SHUEN KWONG TEMPLE LTD v. LAM LEUNG CHUN AND ANOTHER

HCA 115/2018

[2019] HKCFI 2446

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 115 OF 2018

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DECISION

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1.  This is an appeal from a decision of Master K W Wong dated 24 May 2019, wherein the learned master declined Order 14A and related strike out relief as sought by the plaintiff and third party.

The plaintiff’s Claim

2.  These proceedings concern a property known as the 1^st floor of No 9A, Lion Rock Road, Kowloon (one quarter share of the Lot in New Kowloon Inland Lot No 2679 (“Property”). 

3.  The plaintiff contends that the Property was possessed and managed by Ms Sin Yuk Lan (“Ms Sin”, the third party).  It is asserted that she possessed and managed the Property treating it as her own to the exclusion of the whole world from the year 2000.  Particulars of this assertion are provided at §3 of the Statement of Claim.     

4.  The plaintiff further asserts that it took over from Ms Sin in 2017, then assuming continuous adverse possession of the Property to the exclusion of the whole world including the defendants, from that time. 

5.  The plaintiff asserts that through this successive possession,occupation and control of the Property (with no gap in between) by Ms Sin and subsequently the plaintiff, the defendants’ title in the Property was extinguished and in this situation, the plaintiff claims possessory title of the Property.

6.  The plaintiff further asserts that more than 12 years have elapsed since the right of the action first accrued to the defendants to recover the Property and it is asserted that the title of the defendants to the Property have been extinguished by virtue of the provisions of the Limitation Ordinance, Cap 347.

7.  Based on these assertions, the plaintiff seeks various heads of declaratory relief directed towards it having good possessory title to the Property; further or alternatively that the interests in the Property are vested in the plaintiff absolutely; further or alternatively, that the plaintiff is entitled to exercise all rights of occupation and possession.        

Defences

8.  The Defence further addresses the issue of legal ownership of the Property.  The defendants contend that they, along with Ms Cheung Yung Chu (“Ms Cheung”), were the legal owners of the Property in 1998.  Upon the passing away of Ms Cheung in or around 2000, the defendants assert that they became the surviving legal owners of the Property, as joint tenants.

9.  Beyond the issue of legal ownership of the Property, the defendants’ pleadings can be grouped under three headings:

(a) They assert that Ms Cheung was living in the Property in or around 1995 and at this time, she was not in good health. Meanwhile, the 1^st defendant had emigrated to Canada in 1993.  During her trips back to Hong Kong (once or twice annually),she visited the Property and also visited Ms Cheung.  Ms Sin, and the 2^nd defendant looked after Ms Cheung and the Property during this period. This changed on the death of Ms Cheung where it is alleged that the 1^st defendant entrusted Ms Sin to look after the Property together with the 2^nd defendant (emphasis added).  It is asserted that Ms Sin had been looking after or in possession of the Property as a trustee for and on behalf of and for the benefit of the 1^st defendant.  (These pleadings are the subject of the Order 14A and strike out applications before the learned master and I shall return to this part of the Defence below.     

(b) The defendants contend further or in the alternative that Ms Sin possessed the Property as a licensee, not by adverse possession.

(c) The defendants contend that Ms Sin and the plaintiff never had exclusive possession of the Property.  Particulars are provided at §12(a) and (b) of the Defence.

10.  The defendants deny the plaintiff’s claim to adverse possession and seek inter alia a declaration that neither the plaintiff nor the third party had acquired title to the Property and that vacant possession be delivered to the defendants.

11.  Suffice to say that there are stark differences between the parties’ pleaded cases on the question of alleged adverse possession.  This is evident upon reading §3 of the Statement of Claim alongside §12 of the Defence.

Subsequent pleadings and affidavits

12.  The subsequent pleadings (including third party pleadings) add greater detail to the parties’ cases on matters such as legal title to the Property and the central question of alleged adverse possession.  It appears that the issues in dispute are crystalized in the pleadings.

Order 14A and strike out summonses

13.  By way of an inter partes summons dated 18 January 2019, the plaintiff in these proceedings sought the following relief:

(a) A determination of a question of law pursuant to Order 14A of the RHC, namely whether there can be any trust by operation of law or of any kind with the Third Party being the trustee of the 1^st defendant;

(b) If that question be answered in the negative, then identified text in §10 of the Defence and Counterclaim be struck out on the basis that it disclosed no reasonable defence and/or cause of action.

14.  The third party filed an inter partes summons on the same date, seeking similar orders, the difference being that the strike out relief is adjusted so as to relate to identified text in §§8 and 9(b) of the Statement of Claim against Third Party and §12 of the Reply and Defence to the Third Party’s Counterclaim against the Defendants.   

15.  I would pause here to note that the strike out relief sought by the plaintiff and third party is consequent (or dependent) upon my deciding in the negative as to the Order 14A question, as posed.  This is how the applications are framed.

16.  For convenience, I refer to the paragraphs that the plaintiff and the third party are seeking to strike out as “the Challenged Paragraphs”. 

The Master’s decision and the appeals therefrom

17.  Master K W Wong, in his order dated 24 May 2019 dismissed the plaintiff’s and third party’s summonses.  The learned master ordered that the costs of the parties, with certificate for counsel, be in the cause of the main action and third party proceedings. 

18.  The plaintiff and the third party immediately filed Notices of Appeal against the Master’s Order, both dated 24 May 2019.

19.  It is common ground that this hearing is by way of a hearing de novo (see the decision of the Court of Appeal in Killenny Ltd v Attorney General [1996] 1 HKC 30).

Applicable legal principles

20.  The plaintiff and the third party, in their skeleton submissions, contended that Order 14A may be invoked provided that the two conditions in Order 14A rule 1 are met.  They referred me in this regard to the decision of the Court of Final Appeal in Shell Hong Kong v Yeung Wai Man Kiu Yip Co Ltd (2003) 6 HKCFAR 222.

21.  During the hearing, this proposition was qualified by both parties with additional references to the Shell Hong Kong case (supra) and in particular the following paragraphs from the decision of Mr Justice Chan PJ:

“23. ... It is not necessary for the making of an application under Order 14A that the determination of a question of law or construction of any document would finally determine the whole action. Such a requirement would be wrong as a matter of ‘interpretation of the order and as an exercise of discretion’ ... It is sufficient if an issue in the case can be disposed of using such a procedure. However, it is not contemplated that the parties would submit a trivial matter for determination under Order 14A. This would not only be contrary to the spirit and purpose of this procedure, but may also lead to possible abuse, result in unnecessary expense and delay and wastage of judicial time. No judge would accede to that sort of request or application in the proper exercise of his discretion.

24.  It must also be noted that it is inappropriate to use this procedure if the issues of facts are interwoven with the legal issues to be determined.  For obvious reasons, the question of law or construction of documents cannot be dealt with on assumed or hypothetical facts.  And if it is necessary for the court to hear evidence to resolve a factual dispute in order to come to a determination on the question of law or construction of document,it would not normally be suitable to invoke Order 14A.”

22.  As to principles concerning strike out relief, the plaintiff referred me to the decision of Deputy High Court Judge Keith Yeung SC (as he then was) in Leung So Hung Siem v Carson Wen & Ors (unreported, HCA 121/2017), which set out relevant principles from §18/19 of Hong Kong Civil Procedure 2018. 

The parties’ submissions

23.  At the hearing of this matter, Mr Lam, as Counsel for the plaintiff and third party, took me to §10 of the Defence and Counterclaim as the primary (but not only) paragraph that the plaintiff and the third party seek to strike out.  Mr Lam explained to me that §10 of the Defence and related paragraphs (ie, the Challenged Paragraphs) were the subject of a request for further and better particulars made on 2 November 2018, with particulars being provided on 16 November 2018.  In essence, the defendants asserted in their particulars that the trust referred to in the Challenged Paragraphs was not an express trust but rather, a trust by implication of law. The defendants stated that “the 1^st defendant entrusted Madam Sin to look after the Property together with the 2^nd defendant.  Therefore, Madam Sin all along had possession of the Property as a trustee for and on behalf of the 1^st defendant.  Alternatively, Madam Sin possessed the Property as a licensee”. 

24.  Mr Lam then explained that during the hearing before Master K W Wong, there was a suggestion that the Challenged Paragraphs might (or ought) to be amended.  However, the issue of amendments to the Challenged Paragraphs did not form part of any order subsequent to the hearing before Master K W Wong.

25.  Mr Lam explained that following the decision of Master K W Wong on 24 May 2019 to decline Order 14A and strike out relief, the defendants did not seek to amend their pleadings. Instead, the defendants’ solicitors wrote a letter to the plaintiff’s solicitors dated 31 May 2019, setting out a further explanation of the Challenged Paragraphs.  In the second paragraph of that letter, the defendants’ solicitors noted as follows:

“Please note that ‘trustee’ in the said paragraphs carries the meaning of ‘a person being relied upon’, not a trustee in an express or constructive trust for the title of the Property. Ms Sin being one of the teachers of the Association 道德會導師 was treated as a trustworthy person to physically look after the Property. No title of the Property was rested on her at all. That is why our clients have not claimed against the plaintiff and the third party for declaration of express or constructive trust with regard to title of the Property in the pleadings.”

26.  It was further asserted that the Challenged Paragraphs need not be struck out as they did not allege any express or constructive trust for the title of the Property.

27.  The defendants’ solicitors noted in the final paragraph of their letter of 31 May 2019 that costs were escalating for both parties and the defendants were therefore prepared to give consent to the withdrawal of the Notices of Appeal filed by the plaintiff and the third party, with no order as to costs.

28.  Mr Lam completed this part of the discussion by confirming that the plaintiff’s solicitors responded to the defendants’ letter on 11 June 2019, rejecting the defendants’ offer, saying that the Order 14A and strike out applications would proceed to trial. 

29.  At the hearing, Mr Lam referred to the passages in the Shell Hong Kong case (supra) set out at §21 herein and submitted as follows:

(a)  It is sufficient in this case that the trustee issue can be disposed of using the Order 14A procedure.

(b)  The plaintiff and the third party’s Order 14A applications do not fall within the ambit of being “trivial” (Shell Hong Kong, §23) and they would not result in unnecessary expense, delay or wastage of judicial time.

(c)  If the defendants had wanted to assert that it was inappropriate to use the Order 14A procedure in this case, on account of the issues of facts and law being interwoven (Shell Hong Kong, §24), then it was incumbent upon the defendants to explain how this was so.  That is, it is not enough for the defendants simply to assert that the facts and law are interwoven. 

30.  Mr Lam was clear in his submissions.  In his view, the defendants ought to have amended their pleadings formally, so as to cure what he regards as defects in the defendants’ case.  This should not have been done informally by way of the defendants’ letter dated 31 May 2019.  In Mr Lam’s submission, this is not how High Court litigation should be conducted. 

31.  In Mr Lam’s submission, the Challenged Paragraphs should be struck out for disclosing no reasonable cause of action and/or defence.

32.  Mr Hu, who made submissions on behalf of the defendants,started with the assertion that the essence of these proceedings is the plaintiff’s claim to the Property based on a claim of adverse possession. Mr Hu for his part, said that for the plaintiff to succeed with its claim,it must establish both factual possession of the Property as well as the requisite intention to possess (animus possidendi), each for the requisite limitation period.  In Mr Hu’s submission, these are the real issues in the case.  He referred me to two cases on adverse possession, namely,Powell v McFarlane (1979) 38 P&CR 452 and Wong Tak Yue v Kung Kwok Wai & Another (No 2) (1997–1998) 1 HKCFAR 55.

33.  Mr Hu submitted further that the facts and law in this case are interwoven and that this much is evident upon a review of the pleadings.

34.  Mr Hu submitted that the Challenged Paragraphs, as particularised, are clear and should not be struck out.       

Decision

35.  It thus falls for me to decide whether to determine the question of law posed by the plaintiff and the third party.  And if I decide to do so, then if my answer to that question is in the negative, whether I should grant the strike out relief sought. I take these questions in turn.

36.  As to the claim for Order 14A relief, it is clear that both limbs of Order 14A must be met in order for the court, in its discretion, to grant relief. 

37.  From that starting point, Mr Lam has correctly pointed towards Order 14A rule 1(b) in saying that the Order 14A procedure can be used not only to determine an entire cause or matter but also “any claim or issue” in the cause or matter. 

38.  But while Mr Lam’s proposition is correct, this does not finish the inquiry.  There are at least two other pertinent questions that arise from the passages from Shell Hong Kong cited at §21 herein.  These questions are whether the issue framed for determination:

(a)  falls within the ambit of being “trivial” such that determining the issue now would be contrary to the spirit and purpose of the Order 14A procedure and may also lead to possible abuse, resulting in unnecessary delay and wastage of judicial time.    

(b)  calls for the determination of issues of fact and law which are interwoven.

39.  As to the first question, I have concerns as to whether the Order 14A issue, as framed, is suitable for determination without a full trial of this action.  What I believe is required in this case, is a full determination of the facts, particularly on the key issue of alleged adverse possession.  It is only against the matrix of the facts as determined at trial, where the evidence of witnesses will have been tested in cross-examination, that it becomes possible for the court to look at the facts under a legal lens, to determine the questions arising from the pleadings, for example: is the adverse possession case proven?  What is the nature of the relationship between the parties?  Is there a license to occupy?  Despite Mr Lam’s submissions, I am concerned that the Order 14A issue framed in this case is far removed from the issues that will fall to be determined at the trial of this action.  It strikes me that the Order 14A applications before me are simply too distant from the factual and legal issues that will fall to be assessed at trial.

40.  As to the second question posed above, and as will be evident from the foregoing, I am persuaded by Mr Hu’s submission that the facts and law in this case are interwoven and that the issue framed for determination is manifestly not of a type that should be determined without a full trial of the action. 

41.  Thus, I decline to determine the plaintiff and the third party’s Order 14A issue, as framed.   

42.  I turn now to the strike out relief as sought by the parties. 

43.  As I have decided not to determine the Order 14A question as posed by the plaintiff and third party, I believe that the strike out applications fall away.  That is, I have not decided the Order 14A question in the negative.

44.  However, putting to one side that the strike out applications have fallen away, I will nonetheless comment briefly on the strike out relief as sought.  In this context, I have reviewed the particulars provided of the Challenged Paragraphs, namely, the particulars provided on 16 November 2018 and the additional, albeit informal or “voluntary” particulars provided on 31 May 2019, as described above.

45.  I note firstly in this regard, that the gist of the strike out applications is to the effect that the Challenged Paragraphs be struck out on the basis that they disclose “no reasonable defence” or “no cause of action”.  However, I do not believe that it is appropriate to criticise isolated parts of the defendants’ pleadings in this manner.  Clearly, not all paragraphs in a pleading are intended to plead specific defences or causes of action.   Facts and background will, for example, also be pleaded.  The Challenged Paragraphs, as particularised in this case, are clear as to what they allege.

46.  Of course, the plaintiff and the third party do not agree with the defendants’ pleaded case.  They are concerned by the Challenged Paragraphs because if the defendants prove the case set out in the Challenged Paragraphs at trial, this may potentially undermine the plaintiff’s case, including their position on limitation issues. However, disagreeing with the opposition’s case is plainly not a ground for strike out.

47.  In my respectful view, the pleadings in this case have performed their function of bringing the disputes between the parties into focus.   The parties know the cases that they will have to prove—and answer—at trial.

48.  For the reason given at §43 herein and for the further reasons given at §44 to 47 herein, the Challenged Paragraphs should not be struck out.

Costs

49.  Since I have declined the Order 14A and strike out relief sought by the plaintiff and the third party, I make a costs order nisi that the plaintiff and the third party do pay the defendants’ costs of this appeal. I do not believe that the complexity of this case is such that I should certify the need for two counsel.