THE INCORPORATED OWNERS OF KAM LUK BUILDING v. 吳靜燕

CACV 16/2021

[2022] HKCA 1896

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 16 OF 2021

(ON APPEAL FROM DCCJ 1648 OF 2016)

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REASONS FOR JUDGMENT

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Hon Au JA (giving the reasons for judgment of the court):

A.  INTRODUCTION

1.  This is the plaintiff’s appeal against the judgment of His Honour Judge Andrew Li (“the Judge”)  given on 9 April 2020 ([2020] HKDC 196)  (“the Judgment”).

2.  By the Judgment, the Judge dismissed the plaintiff’s claim for recovery of possession of a common area and space underneath Staircase No 63 (“Staircase 63”)  on the ground floor of Kam Luk Building, Nos 61 - 83 Shek Yam Road, Kwai Chung, New Territories (“the Building”)  and further held that the defendant had established adverse possession and acquired possessory title to Staircase 63.

3.  The plaintiff first sought leave to appeal against the Judgment before the Judge, which was refused on 30 June 2020 ([2020] HKDC 492).

4.  The plaintiff re-applied for leave to appeal to this court, which leave was granted on 13 January 2021.  Thereafter, the plaintiff lodged the Notice of Appeal (“Notice of Appeal”)  and the defendant also lodged a Respondent’s Notice (“Respondent’s Notice”).

5.  We heard the appeal on 7 January 2022.  At the end of the hearing, we allowed the appeal with costs and set aside the Judgment.  We further ordered the defendant to demolish the trespassing structure and reinstate and deliver vacant possession of Staircase 63 within 60 days and to pay mesne profits with interest. We indicated that we would hand down our reasons in due course.  This is what we do now.

B.  BACKGROUND

6.  The material background relevant to this appeal is as follows.

7.  The plaintiff is the incorporated owners of the Building.  It was incorporated on 24 July 2008.

8.  According to the defendant, she and her family (collectively “the Ngs”)  with her father (“Ng Senior”)  as its head had been occupying Staircase 63 since at least 1973:

(1)  From around 1973 to April 1978, Ng Senior and the defendant’s elder brother, Ng Tung Chau (“Tung Chau”)  pursuant to a suggestion/permission from a person known as Wu Kam (“Wu Kam”)  moved into and occupied Staircase 63, and erected a shop (“Shop 63”)  to operate a photo finishing and retail business named “Silvery Photo Supplies” (“the Business”).  The defendant’s younger brother, Ng Tung Wai (“Tung Wai”)  had also assisted in the Business since the summer of 1973.[1]

(2)  In around 1978, Tung Wai and Tung Chau followed Ng Senior to set up a new shop named “Chi Tat Photo Supplies” (“Chi Tat”)  diagonally opposite the street at 82 Shek Yam Road for selling cameras and photography accessories.[2] From April  1978 to around December 1994, the Business was operated by the defendant’s elder sister, Ng Ching Kit (“Ching Kit”)  at Shop 63.[3]

(3)  Ng Senior and Ching Kit emigrated to Australia in around 1988 and 1994 respectively.[4]

(4)  From around December 1994 to September 1998, the Ngs continued to run the Business at Shop 63.[5]

(5)  From around September 1998 to November 2000, Tung Wai operated the Business at Shop 63 as a branch of Chi Tat under the trade name of “Silvery Photo 1-hour Photo Develop”.[6]

(6)  From 12 November 2000 to 13 November 2015, the defendant was the sole registered owner of the Business in the business registration and operated the Business at Staircase 63.  Thereafter, the defendant had let out Staircase 63 for short-term tenancies on daily or weekly basis for rental income of about HK$450 to HK$500 per day for an average of 230 to 240 days in a year.[7]

9.  For completeness, around 1985 to 1992, Ng Senior was a registered co-owner of Flat 1 on 1/F of the Building.[8] During 1992 to 1993, the defendant’s brother, Ng Tung Kee (“Tung Kee”)  was also a registered co-owner of the Building.[9]

10.  In February 2010, the Building Authority issued a building order[10] to the plaintiff for the removal of Shop 63 as an unauthorized structure.

11.  On 8 November 2010, the plaintiff’s then solicitors issued a demand letter to the defendant as the occupant of Shop 63 at that time requesting her to demolish Shop 63 and reinstate Staircase 63 to its original state.  The defendant’s then solicitors replied to the plaintiff by way of a letter dated 3 December 2010, refusing the plaintiff’s request and stating that she had acquired possessory title to Staircase 63.

12.  Then in April 2011, the Fire Services Department (“FSD”)  issued Fire Safety Directions instructing the plaintiff to provide or improve the fire services installations and equipment in the Building.  In November 2011, the Buildings Department wrote to the plaintiff and stated, among others, that Shop 63 was an illegal structure.

13.  In March 2014, a consultant for fire services installation works was appointed by the plaintiff.  In December 2015, it further advised the plaintiff that it would require the common parts of the Building (including Staircase 63)  to install sprinklers inlets in order to comply with FSD’s instructions.

14.  On 11 April 2016, the plaintiff took out the present action against the defendant.  In essence, the plaintiff’s case is that the defendant has trespassed onto Staircase 63 as a common area.  It therefore seeks orders, inter alia, that the defendant do demolish the trespassing structure, reinstate the common part and deliver vacant possession of Staircase 63, and be restrained from trespassing the common part.  The plaintiff also seeks mesne profits and damages, as well as interest and costs.

15.  In defence, it is the defendant’s case that since 1973, she and her family have been enjoying exclusive possession of Staircase 63 for more than 20 years or 12 years (since 1991)  by virtue of the fact that she and/or her family have occupied Staircase 63 and operated the Business at Shop 63.  The defendant therefore claims that she has acquired possessory title to Staircase 63 by virtue of adverse possession.  The defendant thus counterclaims for a declaration that the title of the plaintiff and/or its predecessors to Staircase 63 has been extinguished by reason of sections 7(2)  and 17 of the Limitation Ordinance, Cap 347 and the plaintiff’s claim is statute-barred.  Further and in the alternative, the defendant claims that due to the inaction and delay of the plaintiff and its predecessors in the past 40 years, the plaintiff’s claim is barred by reason of the equitable doctrines of acquiescence, waiver, laches and estoppel.

16.  Subsequent to the commencement of the action, Ng Senior passed away in December 2017.

C.  THE JUDGMENT

17.  The trial was conducted before the Judge.  As mentioned above, by way of the Judgment, the Judge dismissed the plaintiff’s claim and gave judgment in favour of the defendant.

18.  The Judge’s reasons for the Judgment are in summary as follows.

19.  First, based on the defendant side’s own evidence given at trial and the defendant’s own pleading that Ng Senior purchased “the right to use” Staircase 63 to run the Business, the Judge found that Ng Senior moved into Staircase 63 in 1973 pursuant to a contractual licence granted by Wu Kam, who was a director and shareholder of Shun Shing Weaving Co Ltd (“Shun Shing”), upon his payment of a sum for the use of Staircase 63 (“Wu Kam Licence”).  Shun Shing was apparently the developer or first owner of the Building.[11] In particular, the Judge rejected the defendant’s case and contentions that Ng Senior in fact purchased the ownership of Staircase 63 with the payment or alternatively that he was under the mistaken belief that he had purchased its ownership: [33] - [47] of the Judgment.

20.  Second, the Judge however concluded that the defendant had established adverse possession of Staircase 63 since 1973 up to the time of the writ:

(1)  The Judge held that Ng Senior moved into Staircase 63 to have actual possession thereof under the Wu Kam Licence and accepted the defendant’s case and evidence that the said possession was exclusive in nature in that Ng Senior and his children had been dealing with it as if they were its true owner by operating the Business at Shop 63 and subsequently renting it out on daily basis: [49] - [71] of the Judgment.  He further concluded that the objective evidence also supported the defendant’s case of factual and exclusive occupation and possession of Staircase 63 over the years. This evidence included the maintenance done on Staircase 63; the utilities and rates and government rent paid and the insurance cover taken out by the defendant’s family: [72] - [80] of the Judgment.

(2)  The defendant and her family members also had the requisite intention to exclude the world at large as demonstrated by the various physical and objective acts carried out by them at Staircase 63 in running the Business: [85] - [90] of the Judgment.

21.  Third, the Judge further rejected the following contentions raised by the plaintiff:

(1)  He rejected the plaintiff’s submissions that, given the Wu Kam Licence, the possession by the Ngs of Staircase 63 was not of an adverse nature, and they also could not have the requisite intention to possess it adversely to the title owner’s interest.  The Judge concluded that the Wu Kam Licence had no bearing on these issues as it could not have been validly granted by Wu Kam who himself did not have any title to Staircase 63 or proper authority to do so: [109] - [114] of the Judgment.

(2)  He rejected the plaintiff’s arguments that Ng Senior and Tung Kee being a co-owner of the Building over certain periods had effectively broken up the adverse possession period as the respective occupation of Staircase 63 must be treated to have been consented to by the other co-owners in law.  The Judge was of the view that on the facts (a)  there was no issue of the Ngs’ possession of Staircase 63 having been consented to by the other co-owners of the Building from 1993 onwards when neither of them was a registered co-owner any longer; and (b) in any event, this had nothing to do with the defendant who had never been a co-owner of the Building.  Further and in any event, the Judge held that, there was no rule in law to prevent common areas such as staircase shops from being adversely possessed by co-owners or strangers to the Deed of Mutual Covenant (“DMC”): [94] - [97] of the Judgment.

(3)  The Judge also rejected the contention that all the possession by the defendant and her siblings were only on behalf of Ng Senior since he had emigrated to Australia as early as 1988.  He held on the evidence that each of the children was respectively in possession of Staircase 63 on his or her own behalf, as each of them had changed the particulars of the business registration to register himself or herself as the sole proprietor of the Business and personally took on the financial risks in running the Business.  It was also unnecessary for each of them to account to Ng Senior for any income arising from the Business.  Each of them therefore was in exclusive possession of Staircase 63 respectively and consecutively on his or her own behalf: [116] - [117] of the Judgment.

(4)  The Judge further found that there was no substance in the plaintiff’s submissions that the court should draw adverse inference against the defendant in not calling Ng Senior, Tung Chau and Ching Kit as witnesses: [119] - [128] of the Judgment.

22.  Lastly and in any event, even if the defendant was unable to establish adverse possession, the Judge further found that the defendant had established her equitable defences on acquiescence, waiver, estoppels and laches.  This was so as the plaintiff and its predecessors had been guilty of long delay in taking enforcement action against the Ngs, which had led them to believe that their respective possession of Staircase 63 would be tolerated and, relying on this, they had carried out various improvements to the property, some of which (such as the installation of an electricity meter)  had even benefited the other co-owners of the Building.  In these circumstances, it would be unjust and inequitable to allow the plaintiff to claim vacant possession thereof: [131] - [145] of the Judgment.

23.  For all the above reasons, the Judge dismissed the plaintiff’s claim for vacant possession of Staircase 63, and further held that the defendant had established her possessory title to it. The Judge therefore allowed the counterclaim and made a declaration that the title of the plaintiff and/or its predecessors to Staircase 63 had been extinguished by reason of sections 7 and 17 of the Limitation Ordinance and the plaintiff’s action was statute-barred.  He further held that the issue of trespass by the defendant was thus not established and the issue of mesne profits on the part of the plaintiff need not be considered: [146] - [150] of the Judgment.

D.  THIS APPEAL

24.  In the Notice of Appeal, the plaintiff has raised the following five grounds of appeal:

(1)  The Judge erred in law in holding that the Ngs were in adverse possession of Staircase 63 despite finding that Ng Senior had entered into possession of Staircase 63 as a result of the Wu Kam Licence and that the Ngs continued to occupy Staircase 63 as a result of the Wu Kam Licence (“P’s Ground 1”);

(2)  The Judge was plainly wrong in the finding of fact that the possession of the defendant and/or her family was not on behalf of Ng Senior and as his licensees as it is contrary to, inter alia, the admissions to that effect by the defendant and Tung Wai in their oral testimony (“P’s Ground 2”);

(3)  The Judge erred in law in holding that there was no rule in preventing common areas such as staircase shops from being adversely possessed by co-owners to a DMC (“P’s Ground 3”);

(4)  The Judge erred in law in finding in favour of the equitable defences of waiver, acquiescence and laches by relying on mere delay alone (“P’s Ground 4”);

(5)  The Judge erred in law in failing to consider that the profits made by the defendant from the use of Staircase 63 would negate any detriment, unjust circumstances and unconscionability for the equitable defences of waiver, acquiescence, estoppel and laches (“P’s Ground 5”).

25.  On the other hand, the defendant in her Respondent’s Notice seeks to affirm the Judgment on the following additional grounds:

(1)  The court ought to have made further findings and held that in 1973 when Ng Senior paid a sum of money to Wu Kam to purchase Staircase 63, Ng Senior was under the mistaken belief that he had rightfully purchased Staircase 63 from the paper owner (when in fact he had not)  (“D’s Ground 1”);

(2)  Further and/or alternatively, even if the “Wu Kam Licence” amounts to a valid licence in law, the Judge should have held that the “Wu Kam Licence”, which was a bare licence and/or mere contractual licence (being personal in nature), was automatically revoked and terminated upon the death of Ng Senior and Wu Kam years ago and/or by reason of devolution of title/ownership of Staircase 63 (“D’s Ground 2”);

(3)  Further and/or alternatively, even if the exclusive possession of Staircase 63 by the Ngs was subject to the “Wu Kam Licence”, the Judge should have held that such adverse possession is to be deemed for the benefit of the licensor ie, Wu Kam and the period of which remains adverse in nature vis-à-vis the paper owners of Staircase 63.  Relying on the “principle of aggregation”, the respective periods of possession by “successive squatters” should add up to find in favour of the defendant being the “last squatter in line” (“D’s Ground 3”);

(4)  The Judge should have made it expressly clear and held specifically that the estoppel which was established at trial was a defence of “proprietary estoppel”, which is capable of binding successors in title and requires equity to grant a proprietary interest in the land in favour of the defendant and her family (“D’s Ground 4”); and

(5)  If the Court of Appeal is of the view that it, as an appellate court, is not in the position to make the additional findings and holdings, the defendant will ask for a re-trial of the limited issue of the “Wu Kam Licence” before the trial judge (“D’s Ground 5”).

26.  In the Respondent’s Notice, the defendant further contends by way of cross-appeal that the Judge erred in his holding that there was a licence granted by Wu Kam for the Ngs to occupy Staircase 63, namely the “Wu Kam Licence”.  In this respect, the defendant’s contentions are twofold:

(1)  The Judge should have held that the plaintiff should not be allowed to advance this “new case” on the “Wu Kam Licence” as it was not pleaded.  It was also not raised in the plaintiff’s opening submissions or witness statement; and

(2)  The Judge should have held that Wu Kam did not grant any “licence” to Ng Senior and there was no licence.  Instead, the Judge ought to have held that Ng Senior had actually purchased Staircase 63 from Wu Kam by paying Wu Kam a certain sum of money, with the belief by Ng Senior that he had then become the lawful owner of Staircase 63 not knowing that Wu Kam was never the paper owner of Staircase 63 and was not in the position to “sell” Staircase 63 to Ng Senior.

27.  We will now turn to consider these grounds arising from the Notice of Appeal and Respondent’s Notice.

E.  DISCUSSION

E1.  P’s Ground 1 and D’s Grounds 1 - 3

28.  The contentions raised under P’s Ground 1 and D’s Grounds 1 - 3 are all related to the Judge’s findings and conclusions relating to the Wu Kam Licence[12]. These grounds can therefore be conveniently considered together.

29.  These grounds are related to the Judge’s following two relevant findings and conclusions.

30.  First, after considering and analysing the relevant evidence, the Judge found that the Wu Kam Licence was contractual in nature and granted by Wu Kam to Ng Senior in 1973 for the right to use Staircase 63 to run the Business but (in rejecting the defendant’s case)  not to purchase its ownership.  He explained his reasons in detail at [33] - [47] of the Judgment as follows:

“33.   In respect of how D and her family had entered into possession or occupation of Staircase 63 in 1973, D has put forward at least 2 different accounts of how their late father Ng Ying Thong (「吳應桐」)  (‘Ng Senior’)  and her family had done so.

34.  The first account was contained in the supplemental witness statement of DW1 Ng Tung Wai (「吳統偉」)  (‘DW1’), the younger brother of D, when he had a conversation with Ng Senior back in 1988:-

「4.   ...先父告訴我說他認識一位關係要好的朋友名為胡錦先生，並稱呼為「胡老頭」。

5.  先父說在大約1973年時，他在青山道經營攝影院，我哥哥吳統洲學歷不高，卻已經停學，並全職協助他營業。當時胡錦說有辦法讓先父及/或吳統洲在該爭議地經營相片沖印生意，希望可以幫助吳統洲有更好的事業發展,也讓先父有機會可以擴大我家的相片沖印業務。我父親接受了胡錦的提議後，我家便在大約1973年得到該爭議地的獨家佔用、管有和控制權，而且一直沒有也不受任何外人干涉。」

35.  In DW1’s own words, the ‘method’ or ‘way’ (「有辦法」)  as proposed by Wu Kam (or ‘Old Head Wu’ (「胡老頭」)  as he was formerly known amongst The Ngs (‘Wu Kam’)  only gave the right to operate the photo finishing business at Staircase 63 but not the ownership of Staircase 63 (「讓先父及/或吳統洲在該爭議地經營相片沖印生意。」).

36.  DW1 also confirmed in his evidence in court that Ng Senior did not tell him that ‘he had obtained ownership of Staircase 63’ from Wu Kam.  DW1 further confirmed that upon receiving such licence, Ng Senior obtained factual possession and not the ownership of Staircase 63 (「該爭議地的獨家佔用、管有和控制權」).

37.  The second account of how The Ngs had come into possession of Staircase 63 was given by D herself when she gave evidence in court.  In her oral evidence, she stated that she had a conversation with Ng Senior sometime in 2010 after receiving a letter from P’s solicitors. During this conversation, she apparently had asked Ng Senior how the shop where the photo developing and finishing business called ‘Silvery Photo Supplies’ (‘Silvery Photo’)  at Staircase 63 was being operated had been obtained (「銀都點得來?」).  Ng Senior replied to her that it was ‘purchased from Wu Kam’ (「同胡錦買返來」).

38.  When cross-examined what was actually bought, D confirmed what was bought was the right to operate the business.  When further cross-examined, D said Ng Senior did not say that he bought the ownership of Staircase 63. Unsurprisingly, there is no document produced by D to show that Staircase 63 was ‘purchased from Wu Kam’. 

39.  I agree with Mr Dicky Cheung, counsel for P, that these 2 accounts are consistent with each other in that they both involved Wu Kam as a director and shareholder of Shun Shing Weaving Co Ltd (‘Shun Shing’), giving permission, consent or licence to Ng Senior to occupy Staircase 63 and operate the photo finishing service business there.  D’s account only added one more crucial detail, namely, Staircase 63 was purchased by Ng Senior from Wu Kam.  I agree with Mr Cheung that the payment of money would turn it into a contractual licence instead of merely a bare licence.  Either way, I agree that it was a licence granted by Wu Kam according to D’s case (‘the Wu Kam Licence’).

40.  I find the 2 accounts tally with D’s pleadings. In the RAD&CC, D had pleaded the following facts which in my view resonate and constitute the Woo Kam Licence:-

‘(a)  The co-owners of the Building ... (being privy to or subject to the BMO/DMC)  i.e. the promisor, made clear and unequivocal representations to the Defendant and/or her family, i.e. the promisee, that the latter could erect the Shop on the Land, exert exclusive possession of the Land and the Shop and operate the Business thereon; and such representations were intended to affect the legal relations between them.’

41.  When asked whether the pleadings above and Wu Kam as a shareholder and director of Shun Shing had promised to let The Ngs to occupy Staircase 63 were referring to the same thing (「係唔係同一件事?」), D replied with a definite ‘Yes’.  By doing so, I find D had in effect admitted the existence of the Wu Kam Licence, first by pleading; later by producing DW1’s supplemental witness statement at §5; and lastly by confirming so in viva voce evidence before the court.

42.  Unsurprisingly, Mr Adrian Leung, counsel for D, tries to play down this important departure of D’s case in her evidence.  He submits that D’s recollection of the alleged conversation between herself and Ng Senior about the Wu Kam Licence would not affect the overall reliability of D’s evidence.  Despite her later retraction from the admission that Ng Senior had purchased Staircase 63 from Wu Kam, he submits that it should not affect the overall quality of her evidence and the outcome of the case. 

43.  With respect, I disagree.  I find D has inadvertently ‘let the cat out of the bag’ and was telling the truth when she gave that important piece of evidence during the trial.  I find it has clearly contradicted the previous account given by her in her own witness statements.

44.  Further, I do not accept that D had a temporary memory lapse when she gave that important piece of evidence as suggested by D’s counsel.  In fact, D’s account that Staircase 63 was purchased by her father from Wu Kam makes perfect sense to me in the context and history of this case as compared with the Related Action.  I could understand why, in the Related Action, one of the directors or shareholders of Shun Shing (not Wu Kam in this case)  would allow that particular staircase to be used by members of his former employees, family or friends so as to allow them to make a living there.  However, there is no evidence in the present case to suggest that such relationship existed between Wu Kam and Ng Senior at all.  In fact, there is no evidence to suggest that this ‘transaction’ was anything other than a commercial one between Wu Kam and Ng Senior. I find it was purely for the purpose of ‘selling’ the right of using Staircase 63 to Ng Senior and his family only. 

45.  I further find that both D and her younger brother DW1 knew well about this matter but were reluctant to admit it in their witness statements and in their evidence.  It was only after the skillful cross-examination by P’s counsel that the truth on this matter had come out during the trial.  In my view, this explains why D had tried to retract this crucial piece of evidence very soon after she realized that she had inadvertently made this important admission.  It also explains why D had become very emotional and could not stop crying for a long time at the beginning of the second day of the trial when she continued with her evidence.

46.  I agree with P’s counsel Mr Cheung that the fact D retracted her second account only about 10 to 15 minutes after she had given it does not distract from the following:

(a)  It was against her own interest and therefore ought to be attached with considerable weight despite her quick retraction;

(b)  The only difference D’s account would make is whether the Wu Kam Licence was one made with monetary payment.  With monetary payment, this would make it into a contractual licence.  Without monetary payment, it would still be a bare licence granted by Wu Kam to Ng Senior (and subsequently to The Ngs).

47.  Based on the oral evidence given by D in court (which she later tried to retract), I find as a fact that Ng Senior had paid Wu Kam a sum of money (the exact sum is unknown as it was not disclosed by D and DW1)  for the use of Staircase 63.  I also find as a fact that Ng Senior had entered into possession of Staircase 63 as a result of the ‘licence’ granted by Wu Kam after payment of the unspecified sum by him for what D described as ‘purchase (of Staircase 63)  from Wu Kam’.  I further find that The Ngs continued to occupy Staircase 63 as a result of the ‘purchase’ made by Ng Senior from Wu Kam.” (emphases added)

31.  Second, the Judge on the other hand rejected the plaintiff’s contentions that, given the Wu Kam Licence, any possession by the Ngs was not wrongful and thus not “adverse”, and the Ngs also did not have the requisite intention to possess in their own name.  His reasons for rejecting these contentions are in substance these:

(1)  Given that Staircase 63 formed part of the common parts of the Building, it was not something that Wu Kam would be capable of selling or giving away.  Further, once the units of the Building had been sold, Shun Shing (or any of its directors or shareholders)  had no right to give any consent or licence to occupy any of the common area.  A fortiori, Wu Kam could not have given any “consent” or “licence” to Ng Senior for the use of Staircase 63: [109] - [110] of the Judgment;

(2)  Moreover, since the coming into operation of the DMC on 2 April 1973, all common parts of the Building, including Staircase 63, were co-owned by all the owners of the Building.  No one could thus validly grant a licence to anyone to use Staircase 63.  Thereafter, when the plaintiff was incorporated in 2008, the common parts of the Building were vested in the plaintiff: [111] - [112] of the Judgment;

(3)  In the premises, whatever “licence” that was granted could not have made Ng Senior and his children’s entering into possession of Staircase 63 “with the consent of the paper owner”: [113] of the Judgment; and

(4)  The Judge also accepted the defendant’s submissions that when a person mistakenly thought that he had rightfully bought the land or acquired the land from the paper owner, when in fact he had not, there was no bar to his claim for adverse possession[13]: [114] of the Judgment.

32.  P’s Ground 1 challenges the Judge’s reasons and conclusion that the Wu Kam Licence did not negate a finding of adverse possession.  In support of this ground, Mr Cheung for the plaintiff[14] submitted that:

(1)  The Judge erred in law in holding that because the Wu Kam Licence was not validly granted by the then legal and paper owner(s)  capable of making the grant, it had no bearing on the nature of adverse possession of Staircase 63 by the defendant and/or her family; and

(2)  The Judge also erred in law in finding that the requisite intention to possess Staircase 63 in one’s own name and on one’s own behalf on the part of the defendant and/or her family was not defeated by the Wu Kam Licence.

33.  We agree that the Judge erred in law in concluding that the Wu Kam Licence had no bearing on the nature of possession of Staircase 63 by the defendant and/or her family.

34.  It is trite that if a person takes possession by virtue of a licence granted by another, it is the licensor who is treated as being in possession.  In Sze To Chun Keung v Kung Kwok Wai David & Anor [1997] 1 WLR 1232 (PC), a squatter in possession was, albeit mistakenly, granted a Crown permit to occupy the land, which had always been in private ownership held under a Crown lease.  The Privy Council held that the effect of the permit was to make the squatter’s possession that of the Crown, and that for the purposes of limitation, the Crown had been possessing the land through its licensee, the squatter.  This principle equally applies even when the licensor (ie, the Crown in that case)  was not the legal and paper owner as the squatter was estopped from denying that the licensor had the right to allow him to occupy: Sze To Chun Keung, at 1234H-1235H, per Lord Hoffmann.

35.  Accordingly, whether or not Wu Kam had the right to grant the licence or give permission to use Staircase 63, the Wu Kam Licence rendered the Ngs’ possession of Staircase 63 that of the licensor.  Hence, if Wu Kam in fact was, or was acting on behalf of, the true legal and paper owner of Staircase 63 in granting the Wu Kam Licence, any possession by Ng Senior pursuant to the licence would not be adverse in nature to the owner’s interest.  Alternatively, if Wu Kam was not, or not acting on behalf of, the rightful owner of Staircase 63, the possession by Ng Senior would still be on behalf of Wu Kam.

36.  On this basis alone, the Judge was wrong in holding that the Wu Kam Licence had no bearing on the nature of adverse possession of Staircase 63 by the defendant or her family because Wu Kam had no proper authority to grant the licence.

37.  Given this conclusion, it would be unnecessary for us to consider the plaintiff’s second point under this ground as to whether the Wu Kam Licence negated the intention to possess the Staircase 63 exclusively.

38.  The plaintiff therefore succeeds under P’s Ground 1.

39.  That leads us to consider D’s Grounds 1 - 3.

40.  Under D’s Ground 1, the defendant’s contention was that the Judge ought to have found that when paying a sum of money to Wu Kam relating to the use of Staircase 63, Ng Senior was under the mistaken belief that he had rightfully purchased Staircase 63 from the paper owner and had since then become the lawful owner of Staircase 63 (even though when in fact he had not).

41.  In this respect, Mr Leung for the defendant sought to rely on the principle that when a person mistakenly thought that he had rightfully bought the land or acquired the land from the paper owner, when in fact he had not, there is no bar to his claim for adverse possession: Pang Yiu Chor v Wong Wai Leung, supra, at p773, [53] and [54].

42.  In our view, this ground is untenable as it is unsupported by any evidence.

43.  First, it is the defendant side’s own evidence (which was accepted by the Judge)  that Ng Senior paid a sum of money to Wu Kam to purchase “the right for the use” of Staircase 63 to operate the Business as opposed to purchasing the ownership of Staircase 63.  As observed by the Judge at [34] - [47] of the Judgment:

(1)  According to Tung Wai’s supplemental witness statement and his oral evidence in court, Wu Kam only gave the right to the Ngs to operate the photo finishing business at Staircase 63 but not the ownership of Staircase 63.  Tung Wai further confirmed that upon receiving such licence, Ng Senior obtained factual possession and not the ownership of Staircase 63: [34] - [36] of the Judgment.

(2)  Under cross-examination, the defendant’s oral evidence in court was that what was bought by Ng Senior was the right to operate the Business, and that Ng Senior did not say that he bought the ownership of Staircase 63.  There was also no document produced by the defendant to show that Staircase  63 was “purchased from Wu Kam”: [37] - [39] of the Judgment.

(3)  In her own pleadings, the defendant pleaded that “The co-owners of the Building ... (being privy to or subject to the BMO/DMC)  i.e. the promisor, made clear and unequivocal representations to the defendant and/or her family, i.e. the promisee, that the latter could erect the Shop on the Land, exert exclusive possession of the Land and the Shop and operate the Business thereon; and such representations were intended to affect the legal relations between them”.  The defendant confirmed in her oral evidence that the pleading in this regard referred to the same thing that Wu Kam had promised in letting the Ngs occupy Staircase 63: [40] - [41] of the Judgment.

(4)  Accordingly, the Judge found that the defendant had in effect admitted the existence of the Wu Kam Licence by her pleading, Tung Wai’s supplemental witness statement and the viva voce evidence at trial.

44.  In our view, based on the defendant’s above own evidence and pleading, it is plainly open to the Judge to find that Ng Senior paid for the Wu Kam Licence for the use, and knowing that it was only for the use of Staircase 63.  The evidence adduced by the defendant not only does not support, but is indeed contrary to, the contention that Ng Senior had paid Wu Kam to purchase Staircase 63 or that he was under any mistaken belief that he had “rightfully purchased Staircase 63 from the paper owner”.

45.  Accordingly, we reject D’s Ground 1.

46.  Under D’s Ground 2, the defendant seeks to argue that even if the Wu Kam Licence existed, it was in any event personal in nature and was automatically terminated or revoked by one of the following events:

(1)  When either Wu Kam or Ng Senior passed away;

(2)  When Ng Senior declared to the Inland Revenue Department (“the IRD”)  that he had “transferred his ownership in Staircase 63” to Ching Kit in 1991;

(3)  When the DMC came into force in April 1973 and the ownership of Staircase 63 was vested in all the co-owners of the Building; or

(4)  When the plaintiff was incorporated in 2008 and the title of Staircase 63 was further vested in the plaintiff.

47.  We are unable to agree with Mr Leung:

(1)  It is undisputed that there is no evidence as to if or when Wu Kam passed away.  Accordingly, taking the defendant’s case at its highest, the earliest date when the Wu Kam Licence was revoked was when Ng Senior passed away in December 2017, which was after the plaintiff issued its writ in the present proceedings.  The defendant will not be able to assert a claim for adverse possession.

(2)  In his letter to the IRD dated 3 July 1991 in relation to the IRD’s request for proof of his assignment of Staircase 63 to Ching Kit, Ng Senior plainly and expressly stated that he only transferred the duties of managing the Business at Staircase 63 to Ching Kit in 1991.  See [60(3)] below.

(3)  In relation to the coming into force of the DMC, as we have pointed out to Mr Leung at the hearing, the defendant had adduced no evidence as to when the Wu Kam Licence was granted, the date when Ng Senior first entered into possession of Staircase 63, or when Ng Senior first obtained the business registration certificate.  Accordingly, there is no evidence to show whether the Wu Kam Licence was given before or after April 1973, when the DMC came into force.  It follows that there is no basis to support Mr Leung’s argument that the Wu Kam Licence was revoked by the DMC.

(4)  In relation to the incorporation of the plaintiff in 2008, this clearly does not assist the defendant.  Even taking the defendant’s case at its highest, given that the writ was issued by the plaintiff in 2016, by the time of the writ, the defendant at most only had had 8 years of possession of Staircase 63 in the absence of the Wu Kam Licence.

48.  For the above reasons, D’s Ground 2 also fails.

49.  Under D’s Ground 3, Mr Leung submits that even if the possession by the defendant and her family was subject to the “Wu Kam Licence”, the Judge should have held that Wu Kam had adversely possessed Staircase 63 through his licensees (ie, Ng Senior and his family), until the Wu Kam Licence was automatically terminated or revoked.  The Judge should then have further relied on the “principle of aggregation” to find that the defendant, being the “last squatter in line”, was entitled to the accumulated periods of adverse possession and established her adverse possession claim.

50.  With respect, there is nothing in this ground.

51.  The defendant’s above contentions are premised on the fundamental proposition that in granting the Wu Kam Licence, Wu Kam himself had the requisite intention to adversely possess Staircase 63 against the interest of the title owner.  However, there is simply no evidence to show what was Wu Kam’s intention at the time of the grant.  For example, there is no evidence to show whether Wu Kam had already obtained Shun Shing’s agreement or consent, or whether he was under the belief (even if a mistaken one)  that he (as a director and shareholder of Shun Shing)  had the proper authority to grant the licence to Ng Senior for the use of Staircase 63 to run the Business.  In other words, there is no evidence to show that Wu Kam in granting the Wu Kam Licence was dealing with Staircase 63 “as if he was a true owner of the land”.

52.  In the premises, there is nothing in the evidence to support the defendant’s contentions.  D’s Ground 3 must therefore also be rejected.

E2.  P’s Ground 2

53.  This ground challenges the Judge’s finding on the facts that the defendant and her siblings did not possess Staircase 63 as licensees of Ng Senior after his relocation to Australia as contended by the plaintiff.

54.  In rejecting the contention, the Judge first observed that this was a “new case” advanced by the plaintiff which was not pleaded or relied on in its opening, but was only added on by way of the plaintiff’s closing submissions.  He in any event went on to reject it for the following reasons[15]:

(1)  It was against logic and misconceived for the plaintiff to artificially differentiate and separate the possession by the defendant and Ng Senior, when the defendant’s evidence and case was that the exclusive possession was enjoyed by herself and/or her family;

(2)  On the evidence, Ng Senior relocated to Australia in as early as 1988.  Thereafter, there was no evidence that Ng Senior was involved in the possession or operation of Staircase 63 and the Business in any way;

(3)  To the contrary, by the time of Ching Kit’s possession, Ng Senior had nothing to do with Staircase 63 already.  Ching Kit’s letter dated 25 June 1991 and Ng Senior’s letter dated 3  July 1991 and the IRD’s letter dated 12 June 1991 when read together showed that the subject matter concerned 「物業轉名」, and the requisite intention was to possess and not to own.  Since 1989 at least, Ng Senior had passed the possession of Staircase 63 to Ching Kit.  It was thus absurd to suggest that the possession of Staircase 63 was by Ng Senior alone and his children were his mere licensees;

(4)  Further, the evidence of the defendant and Tung Wai showed that, during each period of possession of Staircase 63, the Business was operated by each of the children on a self-financing basis, and he or she was not required to account to Ng Senior for any profits arising from it; and

(5)  Moreover, if each of the children occupied the premises as the father’s licensee, it could not explain why each of them would need to change the business registration to his or her own name, pay the tax and/or operate the Business on a self-financing basis under their own name on each occasion when the Business “changed hands” within the family.

55.  In support of P’s Ground 2, Mr Cheung submitted that the Judge had plainly erred in his finding as it cannot be supported by the clear evidence given by the defendant and her own witness, Tung Wai, to the effect that they were all acting under the direction and permission of Ng Senior when dealing with the Business.  In particular, Mr Cheung relied on the following oral evidence given by Tung Wai and the defendant under cross-examination:

(1)  Tung Wai explained that “原則上所有嘢都係阿爸話事” and that Ng Senior would arrange (“安排”)  which of his children was to be designated (“指派”)  to manage the shop.

(2)  Tung Wai further agreed that “阿爸叫你去就去” and “阿爸叫我做乜，我哋就做乜，我唔會質疑，亦都唔會問佢究竟點解咁做”.

(3)  Although according to Tung Wai whoever operated the Business would bear its profits and losses (“自負盈虧”), it was Ng Senior who arranged and permitted the switching of hands (“轉手”)  from one to the other and that the whole process was arranged by Ng Senior (“當然有阿爸同意先得喇” and “成個過程就係阿爸去畀我哋邊 個負責去做。”).

(4)  Tung Wai confirmed that this status of control by Ng Senior was maintained even after Ng Senior had emigrated to Australia:

“問： 又問多啲喇，點解要阿爸同意呢，阿爸都去咗澳洲囉？

答：  咁嗰個阿爸嚟㗎嘛，檔嘢不嬲佢㗎嘛，你唔問過佢喎，佢叫你就要去做㗎喇。”

(5)  The defendant agreed that the takeover by her in 2000 actually was with Ng Senior’s permission/consent (“得到阿爸同意”), and that she would not have been able to take over the operation of the Business if Ng Senior had not permitted it (“阿爸唔同意，妳都無得做”).  The defendant admitted that she needed Ng Senior’s consent to occupy the shop (“都要阿爸同意，妳先可以佔用嗰個舖頭”).

(6)  Further, the defendant agreed that each and every switching of hands (“人手調動”)  from 1973 through to 2000 had been decided and arranged by Ng Senior (“父親安排”).

(7)  The defendant also agreed that the shop had continued to be that of Ng Senior even though the business registration was in the defendant’s name and she bore her own profit or loss (“雖則個商業登記自從2000年係妳，雖則自負盈虧都係妳，2000年之後，但係妳都會覺得檔嘢係阿爸”).

(8)  The defendant also confirmed Tung Wai’s evidence that the Business belonged to Ng Senior (“檔嘢不嬲佢㗎嘛”)  and further agreed that it was because Ng Senior was the head of the family and the family businesses (“一家之主”).

56.  We agree with Mr Cheung that the above evidence clearly shows that whoever of Ng Senior’s children was occupying Staircase 63 to run the Business, he or she could only do so under the direction and with the permission and consent of Ng Senior.

57.  With this clear evidence, it is also clear that the Judge was wrong in relying on the reasons summarised at [54] above to reject the plaintiff’s contention that Ng Senior’s children had been occupying Staircase 63 as the father’s licensees.  All those reasons boil down to the Judge’s view that the facts that each of the children (a)  would change the business registration of the Business to his or her own name; (b)  personally took on the financial risks of running the business without being required to account to Ng Senior for its profits; and (c)  paid the relevant taxes, are all inconsistent with the suggestion they were running the Business and occupying Staircase 63 as Ng Senior’s licensee.

58.  However, with respect, these facts are equally consistent with the position that they were running the Business and occupying Staircase 63 as Ng Senior’s licensee as the defendant herself accepted under cross-examination that despite those facts, she could only go into occupation of Staircase 63 and run the Business after Ng Senior had agreed and allowed her to do so (see [55(5)] above).  It is illustrative to set out the line of cross-examination and her answers as follows:

“問：個問題就係1978年，就係父—又有家族嘅人手調動，父親安排吳統洲、吳統偉去荃灣路德圍新舖，再安排吳靜潔就嚟金祿樓呢個舖頭做嘅—經營？

答：係。

問：吳靜潔，琴日細佬統偉就話1978年一直做到1998年？

答：係。

問：係喇，經營喇。然之後就有一次—又係一次嘅家族裡面嘅人手調動，就係吳統偉接手咗金祿樓63號舖？

答：係。

問：琴日細佬話呢一個接手，都係得到—要得到爸爸同意嘅，啱唔啱呀？

答：啱。

問：喺2000年嘅時候，統偉就將嗰個舖頭經營就畀妳？

答：係。

問：呢一次嘅接手，妳接手都係要得到父親同意喇？

答：係。

問：父親唔同意嘅話，妳都冇得做，啱唔啱呀？

答：啱。

問：我哋知道2000年之後，商業登記係妳個名做經營者，啱唔啱呀？

答：係。

問：琴日統偉都有講過，每一個—琴日統偉都有講過，當一個兄弟姊妹接手嘅時候，佢經營嘅時候，嗰個盈利或者虧損都係嗰個兄弟姊妹自己孭嘅？

答：係。

問：自負盈虧喇佢話，啱唔啱呀？

答：係，啱。

問： 雖則係咁，雖則個商業登記自從2000年係妳，雖則自負盈虧都係妳，2000年之後，但係妳都會覺得檔嘢係阿爸，啱唔啱？

答： 啱。

問： 換句話嚟講，即係都要阿爸同意，妳先可以佔用嗰個舖頭，啱唔啱呀？

答： 係吖。

官： 聽唔到，妳個...

答： 係。

官： ... 答案係『係』？

MR CHEUNG：係。

官： 要阿爸嘅同意去經營個舖頭，係咪呀？

MR CHEUNG：先至可以佔用個舖頭。

官： 佔用舖頭？

MR CHEUNG：係，佔用，係。” (Emphases added)

59.  These clear answers from the defendant plainly negate any suggestion that the defendant had intended to occupy Staircase 63 in her own name or on her own behalf to support her claim of adverse possession.

60.  The Judge’s reliance on the various correspondence to support his conclusion is also plainly wrong.  Contrary to the Judge’s finding, the correspondence between IRD, Ching Kit and Ng Senior in 1991 in our view objectively support instead of undermine the plaintiff’s case that the defendant and her siblings were only licensees of Ng Senior in occupying Staircase 63:

(1)  By a letter dated 12 June 1991, the IRD wrote to the Ngs:

“I refer to the Property Tax Return for 1989/90 you submitted on 8.5.1990.

I note that the captioned property was declared to be transferred to Ms Ng Ching Kit on 1.4.1989. However, I regret to inform you that we cannot ascertain such transfer of ownership in the Lands Office. Therefore, I would like your goodself to provide a copy of assignment of such transfer in order that we can update our record.

Your reply quoting 503-327-98260-0523-08(21)  is appreciated.” (Emphases added)

(2)  By a letter dated 25 June 1991, Ching Kit wrote to Ng Senior:

「我在四月一日89年，入紙將銀都物業轉了我自己個名，而報了自用，現稅務局有信來要證明這種轉了名的証句所以爸爸你要寫一封信給稅務局，這信寫好後你記得要簽名。現在稅務局那信影印副本，銀都當年交收那影印副本，和稅單影印副本一同寄給你看，若你不明這件事，你和我通一次电話呢，如果明就直接寫這信回來給我，由我交去現在幫我做會計那會計師去做，不是你自己去信稅務局的，你要盡快覆這信，(給稅務局那封)。」(Emphasis added)

(3)  Subsequently, by a letter dated 3 July 1991 (“Ng Senior’s Letter”), Ng Senior replied to the IRD:

「稅務局

執事先生：

收到貴局來信檔案號碼503-327-98260-0523-08 (21)  詢問關於新界上葵涌石蔭路六十三號樓梯位轉名事。

現本人吳應桐移居澳洲故自一九八九年四月一日起將樓梯位職權轉交小女吳靜潔負職。已後一切由吳靜潔自理身份証E621079(5)  特地通知貴局。」(Emphases added)

(4)  From the above, it is clear the IRD’s inquiry and request directed at Ching Kit and Ng Senior was for the production of a copy of the assignment or proof for the transfer of Staircase 63. This was made clear to Ng Senior by Ching Kit in her letter (“入紙將銀都物業轉了我自己個名，而報了自用，現稅務局有信來要證明這種轉了名的証句”). Despite the clear nature of the request, Ng Senior’s Letter did not make any reference to any assignment of Staircase 63 or transfer of ownership of Staircase 63, and instead stated that he transferred the job duties to Ching Kit (“將樓梯位職權轉交小女吳靜潔負職” (emphases added)).

(5)  Accordingly, the only proper objective interpretation of the above letters in their proper context is that Ng Senior was merely transferring the position or duties of running the Business to Ching Kit. It does not show in any way, as the Judge held, that Ng Senior confirmed that he had transferred “the possession of Staircase 63” to Ching Kit.

61.  In the premises, given the clear oral evidence coming from the defendant’s own side, summarised at [55] and [58] above, which the Judge had not referred to and dealt with in the Judgment, we are of the view that his finding that the children were not occupying Staircase 63 as Ng Senior’s licensee is plainly wrong in failing to have any regard to this important part of the evidence.

62.  At the hearing before us, Mr Leung for the defendant sought to argue that the plaintiff should not be permitted to advance the case that the defendant was a mere licensee of Ng Senior.  He relied on the Judge’s observations at [115] of the Judgment that this was a “a new case” because “it was not one that had been pleaded nor opened at the beginning of the trial based on such propositions.  It was conveniently added on at the closing submissions stage after the evidence given by Tung Wai and the defendant seems to have supported such a case”.  At the hearing, Au JA asked Mr Leung whether this pleading point was taken in the court below, and Mr Leung, in reply, only said that he would rely on the Judgment.

63.  We are not persuaded by this complaint about the lack of pleading.

64.  First, there is nothing to show that the defendant complained about the lack of pleading at the trial notwithstanding that this “as Ng Senior’s licensee’s” point was expressly raised and relied on by the plaintiff in its written closing submissions based on the evidence given by the defendant and her witness at trial[16]. More importantly, Mr Leung has also not pointed out to us any material prejudice that the defendant had suffered because this was not pleaded.  As a matter of fact, Mr Leung had made substantive submissions in his written closing submissions as to why the plaintiff’s contention that the defendant was only a licensee of Ng Senior should be rejected on the basis of the evidence,[17] which submissions were adopted by the Judge to reject the plaintiff’s contention at [116] of the Judgment.  In the premises, there is no unfairness to the defendant even though this point was not specifically pleaded by the plaintiff and it is now too late for her to raise this objection in the appeal.

65.  Second and in any event, we do not think this is a point that needed to be pleaded by the plaintiff.  As discussed above, in making an adverse possession claim, it is for the defendant to show by evidence that she had been adversely possessing Staircase 63 on her own behalf.  However, as mentioned above, it is the defendant side’s own oral evidence extracted under cross-examination that she and her siblings had been occupying and using Staircase 63 only with Ng Senior’s direction, consent and permission.  The said evidence plainly contradicts the defendant’s claim that she had been possessing Staircase 63 on her own behalf and thus she failed to establish her case on adverse possession.  It is pertinent to note that there is also no suggestion that these lines of cross examination were objected to by the defendant’s counsel at trial.  In the premises, this is not a matter that the plaintiff had to plead.

66.  For all the above reasons, the Judge’s finding that the defendant and her siblings were occupying Staircase 63 not as licensees of Ng Senior was plainly wrong as this was inconsistent with the defendant side’s own clear and undisputed evidence.  This justifies this court to set aside this finding and instead conclude that the defendant and her siblings had been in possession of Staircase 63 on behalf of Ng Senior as his licensees.

67.  The plaintiff therefore also succeeds under P’s Ground 2.

E3.  P’s Ground 3

68.  P’s Ground 3 seeks to appeal against the Judge’s holding that there was no rule in preventing common areas from being adversely possessed by co-owners.  However, given our views on P’s Grounds 1 and 2 above, and noting that it is not disputed that the defendant was not a co-owner of the Building during the material period of her alleged possession, P’s Ground 3 becomes academic for the purpose of this appeal and it is unnecessary for us to deal with this ground.

E4.  P’s Grounds 4 & 5 and D’s Ground 4

69.  P’s Grounds 4 and 5, and D’s Ground 4 relate to the Judge’s findings that, even if the defendant had failed to establish adverse possession to Staircase 63, she had in any event established her equitable defences on acquiescence, waiver, estoppels and laches.  These grounds therefore can be conveniently considered together.

70.  The Judge explained his findings in the Judgment as follows:

(1)  The Judge noted that since July 2008 when the plaintiff was incorporated, no legal actions had been taken against the defendant until the writ was issued on 11 April 2016.  Even though the plaintiff instructed solicitors to issue a demand letter on 8 November 2010 which the defendant’s solicitors responded to on 3 December 2010, the plaintiff had stood by for 8 years when the defendant was in exclusive possession of Staircase 63, which could reasonably lead her and her family to believe that their occupation and possession of Staircase 63 would be tolerated by the plaintiff: [131] - [134] of the Judgment;

(2)  There was therefore “an astonishing gap of 43 years” since the Ngs first went into occupation in 1973, and the plaintiff and/or its predecessors had not taken any legal actions against the defendant or her family until 2016: [133] of the Judgment;

(3)  At the same time, from 1973 to 2011, it was only through the Ngs’ application for and installation of an electricity meter at Staircase 63 that there was electricity supply to the common staircase of the Building.  All the other owners of the Building were fully aware of this matter as each of them had to make a monthly contribution of up to HK$10 for the electricity bill.  The plaintiff must also be fully aware of this matter as the management company employed by the plaintiff had issued a notice on 12 May 2011 to all the owners of the Building that it had been “borrowing” electricity from the Business and requested funding to instruct a contractor to install an electricity meter. The management company had also made payments to the defendant of electricity bills in June and July 2011: [135] - [137] of the Judgment;

(4)  The Judge further found that in reliance on the inaction of the plaintiff and its predecessors, the defendant and the Ngs had spent substantial costs and resources in maintaining and upkeeping the premises at Staircase 63: [139] - [141] of the Judgment; and

(5)  The Judge thus considered that it would be unjust in all the circumstances of the case to grant the injunctive and/or other reliefs sought by the plaintiff.

71.  Under P’s Grounds 4 and 5, Mr Cheung argued that the Judge had only referred to the length of the plaintiff’s delay and did not set out how it was “unjust in all circumstances” to allow all the defendant’s equitable defences.  In particular, counsel submitted that the Judge failed to consider that the defendant had enjoyed profits from the use of Staircase 63, which negated any detriment, unjust circumstances and unconscionability for the equitable defences.

72.  In response, Mr Leung contended that given that the Ngs had installed the electricity meter, the defendant and her family had suffered detriment.  He further argued that according to the Notice of Appeal, P’s Ground 4 only relates to the Judge’s findings on “waiver, acquiescence and laches”.  As the plaintiff is bound by its Notice of Appeal, the findings made by the Judge on “estoppels” are not challenged and thus must stand.  Insofar as P’s Ground 5 is concerned, Mr Leung also submitted that given the modest income generated from the defendant’s occupation of Staircase 63, when that was considered against all the circumstances of the case, it was reasonably open to the Judge to find that the equitable defences were established.

73.  On a proper and fair reading of the Judgment, the Judge allowed all the equitable defences raised by the defendant (be it waiver, acquiescence, laches or equitable estoppel)  on the bases that (1)  there had been a delay in action by (a)  the plaintiff’s predecessor for more than 40 years; and (b)  the plaintiff itself for some 8 years in bringing enforcement action against the defendant which had led to the defendant’s belief that she and her family’s possession of Staircase 63 would be tolerated; and (2)  it would now be unjust to allow the plaintiff to claim possession of Staircase 63 as the defendant and the Ng family had spent substantial costs and resources in maintaining and upkeeping the premises, including installing an electricity meter there which had even benefited the other co-owners of the Building.  See: [131] - [145] of the Judgment.

74.  In our view, given that the Judge had relied on delay and what he regarded as unjust circumstances in upholding all of the defendant’s equitable defences, including estoppel, once it is determined that the Judge had erred in his finding on delay and/or on the unjust circumstances, it will vitiate his conclusion on all the equitable defences.  Mr Leung’s contention that this ground of appeal does not affect the Judge’s conclusion in upholding the defence of equitable estoppel cannot be right.

75.  As a start, we agree that the Judge had erred in law in taking into account and relying on the plaintiff’s predecessors’ 40 years of inaction when considering the equitable defences[18].

76.  The defences of acquiescence, waiver, laches and estoppel (except proprietary estoppel)  are all personal in nature and do not run with the land.  See: Grand Power International Ltd v Chan Sing Hoi Enterprises Ltd [2020] 2 HKLRD 142 at [47].  Hence, even assuming that those equitable defences were made out by the defendant against the plaintiff’s predecessors, they do not bind the plaintiff.  On this basis alone, the Judge had erred in law in taking into account the plaintiff’s predecessor’s inaction when considering the question of delay for the purpose of finding in favour of the equitable defences against the plaintiff.

77.  Moreover, it is common ground that 2 years after the incorporation of the plaintiff, it had instructed its solicitors to issue a demand letter to the defendant on 8 November 2010.  As such, as early as 2010, the plaintiff had made it clear to the defendant that her possession of Staircase 63 was not tolerated.  Although the plaintiff had failed to reply to the defendant’s solicitor’s reply letter dated 3 December 2010 and only issued the writ on 11 April 2016, the only period of “inaction” on the part of the plaintiff in enforcing rights against the defendant over the possession of Staircase 63 is about 6 years.

78.  Further, we are also of the view that the Judge’s conclusion on the unjust circumstances in the present case is also plainly wrong:

(1)  It is not disputed that the defendant and her family members had had the benefit of using Staircase 63 and had continued to make profit from its use throughout. Clearly, they had not suffered any detriment during this period of “inaction” on the part of the plaintiff in continuing to carry on the Business for profits and later renting it out for rental income.

(2)  Mr Leung’s submissions that the installation of the electricity meter had rendered it unjust in all the circumstances for the plaintiff to claim possession of Staircase 63 are also untenable, for the simple reason that the Ngs would in any event have to install the electricity meter for the operation of the Business.  Moreover, on the evidence, they received HK$10 from each owner as a monthly contribution for the electricity bill.  Whether the income generated from the Business and her use of Staircase 63 was modest or not does not negate the fact that in the circumstances of this case, the installation of the electricity meter cannot be regarded as a detriment to the defendant in relying on the plaintiff’s “inaction” before it commenced these proceedings against the defendant to recover possession of Staircase 63.  The same applies to the Ngs’ upkeeping and maintenance of Shop 63.

79.  For the above reasons, given the erroneous material factual finding on the length of the delay and the plainly incorrect conclusion on the unjust circumstances in the present case, it is justified for this court to set aside the Judge’s findings on the equitable defences, and conclude instead that none of the defences are established as it is not unjust in the circumstances of this case to allow the plaintiff’s claim to repossess Staircase 63.  The plaintiff therefore also succeeds under P’s Grounds 4 and 5.

80.  Under D’s Ground 4, Mr Leung also seeks to argue that the Judge should have made it expressly clear and held specifically that the estoppel which was established at trial was a defence of “proprietary estoppel”.

81.  For the reasons we have explained above, in particular, the lack of detriment suffered by the defendant, there is no basis whether on the facts or in law for the defendant to rely on the equitable defence of estoppel, including proprietary estoppel.

82.  Accordingly, D’s Ground 4 also fails.

E5.   D’s Ground 5 – the defendant’s request for re-trial on the issue of “Wu Kam Licence”

83.  Given our analysis above and our rejection of the defendant’s submissions, this ground naturally falls away.

84.  Accordingly, D’s Ground 5 is rejected.

F.  THE DEFENDANT’S CROSS-APPEAL

85.  It is well-established that a cross-appeal made by a respondent’s notice is a separate appeal and the respondent in that situation assumes the obligations of a would-be appellant.  Order 59, rule 6(3)  of the Rules of the High Court, Cap 4A is “mere machinery”, and it does not override the requirement of leave provided in section 63(1)  of the District Court Ordinance, Cap 336: see Ng Hong Ki v Leung Fong Kiu [2012] 1 HKLRD 435 at [24] - [26].

86.  In the present case, the defendant sought to raise her cross-appeal by way of her Respondent’s Notice filed on 30 April 2021.  However, no application for leave to appeal was made whether in the District Court or this court.  On this basis alone, her intended cross-appeal is improperly constituted and must be dismissed.

87.  In any event, the defendant’s intended cross-appeal is without merit:

(1)  Given that the Wu Kam Licence was not specifically pleaded in the defendant’s Re-Re-Re-Re-Amended Defence and Counterclaim, it is plainly reasonable that the plaintiff had not specifically alluded to the same in its Re-Re-Re-Amended Reply and Defence to Counterclaim. Accordingly, the defendant’s pleading point in relation to Wu Kam Licence is wholly unarguable.

(2)  In any event, as analysed above, the Judge’s finding on the evidence that Ng Senior had only obtained the right to use and occupy Staircase 63 to operate his Business, as opposed to the ownership of Staircase 63, cannot be faulted.  Accordingly, there is simply no basis to support the defendant’s intended cross-appeal.

88.  Accordingly, her intended cross-appeal must be rejected.

G.  CONCLUSION

89.  For all the above reasons, we allowed the appeal and made the following orders:

(1)  the Judgment be set aside;

(2)  the defendant do demolish the trespassing structure and reinstate Staircase 63 so affected by the said trespassing structure in accordance with the plans approved by the Building Authority, and deliver to the plaintiff vacant possession of Staircase 63, within 60 days[19];

(3)  the defendant do pay to the plaintiff mesne profits at HK$8,213 per month[20] from 11 April 2010;

(4)  the defendant do pay to the plaintiff interest (a)  on pre-writ mesne profits at prime + 1% from the date of writ to judgment, and thereafter at judgment rate; and (b)  on post-writ mesne profits at prime + 1% from date of accrual to judgment, and thereafter at judgment rate;

(5)  the defendant do pay the plaintiff the costs of the appeal, including the application for leave to appeal, and the costs in the court below (with certificate for counsel)  including costs of the original action and the counterclaim; and

(6)  the defendant's own costs be taxed in accordance with the Legal Aid Regulations.