period of occupation by PYC and then the plaintiff, I turn to summarise the relevant law.

The law

15.  There was no disagreement between the parties in regard to the ‘adverse possession’ principles, and although a number of cases were referred to by the parties, the general propositions are very capably summarised in the decision of Lok J in Lee Siu Fong v Wong Wan Leung & Ors (unreported, HCA 122/2012; 3 January 2017):

“ 19. The following legal principles applicable to a claim for adverse possession are now well settled:

(i) to succeed in a claim for adverse possession, the adverse possessor must prove: (i) a sufficient degree of factual possession; and (ii) animus possessendi (i.e. an intention to possess);

(ii) the element required of factual possession are (i) there must be an appropriate degree of physical control; (ii) possession must be single and conclusive, though there can be single possession exercised by or on behalf of several persons jointly; (iii) factual possession must be exclusive, continuous, open, visible and notorious, and it must not be equivocal, occasional, or for a special or temporary purpose; and (iv) the question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances having regard to the nature of the land and the manner of possession;

(iii) unless there is contrary evidence the registered owner of the land is presumed to be in occupation, and the party claiming adverse possession has the burden of proving otherwise;

(iv)intention to possess is the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with paper title so far as is reasonably practicable and so far as the processes of law will allow;

(v) in ascertaining the adverse possessor’s intention to possess, little regard should be given to self-serving statements of subjective intention, rather the court would make inference from the actions of the adverse possessor in the light of all the circumstances; and

(vi)the burden is on the adverse possessor to prove both factual possession and the intention to possess, and the evidence adduced must be compelling although the standard of proof is still the normal civil standard based on the balance of probabilities.

20. It is also trite law that occupation under a licence or otherwise with the permission of the legal or paper owner does not amount to possession for the purposes of adverse possession as the occupation is enjoyed under lawful title….”

16.  That requirement for “compelling evidence” was emphasised by the Court of Final Appeal in Wu Yee Pak v Un Fong Leung & Ors (2004) 7 HKCFAR at paragraph 5.

17.  The plaintiff relies on a passage in Land Law in Hong Kong (4^th Ed) by Goo and Lee, in which the authors express the view that changing the lock of a flat and occupation of the flat would certainly be evidence of physical control, and counsel for the plaintiff, and counsel for the defendants to the counterclaim place considerable stress on this action having been taken by the plaintiff.  Physical control is not really in issue however, there being no doubt that the plaintiff had, effectively undisturbed possession.

18.  The authors Goo and Lee also note (at para 6.33) that possession must be ‘open’ so as to allow the ‘true’ owner to challenge possession.  As was stated in Mayor and Burgess of the London Borough of Lambeth v Blackburn [2001] EWCA Civ 192; (2001) 82 P & CR 39: the intention to maintain possession against the whole world must be manifest so that, if the true owner were present, he would be aware of the occupant’s intentions.  As it was put by Clarke LJ:

“ 18. It is not perhaps immediately obvious why the authorities have required a trespasser to establish an intention to possess as well as actual possession in order to prove the relevant adverse possession. It seems to me that the answer lies in the fact that the possession must be adverse, that is adverse to the interest of the paper owner. It can only be adverse if the adverse possession is apparent to the owner; that is if it is manifest to the owner that the trespasser intends to maintain possession against the whole world including the owner. That does not mean that it must in fact be known to the owner, but that it must be manifested to him so that, if he were present at the property he would be aware that the trespasser had taken possession of it and intended to keep others out.

19.  The necessity for the manifestation of the adverse possession is clear from … the judgement of Slade J in Powell…”

19.  It is therefore of crucial importance that the occupier’s acts must be unequivocal, and known, or obvious to the paper owner of the property in question.  As was said by Slade J in Powell v McFarlane(1977) 38 P & CR 327:

“ The position is, however, quite different from a case where the question is whether a trespasser had acquired possession. In such a case the courts will, in my judgment, require clear and affirmative evidence that the trespasser, claiming that he has acquired possession, not only had the requisite intention to possess, but made such intention clear to the world. If his acts are open to more than one interpretation and he has not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will treat him as not having the requisite animus possidendi and consequently as not having dispossessed the owner.”

1975-1977

20.  So far as the period of time leading up to the dissolution of the partnership in 1976 is concerned, the evidence seems to me to support this being a period of tenancy by PYC.  The defendant spoke in his evidence about collecting rent.  This was only a period of a few months however.

21.  That was then followed by the ‘second relevant period’ during which PYC remained in occupation but without paying rent.  That non payment of rent is the only fact relied on as showing an intention by PYC to dispossess the defendant.

22.  The defendant stated in his written and oral evidence that it had been his late father’s wish to allow “the Poon family” to remain in the Premises until such time as the defendant should need the Premises for his own use.  That eventuality had not come to pass, and so the defendant had been content to allow the Poon Family to remain in occupation throughout the years.

23.  The defendant was challenged on his explanation in the course of his evidence.  It was suggested to him that any agreement to allow occupation of the Premises rent-free was confined to an agreement at an early stage, and made by Poon Senior and Lai Senior in favour of PYC only.  This was the recollection of Poon Senior who gave evidence on behalf of the plaintiff.  The defendant accepted that the primary actor in deciding what was to happen with the Premises was Lai Senior, with he himself largely following along with what his father decided.

24.  It was also suggested to Lai Senior that any such arrangement permitting rent free occupation as suggested would have been recorded in writing.  The defendant was however unswayed from his evidence that permission to use the Premises was given, and was given to the “Poon family”, and not to one or more specific members.

25.  So far as this period in time is concerned, the defendant gave his evidence in a straightforward manner, and I am of the view that his evidence was accurate on this point.  Not only was his evidence self-consistent on this question, it is consistent with what in fact happened, namely that there was no attempt made to recover possession, or even charge rent, following the dissolution of the partnership.  Lai Senior was clearly aware of the continued occupation of the Premises, and there is no dispute that he purported to “give” full ownership of the Premises to his son.  It would make no sense for him to have, in effect, abandoned the Premises in those circumstances.

26.  There is no obvious explanation as to why Lai Senior should have felt disposed to allow relatives of Poon Senior to remain in the Premises on a rent-free basis when the partnership had broken up in acrimonious circumstances.  Clearly however, he did, and equally clearly the defendant did the same, even after being told by Lai Senior that the Premises were his, legally and beneficially, in about 1976.  Given the circumstances and the persons involved I find nothing strange in this arrangement not being recorded in writing.

27.  Poon Senior (Poon Wing Chung), gave the only evidence as to a relevant contact between the families when he recounted in his written evidence a very brief chance meeting between himself and the defendant in 2004.  He stated that he raised the question as to how to “deal with the Premises”, but the defendant’s recollection was different, being that Poon Senior asked if the Premises could be transferred to him at a low price.  Poon Senior seemed not to recall the meeting in his cross examination by counsel for the plaintiff, and on balance I accept that he probably asked about the possibility of purchasing the Premises.

28.  On balance therefore I accept that, at the least, the Premises were occupied by PYC and his family, and after his death by his wife and his son, with the permission of the defendant.  This ‘second relevant’ period of possession was not therefore adverse to the defendant.  It is only necessary to determine the nature of this possession by PYC and his family however if the later occupation by the plaintiff is adverse in nature only for part of the period of his occupancy.

The nature of the plaintiff’s occupation; a licence?

29.  The defendant’s primary pleaded position was that there was a licence by which the plaintiff was allowed to be in the premises, and the existence, or otherwise, of any such licence as between the defendant and the plaintiff was the focus of submissions on behalf of the plaintiff. Although the defendant’s primary position was that there was such a licence, he had pleaded that the plaintiff was allowed to be in the premises by virtue of a licence “or otherwise with permission”, and counsel for the defendant submitted that it was not necessary to establish any licence in order to defeat the claim in adverse possession.  It is indeed clear from the passages above, and other authorities referred to by the parties, that it is not necessary for the defendant to establish that a licence in fact existed (although the existence of a licence would defeat the claim for adverse possession) if he is able to establish permission to be in occupation not amounting to a licence, or if the other requirements for a claim of adverse possession have not been made out by the plaintiff.

Other permission?

30.  Even in the context of the plaintiff’s occupation of the Premises, the relevant events took place quite a long time ago.  The plaintiff took up occupation in 1997, and the most important events on which he relies took place about then.  Nevertheless, there is little if any factual controversy about these matters.  The plaintiff and the defendant were both able to give evidence at the trial, and there no issues as to documents having become unavailable.  The defendant accepted that there had been no communication with the plaintiff at any time before proceedings commenced, and so there is no question of an express oral permission having been given.  The defendant relies on a broader permission said to have been given by Lai Senior, and adopted by him, allowing occupation by the Poon family.

31.  This is, at best, therefore an unspoken permission, uncommunicated to the plaintiff by the defendant.  The question is not however whether there is a necessity for the permission to be enunciated, but rather whether it has been given at all.  Since there is no evidence other than the word of the defendant himself, this has to be approached with caution, but in light of the circumstances, and as appears below, I accept that the defendant was aware of, and was agreeable to, the occupation of the Premises by the Plaintiff and his family, because that was the way in which Lai Senior had asked him to deal with the Premises.

Was possession adverse?

32.  The plaintiff enjoyed exclusive possession of the Premises, as indeed did some other members of his family before him.  That fact of possession is not, by itself sufficient for the plaintiff to succeed in a claim of this nature.  As is noted in the quotation from Lee Siu Fong above, the possession must (assuming it is not pursuant to a licence or permission) be open, visible and notorious, and not equivocal in nature. 

33.  The plaintiff relies on three broad matters: the fact of occupation by himself and his family; the changing of the lock when he took occupation; and the payment by him of management and maintenance bills. All of these are to be considered in the context of an acrimonious end to the partnership between Lai Senior and Poon Senior, which was followed by more than 20 years over which the former partners did not communicate with each other, and the occupation by PYC.  It is submitted on behalf of the plaintiff, and by counsel for the defendants to the counterclaim, that these acts are, in that context, unequivocal in demonstrating an intention to possess the Premises, and exclude the registered owner.  Both elements must be established.

34.  That these acts were undertaken by the plaintiff is not challenged.  The relevant question, it seems to me is whether in doing these things the plaintiff neither knew nor believed he had some unspoken permission to be on the Premises: see Cheung Chung Yan v Chan Man Kwong & Ors; and whether these acts of occupation were such as to entitle him to claim exclusive and adverse possession of the Premises, or to constitute an element of such a claim.

35.  As regards the latter, the issue is whether these acts are sufficient to satisfy the burden on the plaintiff to show, by clear and cogent evidence, that the plaintiff was intent on excluding the defendant owner from the Premises.

36.  The plaintiff went into occupation following on from his aunt and I think it is a reasonable inference that he understood that his father, Poon Senior had, by that time, treated the Premises as being owned fully by the defendant.  It seems a reasonable objective starting inference therefore that his occupation would be on the same basis as PYC and his aunt. For a claim in adverse possession to succeed it is or was necessary that his actions (then or subsequently) demonstrate the requisite intention. 

37.  However, in my view at that point in time his actions were equally consistent with his present claim to adverse possession, and ordinary occupation whether under a lease or a licence or otherwise.  He redecorated the Premises and changed the locks.  Neither action was, it seems such as to make it unequivocally clear that he was intending to oust the defendant.

38.  In some circumstances the changing of a lock could be seen clearly to be an ouster of the paper owner by preventing his or her physical entry or control.  In the present case, there is in fact no evidence as to whether the defendant was deprived of access by this action, there is no evidence as to whether the defendant ever had keys to the Premises.  His evidence was that the keys were with PYC and family.  Moreover, the relationship and arrangement between these parties was such that it was clear that the defendant would not seek independent physical entry to the Premises.

39.  Clarke LJ, and Slade J, in the passages referred to above, dealt with the position of trespassers, whose occupation of property is, by definition, without lawful sanction.  The requirement for the manifestation of an intention to exclude the ‘paper owner’ is, a fortiori even more onerous, in my judgement, in the case of an occupier who has entered into possession either pursuant to a lease or licence, or with the (even unspoken) permission of the ‘paper owner’.

40.  Changing the locks in these circumstances, especially without notifying the defendant, does not make “an intention to exclude the owner” manifest.  Nor, in my judgement does the payment of management fees for the Premises, or payment of maintenance of the building indicate, much less amount to, compelling evidence of an intention to exclude the world at large, and the paper owner in particular. 

41.  In my judgment, none of the acts relied on by the plaintiff, whether considered separately or cumulatively, come close to providing cogent and unequivocal evidence of the intention to dispossess the defendant, and exclude him from any right to the Premises.  The plaintiff having assumed occupation, assumed also responsibility for the payment of refurbishment and management costs, as lawful occupiers regularly do.  The acts relied on by the plaintiff are equally consistent with possession under a lease, a licence, or merely at the defendant’s pleasure.  None were manifest statements of intention to dispossess the defendant. 

42.  I therefore hold that the acts of the plaintiff were, for these purposes, equivocal.  In my judgement, the plaintiff has not discharged the burden which lies upon him to show the necessary animus in order to make out the claim in adverse possession so as to be entitled to the order he seeks.

The counterclaim

43.  The pleaded counterclaim is premised, primarily on the existence of a licence agreement between the defendant and the plaintiff.  As referred to above, the defendants to the counterclaim, including the plaintiff, challenge the existence of any such licence, not least because there has been no communication between him and the defendant regarding the occupation of the Premises.  There is, it is submitted, no room for the implication of a licence, nor was there any express agreement made between those parties.  In submissions, perhaps in tacit acknowledgement of the evidential difficulties, counsel for the defendant submitted that it was unnecessary for the defendant to establish the existence of a licence in order to defeat the adverse possession claim, and I have accepted that to be correct.

44.  The defendant has knowingly acquiesced in the occupation by the plaintiff and his family up to the commencement of these proceedings, and I accept that this was because he understood it to be Lai Senior’s wish that he does so.  But there is nothing in the evidence to suggest he turned his mind to the grant of a licence or its terms as such, much less communicated the same to the plaintiff.  I am sympathetic to the submissions of the defendants to the counterclaim on this aspect therefore, but do not find it necessary to draw any firm conclusion as to the existence of a licence covering the period of the occupation of the plaintiff and his family.  However, that period of occupation is analysed, whether under a licence or otherwise, the plaintiff’s permission to remain, and therefore his period of lawful occupation has been terminated, as evidenced by the notification given by the defendant through the affirmation relied on.

Order for possession

45.  In light of my finding above that the permission given to the plaintiff to occupy the Premises has been withdrawn, there would appear to be no reason why the order for vacant possession which the defendant seeks in his counterclaim should not be made.

46.  As regards the claim for mesne profits, the plaintiff seeks to quantify this by reference to the rateable value of the property, which is $199,560 per year.  It is trite that a claim to mesne profits may represent either the loss suffered by the wrongful use of another’s land, or the recovery of a gain unlawfully enjoyed by the occupier.  To my understanding, the rateable value of the property represents neither of these losses, forming only the basis upon which rates are payable.

47.  Accordingly I make no monetary award in respect of the claim.

Costs

48.  In the circumstances, I make an order nisi that the costs of the plaintiff’s claim are to be to the defendant.  The costs of the defendant’s counterclaim, on a like basis, are also to be to the defendant.  Both sets of costs are to be taxed if not agreed.

Orders

49.  I will hear from the parties in writing as to the terms of the relevant orders should this be the subject of any controversy.