KARLIN CONSULTANTS LTD. v. LIU WING FAT

HCA13711/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13711 OF 1998

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J U D G M E N T

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1. In Shek Wu Hui, Sheung Shui, there is a piece of open ground bounded on the north and south by San Lok Street and Lung Sum Avenue respectively, and on the east and west by buildings. Most of its area is taken up by private land designated as the Remaining Part of Lot 356 and the Remaining Part of Lot 360 in D.D.91. For convenience I will call them 356 and 360. They are contiguous on a line running more or less from south-east to north-west. Both lots are in two parts with a strip of Government land running from east to west between the parts, and the rest of the open space is also Government land.

2. The Sheung Shui Wai area is the ancestral home of the Liu clan. 360 originally belonged to members of that clan. In 1994, the owners were Liu Chu Wun, Liu Chin Hing, Liu Chin Pang and the Liu Man Fung Tso. They sold it to Fortune King Holdings Ltd for $10,000. That company in turn sold the land to the plaintiff on 1 August 1997 for $20,800,000.

3. 356 belongs to the Liu Yau Pak Tso, of which the defendant is a member, also it is an institution for holding ancestral land. The Tso leased it to the defendant on 23 January 1978. He remained in occupation thereof until he vacated it in 1997 pursuant to an order made by Findlay J in the High Court in March of that year.

4. The defendant is in possession of 360. The plaintiff now claims possession and other relief including mesne profits until delivery. The defendant contests the claim on the grounds that he has acquired title by adverse possession and counterclaims for declarations to that effect.

5. It is the defendant's pleaded case that he took possession of 360 in 1975 and used it for storage and hawking purposes. From 1978 he used the two plots, 356 and 360, as a commercial car park until he gave up 356 in mid-1997. He has since then continued in occupation of 360 for his car parking business. He has been in adverse possession of 360 to the exclusion of its owner since 1975.

6. The plaintiff denies that the defendant was ever in possession of 360. It avers that in the early 1980s vehicles from 356 parked on 360. One of the owners of 360 complained; the defendant apologised. Later that owner granted the defendant a licence to use the land on the basis of the defendant's agreement to vacate when required. Unfortunately the former owner, who was to have given evidence of these matters, did not come to court.

7. The plaintiff has the paper title. In order to succeed against the plaintiff, the defendant has to prove adverse possession for 20 years prior to the date of commencement of proceedings, i.e. 14 August 1998. This was the period provided for prior to the 1991 amendment to the Limitation Ordinance, Cap. 347. He has to prove the dispossession of or discontinuance of possession by the former owner on a date prior to 14 August 1978 (section 13(1)) and continuous adverse possession for 20 years thereafter (section 13(2)).

8. What he has to prove is possession coupled with the intention to possess. The requirements are encapsulated in the words of Saville LJ of the Court of Appeal in England, in the case of Hughes v. Cork (14 February 1994, unreported), cited by Barnett J in Wong Luen Chun & Anor. v. Secretary for Justice, [1998] 4 HKC 122 at 129 :

"What the law requires is factual possession, i.e. an exclusive dealing with the land as an occupying owner might be expected to deal with it, together with a manifested intention to treat the land as belonging to the possessor to the exclusion of everyone else."

9. There is no evidence of discontinuance of possession by the former owner. This was originally an agricultural plot which had not been used as such for some time. The defendant's wife said that it had been used for vegetables but it is not clear when. Merely to leave agricultural land unused would not necessarily infer discontinuance of possession. The defendant must prove that he dispossessed the former owner by taking possession himself.

10. Not every act of user would amount to dispossession. An act which did not interfere with, and was consistent with the purpose which the owner intended to devote to the land would not. See Williams Bros. Direct Supply Ltd v. Raftery, [1958] 1 QB 159. However in every case dispossession is a question of fact.

Evidence

11. The plaintiff's expected main witness, Mr Liu Chu Wun, one of the owners of 360, did not come to give evidence so there is no reliable evidence from the plaintiff's side as to what was done with 360 between 1975 and 1994 when Mr Liu and his co-owners sold it.

12. PW1, Mr Liu Yuk Wah, said that he was one of the middle-men for the 1994 sale. He had gone to the land with Mr Liu Chu Wun and the defendant. Liu Chu Wun told the defendant that they were there to mark the boundary between 356 and 360 so that vacant possession of 360 could be given to the buyer. Acting on information given by Liu Chu Wun and the defendant, Liu Yuk Wah had marked out the boundary between 356 and 360 using one-metre iron rods hammered into the ground and linked by nylon rope.

13. PW2, Mr Liu Kai Tung, gave evidence to the effect that he had seen both lots, 356 and 360, vacant for many years and that the defendant had allowed a few cars to park on 356 from 1980-81. This evidence is not reliable; it does not agree with the aerial photographs, to which I will refer later.

14. PW3 is one of the directors of the plaintiff company, but he had no actual part in the purchase himself, and he too did not assist the case either way.

15. The defendant's evidence was, in brief, that he took over 360 in 1975. He fenced it with a temporary fence of bamboo, planks and ropes. This went round the side of a pond on 356. He cleared all trees and shrub. He put a hut on 360 to hold his grave digging tools. He allowed hawkers to place their cars (I presume this means carts) on 360.

16. In January 1978, he rented 356 from the Liu Yau Pak Tso. He levelled the two lots to the same level as the surrounding land for use as a car park. He and his wife did the work and it took about a year. He put wire fences round the whole area including 360, 356 and the Government land around and in the middle of them. He put up a wooden shed. He registered his business in August 1978 and he paid tax from 1978. He has produced various correspondence with the Inland Revenue Department. He also produced his car parking records dating from September 1978.

17. As to the boundary marking exercise in 1994, he said that this never happened.

18. He continued in possession of 360 to date and after the sale to the plaintiff he put up a wire fence between 360 and 356. He then used 360 for growing tangerines and some car parking.

19. The defendant was cross-examined extensively and various discrepancies were highlighted between his evidence of dates and the like and what appeared from his tax returns and business registration documents. It was also clear from various agreed photographs that his evidence as to when he started to grow tangerines was wildly inaccurate as to date. I will deal with these discrepancies later. The most important thing to come out from cross-examination was, however, that according to the defendant, though he never knew the owner of 360, he remained willing throughout his period of occupation to pay rent, if the owner had appeared and demanded it.

20. The defendant called his wife, who gave evidence supporting his, of what they did with the land in about 1975 to 1978. She was a rather vague witness. In cross-examination she said that the original plank fence between the lots had only been put up after the defendant leased 356. She also said that there was no pond, only a depression into which people dumped rubbish.

21. There were two other factual witnesses, Mr Cheung Pui Hon ("Mr Cheung") and Mr Kay Chi ("Mr Kay"). Mr Cheung did not assist much because although he said he parked his car on 360 since 1990 and still does, he cannot speak to what happened earlier.

22. Mr Kay said that 360 was fenced up by bamboo and ropes since 1975 and used by four or five cars. The defendant kept dogs on it from 1975. However he said that he was aged 78 and "did not remember much".

23. Each side called an expert witness to deal with aerial survey photographs of the lots, dating from October 1978 onwards. Both of them assisted the court though there were some points of disagreement. Miss Chan for the plaintiff was more definite in her views than was Mr Watten for the defendant. The photographs are simply aerial photographs of common objects and buildings on land. They are nothing like, for instance, X-rays, MRI or ultrasound scans which need expert interpretation. They are pretty clear to the layman's eye. Miss Chan's opinion seems to accord better with what is visible on the photographs and where there is a dispute, I prefer her evidence.

24. The issues before me are, did the defendant dispossess the plaintiff's predecessors-in-title and when; did he maintain that possession for the whole of the limitation period; and did he maintain the intention to possess for the whole of the limitation period.

Dispossession

25. The defendant himself was not an impressive witness. I find it difficult to believe that a Liu clansman, living in an area inhabited by Liu clansmen and himself a member of a Tso which owned adjacent land, would have been quite as ignorant of who owned 360 as the defendant claims he was. He even said that he did not know that his own Tso owned 356, before he rented it on 23 January 1978. Maybe it had many members - the judgment of Findlay J mentions that - but nevertheless it was land in which he had an interest.

26. As I have indicated, there were some discrepancies between what the defendant said about when he fenced and levelled the two plots, and his tax returns which show an entry for payment of about $40,000 for fencing and levelling in 1979. Either he is not telling the truth when he says he did this in 1978 or he did not tell the truth in his tax accounts. The matter of when the tangerines were planted is also incredible; it is clear from the plaintiff's photographs that no tangerines were on 360 up to January 2000.

27. The evidence of the defendant's dealings with the Rating Department and the Inland Revenue regarding business registration do not assist much. One might have expected him to include 360 in his address at the beginning if he was indeed using it as a car park, but he did not include it later when he clearly was.

28. I have looked closely at the aerial survey photographs and it has to be said that these do not accord with the defendant's evidence. The first such photograph is dated 30 October 1978. It appears to show an established car park on the west side of the open ground. Gates are visible on the north side to San Lok Street and on the south side to Lung Sum Avenue. There is some kind of structure next to the latter gate and another structure of some sort to the north-east of that; presumably the sheds which the District Office later ordered to be demolished. I will call these the first and second structures.

29. Running more or less northwards from the east side of the latter structure, along the boundary of the southern part of 360, across the dividing Government land and through the middle of the northern part of 360 is a dark line which suggests a hedge or solid fence. The defendant's wife says that this is the temporary fence she and her husband put up in 1975, with vegetation grown along it. That could very well be a proper description of this feature.

30. However, when one looks at the east side of this dark line, i.e. at the rest of the north part of 360 and the whole of the south part, as well as the contiguous Government land, what appears is mostly unused land, covered with vegetation. There does not appear to be any fencing on Lung Sum Avenue to the east of the first structure. There are cars south of the southern side of the second structure; it does not appear that they could have got in from the rest of 356, between the two structures, and this suggests they entered directly from Lung Sum Avenue. Further east, towards House 42 Lung Sum Avenue, there appears to be no fence, and such vehicles as are on the south-eastern corner of 360 probably entered from the unfenced lane next to House 42. There appears to be some sort of dividing line, perhaps a fence, between the end of the dark line and House No. 34 San Lok Street.

31. What I have described broadly agrees with the plaintiff's expert, Miss Helen Chan.

32. There is nothing on 360 which corresponds with the hut which, according to the defendant, he used to house his grave-digging tools. It is difficult to see how, if the defendant allowed hawkers to put their carts in the position shown on his plan, they could get in there because there appear to be some sort of structures like hedges running from east to west on the south part of 360. Further the dark area at that point suggests vegetation which would have been destroyed if hawker carts had been going over it.

33. In effect what one sees in this picture is an established car park on 356, which has encroached a little onto the northern part of 360, and vacant ground on the rest of 360 without any fencing from the street, at any rate on the south side. This does not agree with the defendant's evidence about his use or fencing of 360 prior to 1978. It is true that the dark line could have been the temporary barrier he says he put up in 1975, but the southern part of 360 was not fenced from the street and anyone could get in. Also it does not agree with his evidence that he levelled 356 and 360 together. The former was cleared and levelled in the 1978 photograph; the latter was not even cleared.

34. By contrast, in the photograph dated 5 November 1980, the car park has clearly encroached onto the whole of 360. The structures have gone. There is a board fence or something of that sort more or less along the eastern boundary of 360 and there is fencing along San Lok Street and Lung Sum Avenue. Both experts agree on the fencing. The defendant's tax account showed, as I have indicated, an entry for levelling and fencing in 1979 and it seems likely that this represented the change to what is seen in this latter photograph.

35. As I have indicated above, not every act of user would amount to dispossession. Just parking on a piece of unused agricultural land would not. Putting up a hut on it, without fencing it, would probably not. Fencing it off and using it as a car park would. Whatever the true owner's purpose, he could not carry out that purpose once the wire fences were put up.

36. Clearly by 5 November 1980, the defendant had dispossessed the true owner of 360. He had taken over the lot, fenced it in, and was using it for his car parking business. However in the light of the evidence and particularly the photographs, I cannot accept that the defendant carried out acts of ownership of 360, prior to August 1978, which would amount to such dispossession. I do not believe he put up a hut and I do not believe that he fenced around 360 so as to exclude all others, before that date.

Continued possession and intention to possess

37. There is no doubt that the defendant continued in possession and still continues. In connection with the issue of continued intention to possess there are two matters to consider, namely the boundary marking exercise in 1994 and the defendant's admission that he was willing to pay rent if the true owner made himself known.

38. PW1's evidence of the boundary marking was quite straightforward and there is nothing to suggest that he was not independent of the parties. He was a middleman in 1994. Presumably, if he acted as such for reward, he got his reward then. There is nothing to suggest any reason for him to lie about an incident which, according to the defendant, never happened.

39. The sale and purchase agreement was dated 3 December 1994. PW1 was not very clear about when the boundaries were marked but it was about then. There is no trace of his markers in the nearest aerial photograph after that, namely that dated 5 May 1996, but a long time had passed. If the new owners made no attempt to do anything with the property, and there is no evidence that they did, it would be easy enough to remove the markers and carry on using the car park as before.

40. On this matter, I prefer the evidence of PW1 to that of the defendant. I find that this boundary marking exercise did take place. The defendant knew about it and assisted in it. There has been some argument about the terms of the sale and purchase agreement and whether these indicate that the sellers were not giving vacant possession. There is certainly nothing to indicate that the sale was subject to any occupier's rights. To my mind the relevant clause 6 of the agreement was simply the usual formula to cover all eventualities.

41. Mr Liu Chun Wun's actions in having the boundary marked for the sale indicate that the owners did not intend to discontinue their ownership or allow anyone else to acquire ownership, other than the buyer. The defendant's actions in allowing and indeed taking part in the boundary marking exercise were entirely inconsistent with any continued intention to possess on his part. He abandoned such intention then. He no doubt renewed his intention to possess later on, but limitation would cease to run on such abandonment.

42. As to the admissions of willingness to pay rent if the true owner appeared, the plaintiff relies on the case of Wong Tak Yue v. Kung Kwok Wai & Another, [1998] 1 HKLRD 241, CFA. In that case the Court of Final Appeal held that a squatter's intention to pay rent if the owners had requested it demonstrated that he was not intending to exclude the owner with the paper title but showed that he was treating himself as enjoying possession under a lawful title from the owners.

43. Mr Law for the defendant contends that that case stood on its own facts, which are different from the facts here. The squatter had been a tenant; the tenancy had long expired and no one had come from the landlord to collect rent. Litton PJ held :

"The owner of the land with the paper title is deemed in possession of the land. If the law is to attribute possession to a person who can establish no paper title to possession, and claims to be a mere trespasser, the burden is upon him to establish his intention to exclude the whole world, including the owner of the land. Only in this way can he establish 'adverse possession' in terms of s.13 (1) of the Limitation Ordinance (Cap. 347)."

44. If willingness to pay rent is indicative of lack of intention to exclude the owner, then I do not see that I can distinguish the two cases. If the defendant was willing to pay rent, that must mean that he did not intend to exclude the owner. However, if I am wrong in this and have misunderstood the Court of Final Appeal, there is ample evidence on the facts to show lack of possession or intention to possess for the whole of the limitation period.

45. It follows that the defendant has not proved possession or the intention to possess for the requisite limitation period and so he has not set up adverse possession. The plaintiff must succeed against him.

46. Mr Ma also contends that if the defendant took over the north-western corner of 360, i.e. west of the structure shown in the 1978 photograph before 14 August 1978, he should at least be taken as having adverse possession of that small area. He probably did take over this area when he rented 356 from the Tso. The structure which shows as a dark line was put up in mistake as to the location of the boundary line. However, he did not occupy this area as a trespasser but as tenant of the Tso. He could not have had the requisite intention to exclude the true owner. As far as he was concerned, his landlord was the true owner. He could not therefore establish adverse possession of this small area.

Quantum

47. Again there are two experts, Miss Ellen Lo ("Miss Lo") for the plaintiff and Miss Sat Wai Ling ("Miss Sat") for the defendant. The former puts the market rent for 360, used as a car park, as at 1 August 1998 at $9,000. The latter puts it at $3,800. This fell from a possible $4,400 in 1997.

48. It is always difficult to decide between estimates of this sort. One side might be too optimistic and the other too conservative. At the end of the day, both are guessing. It might be informed and expert guesswork but it remains guesswork. Having said that, Miss Lo is working nearby in Landmark North and this suggests that she should have the edge on guesswork as having more local knowledge.

49. Miss Lo was cross-examined about her comparables and her method of working. The base date for her calculations was August 1997 but she had applied percentage figures to allow for the time difference and the economic downturn. Her nearest comparable car park by location she put as worth $2.3 per square foot per month as against the average for all comparables of $3.56. If that figure were applied, it would bring the monthly income down to about $5,700. However she also indicated that 360 is closer both to the new development at Landmark North and the railway station. She said that many people crossing the border on a daily basis would drive to Sheung Shui and park there, then go by train. She said it should be possible to get $2,000 per month for parking a car on 360 at the present time. She pays $2,700 a month in Landmark North.

50. Allowing for the nearness to the railway, even if one applied the closest comparable figure, a reasonable figure would be $6,000.

51. The main difference between Miss Lo and Miss Sat was that the latter assumed a lower number of cars to be put on the site and a lower occupancy rate. She also put the outgoings higher. I think Miss Sat's estimate of eight cars on the site is probably not right. Whoever occupied the lot would be able to use the Government land in the middle; the Government has never bothered about that since 1978. The correct figure is probably 10 private cars. Miss Sat's occupancy rates, given the economic downturn, are suitably conservative, but 60% of 10 cars would be six cars and not the five she estimates.

52. Given that the defendant himself said that he simply gave the car owners a key apiece I think Miss Sat's outlays are too high. For a one-man operator like the defendant, there would be no need to employ anyone. Applying these corrections, her figure should be about $5,900 for six cars with no deduction for running costs. That is close to my adjusted figure of $6,000 from Miss Lo's estimate.

53. On this basis I will allow mesne profits at $6,000 per month from 1 August 1997 until vacant possession be given up. This would cover any damages for trespass; the proper measure would be the same as for mesne profits. The figure up to 30 September 2000 is calculated at $6,000 x 38 = $228,000.

54. There will be judgment for the plaintiff for :

1. Possession of the suit land;

2. Mesne profits from 1 August 1997 at the rate of $6,000 per month until 30 September 2000, amounting to $228,000 and thereafter until vacant possession be given up;

3. A declaration that the defendant is not entitled to enter or cross the suit land;

4. Injunction to restrain the defendant, whether by himself or his servants or otherwise howsoever, from entering or crossing the suit land;

5. Order that the defendant do forthwith remove the vehicles put on the suit land with liberty to apply for damages in the event of non-compliance;

6. Interest on the sum of $228,000 at the judgment rate until payment;

7. Costs (nisi) to be taxed if not agreed.