LAM CLANSMEN MUTUAL AID ASSOCIATION LTD v. LAM KAM LOI, THE PERSONAL REPRESENTATIVES OF LAM YIU CHI, DECEASED

HCA 2005/2018

[2020] HKCFI 2816

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2005 OF 2018

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REASONS FOR JUDGMENT

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APPLICATION

1.  By Summons dated 8 September 2020, Lam Clansmen Mutual Aid Association Limited, the Plaintiff, applies for default judgment based on a claim in adverse possession against the Defendant, the absolute legal and beneficial owner of a property situated at Flat B on 6^th Floor, No 64 Fei Fung Street, Nos 54-60 Ming Fung Street, Fung Wong New Village, Kowloon (the “Property”).

2.  I made an order in favour of the Plaintiff after the conclusion of the hearing on 28 October 2020.  I now give my reasons.

THE PLAINTIFF’S PLEADED CASE

3.  The Plaintiff’s case is set out in its Re-Amended Statement of Claim dated 27 August 2020 (“Re-ASOC”).  It applies for default judgment against the Defendant based on the facts as pleaded in the Re-ASOC.

4.  The material facts as gleaned from the Re-ASOC are as follows:

(a)  The Property was co-owned by a number of co-owners since around 10 September 1966 (the “Paper Owners”).  The Paper Owners were joint tenants at law. Hence, the law of survivorship applied.

(b)  On 15 May 1973, the Plaintiff was incorporated in Hong Kong as a company limited by guarantee under the then Companies Ordinance.  Since the same date, the Plaintiff has been in exclusive possession of the Property continuously.

(c)  Prior to the Plaintiff’s incorporation, the predecessor of the Plaintiff was a society registered with the Hong Kong Police Force which lacked the legal capacity to purchase a property.  The members of the predecessor then raised funds amongst themselves for the purchase of the Property by the Paper Owners.

(d)  After the purchase, the Property has always been used by the Plaintiff’s predecessor and then the Plaintiff.  There was no formal transfer of title of the Property from the Paper Owners to the Plaintiff after its incorporation.

(e)  While the Paper Owners were alive, the Plaintiff used and occupied the Property under a licence.  The Plaintiff (acting through its Management Committee (“MC”)) acknowledged the superiority and/or paper title of the Paper Owners because of their trustworthiness, integrity and standing among members of the Lam Clan (i.e., clansmen with surnames “Lam”) (the “Lam Clan”).  Such acknowledgment was mere personal to the Paper Owners, and did not include the Paper Owners’ successors.

(f)   The Paper Owners passed away on the following dates respectively: (i) Lam Bit – 30 March 1967, (ii) Lam Ping – 23 September 1974, (iii) Lam Shing Poon – 3 January 1986, and (iv) Lam Yiu Chi – 10 January 1987 (i.e., the Deceased).

(g)  Upon the death of the last surviving Paper Owner, i.e., the Deceased, on 10 January 1987, the licence to use the Property was revoked and/or terminated and the Plaintiff’s continued occupation and possession of the Property thereafter amounted to adverse possession.  Further and/or alternatively, the Plaintiff (acting through its MC) did not accept the superiority and/or paper title of the successor(s) to the Deceased and decided to ignore any licensing arrangement (even if there is any).

(h)  The Plaintiff further pleaded that it was no longer bound by any permission, licence and/or other authority whatsoever, and adversely and exclusively possessed and continued to use the Property.

(i)  The Plaintiff’s continuous and uninterrupted exclusive factual possession with the intention to adversely possess lasted for more than 20 years, or 12 years at the very least.

5.  It was against the above backdrop that the Plaintiff commenced this action against the Defendant for, inter alia, a declaration of possessory title on the basis of its adverse possession against the Property.

6.  The present action in adverse possession was commenced by Writ on 27 August 2018 against the personal representatives of Lam Yiu Chi, deceased (the “Deceased”), who was the sole surviving owner of the Property just before he passed away.  By operation of law, the legal title of the Property is now vested with the Deceased’s estate.

7.  By an Order dated 6 August 2019 and filed 29 August 2019, Master Chow appointed Lam Kam Loi (son of the Deceased) to represent the estate of the Deceased for the purpose of the present proceedings, and that the proceedings taken out by the Plaintiff herein be carried on against Lam Kam Loi as the person appointed to represent the estate of the Deceased (the “Representation Order”).

SERVICE OF DOCUMENTS

8.  This Court is satisfied that the Writ and the Re-ASOChave been duly and properly served on the Defendant: see 8^th Affirmation of Lau Chi Ho.  The Affirmation of Lau Chi Ho confirmed that valid and proper service of the Writ was effected by personal service.  I am satisfied that the Defendant has knowledge of these proceedings. It is understandable why the Defendant chose not to take any actions in these proceedings.  The Property has always been used by the Plaintiff for the public good of Lam’s clansmen and none of the Paper Owners had ever asserted any personal benefits over the Property.

9.  Notice of the present proceedings was also duly and properly given to the Defendant, as confirmed by the 8^th Affirmation of Lau Chi Ho.

10.  The Defendant and other successors of the Deceased have also been kept informed of the Representation Order made by Master Chow, as confirmed by the 2^nd Affirmation of Lau Chi Ho, as well as the Plaintiff’s attempt to seek default judgment on the previous occasion on 31 December 2019, as confirmed by the 7^th Affirmation of Lau Chi Ho.

11.  In the 9^th Affirmation of Lau Chi Ho, it is also confirmed that court papers in relation to the present hearing and application were all duly served on the Defendant.

12.  The Defendant has not taken any step to defend the present proceedings even though due and proper service has been effected on him.

APPLICABLE LEGAL PRINCIPLES

The legal principles on default judgment

13.  It is well established that default judgment would only be given on the pleaded case.  Judgment will be given on the plaintiff’s claim provided that the pleaded facts give rise to the relief sought: see Lam Chi Fat v Liberty International Insurance [2002] 3 HKLRD 480, §§26-27 per Ma J (as he then was).  For this reason, this Court needs look no further than the Plaintiff’s Re-ASOC in determining the present application.

14.  The Court’s practice in relation to the grant of declaratory relief in a default judgment application is summarised under Hong Kong Civil Procedure 2020, §19/7/20:

(a)  It is not the normal practice of the Court to make a declaration without a trial, particularly where the declaration is that the defendant in default of defence has acted fraudulently.

(b)  However, this is only a rule of practice which should not be followed when the plaintiff has a genuine need for the declaratory relief and justice will not be done if such relief are denied.

(c)  Where declaratory relief is sought, the Court will scrutinise the application for default judgment carefully and does not hastily grant the relief sought.

(d)  The declaratory relief to be granted should not be in terms wider than what the plaintiffs are entitled to and what is necessary to do justice to them.

15.  Mr Cheung for the Plaintiff drew to the attention of the Court the following instances where default judgments of declarations for adverse possession were given, namely, (i) Li Sau Sing v CTMA Holdings, DCCJ 4825/2014 (unreported, 3 February 2016); (ii) Lee Kwok Leung & Another v Li Foa Shang, DCCJ 2165/2014 (unreported, 10 April 2015) and (iii) Cheung Kwan Yin & Another v Chan Yuk Kuen, DCCJ 1489/2016 (unreported, 11 April 2017).

16.  Mr Cheung further submitted that it was remarked in Lee Kwok Leung (supra) that the aforementioned principle was no more than a rule of practice, which should not be followed when the plaintiff had a genuine need for the declaratory relief and justice would not be done if such relief were denied (at §7).  I agree.  Whether or not declaratory relief should be granted depends very much on the facts and circumstances of each case.

The legal principles on adverse possession

17.  The law on adverse possession is also well-established.  Put simply, three elements have to be satisfied:

(a)  First, factual possession.  The adverse possessor must show a sufficient degree of physical control of the land.  In this connection, enclosure is probably the strongest possible evidence of adverse possession.

(b) Second, animus possidendi, in other words an intention to possess the land to the exclusion of all other persons including the paper owner.  Clear and affirmative evidence is required to show that such an intention to dispossess has been made sufficiently clear to the world, and particularly to the attention of the paper owner.

(c)  Third, the requisite time period.  For non-Government lands, the time period is 12 years: section 7(2) of the Limitation Ordinance (Cap 347) (“the Ordinance”).

(d) The combined effect of the common law, together with sections 7, 8, 13 and 17 of the Ordinance, is that for non-Government lands, the paper owner’s title to the land would be extinguished vis-à-vis the adverse possessor after 12 years of continuous exclusive possession with the requisite animus possidendi.

See:   Fung Sau Mui Janne v Fung Wing Tong HCMP 798/2016 (unreported, 3 October 2018), §§78-79 per DHCJ William Wong SC.  For completeness, as per section 38A of the Ordinance, the relevant time period is 20 years if the cause of action accrued before 1 July 1991.

FORMER DEFAULT JUDGMENT APPLICATIONS

18.  Mr Cheung very fairly drew to this Court’s attention the Plaintiff’s two former attempts to apply for default judgment against the Defendant.  I am satisfied that the concern of Deputy High Court Judge To that someone ought to be appointed to represent the estate of the Deceased before the Court can consider granting default judgment, and that P should ensure that all parties interested were informed of the proceedings has been dealt with by the Representation Order.

19.  The second hearing was before Deputy High Court Judge MK Liu who expressed the view that there may be a trust arrangement as a result of the fund raising exercise pleaded at §2(1) of the then Amended Statement of Claim (“ASOC”) (the “Potential Trust”):

“Prior to the Plaintiff’s incorporation, the predecessor of the Plaintiff was a society registered with the Hong Kong Police Force which lacked legal capacity to purchase a property (the “Predecessor”).  The members of the Predecessor raised funds amongst them for the purchase of the Property by the Paper Owners.”

20.  Further, Deputy High Court Judge MK Liu also asked the Plaintiff to elect whether to proceed with an application for default judgment based on adverse possession (which would only give rise to a possessory title) or to structure another cause of action to obtain an absolute title over the Property.  Upon taking instructions at the hearing before Deputy High Court Judge MK Liu, the Plaintiff’s firm position is that it is contented with the lesser title, namely a possessory title over the Property.

21.  Notwithstanding the Plaintiff’s confirmation, because of the Potential Trust concern, Deputy High Court Judge MK Liu did not grant the default judgment in favour of the Plaintiff on 31 December 2019.

22.  Mr Cheung submitted that there cannot be any trust arrangement as a result of the fund raising exercise pleaded at §2(1) of the ASOC because:

(a)  There cannot be any express trust since an express trust over landed property (ie the Property) has to be in writing: see Section 5(1) of the Conveyancing and Property Ordinance (Cap 219).  There is no such written instrument in the present case.

(b) There cannot be any constructive trust since the funds raised were in the form of donations such that none of the donors had any intention to retain any form of, or acquire any form of, interest by way of the donations.  No common understanding in the usual context of constructive trust existed.  This is hence no constructive trust generated by the fund raising exercise at all.

(c)  There cannot be any resulting trust since the actual intention of making gifts on the part of the donors negates the existence of any resulting trust.

(d) In this case, the Paper Owners of the Property were named as the full legal and beneficial owners of the Property because of their trustworthiness, integrity and standing among members of the Lam Clan.  The donors did not intend to retain any interest in the Property, and the interest of the Property vested in the Paper Owners’ names was a full and absolute legal and beneficial interest.  By reason of survivorship in the context of joint tenancy, the interest of the Deceased (ie the last survivor prior to his demise) in the Property was also a full and absolute legal and beneficial interest.

23.  To address the Potential Trust concern, the Plaintiff has taken the following four steps:

(a)  First, the ASOC has been further amended such that §2(1) of the Re-ASOC is now fully particularised to negate the existence of any trust.

(b) Secondly, a summary of the hearing before Deputy High Court Judge MK Liu (in Chinese) as well as the transcript of the hearing had been sent to the Defendant, the personal representative of the estate of the Deceased and other three family members of the Deceased, namely Lam Mei Yung, Lam Mei Chuen and Lam Mei Hoi and posted at a prominent position of the Property on 7 July 2020 and 10 July 2020 respectively, inviting interested persons (if there is any) to come forward to oppose the Plaintiff’s application if and when they so wish: see 7^th Affirmation of Lau Chi Ho §§1-5.

(c)  Thirdly, the draft Re-ASOC was also sent to the Defendant, the personal representative of the estate of the Deceased and other three family members of the Deceased, namely Lam Mei Yung, Lam Mei Chuen and Lam Mei Hoi and posted at a prominent position of the Property on 14 July 2020 and 15 July 2020 respectively: see 7^th Affirmation of Lau Chi Ho §§6-10.

(d) Fourthly, all documents relevant to the Plaintiff’s current application for default judgment has been served on the Defendant, the personal representative of the estate of the Deceased and other three family members of the Deceased, namely Lam Mei Yung, Lam Mei Chuen and Lam Mei Hoi and posted at a prominent place of the Property way ahead of the actual hearing on 5 October 2020, inviting interested persons (if there is any) to come forward to oppose the Plaintiff’s application if and when they so wish: see 8^th Affirmation of Lau Chi Ho §§1-6.

24.  No one has come forward to oppose the Plaintiff’s application.

25.  I am satisfied that there is no trust arrangement in favour of the Plaintiff on its pleaded case.  The Plaintiff is entitled to apply for default judgment based on its pleaded case.

Whether the Plaintiff has established its case in adverse possession on pleaded facts

26.  Mr Cheung submitted that in the Re-ASOC, the Plaintiff has fully particularised its factual exclusive possession, intention to adversely possess, as well as the duration of continuous and uninterrupted adverse possession as follows:

(a)  The Plaintiff has always managed the Property through its MC.  The key of the Property is and was at all material times kept by a secretary of the MC (義務文書), to the exclusion of any successor(s) of the Deceased.  The Deceased’s successor(s) at all material times had no access to the key of the Property, nor were they entitled to keep and/or use the key without the Plainiff’s consent, permission and/or authority.

(b) The Plaintiff used the Property for ancestral purposes, including placing of ancestral tablets, worship, festival celebration, etc.  All individuals intending to visit the Property, including for ancestral purposes, must first obtain Plaintiff’s permission through its MC.

(c)  The Plaintiff also used the Property for administrative and management purposes.  The inauguration ceremony of its MC, elected every two or three years, is and was at all material times held at the Property.

(d) The Plaintiff further used the Property as a venue for discussion of significant matters concerning the Lam Clan.  With the Plaintiff’s permission, members of the Lam Clan would come to the Property for such discussion.

(e)  The Plaintiff paid for the water bills, electricity bills, rates, government rents and other miscellaneous expenses concerning the Property using the Plaintiff’s own funds.  None of the successor(s) of the Deceased ever paid for any such expenses.

(f)   The Plaintiff further paid for the renovation of the Property using the Plaintiff’s own funds, including, inter alia, a larger scale renovation in 2013.  The decision for any such renovation does not have to be approved and/or authorised by any successor(s) of the Deceased.

(g) The Plaintiff never paid any rents to anyone since the Plaintiff considers and at all material times considered that, after the death of the Deceased, the Plaintiff is entitled to use the Property to the exclusion of the whole world, including any paper owners and the Deceased’s successor(s).

(h) Indeed, all title deeds of the Property are and were at all material times kept by the Plaintiff, to the exclusion of any successor(s) of the Deceased.

(i)   Importantly, no successor of the Deceased has ever come forward to assert his/her entitlement, title and/or interest in the Property.  At the same time, the Plaintiff also considered that it is and was at all material times not bound by any entitlement, title and/or interest of any successor(s) of the Deceased, and hence did not approach any such successor(s) to seek any consent and/or permission to continue to use the Property.

27.  Given the above, since around 10 January 1987, the Plaintiff has been in factual exclusive possession of the Property with the requisite animus possidendi, and that has lasted for a continuous and interrupted period exceeding 20 years, or 12 years at the very least.

28.  By reason of the facts and matters pleaded above, the title of the Defendant or the Deceased’s estate to the Property was extinguished by virtue of the operation of the doctrine of adverse possession under common law as well as sections 7, 8, 13 and 17 of the Ordinance.

29.  On the above pleaded facts, I am satisfied that the Plaintiff has made good its claims based on adverse possession.

Whether declaratory reliefs should be granted in this hearing

30.  I am also satisfied that in the circumstances of the present case, declaratory relief should be granted as there are no useful purposes to be served by requiring the Plaintiff to go through a full-blown trial with the necessary legal costs.  This Court also takes into consideration that the Plaintiff serves the interest of the Lam Clan.  The Plaintiff’s concern that both the Defendant and itself should not be exposed to further legal costs is a real one.

31.  At the end of the day, the Court exercises its discretion to do justice to all parties if the circumstances justify. In Lee Ping Sum v The Personal Representatives of the Estate of Ng Hoi Ling Pauline, Deceased, DCCJ 4192/2018 (unreported, 12 July 2019), the Deputy District Judge SH Lee, after examining the pleas in the statement of claim, concluded at §§70-71 as follows:

“70. I am fully conscious of the rule of practice at para 25 and the reasons behind it. But it is also my duty to do the fullest justice to the plaintiff to which he is entitled.

71. ... After careful scrutiny of SOC, this court can discern nothing special or suspicious that justifies or requires the plaintiff to prove his case by evidence at trial.” (Emphasis added)

32.  On the facts of the present case, the Defendant has no interest in the asserting any interest in the Property.  The Property has always been used by the Plaintiff with no dispute from the Deceased and/or the Defendant.

33.  The Plaintiff is satisfied with a possessory title to the Property.

34.  In the circumstances, I am of the view that it is right and just to grant the declaratory relief as prayed for by the Plaintiff.

DISPOSITION

35.  For all the reasons stated above, I make an order in terms of paragraphs 1 and 2 of the Summons with no order as to costs.

36.  Finally, this Court thanks Mr Cheung for his able and helpful assistance.