ROYAL MORTGAGE LTD v. BLISSFUL YEAR LTD AND OTHERS

HCA 302/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 302 OF 2013

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(By Counterclaim)

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JUDGMENT

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Introduction

1.  The Original Action was taken out on 18 February 2013 by Royal Mortgage Limited (“Royal”) against Blissful Year Limited (“Blissful”) alone.  That action was one for recovery of a loan (with interest) which Royal had advanced to Blissful.  The said loan was secured by a mortgage (dated 16 November 2010) in Royal’s favour over a piece of land, known as Lot No 2082 in Demarcation District No 104 (“the Land”) of which Blissful was the registered owner. Blissful did not file any acknowledgement of service or defence to the Original Action so that Royal obtained a defaulted judgment on 7 May 2013.  On 2 July 2013, Royal also obtained a Writ of Possession against Blissful for delivery up of vacant possession of the Land. 

2.  On 5 June 2015, upon the application of Yu and Chow, the execution of the defaulted judgment by Royal against Blissful was stayed and Yu and Chow were added as defendants to the Original action.[1] In July 2015, Yu and Chow filed their respective defence and each of them also counterclaims against Royal and Blissful for a different portion of the Land (“the Climbed Portions”)[2] based on their respective uninterrupted adverse possession beginning in about 1970 which they say has the effect of extinguishing Blissful’s title to the Claimed Portions.  On 11 September 2015, Royal filed its Reply and Defence to Counterclaim putting Yu and Chow to strict proof of their respective Counterclaims.  On the other hand, Blissful has not responded to Counterclaims at all.

3.  On 16 April 2017, Royal filed an inter-parte summons seeking declarations basically submitting to the Counterclaims of Yu and Chow.  That summons, however, could not be proceeded with without surveyor plans for the Claimed Portions.  On 20 April 2017, upon the undertaking of Yu and Chow to provide surveyor plans for the Claimed Portions, this court ordered that the hearing of Royal’s inter-parte summons be adjourned to a date to be fixed.  I am told that a date in November 2017 has already been fixed for the hearing.

4.  The two applications now before this court are from Yu and Chow,[3] each seeking that judgment be entered in their favour against Blissful in default of defence to the Counterclaims, pursuant to Order 19, rules 7 and 8 of the Rules of the High Court (”RHC”).  They also seek declaratory reliefs as follows:

(a) Blissful has lost its right to bring an action to recover its share or interest in the Claimed Portions by virtue of section 7(2) of the Limitation Ordinance (Cap 347);

(b) Glassful’s title to the Claimed Portions was extinguished prior to the commencement of these proceedings by virtue of section 17 of the Limitation Ordinance (Cap 347);

(c) Yu has acquired the right to sole and exclusive physical occupation of and in [the portion of the Land she is counterclaiming][4] and holds a good possessory title thereto; and

(d) Chow has acquired the right to sole and exclusive physical occupation of and in [the portion the Land she is counterclaiming][5] and holds a good possessory title thereto.

5.  Although Royal is technically not a party to the summonses taken out by Yu and Chow, it has been served with the summonses and also the written skeleton submission together with a bundle of authorities prepared by Mr Yim, counsel for Yu and Chow.  Mr Leung, solicitor acting for Royal appeared at the hearing and he confirms that Royal does not oppose the aforesaid applications of Yu and Chow.

Applicable legal principles

Judgment in default

6.  The relevant legal principles relating to judgment in default are well-settled:

(a) the court could not receive any evidence, but must give judgment according to the pleadings alone: Smith v Buchan[6]; and Young v Thomas[7].  Therefore, no evidence would need to be filed: Webster v Vincent.[8] See also generally Hong Kong Civil Procedure 2017Vol 1 (“HKCP”), at §19/7/11;

(b) a defendant who counterclaims against a plaintiff shall be treated for the purposes of Order 19, rules 2 – 7 as if he were a plaintiff who had made against a defendant the claim made in the counterclaim: Order 19, rule 8, RHC;

(c) the statement of claim (or counterclaim) must show a case for the order that the applicant seeks to obtain: HKCP, at §19/7/14; and

(d) the court’s power to grant judgment under Order 19, rule 7, RHC, is discretionary.

Adverse possession

7.  The following legal principles relating to adverse possession is also clear:

(a) actions for recovery of land by any person are statute-barred after 20 years from the date the right of action accrued, where the right accrued before 1 July 1991: see the Limitation Ordinance 1965 (No 31 of 1965), section 7;[9]

(b) by section 13, Limitation Ordinance, no right of action to recover land shall be deemed to accrue unless the land is in the possession of some person in whose favour the period of limitation can run;

(c) it is provided in section 17, Limitation Ordinance, subject to the provisions of section 10 regarding trust property, “at the expiration of the period prescribed by this Ordinance for any person to bring an action to recover land (including a redemption action), the title of that person to the land shall be extinguished”;

(d) the squatter has to prove both factual possession and the requisite intention to possess (animus possidendi): Powell v McFarlane.[10]  In Wong Tak Yue v Kung Kwok Wai & Anor (No 2),[11] Li CJ, giving the judgment of the Court of Final Appeal, said that the question of intention to possess, as with any other question of intention, is one of fact.  Whether it can be established depends on an assessment of all the circumstances in a particular case; and

(e) the effect of expiration of the time limitation, however, is that it extinguishes only the title of the dispossessed against the squatter. The statute does not operate as a parliamentary conveyance of the owner's title to the squatter: see St Marylebone Property Co Ltd v Fairweather[12], adopted in Chan Tin Shi & Ors v Li Tin Sung & Ors[13].

The present case

8.  Based on the respective pleadings of Yu and Chow, which are not contradicted, any cause of action which Blissful may have against them for recovery of the Claimed Portions would have already been accrued as late as in 1970s and therefore has long been time-barred, with the result that the title of Blissful to the Claimed Portions has been extinguished.  Applying the aforesaid legal principles to the present case, it is clear that Yu and Chow are entitled to judgment on their Counterclaims as against Blissful. 

Declaratory reliefs

9.   As pointed out by Mr Yim, the principle that a declaration will not be granted when giving judgment by consent or without trial, including judgment in default of defence or notice of intention to defend, is a rule of practice and not of law and it will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled: Patten v Burke Publishing Co Ltd.[14]  Therefore, that rule of practice may not be followed when justice would not be done if the declaratory relief is to be denied or when a claimant has a genuine need for such relief: see Lam Shing Shou v Lam Hon Man[15]; and Lai Wai Kuen v Wong Shau Kwong[16].

10.  In the present case, the reliefs sought by Yu and Chau are all declaratory in nature.  Having carefully scrutinize their applications, I am satisfied that each of them has a genuinely need for the declaratory reliefs sought and that justice would not be done to either of them if they were to be denied of those. 

11.  Having taking into account the aforesaid case authorities on adverse possession, I hold that Yu and Chow are entitled to the declarations in terms of paragraphs 1(i) – (iii) and 2 of their respective summonses dated 4 August 2017 with the following amendment at paragraph 1(iii) of the two said summonses, namely instead of “has acquired the right to sole and exclusive physical occupation”, it shall be read as “has acquired the right, as against Blissful Year Limited, to sole and exclusive physical occupation”. 

12.  Although both Yu and Chow ask in their respective summonses that their possessory titles be declared as “good possessory title”, Mr Yim, inspired by the terms of the order made in Lam Wai Kuen’s case, asks instead that their titles be each declared as “indefeasible possessory title”.  With respect, whether a possessory title is “indefeasible” would depend on the facts of each case.  Lam Wai Kuen’s case was about adverse possession in the context of a co-ownership and in a situation where ouster of a tenant-in-common by the other could be presumed.  In the present case, the facts are quite different and the respective titles of Yu and Chow have derived only from their possession.  In my view a “good possessory title” is what Yu and Chow are each entitled to.  Moreover, I do not see any reasons, for the purpose of doing justice to either Yu or Chow, as to why it would be necessary to declare their possessory titles as “indefeasible”. 

13.  Therefore, as regards Yu, paragraph 1(iii) shall become:

“ a declaration that [Yu] has acquired the right, as against Blissful Year Limited, to sole and exclusive physical occupation of and in the Green Hatched Black Area and holds a good possessory title thereto”

And as regards Chow, paragraph 1(iii) shall become:

“ a declaration that [Chow] has acquired the right, as against Blissful Year Limited, to sole and exclusive physical occupation of and in the Pink Hatched Black Area and holds a good possessory title thereto”

Costs

14.  At the application of Mr Yim, following the general rule that costs should follow the event, I order that Blissful shall pay the costs of Yu and Chow (with certificate of counsel), to be taxed if not agreed and that Yu’s and Chow’s own costs be taxed in accordance with legal aid taxation.

15.  As regards Royal’s application for costs, although it has been served with the summonses and the skeleton argument of Yu and Chow, in my view it should be clear to its legal representatives that Royal’s appearance is not in fact necessary.   Moreover, Royal has received the summonses for about a month before the hearing and there are plenty of opportunities for all the parties concerned to communicate with each other so as to save time and costs.  In the circumstances, I decline to order any costs either in favour of or against Royal in relation to Yu’s and Chow’s applications and the hearing of their applications.

16.  As regards the outstanding inter-parte summons taken out by Royal dated 16 April 2017, in the absence of any agreement between the parties for the time being, I leave it to them to consider, in view of the orders that I have made above, whether the hearing fixed in November is still necessary and what should be done about it.