THE PERSONAL REPRESENTATIVE OF THE ESTATE OF LEE CHIU TAI, DECEASED AND ANOTHER v. TSANG LOI KI AND ANOTHER

DCMP 3485/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 3485 OF 2000

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DECISION

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INTRODUCTION

1.  By an originating summons filed on 1 December 2000, the plaintiffs made a claim of adverse possession in respect of the land owned by the defendant, which is the land known and registered in the Yuen Long New Territories Land Registry as Lot Nos 1384, 1487, 1488, 1489 and Section E of Lot No 1606 all in Demarcation District No 114 (“the Land”).

2.  Notice of the proceedings was given to the defendant by substituted service ordered by the court.  The originating summons was heard by HH Judge Mimmie Chan (as she then was) on 7 September 2007.  The defendant was absent in that hearing.  After hearing counsel for the plaintiffs and reading the affirmations filed by the plaintiffs, the court gave judgment to the plaintiffs (“the Judgment”).

3.  By a summons filed on 6 April 2016 (‘the 1^st summons”), the applicant Fong Ping Kit applies for leave to join in these proceedings as the 2^nd defendant and seeks various directions.  The 1^st summons is supported by an affirmation made by the applicant and filed on 6 April 2016.  As per the supporting affirmation, the applicant’s case is that the defendant, who was the registered owner of the Land, died on a date unknown to him.  The applicant and his family were in possession of the Land to the exclusion of the others since 1981.  The plaintiffs have never been in possession of the Land.  The court has been misled in giving the Judgment to them.

4.  On 29 August 2016, the applicant obtained leave to take out an application for an order for substituted service of the 1^st summons and the supporting affidavit on the defendant.

5.  By a summons filed on 6 February 2017 (“the 2^nd summons”), the applicant seeks leave to amend the 1^st summons in the way as suggested in the draft amended summons (“the draft amended summons”) annexed to the 2^nd summons.  As per the draft amended summons, the applicant intends to seek an order in the following terms:-

(a) leave to the applicant to join in this action as the 2^nd defendant;

(b) the Judgment be set aside on the grounds that:-

(i) the defendant was deceased as at the date of the Judgment;

(ii) the Judgment was obtained by fraud; and

(c) costs of the application be to the applicant.

6.  By a consent summons signed by the applicant’s solicitors and the plaintiffs’ solicitors and filed on 7 July 2017 (“the consent summons”), the applicant and the plaintiffs jointly apply for leave to the applicant to make the amendments as per the draft amended summons, leave to the plaintiffs to file and serve affirmation(s) in opposition, leave to the applicant to file and serve affirmation(s) in reply, the time for the applicant to apply for substituted service of the amended summons on the defendant being extended, and some other directions.

7.  The consent summons reached me on 10 July 2017.  When I first saw the consent summons, I was troubled by the proposal therein.  I therefore directed the applicant and the plaintiffs to provide skeleton submissions on the following questions and to appear before me on 26 July 2017:-

(a) why it is possible for the applicant to apply for setting aside the judgment on the ground of fraud (which would involve factual disputes) in these proceedings and not by a fresh action?  See LCKLM nee CKLM v LWK (CACV 186/2016, 4 May 2017), [6.1] and [6.4];

(b) whether the Judgment is binding upon the applicant; and

(c) whether the applicant is precluded from claiming a possessory title to the Land as a result of the Judgment.

8.  The parties have duly provided their skeleton submissions to me.  The plaintiffs have transferred the possessory title to a company called Goodlink Limited.  At present, there are proceedings between the applicant and Goodlink Limited in the Court of First Instance (HCA 2510/2016).  The Land has also been mortgaged on the strength of the Judgment.

9.  After reading the skeleton submissions and hearing the oral submissions from counsel, I would now answer the 3 questions in turn in the paragraphs below.

Question 1

10.  There are 2 ways to set aside a judgment obtained by fraud, ie (a) by an appeal, or (b) by a fresh action.  The principles have recently be restated by the Court of Appeal in the LCKLM case, in which Lam VP said:

“6.1 There are three ways for error recorded in a judgment to be corrected. The first is to apply to the judge who gave or approved the judgment under the inherent jurisdiction of the Court or by way of the ‘slip rule’ to correct an accidental omission so that the Court’s intention is manifested. In the case of a consent order, the Court’s intention is to give effect to the true bargain of the parties as recorded in the consent order. The second is to appeal against the judgment and the third way is to commence a fresh action to set aside the judgment by reason of fraud or mistake.

…………

6.4. In respect of the second and third methods, this Court in WTOL v WYPP (Unrep. CACV 241/2011, 18 July 2012) states that,

‘34. In de Lasala v. de Lasala [1980] AC 546, the Privy Council, on appeal from Hong Kong, held at page 561 (per Lord Diplock) that:

“Where a party to an action who seeks to challenge, on the ground that it was obtained by fraud or mistake, a judgment or order that finally disposes of the issues raised between the parties, the only ways of doing it that are open to him are by appeal from the judgment or order to a higher court or by bringing a fresh action to set it aside.”

See Lui Sik-kuen alias Lui Lup-fun v. Lee Suk-ling [1992] 2 HKLR 371 applying de Lasala v. de Lasala.

35. In respect of these two approaches, a fresh action is clearly more appropriate where there are factual disputes between the parties.  As Booth J (as she then was) in Crozier v. Crozier [1994] Fam 114 at 117 stated:

“In cases where issues of fact will need to be resolved or the court will be asked to make substantive orders, then it will clearly be more convenient for the case to be heard by a judge with the appropriate jurisdiction rather than by the Court of Appeal.” ’ ”

11.  Mr Erik Shum (leading Mr Victor CF Cheung), counsel for the plaintiffs, submit that the above would be the only ways to set aside the Judgment.

12.  Mr Terrence Tai, counsel for the applicant, submits that apart from those ways, this court may order the setting aside of the Judgment in the present proceedings by invoking the jurisdiction in the Rules of the District Court, Order 28 rule 4(1), which provides:

“The Court by whom an originating summons is heard may, if the liability of the defendant to the plaintiff in respect of any claim made by the plaintiff is established, make such order in favour of the plaintiff as the nature of the case may require, but where the Court makes an order under this paragraph against a defendant who does not appear at the hearing, the order may be varied or revoked by a subsequent order of the Court on such terms as it thinks just.”

13.  The Judgment was made in a hearing in which the defendant did not appear. Accordingly, if the defendant applies for setting aside the Judgment, I would have the jurisdiction to entertain the application under Order 28 rule 4(1). However, it is not the defendant applying for setting aside the Judgment, but is a third party making the application.  I doubt whether this court has the jurisdiction to consider an application made by a third party for setting aside an order previously made by the court on an originating summons under Order 28 rule 4(1).  Mr Tai is unable to refer me to any cases in which the court has done so.

14.  The important part of Order 28 rule 4(1) reads as follows:

“…… where the Court makes an order under this paragraph against a defendant who does not appear at the hearing, the order may be varied or revoked by a subsequent order of the Court on such terms as it thinks just.” (Emphasis added)

It is plain that under this rule, the jurisdiction for varying or revoking a previous order made on an originating summons would only be invoked if a defendant has not appeared in the hearing in which the order was made.  In my view, the jurisdiction would only be invoked upon an application made by a defendant.  The rule is not applicable if a third party applies for setting aside an order made by the court on an originating summons.

15.  Mr Tai refers me to Minet v Johnson (1890) 6 TLR 417 and Yu Wing Kan v Lau Shuk Lan (CACV 68/1989, 28 June 1990), which concern Order 15 rule 10. Order 15 rule 10 provides:

“Without prejudice to rule 6, the Court may at any stage of the proceedings in an action for possession of land order any person not a party to the action who is in possession of the land (whether in actual possession or by a tenant) to be added as a defendant.”

16.  I doubt whether I would have jurisdiction under Order 15 rule 10 to allow the applicant to join in these proceedings and to make an application for an order setting aside the Judgment in these proceedings.  In order to be within the ambit of Order 15 rule 10, the applicant has to be “in possession of the land”.  Who is in possession of the Land is a controversial issue between the applicant and the plaintiffs.  Before being sure that the applicant is in possession of the Land, I have reservation as to whether Order 15 rule 10 is applicable.

17.  Even if I have the jurisdiction to allow the applicant to join in these proceedings and to make an application for setting aside the Judgment in the present proceedings, I would exercise my discretion to refuse to do so.  In my view, since the applicant is applying to set aside the Judgment on the ground of fraud, it would not be possible to proceed by just considering the affidavit evidence filed and to be filed by the parties.  It would be proper and necessary to proceed by a writ action, with the allegation of fraud clearly set out on the pleadings, followed by mutual discovery and filing of witness statements. Further, there should be live evidence and cross-examination at trial.  Mr Tai suggests that there can be cross-examination of the deponents of the affidavits filed by the parties.  This would not be a desirable approach. When the applicant is putting forward a case of fraud, the fraud as suggested by the applicant must be set out on pleadings distinctly and with utmost particularity.  The battle field must be clearly defined by pleadings.  Without pleadings, it would be difficult to know what exactly are the issues between the parties, and in turn it would be difficult to know what documents are documents relevant to the issues in dispute and are subject to disclosure. While an allegation of fraud is involved, to hear live evidence without any pleadings would not be a desirable approach.

18.  I decline to allow the applicant to join in these proceedings to apply for setting aside the Judgment.  However, this does not prevent the applicant from commencing a writ action against the plaintiffs for setting aside the Judgment on the ground of fraud.

Question 2

19.  Mr Tai submits that the Judgment is only binding upon the plaintiffs and the defendant and is not binding upon anyone who is not privy to the proceedings, including the applicant.  In support of his submissions, Mr Tai refers me to Jourdan & Radley-Gardner on Adverse Possession (2nd Edn), [20-12] and [20-13]:

“20-12 The extinction of the true owner’s title is not absolute. It is not destroyed for all purposes, but only in so far as is necessary to prevent the true owner from claiming against the squatter, or those claiming under the squatter. In Fairweather v St Marylebone Property Co Ltd, the House of Lords held that the extinction of a tenant’s title to a lease by adverse possession did not destroy the lease itself, but only prevented the tenant from claiming possession against the squatter. As against the landlord, and against any third party not taking through the squatter, the lease remained inexistence. Lord Radcliffe endorsed the view that:

‘… the right or title extinguished is coterminous with the right of action the barring of which is the occasion of the extinguishment.’

This meant that:

‘… when a squatter dispossesses a tenant for the statutory period, it is the tenant’s right and title as against the squatter that is finally destroyed but not this right or title as against persons who are not or do not take through the adverse possessor.’

20-13  This suggests that if S takes adverse possession of O’s land for 12 years, and S then vacates the land, O can bring possession proceedings against a subsequent squatter, S1, who takes possession.  Although O’s title is extinguished so far as claiming possession against S is concerned, or against those deriving title under S, there is no effect on O’s title against a third party.”

20.  Mr Shum submits that the Judgment gives proprietary interest of the Land to the plaintiffs and hence is a judgment in rem and is binding upon the applicant. Mr Shum however does not refer me to any authority in support of his position.

21.  In my judgment, Mr Tai is correct on this issue.  Regrettably, sometimes practitioners have some misunderstanding as to what a possessory title means. The law on this point has been made clear by the Court of Appeal in Wong King Lim v The Incorporated Owners of Peony House (CACV 3/2012, 29 May 2013) and by Mr Recorder Jat SC in Tsang Cho Kiu v Lam Tsat Fuk (HCMP 1077/2013, 10 December 2013).  In Tsang Cho Kiu, the issue before the court is whether an adverse possessor is entitled to have an order requiring that the name of the registered owner on the Land Registry be deleted and replaced by the name of the adverse possessory.  The learned recorder refused to make this order.  In that case, the learned recorder said:

“14. …… Mr Lam drew my attention to the recent decision of the Court of Appeal in Wong King Lim v The Incorporated Owners of Peony House, CACV 3/2012, 29 May 2013 (Yuen and Lam JJA, Au J). …… In dismissing the incorporated owners’ appeal, the court referred to general principles which are relevant to the question before me.

15. In judgment para 33.2, Yuen JA (with whom Lam JA and Au J agreed) noted that:

“It is important not to confuse land with title. Land A remained subject to the covenant in favour of land B, even though the title of the owner of land A had been extinguished by the squatter’s adverse possession. Thus Collins MR held [in Re Nisbet and Potts’ Contract [1905] 1 Ch 391] at p.402 that the whole (meaning the entirety of the) right the squatter acquires under the statute of limitations is the extinguishment of a title adverse to his own, and nothing else.” (original emphasis)

16. Lam JA (as Johnson Lam VP then was) separately observed in judgment para 37 that:

“Under common law, a squatter does not succeed to nor take over the title of the paper owner whom he has dispossessed, see Fairweather v St Marylebone Property [1963] AC 510. As observed by Keith J in Chung Ping-kwan v Lam Island Development [1995] 2 HKLRD 228 at p 235, “the squatter’s possessory title was an independent title …” The title of the squatter stems from his possession of the land and it was defeasible by the paper owner’s title until the right of the paper owner against him has been extinguished under the Limitation Ordinance by dispossession for the requisite period of time. In Fairweather, the majority of the House of Lords held that the paper owner’s title was only extinguished vis-à-vis the squatter. It remains as a title as between the paper owner and his lessor and it could be surrendered, and upon such surrender the lessor’s right of possession started to accrue and basing on that right the lessor could recover the land from the squatter. This outcome vividly demonstrates the proposition that a squatter does not acquire the title of the paper owner and the Limitation Ordinance does not operate as a statutory conveyance of that title to the squatter.”

17. In my judgment, these principles apply to the present case.  Mdm Tsang has established a possessory title as against the paper owner; but it does not follow that she is entitled to be substituted as owner in the Land Registry records.”

22.  These principles have also been emphasized by me in Wang Hanzhen v Li Kuen (DCMP 3269/2014, 17 February 2016), in which I said at [53]:

“Notwithstanding the plaintiff's success in adverse possession, the plaintiff would not take over the title of the defendant. The defendant's title has only been extinguished vis-à-vis the plaintiff. It remains as a title vested in the defendant and could be surrendered to the Government. See Wong King Lim v The Incorporated Owners of Peony House (CACV 3/2012 , 29 May 2013), per Yuen JA at [33.2] and per Lam JA (as he then was) at [37]. Applied by Recorder Jat SC in Tsang Cho Kiu v Lam Tsat Fuk (HCMP 1077/2013, 10 December 2013).”

23.  So the Judgment obtained by the plaintiffs only means that the defendant’s title has been extinguished vis-à-vis the plaintiffs and those deriving title under the plaintiffs, no more and no less.  The applicant is not a party to these proceedings and would not be bound by the Judgment.

Question 3

24.  Mr Tai submits that as the applicant is not bound by the Judgment, the applicant is not precluded by the Judgment from claiming a possessory title to the Land.

25.  Mr Shum submits that the applicant is bound by the Judgment, and unless the applicant can set aside the Judgment by a fresh action, the applicant is precluded from any claim of possessory title to the Land.

26.  I have ruled that Mr Tai is correct on Question 2.  Accordingly, the answer to Question 3 is the one suggested by Mr Tai.

27.  Mr Tai submits that although the Judgment is not binding upon the applicant and the applicant may claim possessory title to the Land, it would be more convenient to allow the applicant to join in these proceedings and make an application to set aside the Judgment on the ground of fraud in these proceedings, as the plaintiffs and the defendant have already been parties in this action.  With respect, for what I have said concerning Question 1 above, I am unable to accept these submissions.  In my judgment, if the applicant is determined to apply for setting aside the Judgment on the ground of fraud, he should do so by a fresh action, and that action should be a writ action.

Disposition

28.  For the reasons above, I do not regard the directions proposed in the consent summons as appropriate.  I dismiss the consent summons.  As a result of this decision, the 1^st summons and the 2^nd summons should also be dismissed, and I so order.

29.  Having heard submissions on costs, I am of the view that as the directions in the consent summons are jointly proposed by the applicant and the plaintiffs, none of them can be regarded as a successful party in this hearing.  As to the costs of the consent summons and the costs of this hearing, there be no order as to costs.

30.  The 1^st summons and the 2^nd summons are summonses taken out by the applicant.  Since these summonses have been dismissed, the costs of these summons should be paid by the applicant to the plaintiffs, and I summarily assess those costs at HK$20,000.

31.  For the avoidance of doubt, the dismissal of the aforesaid summonses does not mean that the applicant cannot take action to apply for setting aside the Judgment on the ground of fraud.  If the applicant intends to do so, he should do so by a fresh writ action.  Further, the applicant may claim possessory title to the Land in separate proceedings.

32.  Both the applicant and the plaintiffs are legally represented.  As to what should be the next step, each party may consult their own legal advisors and make a wise decision.

33.  Lastly, it remains for me to thank Mr Tai, Mr Shum and Mr Cheung for the assistance provided to this court.