UNITY PROFIT LTD v. LEE CHING LAM

HCA 2503/2017

[2024] HKCFI 3178

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2503 OF 2017

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BETWEEN

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J U D G M E N T

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INTRODUCTION

1.  This action concerns six adjacent plots of land in Wu Kai Sha (烏溪沙) located in Demarcation District No 169, Ma On Shan, New Territories. They are:

(1) Subsection 1 of Section A of Lot No 359;

(2) Remaining Portion of Section A of Lot No 359;

(3) Subsection 1 of Section A of Lot No 360;

(4) Remaining Portion of Section A of Lot No 360;

(5) Section A of Lot No 365; and

(6) Section B of Lot No 365.

2.  Annexed to this judgment is a lot index plan showing the lots. It can be seen that to their southwest is a modern residential development, known as Villa Athena, and to their northeast is a group of village houses. I should highlight at the outset that Section A of Lot 359 and Section A of Lot 360 were each sub-divided into two sections under a deed poll dated 27 August 2002. The sub-division results in the four lots of land as set out in sub-paras (1) to (4) above. According to the plaintiff, the sub-division was effected so as to carve out a piece of land of about 8,000 sq ft, which now comprises Subsection 1 of Section A of Lot 359 and Subsection 1 of Section A of Lot 360. The lots in sub-paras (1) to (5) are referred to in this action as “Lots A”, the lot in sub-para (6) “Lot B”, and, together, “the Premises”.

3.  The plaintiff is the present legal owner of Lots A and Lot B. It acquired Lots A in 1996 and Lot B in 2001.

4.  The plaintiff says that it entered into a written tenancy agreement dated 9 January 2009 with the defendant for a monthly rent of $15,000 in respect of both Lots A and Lot B (“the tenancy agreement of 2009”). The defendant ceased to pay rent, rates and government rent since 1 June 2009. The tenancy agreement expired on 31 December 2009. However, the defendant has continued to occupy the Premises up to the present day without paying any rent, rates and government rent. The plaintiff’s pleaded case is that upon the expiry, a monthly periodic tenancy came into being as a matter of law. In May 2017, the plaintiff demanded the defendant to pay the outstanding amounts. The demand was not met. Hence, the plaintiff says that from 1 June 2017 onwards, the defendant has been occupying the Premises without consent and is a trespasser.

5.  The plaintiff now claims (1) vacant possession of the Premises, (2) arrears of rent, rates and government rent under the tenancy agreement of 2009 in the sum of $1,935,962, and (3) mesne profits at a monthly rate of $15,000, together with rates and government rent from 1 June 2017 until the delivery of vacant possession.

6.  The defendant puts forward different defences for Lots A and Lot B.

7.  For Lots A, he has three alternative positions.

8.  He accepts that the tenancy agreement of 2009 was entered into but the tenancy was in respect of Lots A only. He also accepts that he ceased to make payment from June 2009.

9.  His primary case is that the plaintiff has stood by all these years while he has been paying no rent at all. He has relied on such conduct and acted to his detriment by incurring significant expenditures on the maintenance of Lots A. Hence, he says that the plaintiff is now estopped from claiming reliefs against him. This is the “standing by” defence.

10.  Secondly, and alternatively, he alleges that there was a telephone conversation between him and Mr Ho Kwan Chu (“Ho”) acting as the plaintiff’s representative in about May 2009. In that conversation, Ho made a number of representations to him. Materially, Ho represented that he only needed to return the land to the plaintiff after the plaintiff satisfied two conditions. As a result, the defendant has stayed on without making any payment and continued to incur significant expenditures on Lots A. In the circumstances, he says that the plaintiff is estopped from claiming reliefs against him. This is the “May 2009 conversation” defence.

11.  Thirdly, and as a further alternative, the defendant contends that the May 2009 conversation amounted to an oral agreement under which the plaintiff granted a licence to him to occupy Lots A without payment and that the tenancy agreement of 2009 was replaced by this licence agreement. He is therefore not a trespasser. This is the “licence agreement” defence.

12.  Relying on the “standing by” defence or the “May 2009 conversation” defence, the defendant contends that he has acquired an equity in Lots A by way of proprietary estoppel and counterclaims a declaration to that effect. Alternatively, he relies on the “licence agreement” defence and counterclaims an order of specific performance or damages in lieu.

13.  For Lot B, the defendant denies that the tenancy agreement of 2009 covered Lot B. In fact, he has been in adverse possession of the lot since 1994. He makes a counterclaim on that basis. Alternatively, he says that he has established proprietary estoppel on the same facts and it is unconscionable for the plaintiff to assert its title against him.

14.  The material events in both the action and the counterclaim span over a long period of time. In respect of Lots A, the key events, as alleged, took place in 1993, 1996 and 2009. In respect of Lot B, on the defendant’s case, the material period is from 1994, which is the time when he allegedly entered into possession of the land. On the plaintiff’s case, the key event was a conversation between Ho and the defendant in 2001.

15.  The parties are putting forward different accounts of the key events. This case is therefore primarily a factual dispute.

16.  The plaintiff has one witness, namely Ho. Ho is a solicitor and a partner of KC Ho & Fong, a law firm. He is a director and shareholder of a company, who in turn is a shareholder of the plaintiff.

17.  The defendant testified at trial. He is engaged in the business of developing village houses. He also called Mr Wong Chung Ming, a business partner, as a witness. Wong adopted his witness statement as evidence but was not cross-examined at all.

18.  It is common ground that Ho and the defendant came to know each other in about the 1980s on some business dealings and until these proceedings were on friendly terms and would sometimes play golf and have dinner or other leisurely gatherings together.

19.  At the trial, the plaintiff was represented by Mr Adrian Leung and Mr Sunny Chan. The defendant was represented by Mr Osmond Lam and Ms Jacquelyn Ng.

20.  It is convenient to recite the defendant’s case first.

THE DEFENDANT’S CASE

21.  According to the defendant, he and his family have a long history with Lots A.

Use of Lots A since the 1950s

22.  Since around the 1950s, the defendant and his family had been farming on that part of Lots A which comprises Lot 359A and Lot 360A. They also built residential and storage quarters on Lot 365A. They were tenants of Lots A until 1983 when the family purchased them from the landlord. In 1993, the family set up a company called Sino Charm Development Ltd to manage the land.

Sale of Lots A in 1993

23.  In the 1990s, there were discussions between the defendant’s family and the Sun Hung Kai group about the sale of Lots A. But nothing came out of the discussions.

24.  In the early 1990s, through Wong, some merchants from Zhuhai approached the family expressing their interest in acquiring Lots A. Eventually, the lots were sold to a company called Sinbon Development Ltd, which represented the interests of the Zhuhai merchants. A sale and purchase agreement dated 16 December 1993 was signed by Sino Charm as vendor and Sinbon as purchaser (“the 1993 SPA”). The purchase price was $25,000,000.

25.  The 1993 SPA is material in the defendant’s case as its terms have subsequently led to the May 2009 conversation.

26.  In essence, it was contemplated that Sinbon would apply to the government for changing the user of Lots A such that it could re-develop the lots into multi-storey buildings for commercial and residential use. In return, Sino Charm would receive one whole floor of the buildings and two car parking spaces in the proposed development. In the event that the application for the change of user was unsuccessful, it was agreed that a specific portion of Lot 359A and of Lot 360A of around 8,000 sq ft would be assigned back to Sino Charm. In the meantime, Sinbon was to lease Lots A back to Sino Charm at the nominal rent of $1 from the date of the 1993 SPA until the application to alter user was approved or upon Sinbon assigning the 8,000 sq ft to Sino Charm.

27.  The relevant provisions are to be found in clauses 17, 20 and 21 of the 1993 SPA. They read:

“17. The Vendor shall on completion deliver to the Purchaser vacant possession of the said premises hereby agreed to be sold and purchased. On completion, the parties hereto shall enter into a Tenancy Agreement whereby the Purchaser shall let the said premises to the Vendor at the rental of HK$1.00 for the term from the date of completion until:-

(i) upon the said premises being required by the Government for surrender pursuant to approval by the Government of the modification or change of user of the said premises in accordance with paragraph 20 hereinafter provided; or

(ii) the Purchaser has assigned a portion of the said premises, the area of which is 8,000 sq. ft., to the Vendor pursuant to Clause 21 hereof,

whichever is the sooner.

…

20. (a) In further consideration of the sale and purchase herein contained, the Purchaser shall use its best endeavour and due diligence to apply to the Government of Hong Kong to modify the existing user of the said premises for redevelopment into a commercial/residential area and to erect thereon multi-storey buildings for commercial and residential use upon such plans and modification as the Purchaser shall deem fit (“the Development”) and the Purchaser shall as soon as is practicable grant/assign to the Vendor All That the whole of the 10th floor of one of the buildings of the Development (such floor to be for residential use) (“the said 10th Floor”) and 2 car parking spaces thereon to the Vendor (the Floor Area of the said 10th Floor is estimated to be 1,800 sq.ft.). …

21. In the event that: -

(i) the application for the said modification/change of user and redevelopment of the said premises is rejected by the Government; or,

(ii) the Purchaser has not made such application within 12 months from completion of the sale and purchase herein; or,

(iii) the application for the said modification/charge of user and redevelopment of the said premises is not approved within 36 months from completion,

the Purchaser shall forthwith notify the Vendor of the same and shall execute a deed poll and an assignment (and/or such other necessary document(s)) assigning and delivering vacant possession of a portion of the said premises (as shown coloured pink on the plan hereto annexed), the area of which is 8,000 sq. ft., to the Vendor. All legal costs, plan fee, registration fees and other costs of and incidental to the preparation execution and registration of such deed poll, assignment and other document(s) incidental thereto shall be borne by the Purchaser. This clause 21 shall survive completion of the sale and purchase contained in this Agreement.”

28.  I shall refer to the provision concerning the tenancy at the nominal rental of $1 as contained in clause 17 as “the $1 tenancy provision” and the provision concerning the return of the 8,000 sq ft of land as contained in clause 21 as “the 8,000 sq ft provision” below.

29.  Pursuant to clause 17, Sinbon and Sino Charm entered into a tenancy agreement also dated 16 December 1993 in respect of Lots A.

30.  After that, the defendant and his family continued to use and occupy Lots A without interruption.

31.  Up to now, the user of Lots A has not been modified.

The plaintiff purchased Lots A in 1996 and the defendant started to pay rent in 2000

32.  In May 1996, the plaintiff purchased Lots A from Sinbon. But the defendant only learnt of the purchase in 2000.

33.  Early that year (ie 2000), the defendant, Wong and Ho inspected some farmland in 十四鄉 together in order to evaluate the investment potential. After the inspection, they went to Lots A. Ho saw that the lots were being used by the defendant as a car park for monthly rental and he learnt that the defendant was making a profit. It was at that point that he told the defendant that he had acquired Lots A and requested the defendant to pay rent.

34.  As Ho was a friend and a solicitor experienced in dealing with village houses and farmland, the defendant did not doubt what he said. He believed that since Lots A had changed hands, he should pay rent as suggested by Ho. Therefore, from February 2000 onwards, he started paying rent to the plaintiff. He would send the rent to Ho’s law firm and the firm would send him the quarterly demand notes for rates and government rent, which he would settle. This arrangement would carry on until 2009.

Tenancy agreements were signed for 2008 and 2009

35.  In 2007, a notice to vacate was posted on the land. The defendant immediately contacted Ho. Ho said that it was some routine action and asked the defendant to go to his law firm to sign a tenancy agreement. At that time, the defendant was worried that Ho would sell Lots A, as the defendant’s plan was to continue investing in and maintaining facilities on the lots if he were to carry on using them. He asked Ho about this. Ho assured him that he would not sell in the short term but would develop at the right time.

36.  The plaintiff and the defendant then signed a tenancy agreement, which was dated 12 March 2008. The tenancy was for one year and expired on 31 December 2008. The monthly rent was $12,800.

37.  Upon its expiry, the parties entered into a new tenancy agreement on 9 January 2009. It was also for a one-year term and the rent was increased to $15,000. That would be the tenancy agreement of 2009, which is the subject-matter of the plaintiff’s claim in this action. The defendant continued to pay rent, rates and government rent under its terms until May of that year.

The May 2009 conversation

38.  There were two conversations between the defendant and Ho in about May 2009. And it was in the second conversation that Ho made a number of representations, which eventually led to the defendant stopping paying rent from June 2009 onwards. I shall refer to that second conversation as “the May 2009 conversation” in this judgment.

39.  It was in about May 2009 that Ho all of a sudden contacted the defendant asking him to vacate the land as soon as possible as he had a good offer for it. Dismayed, the defendant confronted Ho and reminded him that he previously guaranteed that he would not sell the land in the short term and that was why the defendant had been spending a lot of money on maintaining the facilities on Lots A. However, Ho insisted on selling the land as it was a good price.

40.  This is what the defendant said in his witness statement:

“22. 到了約2009年5月中，何先生突然給我電話，說有朋友將會以好價錢收購該A地段，叫我儘快搬走。由於這跟前一段提及簽租約時，何先生說短期不會賣地的說法不一致，我便質問他，說他曾對我保證不會那麼快就說要賣地，我才在簽租約後陸續把該A地段上面的設備維修 — (沒有收據，但有當時維修好的相片可以證明)。我已經花費了不少金錢，他現在收回該A地段對我不公平。

23. 何先生當時說雖然我是他的好朋友，但是也有人願意比好價錢給他，所以他決定“要錢不要老友”他選擇無義氣。我當時我有嘗試跟他理論，可是何先生堅決賣地。”

41.  The defendant then consulted Ho & Wong, a law firm, for advice on this development. He was told that according to the 1993 SPA, Sinbon or any subsequent purchaser was not entitled to receive rent from him when the 8,000 sq ft of land was not yet returned. Only then did he realise that he had been making payment to the plaintiff from 2000 to 2009 by mistake. The rent, rates and government rent which he paid over that period amounted to $1,813,999.20 in total.

42.  Based on the legal advice, the defendant demanded Ho to return the money paid by mistake. Ho then agreed to pay him back that sum and return the 8,000 sq ft of land to Sino Charm and the defendant would only be required to return the remainder of Lots A after that. That would be “the May 2009 conversation”. As a result of that, the defendant ceased to pay rent to the plaintiff and the plaintiff ceased to send him the demand notes for rates and government rent.

43.  This is what the defendant said in his witness statement about the May 2009 conversation:

“根據以上法律意見，約2009年5月左右我向何先生要求歸還錯誤繳交的費用。他當時清楚答應交還該筆總租金連差餉費用HK$1,813,999.20元，而且同意歸還該8000呎給我家族公司。以上錢和地退回後，我才交還該A地段剩餘部分的土地。所以由2009年後期起，我沒有再按月交租金，何先生亦停止按慣例將差餉單轉寄給我付費。”

44.  In this action, the defendant has produced copies of letters from KC Ho & Fong enclosing demand notes for rates and government rent for Lots A which were sent to him from October 2000 to April 2009 (for each quarter except for the second quarter in 2001 and the fourth quarter in 2006). The last letter was dated 6 April 2009 which enclosed the demand notes for the period from 1 April to 30 June 2009.

45.  Since then, the defendant has continued to occupy Lots A. It was only until 2017 that the plaintiff demanded him to pay arrears of rent, rates and government rent and deliver vacant possession, notwithstanding the May 2009 conversation.

Defence and counterclaim in respect of Lots A

46.  On the above factual premise, the defendant denies that he is liable to make any payment under the tenancy agreement of 2009 from June 2009 onwards.

47.  On the contrary, his primary position is that at all times, the plaintiff was and has been aware of his occupation of Lots A without paying any rent but made no complaint and stood by. Relying on such conduct, the defendant incurred significant expenditures on the maintenance of the lots. In the circumstances, the plaintiff is estopped from obtaining any relief from him. The defendant relies on the doctrine of proprietary estoppel.

48.  Alternatively, based on the May 2009 conversation and the defendant having incurred significant expenditures on Lots A, the plaintiff is estopped from charging any rent, rates and government rent for the use of Lots A until the 8,000 sq ft of land is returned to Sino Charm and the sum of $1,813,999.20 is returned to him. The defendant similarly relies on the doctrine of proprietary estoppel and seeks a declaration to that effect.

49.  As a further alternative, the defendant contends that the May 2009 conversation formed a licence agreement and he had given full consideration by having incurred and continuing to incur significant expenditures on the maintenance of Lots A. He is ready and willing to perform his part of the agreement. He asks for specific performance of the licence agreement.

Lot B

50.  The defendant’s case on Lot B is as follows.

51.  There was a house on Lot 365A (“the 365A house”), which the defendant had always used as storage. The 365A house was adjacent to a house built on Lot B (“the Lot B house”). The latter house is about 1,200 sq ft. The two houses were separated only by a wall.

52.  In about 1994, the 365A house was infested with termites. The defendant found out that they came from the wall connecting the two houses. He therefore went to investigate in the Lot B house. By that time, the Lot B house and Lot B had been abandoned for some years. Previously, the lot was used by Sun Hung Kai for storing building materials as it was developing the farmland nearby. After the development at Villa Athena was completed, the Lot B house was no longer in use and had fallen into disrepair.

53.  The defendant saw that the Lot B house was seriously infested with termites. He was worried that the 365A house would be affected. He therefore paid out of his own pocket to repair both houses, including changing the front door and the door lock of the Lot B house. Since then, he has kept the key to the Lot B house for his own use and enjoyment.

54.  From 1994 onwards, he has dealt with Lot B as if he were the owner. He set up electricity supply to the Lot B house and re-laid the electricity wires there. He used the house for storage. He invited Wong to visit the house after the renovation. He used the land in front of and behind the house to plant plants, for storage and to sell Chinese New Year flowers.

55.  In 2003, a fire broke out in the Lot B house and it was seriously damaged, leaving behind only the four walls and the rooftop beam. Afterwards, the defendant wrote a letter to the Fire Department expressing his appreciation of the efforts of the firemen. A copy of the letter was disclosed in this action.

56.  The defendant then renovated the entire house. After that, he used it as office and for storage.

57.  Then, in 2005, he carried out some renovation works at Lot B.

58.  He built a canopy over the land in front of and behind the 365A house and the Lot B house.

59.  The only access to Lot B was through Lot 365A. Anyone who wished to gain entry to Lot B would need to seek the defendant’s permission. The defendant installed a metal gate at the entry point and he has kept the key.

60.  The front and back portion of Lot B have been used by the defendant for storing equipment. They would also be used for selling Chinese New Year flowers.

61.  He converted the ground floor of the 365A house and the Lot B house into a restaurant. The business started in December 2005 but was closed shortly afterwards in 2006 as the licence application was unsuccessful. Later, the defendant converted the ground floor of the Lot B house into a grocery store, which operates until the present day.

62.  In 2011, the defendant opened up the wall between the two houses on the first floor and converted the space into storage units for renting out.

63.  From 2012 to 2015, a portion of the ground floor of the Lot B house was leased out as a district councillor’s office at a monthly rent of $4,500. After the lease expired, the space was converted into storage units for renting out and has been so used up to the present day.

64.  In 2013, the defendant converted the space behind the 365A house and the Lot B house into four en suite rooms for renting out.

65.  The defendant’s case on Lot B is primarily based on his own assertions. He also relies on Wong’s evidence. According to Wong, while he emigrated to Canada in about 1994, he would return to Hong Kong to handle his village house business from time to time. Every time he came back, he would meet up with the defendant in the area. In about 1994, the defendant told him about the termite infestation at the Lot B house. He knew that it was the defendant who repaired the house using his own funds. He also saw the house both before and after the repair. As Lot B is along the passage way for cars going to the village houses in that area, Wong was able to see how the defendant made use of the 365A house and the Lot B house over the years. He also knew about the fire in 2003 from the defendant. At the latter’s invitation, Wong went to see the house after the defendant renovated it.

66.  Apart from the defendant’s and Wong’s assertions, the defendant has in this action disclosed 17 photographs which show some land, car parks, structures and the inside of buildings. No mention was made of these photographs in his witness statement. Hence one could not tell from the photographs alone what subject-matter they are showing.

67.  It was only in his examination-in-chief that the defendant told the court that save for one photograph which was taken in 1996 showing some unpaved land, all the rest were taken in 2017 showing the Premises. I should immediately point out that even after his clarification, it is not clear which parts of the photographs show Lot B. One can see a large-scale open air car park on properly paved ground. That would appear to be within Lots A. One can see from the index lot plan that Lots A are much larger than Lot B. Without any explanation or identification of the boundary of the lots, one simply cannot tell which parts are areas within Lot B.

68.  The defendant has adduced no expert surveying evidence in relation to Lot B in this action.

69.  Based on the above factual premise, the defendant says that he has been in adverse possession of Lot B since 1994. All along, he has taken the entirety of the land as belonging to himself, with the intention to exclude the world at large. The applicable limitation period is 12 years. He had thus acquired a possessory title by the time the plaintiff commenced the present action in 2017.

70.  Alternatively, the defendant says that he has established proprietary estoppel based on the same facts. His pleaded case is that his use of Lot B was open and that the plaintiff was aware of his use. Nevertheless, the plaintiff had stood by and acquiesced in his conduct.

71.  The defendant denies that the tenancy agreement of 2009 covered Lot B. All along, from 2000 up to May 2009, the tenancies between him and the plaintiff covered Lots A only. It was the defendant’s oral evidence that he only knew about the plaintiff’s acquisition of Lot B at a later stage when Wong told him about it.

THE PLAINTIFF’S CASE

72.  I shall set out the plaintiff’s case on Lots A and Lot B together.

The plaintiff acquired Lots A in 1996

73.  In 1996, Ho was approached by Sinbon with an offer to sell Lots A. He eventually procured the plaintiff to acquire the lots at the price of $6,800,000. Ho considered it to be a very good deal as Lots A have an area of over 24,000 sq ft and Sinbon acquired the land from Sino Charm at $25,000,000 back in 1993.

74.  The defendant was aware of the plaintiff’s purchase of Lots A. Shortly after the acquisition, the plaintiff allowed the defendant to continue his occupation there under licence.

75.  In his witness statement, Ho explained why the plaintiff did so:

“Shortly after the Plaintiff acquired Lots A of the Premises in around May 1996, the Plaintiff allowed the Defendant to continue his occupation of Lots A under licence. This arrangement was made between myself and the Defendant as we were on friendly terms back then. It made commercial sense for the Plaintiff to let the Defendant use Lots A under licence, therefore, he would be looking after the land for the Plaintiff so no one would trespass and illegally occupy the land.”

The plaintiff started to charge rent for Lots A in 2000

76.  Lot B was prior to 2001 owned by the Sun Hung Kai group. Both Ho and the defendant were aware of that. Ho had in fact been trying hard to get Sun Hung Kai to sell the lot to him.

77.  It appears from the witness statement that that was the background leading to the plaintiff starting to charge rent for Lots A in 2000. Ho said:

“In the ensuing years, despite my best efforts, Onlawin [ie the Sun Hung Kai vehicle] were not willing to sell Lot B. By the beginning of 2000, I decided that I had to charge rent for the Defendant’s use and occupation of Lots A.”

78.  It is not readily apparent from the above passage why the plaintiff decided to charge rent for the use of Lots A because Ho was not able to acquire Lot B. In any event, in cross-examination, Ho said that during a visit to Lots A in 2000, he saw that the defendant was making a profit out of the land by operating a car park there. He therefore decided that he should charge the defendant rent for that.

The plaintiff acquired Lot B in 2001 and allowed the defendant to use it

79.  Eventually, the plaintiff succeeded in purchasing Lot B from the Sun Hung Kai group in January 2001. Ho then told the defendant that the plaintiff would allow him to use Lot B together with Lots A so that he could look after the lands for the plaintiff and to watch out for any trespass or illegal occupation.

80.  In cross-examination, Ho recalled that this is what he said to the defendant at the time:

“清林哥，我買咗新鴻基幅地，你攞埋去用啦。”

81.  Hence, the plaintiff denies that the defendant has been in adverse possession of Lot B since the use was with its express permission.

82.  The plaintiff’s case is that since 2001, the defendant had been occupying both Lots A and Lot B under an oral tenancy. He had been paying monthly rent. The amount of the rental varied from time to time following the parties’ negotiations throughout the years.

Tenancy agreements were signed for 2008 and 2009

83.  Then, in October 2007, KC Fong & Ho, acting on behalf of the plaintiff, issued a notice to quit to the defendant (“the notice to quit of 2007”). He was demanded to vacate the Premises upon the termination of the prevailing tenancy, namely 31 December 2007. The notice expressly stated the lot numbers for both Lots A and Lot B.

84.  It is common ground that the written tenancy agreements of 2008 and 2009 were entered into. However, the parties disagree on what lots of land the two tenancies covered. Even though the two written agreements expressly referred to Lots A only, the plaintiff says that in fact they covered Lot B as well.

85.  Ho said in his witness statement:

“Pausing here, I wish to point out that, although the Tenancy Agreement only mention Lots A, the rental paid in fact cover both Lots A and Lot B pursuant to the understanding reached between the parties. It was obvious by 2009 that both parties intended the rent to cover the Defendant’s occupation of both Lots A and Lot B and that the Defendant occupied both Lots A and Lot B which (by 9^th January 2001) belonged to the Plaintiff.”

86.  In cross-examination, naturally, Ho was asked questions why the written tenancy agreements would omit to mention Lot B if the intention was indeed that that lot was also leased out together with Lots A. Ho gave a number of different answers as the cross-examination proceeded.

(1) Initially, he was sure that he had told his staff to include Lot B in the agreement for 2008 but his staff omitted to do so, and he himself also failed to spot the omission by mistake. Then when it came to the agreement for 2009, the staff simply took out the last agreement and “inherited” the mistake from that template. He added that the staff responsible for handling the acquisition of Lot B were different from the staff responsible for handling the tenancy.

(2) Then, later, he was asked again why the first tenancy agreement did not mention Lot B. This time, he said that he was the client for that file and he did not give instruction to the staff and it was his fault.

(3) Immediately after that, he said that in 2008, when he gave instruction to his staff, he simply referred to “李清林烏溪沙塊地” but did not mention Lot B.

The conversation in 2009

87.  The plaintiff denies that the May 2009 conversation took place as alleged by the defendant. However, Ho accepts that he did have a conversation with the defendant over the subject of columbarium. But it was a short and general conversation. There was mention that there was a lack of columbarium in Hong Kong but nothing specific was discussed.

88.  Furthermore, he points out that he would not have promised to refund the sum of over $1.8 million to the defendant straightaway in a short telephone conversation. He would have needed some time to find out whether he had indeed made a mistake by charging the defendant rent over the years.

89.  It will be recalled that according to the defendant’s case, Ho’s representations arose out of the 8,000 sq ft provision and the $1 tenancy provision in the 1993 SPA. The plaintiff’s position on the provisions is as follows.

90.  When the plaintiff acquired Lots A in 1996, Ho was fully aware that the 1993 SPA contained the 8,000 sq ft provision and that the plaintiff’s purchase of Lots A was subject to that. All along, the plaintiff has intended to abide by that provision. This is evidenced by the fact that subsequently it executed a deed poll in August 2002, which effect was to carve out the 8,000 sq ft of land from Lots A so that it could be returned to Sino Charm. That was why Lot 359A and Lot 360A were each sub-divided into Section 1 and the Remaining Portion. Together, Section 1 of Lot 359A and Section 1 of Lot 360A make a total area of 8,000 sq ft. The Deed Poll was made in contemplation of the plaintiff’s sale of Lots A to a third party buyer in 2002. On completion, the 8,000 sq ft would be assigned to Sino Charm, Sino Charm would vacate from the remainder of Lots A which would be assigned to the buyer. However, that sale fell through in the end. Ho said that the plaintiff was in full communication with the defendant on the preparation of the deed poll.

91.  Furthermore, in his oral testimony, Ho unequivocally and repeatedly confirmed that the plaintiff has always been, and still is, willing and ready to return the 8,000 sq ft of land to Sino Charm.

92.  By contrast, the plaintiff’s position on the $1 tenancy provision is much less clear. Ho’s oral evidence given in cross-examination on whether he has been aware of the term and has intended to abide by it is incoherent, inconsistent and self-contradictory.

(1) Initially, when he was shown by counsel the 1993 SPA and asked whether he was aware of the 8,000 sq ft provision and the $1 tenancy provision, he said he certainly knew of them. Even though at the time of acquisition, it was another solicitor who handled the documents, he knew about the terms.

(2) Towards the end of his cross-examination, I asked him whether it was his intention to abide by the $1 tenancy provision, just as it was his intention to honour the 8,000 sq ft provision. Ho confirmed that from 1996 to 2000, he did not charge Sino Charm any rent. But, in 2000, he changed his position and decided to charge the defendant rent at the market rate.

(3) He was asked why he was willing to comply with the 8,000 sq ft provision but not the $1 tenancy provision. Ho then gave the surprising answer that he was never aware of the $1 tenancy provision “from start to finish” and he only learnt about it recently from the defendant’s “affirmation”. I reproduce his answer in his own words:

“我知道有八千呎個問題喺度，而免租一蚊嗰個呢，我由頭到尾我冇察覺嘅，我由頭到尾冇察覺，由頭到尾，好坦白講句，完全冇。

只不過到到最近我先至呀，李清林個affirmation喎，有呢樣嘢提到，我先知有呢樣嘢… ”

(4) When it was immediately pointed out to him that he just gave the court two contradictory answers about his knowledge of the $1 tenancy provision back in 1996, Ho replied that at that time he knew that Sinbon had allowed the defendant to use the land but he did not know on what terms.

The plaintiff stopped sending demand notes to the defendant from June 2009

93.  It will be recalled that on the defendant’s case, after the May 2009 conversation, the plaintiff stopped sending him demand notes for rates and government rent for Lots A. The plaintiff accepts that to be the case, as confirmed by Mr Leung in his oral closing submissions. However, I must highlight Ho’s evidence on this issue. The evidence is, again, incoherent, inconsistent and self-contradictory.

94.  In his witness statement, Ho said that it was the practice of the plaintiff to settle the rates and government rent first and then seek payment from the defendant. The defendant had paid these sums for Lots A,

“until 2009 when he suddenly stopped. The plaintiff continued to send the demand notes to the Defendant for payment of Government Rent of Lots A, however, the Defendant did not pay the Plaintiff.” (underline added)

95.  In cross-examination, however, Ho gave inconsistent evidence as to whether the plaintiff in fact continued to send the demand notes after May 2009.

(1) On the first day of his cross-examination, Ho was shown KC Fong & Ho’s letter dated 6 April 2009 enclosing the demand notes for that quarter, which was the last of such letters disclosed in this action (see para 44 above). Ho confirmed that after May 2009, the plaintiff did not send any further demand note to the defendant. He was asked whether it was he who instructed the accounting department to stop sending them. He replied no. He was then asked why the accounting department would all of a sudden decide on its own not to send them anymore. Ho said he could not explain. He added that from 2000 to 2010, he was extremely busy with his work.

(2) Then, on the second day of his cross-examination, it was pointed out to him that his oral evidence was directly opposite to his written evidence and he was asked to clarify. Ho’s initial response was that the written evidence was wrong. Very shortly afterwards, he said that in fact the oral evidence was wrong. He then stressed that he really did not know whether the staff had continued to send demand notes, as he did not handle the matter himself. In the end, he said that his written evidence was correct and his oral evidence was wrong.

(3) The court remarked to Ho that his answers were internally contradictory. Ho said that he did not have an answer to that. He added that he was told by his staff that further demand notes were sent and that was why he put that down in the witness statement.

96.  Notwithstanding the above, the plaintiff’s case is that the tenancy agreement of 2009 continued without interruption. However, the defendant ceased to pay rent, rates and government rent from June 2009 onwards. He continued to remain in occupation of Lots A and Lot B. Therefore, the plaintiff contends that upon the expiry of the agreement, a monthly periodic tenancy came into being as a matter of law under the same terms with effect from 1 January 2010 onwards. And the defendant is liable to make payment at the same rates as under the agreement.

The plaintiff demanded the defendant to pay rent arrears etc in 2017

97.  Notwithstanding that the defendant stopped making payment in June 2009, the plaintiff only demanded him to pay the arrears by letter dated 23 May 2017 (“the demand letter of 2017”).

98.  The demand was not met. Hence, the plaintiff says that from 1 June 2017 onwards, the defendant has been occupying the Premises without consent and is therefore a trespasser.

99.  In summary, the plaintiff contends that both Lots A and Lot B were leased to the defendant under the tenancy agreement of 2009. It now claims the arrears of rent, rates and government rent from June 2009 onwards up to May 2017 in the total sum of $1,935,962, and after that mesne profits at the same rates until the delivery of vacant possession.

EVALUATION OF THE EVIDENCE

100.  In respect of Lots A, the key factual dispute is whether the May 2009 conversation as alleged by the defendant in fact took place. In respect of Lot B, the material factual dispute is whether the oral tenancies from 2001 to 2007 and the tenancy agreements of 2008 and 2009 covered Lot B as well as Lots A, as alleged by the plaintiff. This would turn on whether Ho told the defendant that he could use Lot B together with Lots A shortly after the plaintiff acquired Lot B in January 2001. I would identify these two disputes as the primary factual disputes as the parties’ accounts of events are diametrically opposite. It is in essence Ho’s words against the defendant’s words. It will turn on the court’s assessment of the credibility of their testimony.

101.  In respect of Lot B, if the court finds in favour of the defendant on the primary factual dispute, the burden is still on him to make out his case of adverse possession in accordance with well-established principles in this area. The question here is whether he has put forward cogent and compelling evidence to prove his case.

102.  In the discussion below, I shall first deal with the two primary factual disputes. The issue of whether the defendant has made out a case of adverse possession will be dealt with separately.

103.  The principles on evaluating the truthfulness of an account given by a witness are well-established. Mr Leung has referred me to the summary set out in Leung Chi Sing, Rabo v Ko Chun Hey, Kelvin [2021] HKCFI 2242 at paras 41 to 44, which I reproduce below.

104.  Contemporaneous documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility. Importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events. Regard should be had to the consistency of the witness’ evidence with undisputed or indisputable evidence and the internal consistency of the witness’ evidence. Care should be taken in drawing conclusions about truthfulness and reliability solely or mainly from the appearance of a witness or from the assessment of a witness’ character. The witness’ credibility should be tested by reference to the objective facts proved independently of their testimony, and regard should be had to their motives and to the overall probabilities. It has been said that the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance on witnesses’ recollection of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.

The defendant’s account in respect of Lots A is generally consistent with objective or indisputable facts

105.  I am of the view that the defendant’s account of events in respect of Lots A is generally consistent with and corroborated by objective or indisputable facts.

106.  First, the contents of the May 2009 conversation, as alleged, reflect and are in line with the the 8,000 sq ft provision and the $1 tenancy provision.

107.  The commercial intention behind these provisions is plain. Before the 1993 SPA was entered into, the defendant and his family were already in occupation of Lots A. The purpose of the provisions were to enable them, through their corporate vehicle Sino Charm, to carry on using the lots without paying any rent even after the sale to Sinbon. If, in the future, the change of user was successful, Sino Charm would of course have to vacate the land but would receive property in the new development. Otherwise, it would still have to vacate the land but would be re-assigned the 8,000 sq ft of land within Lots A.

108.  In either case, pending the application for change of user, the defendant, through Sino Charm, could remain in occupation of Lots A without having to pay any rent to the owner. That was in fact what happened from 1993 to 2000. It was only in 2000 that Ho demanded the defendant to pay rent for the first time. The defendant complied. He explained that he did so because he believed in what Ho said as Ho was a solicitor and he believed that he would have to pay rent since the lots had changed hands. I consider that to be an inherently plausible explanation.

109.  Then, in the May 2009 conversation, according to the defendant’s case, armed with his legal advice, he confronted Ho. Ho then made the alleged representations about the refund and the return of land. This arrangement in fact mirrored the $1 tenancy provision and the 8,000 sq ft provision. In fact, all along, Ho has made it very clear that the plaintiff, as a subsequent purchaser of Lots A, would be willing to honour the 8,000 sq ft provision.

110.  Accordingly, in my view, the provisions in the 1993 SPA and the objective fact that the defendant was in occupation of Lots A without paying rent from 1993 to 2000 are both objective background facts which corroborate the May 2009 conversation.

111.  Secondly, the contents of the May 2009 conversation are also consistent with subsequent development.

112.  The objective fact is that after the defendant stopped paying rent in June 2009, the plaintiff did not chase for the arrears for eight years. A demand was only made in May 2017. There is no apparent reason why the plaintiff took no action at all for such a long period of time. By contrast, the defendant’s account can explain why there was no chaser because no payment was due as a result of the May 2009 conversation.

113.  The further objective fact is that after the tenancy agreement of 2009, no further written tenancy agreement was signed. Nor did there appear to be any attempt by the plaintiff to arrange for one to be signed. The tenancy arrangement had been in place since 2000. It is notable that the plaintiff in fact took the conscious step of arranging for written agreements to be signed for 2008 and 2009. There appears to be no explanation why the plaintiff did not continue the practice if the tenancy arrangement was to continue. When asked about this, Ho simply said he was very busy and he did not pay much attention to his own file. That explanation is unconvincing. By contrast, the defendant’s account can explain why there was no more tenancy arrangement.

114.  The further fact which corroborates the defendant’s account is the fact that the plaintiff stopped sending demand notes for rates and government rent to the defendant after May 2009. Notwithstanding the oral evidence of Ho, Mr Leung confirmed in his oral closing that the plaintiff accepts that to be the position.

115.  On the issue of demand notes, the defendant’s evidence is clear, consistent and aligns with contemporaneous documents. He is able to produce the letters from KC Fong & Ho sent to him over the years from October 2000 to April 2009 enclosing the demand notes. By contrast, Ho’s evidence on this issue is plainly self-contradictory. His oral evidence contradicts his written evidence. And the answers within his oral evidence contradict each other.

116.  This fact of course overwhelmingly supports the defendant’s case. By May 2009, the practice of sending demand notes to the defendant had been continuing for nine years without interruption. There must have been a reason why the plaintiff stopped doing so all of a sudden. The plaintiff has not been able to offer any explanation.

117.  In respect of the defendant’s case on Lots A, I should deal with a submission made by Mr Leung arising out of two solicitors’ letters written on behalf of the defendant. First, the letter dated 5 October 2009 written by Fong Yin Cheung & Co (“FYC”). Second, the letter by the same firm dated 7 June 2017.

118.  According to the defendant’s evidence, after seeking advice from Ho & Wong prior to the May 2009 conversation, he subsequently sought further advice from FYC, who told him that the plaintiff was bound by the $1 tenancy provision and had no basis to receive rent from him. In the letter dated 5 October 2009, FYC referred to the 1993 SPA and the 8,000 sq ft provision and the $1 tenancy provision. It concluded that due to inadvertence, the defendant had entered into a tenancy with the plaintiff and that the tenancy agreement was therefore not valid due to the title history.

119.  The letter dated 7 June 2017 was a reply to the plaintiff’s demand letter of 2017. It referred to the 1993 SPA and clause 17. It concluded that the defendant had been renting Lots A from Sino Charm and requested the plaintiff to produce a tenancy agreement showing its entitlement to collect rent from the defendant direct.

120.  Mr Leung points out that in neither letter was there any mention of the May 2009 conversation. For the letter of 5 October 2009, it was only five months after the conversation and it is difficult to see why the conversation would be omitted if it had indeed taken place.

121.  I think the observation is a fair one. The defendant was cross-examined on the first letter and asked why there was no mention of the May 2009 conversation. His reply was that the solicitor (Fong) knew Ho’s character very well and knew that Ho would not pay back regardless of what was written. I have to say that the explanation does not seem to be very logical.

122.  However, subject to this point, the defendant’s account of the events concerning Lots A appear to me to be on the whole coherent and consistent.

The defendant’s denial of tenancy over Lot B is generally supported by contemporaneous documents

123.  In my view, the defendant’s account of events in respect of Lot B is generally corroborated by contemporaneous documents, namely the tenancy agreements of 2008 and 2009 and the demand letter of 2017.

124.  The defendant’s case is that the oral tenancies from 2000 to 2007 and the written tenancies for 2008 and 2009 concerned Lots A only. Lot B was not covered in those tenancies. That position is of course supported by the tenancy agreements of 2008 and 2009 themselves, which only referred to Lots A. The agreements are in themselves strong proof of the defendant’s position. They were in fact drafted by Ho’s law firm.

125.  On the other hand, the notice of quit of 2007 referred to both Lots A and Lot B. This would appear to support the plaintiff’s position.

126.  The notice to quit and the tenancy agreements were both prepared by Ho’s law firm. Ho’s evidence was that the former was prepared by a staff member who worked in the litigation department and had over 40 years’ experience and the latter were done by a different department. Insofar as he was suggesting that that was why the notice to quit included the correct description of the lots whereas the tenancy agreements did not, I find the explanation to be arbitrary and unconvincing.

127.  Lastly, I should also refer to the demand letter of 2017. That letter was signed by Ho himself. Like the tenancy agreements of 2008 and 2009, it again did not refer to Lot B. The purpose of the letter was to chase for arrears over the past eight years. Hence one would expect that care would be taken to get the information correct. Once again, when asked about the omission of Lot B, Ho said that it was left out by mistake. I find the explanation unconvincing.

Ho’s evidence is tainted with internal inconsistencies and contradictions

128.  I have recounted Ho’s evidence in detail on the following matters:

(1) why the tenancy agreements of 2008 and 2009 did not mention Lot B (see para 86 above);

(2) whether the plaintiff continued to send demand notes for Lots A after May 2009 (see para 95 above); and

(3) whether from the time when the plaintiff acquired Lots A, Ho was aware of the $1 tenancy provision and whether the plaintiff had intended to abide by it (see para 92 above).

129.  I have already commented above that his evidence on these matters is self-contradictory. He was given ample opportunity to explain or reconcile such contradictions in cross-examination. But he was unable to do so. It must be pointed out that these matters are not peripheral matters in the context of the present factual disputes. For instance, if the plaintiff had indeed stopped sending demand notes to the defendant after May 2009, it would strongly corroborate his case on the May 2009 conversation.

130.  Hence, the contradictions and inconsistencies within Ho’s evidence are material. They seriously undermine the credibility and reliability of his evidence as a whole.

131.  I should also add that Ho’s assertion that he was not aware of the $1 tenancy provision “from start to finish” is inherently implausible. This provision and the 8,000 sq ft provision were in fact tied to each other in the 1993 SPA. They together gave effect to the commercial arrangement that Sinbon would allow the defendant (through Sino Charm) to continue using Lots A for free pending application for change of user and in the event that the application failed, Sino Charm would get back the 8,000 sq ft of land.

132.  Ho had at all times been aware of the 8,000 sq ft provision. In my view, it is simply inconceivable that with his conveyancing and litigation experiences as a solicitor, he would be ignorant of the $1 tenancy provision when the plaintiff purchased the land in 1996.

Findings on the two primary factual disputes

133.  In my judgment, on balance, the defendant’s evidence on the two primary factual disputes identified in para 100 above is on the whole more credible than the plaintiff’s and more likely than not to be true.

134.  Accordingly, I accept the defendant’s factual case on these two disputes as true and, in case of conflict, I prefer the defendant’s evidence to the plaintiff’s.

135.  More specifically, in respect of Lots A, I make the following findings. When the plaintiff acquired them in 1996, Ho was, and has since been, aware of both the 8,000 sq ft provision and the $1 tenancy provision in the 1993 SPA. Notwithstanding that, in 2000, he charged the defendant rent for using Lots A as he saw that the latter was making a profit there. The May 2009 conversation took place. And that was why the plaintiff ceased sending demand notes to the defendant after that. That was also why the defendant stopped paying any rent and why the plaintiff did not chase for the arrears for the following eight years. For the same reason, no further written tenancy agreement was entered into by the parties.

136.  I further find that Lots A have since 1996 transformed from some barren land to a properly paved and well-maintained car park with structures built on the land, as shown in the photographs taken in 2017. I accept Mr Lam’s submission that the car park and other facilities on Lots A are of a large scale and that the investments have been of a capital nature. The photographs really speak for themselves. I accept the defendant’s assertion that over the years, he intended to, and did from time to time, incur significant expenditures on maintaining the facilities on the lots.

137.  In respect of Lot B, I find that after the plaintiff purchased the land in 2001, Ho did not tell the defendant to use Lot B as well as Lots A. The defendant only found out about the purchase later from Wong. He was in possession of the lot without any express permission of the plaintiff or Ho. Accordingly, Lot B did not form part of the oral tenancies from 2001 to 2007 and the tenancy agreements of 2008 and 2009 did not cover Lot B. And that was why in 2017 when the plaintiff sent the demand letter, Lot B was not mentioned.

The defendant’s evidence on adverse possession of Lot B

138.  The defendant has given an account of how he has occupied and made use of Lot B over the years since 1994. The plaintiff has not adduced any evidence to rebut his account.

139.  Nevertheless, it remains to be the case that in order to acquire possessory title of Lot B, it is for the defendant to prove factual possession of the land and the intention to possess it. To establish factual possession, there must be a degree of exclusive physical custody and control. Whether there is a sufficient degree must depend on the circumstances, including the nature of the land. To establish the requisite intention to possess, the squatter should show that he intends, in his own name and on his own behalf, to exclude the world at large, so far as is reasonably practicable and so far as the processes of the law will allow. See J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419 at paras 42 to 43, approving Slade J’s analysis in Powell v McFarlane (1977) 38 P&CR 452; Incorporated Owners of San Po Kong Mansion v Shine Empire Ltd (2007) 10 HKCFAR 588 at para 7.

140.  Adverse possession is a question of fact to be established by cogent and sufficient evidence. The burden of proof is on the squatter. There is no place for any presumption, whether legal or evidential, in favour of the squatter: On Yip Property Development Co Ltd v Kwok Tai Kuen Alan HCMP 3192/2013, 15 April 2014, para 8. It has also be said that the evidence required must be compelling: Wu Yee Pak v Un Fong Leung (2004) 7 HKCFAR 498 at para 5. This gives recognition to the serious consequence of a finding that the title of a paper owner is displaced by a squatter, although the standard of proof is still the civil standard of balance of probabilities: Tsang Foo Keung and Key Kwong Development Ltd v Chu Jim Mi Jimmy [2015] 6 HKC 200 at para 42.

141.  In my view, the defendant fails to discharge the burden. His evidence falls far short of being cogent, sufficient and compelling.

142.  His evidence comprises his own assertions, Wong’s evidence and some photographs.

143.  Wong’s evidence is not of much probative value. First, his evidence relates only to the Lot B house but not the front and back spaces within the lot. In this regard, it must be borne in mind that the defendant is claiming adverse possession of the entire lot, not just the house. Secondly, Wong lives in Canada and only comes back to Hong Kong from time to time. The source of his knowledge about what the defendant did to the house over the years seems to have all come from the defendant himself.

144.  As for the photographs, I am prepared to accept that they show the general condition of parts of the Premises, ie both Lots A and Lot B, as of 2017. However, as remarked above, it is not possible for me to tell which parts of the photographs relate to Lot B. I can see a house with a grocery store inside but I am not able to tell exactly which part of it is the 365A house (located within Lots A) and which part is the Lot B house (located within Lot B). I cannot tell from the photographs which parts are the front and back portions of Lot B. In any event, these photographs only show the condition in 2017. There are no photographs showing the physical condition of Lot B in previous years.

145.  The defendant’s own evidence does not touch on the physical characteristics of the land. It does not reveal the size of the Lot B house relative to the size of the lot as a whole. It does not say anything about the boundary of the lot. The court simply cannot visualise the physical condition of the land over the years, purely based on his assertions.

146.  An important feature in this case is that Lot B is a piece of open land. On the defendant’s own case, there are front and back portions to the Lot B house. In order to show exclusive possession of land of such a nature, a squatter often has to show that the land has been fenced or enclosed or that there are some other features on the land which would have the effect of excluding outsiders from entering the land. And for this, he needs to adduce cogent, sufficient and compelling evidence.

147.  The defendant alleges that the only access to Lot B is through Lot 365A and that he has installed a metal gate with lock at the access point. This is a bare assertion made by him without any objective supporting evidence. One cannot tell from the lot index plan where that metal gate is located and how the boundary of the lot is enclosed. The evidence is plainly not sufficient and is nowhere close to showing the exclusive character of the defendant’s occupation.

148.  In this action, the defendant has elected to not adduce any expert surveying evidence. It is not clear why he has made that decision. While such expert evidence is not a must in adverse possession cases, the present case plainly calls for it in view of the nature of the land and the uses to which the defendant says he has put the land over the years. In the absence of surveying evidence, the court does not have any objective or credible evidence showing how the land was being used by the defendant over the years.

149.  In conclusion, the defendant has failed to adduce sufficient evidence to show that he had been in exclusive possession of Lot B since 1994. His adverse possession claim fails for that reason.

The defendant’s evidence on the proprietary estoppel claim of Lot B

150.  As to the defendant’s claim based on proprietary estoppel, there is simply no or no sufficient evidence that the use of Lot B as a whole was open and that the plaintiff was aware of such use. The claim fails for that reason.

RULINGS

151.  Based on the facts as found, I now set out my rulings.

Lots A

152.  The principles on proprietary estoppel are well-known. The requirements are (1) a representation or assurance made to the claimant, (2) reliance on it by him, and (3) detriment to the claimant in consequence of that reliance. But these requirements are not to be treated as watertight compartments. The court must look at the matter in the round and should conduct a broad inquiry to see whether repudiation of an assurance is or is not unconscionable in all the circumstances: Cheung Lai Mui v Cheung Wai Shing (2021) 24 HKCFAR 116, [2021] HKCFA 19 at paras 23 and 24.

153.  On the issue of detriment, where a claimant enjoys the benefit of using the land during the period of occupation and makes a profit, it has been held that he is not suffering from any detriment: see, eg, The Incorporated Owners of Kam Luk Building v 吳靜燕 [2022] HKCA 1896 at para 78(1). The court in general takes into account any countervailing benefits that the claimant has received. There will be cases where the court takes the view that the countervailing benefit has outweighed the detriment which the claimant has occurred. In those cases, the requirement of detriment is not satisfied. However, it must be borne in mind that detriment is not a narrow or technical concept and it is not a mere matter of balancing financial gains and losses. It forms part of the “broad inquiry” which the court should undertake: Megarry and Wade, The Law of Real Property (9^th ed) at para 15-018.

154.  In respect of Lots A, I have found that the May 2009 conversation took place. I am satisfied that the plaintiff, through Ho, made clear representations to the defendant and that the latter had relied on them and as a result suffered detriment by continuing to incur significant expenditures on maintaining the facilities on the lots. It is true that at the same time the defendant was operating different businesses there and generating revenues. However, I do not consider that such benefit would outweigh the detriment as it is plain, as I have found, that the investments put in by the defendant are capital in nature and of a large scale. They have amounted to improvement to the lots.

155.  In the circumstances, when one takes into account the clear representations made by the plaintiff, the background reasons why the representations were made, and the substantial improvements to the lots, I hold that it is unconscionable for the plaintiff to go back on those representations by making the present claims against the defendant when all that the latter has done is to stay on using the lots in line with the representations.

156.  The proprietary estoppel is established. The proper relief would be to give effect to the representations made. It follows that the plaintiff’s claim for arrears of rent, rates, government rent and mesne profits in respect of Lots A fails. It is therefore unnecessary to deal with the “standing by” defence and the “licence agreement” defence.

Lot B

157.  In respect of Lot B, the plaintiff’s claim for arrears of rent, rates and government rent (up to May 2017) based on the tenancy agreement of 2009 fails as I have held that the agreement did not cover Lot B and that Ho did not give permission to the defendant to use the land. At the same time, the defendant fails to make out his case of adverse possession or proprietary estoppel. He is therefore a trespasser.

158.  As legal owner, the plaintiff is entitled to vacant possession of the lot. As for mesne profits, given how the plaintiff has formulated its claim, it has not put forward any separate figure for the calculation of mesne profits for Lot B. For that reason, I make no award on this.

CONCLUSION

159.  In respect of the action, I order that the defendant do forthwith deliver vacant possession of Lot B to the plaintiff. I dismiss the rest of the plaintiff’s claims.

160.  In respect of the counterclaim, I grant a declaration that the plaintiff is estopped from charging the defendant any rent, rates and government rent for the use of Lots A until the sum of $1,813,999.20 is refunded to the defendant and the 8,000 sq ft of land within Lots A are assigned to Sino Charm. The remainder of the counterclaim is dismissed.

161.  On the primary factual disputes concerning both Lots A and Lot B, I have found in favour of the defendant. On the other hand, I have found that he has failed to prove adverse possession of Lot B on the evidence. As for the end result, neither party is wholly successful. For these reasons, I make a nisi order that there be no order as to costs of the action and the counterclaim.

Annex