HILDER COMPANY LTD v. WONG YAT YAU AND ANOTHER

HCMP 1868/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLLANEOUS PROCEEDINGS NO. 1868 OF 2000

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DECISION
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1.  Wong Yat Yau (“Wong”) by his two summonses both dated 6 January 2015 applies to make amendments to his Reply and Defence to Counterclaim and for further directions for filing of supplemental expert reports. These apparently simple applications are complicated by the imminence of the 15-day trial of this action commencing on 1 June 2015.

2.  By the proposed amendments occupying 3 full pages, Hilder Company Limited (“Hilder”), the plaintiff, seeks to include matters relating to the doctrine of encroachment. The doctrine, if applicable, will seriously affect Wong’s claim for adverse possession. Mr Suen, counsel for Hilder, indicates that the supplemental expert evidence sought to be adduced is necessary only if the application for amendments is granted.

3.  I first assess the merit of the proposed amendments and then proceed to consider any real prejudice that Wong may suffer if I allow the proposed amendments. This was the approach adopted by A Cheung J (as the Chief Judge then was) in VSC Building Products Company Limited v Kono Insurance Limited, unreported, HCA 947/2005, 9.9.2009.

Background

4.  The background facts for the purpose of this Decision can be briefly outlined as follows.

5.  Hilder brought this action to recover possession of certain lots of lands registered in North Land Registry as Lot Nos. 860, 861, 863 and 864 in Demarcation District No.95, Kwu Tung, New Territories, Hong Kong by reason of its ownership of both their legal title and beneficial interest that it acquired in 1992 and 1993.The controversy between Hilder and Wong is about part of Lot No.860 (“the Disputed Land”), which was purchased by Hilder in December 1992.

6.  Master Kwan made an order for possession in respect of, among other lands, the Disputed Land on 5 June 2000 (“the Possession Order”). Hilder took possession of the Disputed Land on 10 November 2000. Wong by his summons dated 19 July 2004 applied to join these proceedings on the basis that he had adversely possessed the Disputed Land for not less than 20 years before the commencement of these proceedings and to set aside the Possession Order (“the 2004 Application”). Reyes J acceded to the 2004 Application and set aside the Possession Order on 29 January 2007.

7.  Hilder contends that its claim to recover the Disputed Land is not time-barred by the virtue of the Limitation Ordinance, Cap.347.

8.  In his Defence, Wong avers that his family started farming on the Disputed Land in around 1973 and 1974 after improving its cultivability. In around 1994 and 1995, his family changed their farming use of the Disputed Land and in about 1999, the Dispute Land together with its adjoining lands were converted to parking and open storage use.

9.  Wong claims adverse possession of the Disputed Land on the basis of his undisturbed and exclusive use of the Disputed Land without any consent or licence given by the title owner for more than 20 years since 1993 and no one has ever sought rent from him and he never pays any rent for his use of the Disputed Land. It was not until Hilder started legal action that his use of the Disputed Land was disturbed. The 2^nd defendant counterclaims, among other matters, a possessory title to the Disputed Land.

10.  In its Reply and Defence to Counterclaim, Hilder disputes that Wong and/or his alleged predecessors-in-title has ever been in continuous uninterrupted and undisturbed adverse possession of the Disputed Land for a period of more than 20 years. Hilder by reference to certain aerial photographs in its pleadings denies Wong’s alleged farming activities on the Disputed Land since 1992.

11.  Of relevance to these applications is that in the Defence, Wong also avers that his family began farming on other pieces of lands adjourning the Disputed Land including Lots 834, 835, 837, 839 and 840 (“the Farmlands”) in 1965 and 1966. For Lot 836, they stopped growing vegetables on this lot in or about 1993 and for Lot 837, they stopped in or about 1994.

12.  In his “Answer to the Interrogatories by the Plaintiff to the 2^nd Defendant” dated 27 June 2014 and verified by his 3^rd Affirmation dated 9 October 2014 (“the Answer”), Wong alleges that from 1965 onwards, he and his family rented by an oral tenancy Lot Nos. 835 and 837 (“the Two Lots”) from a landlord whose identity was unknown to them and an annual rent of HK$120 was payable to the landlord through an agent. In or about 1997 or 1998, Wong and his family stopped farming on the Two Lots and stopped paying rent to the landlord.

Merit of the Proposed Amendments

13.  Since the proposed amendments relate to the presumption of encroachment, it is pertinent to take note of the authoritative definition of this common law doctrine laid down by Lord Scott NPJ in Secretary for Justice v Chau Ka Chik Tso )2011) 14 HKCFAR 889 at 926 (§108):

“The principle of “encroachment” is that if a tenant goes into, and remains in, occupation of land belonging to his landlord, it is to be presumed, particularly if the encroached-upon land is adjourning the demised land, that the tenant’s encroachment is intended by him to annex the encroached-upon land to his demised so as to enable him to occupy and use the encroached-upon land as if it were part and parcel of the demised land (see Kingsmill v Millard (1855) 11 Ex 313, 318). The presumption, although imposed by judge-made law, is a rebuttable one and can be rebutted by evidence that the tenant intended to occupy the encroached-upon land not simply as tenant as owner.”

14.  The following passage in Lord Scott’s speech is also of relevance (§113):

“I conclude, therefore, that if a lessee enters into and remains in possession of land belonging to his lessor and adjoining the demised land and does so with the intention, presumed and unrebutted or simply proved, of thereby enlarging the demised land and treating the encroached-upon land as annexed to the demised land, his (the lessee’s) possession is adverse possession, for he is in complete and exclusive possession and is, unless the lessor has consented to the encroachment, undoubtedly a trespasser. But it is a limited adverse possession, for it does not deny, and indeed accepts, the right of the lessor, the owner, to recover possession on the termination of the demise. It is adverse only for the limited purpose of acquiring a title during the continued currency of the demise. In such a case, there is, in my opinion, no reason why, if the possession continues uninterrupted for the requisite limitation period, the encroacher should not obtain, in effect, a leasehold title to the encroached-upon land for a period commensurate with the term for which he holds the demised land, and every reason why, on the expiry of that term, the lessor should be entitled to recover possession not only of the demised land but also of the encroached-upon land. Section 9(1) of the Limitation Ordinance would, in my opinion, apply.”

15.  The relevance of the presumption of encroachment in the circumstances of these proceedings is obvious. Given Lord Scott’s seminal explanation of the presumption, it is clear that if Wong was granted a tenancy for the Two Lots adjourning the Disputed Land by his landlord who was at the same time also the owner of the Disputed Land, the rebuttable presumption of encroachment arises and this presumption places upon Wong the burden to prove that he in fact despite the alleged oral tenancy intended to occupy the encroached-upon land not simply as tenant but as owner.

16.  If Wong fails to rebut the presumption, he would be taken to have entered and remained in the Disputed Land adjourning the Two Lots with the intention of thereby enlarging the demised Two Lots and treated the encroached-upon land as annexed to the demised Two Lots. As a result, his adverse possession is only a limited one for the limited purpose of acquiring a leasehold title during the continued currency of the demise. This would certainly have a strong bearing on his claim of adverse possession.

17.  Mr Suen refers this court to Wong Tak Yue v Kung Kwok Wai (1997-98) 1 HKCFAR 55 for the well-established principle that the burden of proving adverse possession rests with the squatters and they have to prove their animus possidendi. Mr Pun, counsel for Wong, agrees with this.

18.  Despite the apparent relevance of the presumption of encroachment, however, it should be noted that Wong’s affirmed allegation that he and his family were leased the Two Lots under the alleged oral tenancy (“the Alleged Oral Tenancy”) and the fact that at all material times, the Two Lots and the Disputed Land shared the common ownership have not yet featured in the pleadings.  This is indeed unsatisfactory. Wong should not be allowed to shy away from his own allegation of the Alleged Oral Tenancy and hence altogether avoid his burden to rebut the presumption of encroachment in the course of his establishing his claim for adverse possession of the Disputed Land.

19.  I can accept that Wong may, if he so wishes, succeed in abandoning his allegation of the Alleged Oral Tenancy in the Answer in the end and thus there is no room for the presumption of encroachment at all. In my view, nevertheless, the existence of the Alleged Oral Tenancy has to be an issue to be properly investigated at trial and to this end, it has to be pleaded in the pleadings as a material fact in the first place. Though the allegation of the Alleged Oral Tenancy came from Wong, I am convinced that given the Answer, Hilder has the evidential basis to plead this material factual allegation in its pleadings so as to allow this issue to be canvassed at trial and that it must be specifically pleaded pursuant to Order 18 r.8(8), the Rules of the High Court (“RHC”).

20.  As far as the ownership of the legal title of the Two Lots and the Disputed Land is concerned, this is again a material fact that should be pleaded for the purpose of the presumption of encroachment.

21.  Given the Answer, I am convinced that the presumption of encroachment should be a relevant issue. In order to secure the just resolution of disputes in accordance with the substantive rights of the rights of the parties, being the underlying objectives of the CJR expressed in Order 1A rule 2(2) of the RHC, and to determine the real controversy between the parties, I am inclined to accept that amendments should be made to Hilder’s Reply to include these two material facts so that this issue can be adequately argued and disposed of one way or another, subject to the issue of real prejudice.

22.  Mr Suen places heavy reliance on a recent decision of Liu Kam Hoi and Ors v Liu Ping Kuen, the personal representative of the estate of Liu Fun Kee, unreported, HCA 6728/1998, 14.1.2015. There, on the first day of the trial, DHCJ Nicholas Cooney SC allowed the defendant to amend his pleadings and file supplemental witness statement to include material facts to deal with the perceived risk of the plaintiff’s reliance on the presumption of encroachment, which had not been pleaded by the plaintiff. The defendant contended that such additional material facts to be pleaded could negative the presumption.

23.  The facts in that case are rather different from the present one and this court has different considerations in the balancing exercise. In that case, in light of the existing pleaded allegations of the defendant, the presumption of encroachment already arose though the plaintiff had not made an express plea of the doctrine. The deputy judge accepted the submission of the plaintiff’s counsel that only material facts and not their legal result had to be pleaded. Hence, so long as the material facts giving rise to the presumption are included in the pleadings, the presumption arises even in the absence of an express plea of the legal conclusions to be drawn from such facts. The deputy judge was plainly right.

Real Prejudice Resulting from the Proposed Amendments

24.  The parties differ on the applicable general principles relating to late applications for amendments after the CJR and refer to me a number of authorities, both pre-CJR and post-CJR such as Chong Hing Bank Ltd v Lau and Cheng Investment Ltd and Anor., unreported, HCMP 1574/2009, 19.9.2013; Hongkong Changyi Real Estate Development Ltd v Neo-China (Group) Infrastructure Investment Ltd & Ors, unreported, HCA1576/2011, 25.2.2014, DBS Bank (Hong Kong) Limited v Sit Pan Jit, unreported, HCA 382/2009, 6.2.2014 and Nam Ching Wun v Tsun Un Pawn Shop & Ors., unreported, HCA 2151/2008, 7.10.2014.

25.  In my view, such principles are very clear and leave no room for debate. After the CJR, the Court is generally reluctant to allow late applications unless good reasons exist. Not to overburden this Decision, here suffice it for me to say that I accept that there should be exceptional circumstances to justify a late application especially when it would disturb the trial date(s) already fixed.

26.  Whilst the parties have made extensive accusations against each other for causing delay in this application by reference to the procedural history of this litigation, my overriding concern is whether Wong would suffer real and unfair prejudice if the proposed amendments are to be allowed at this late stage given their necessity. In this regard, I have considered the following matters:

(1) Wong was privy to the Alleged Oral Tenancy. Though he or his legal advisors may have a different view of the strength of the presumption of encroachment, they should accept that the presumption of encroachment is a real issue between the parties calling for a proper investigation and a final adjudication by this court. Wong should himself have pleaded the Alleged Oral Tenancy and the common ownership of both the Two Lots and the Disputed Land as material facts in his pleadings and long prepared himself to rebut the presumption of encroachment arising therefrom.

(2) To support his 2004 Application, both Wong and his mother Madam Ho filed their affirmations filed in July 2004. Both affirmations contained the same averment to the effect that in the first two years after they came to Kwu Tung Village, that is around 1965 and 1966, Wong’s family began to farm on some pieces of lands (the Farmlands), some of which they needed to pay rent and some did not.

(3) As mentioned above, in the Defence, Wong pleaded that his and his family’s farmed in the Farmlands. He should expect the circumstances under which they entered and remained in the Farmland including the Two Lots would be the subject matter of investigation by Hilder in these proceedings.  

(4) Wong not long ago confirmed the Alleged Oral Tenancy and its particulars in the Answer and he did so only after some unexplained delay. It is reasonable to expect that Wong and his legal advisor should have amassed the best evidence in respect of the Alleged Oral Tenancy before filing the Answer in June 2014.

(5) The common ownership of the Two Lots and the Disputed Land cannot be controversial and should be evidenced by their land search records. Wong and his legal advisors should be well aware of this material fact.  This can cause little surprise to Wong.

(6) In light of the foregoing matters, I accept that Hilder should not be held solely accountable for the necessity and the lateness of these applications.

(7) In his written submissions, Mr Pun submits that Wong can readily rebut the presumption of encroachment on the evidence that he and/or his family intended to occupy the encroached-upon land not simply as tenant but as owner. He further highlights to this court the fact that the Two Lots are actually much smaller in size than the Disputed Land. To start with, I cannot agree that it is plain and obvious that the presumption of encroachment cannot arise on the evidence.

(8) Further, given Mr Pun’s indication, I am satisfied that Wong is ready to discharge his burden to rebut the presumption of encroachment at the trial on the scheduled dates and he is not prejudiced by the time constraint for the preparation of his rebuttal evidence despite the alleged difficulties in the opposing affirmation filed on his behalf. As explained above, he should have long expected to deal with the presumption. In any event, Wong has to prove his animus possidendi for his alleged adverse possession of the Disputed Land.  

(9) On the part of Hilder, Mr Suen reassures this court that Hilder only relies on the matters raised by Wong in the Answer and without materially lengthening of the trial owing to this small amount of additional evidence, the trial can still take place and be completed in June as scheduled. I agree with his submission.

(10) As regards the pre-trial hearing fixed on 23 March 2015, another milestone date, both Mr Suen and Mr Pun agree that these applications are the only outstanding matters to be resolved before trial and the parties are otherwise ready for trial. Given this agreement, I see little point having the pre-trial hearing on that date and so little prejudice would be caused to Wong if it is to be vacated altogether.

27.  In the circumstances, I am convinced that I should exercise my discretion to allow Hilder to plead the said two material facts so that  the presumption of encroachment can arise on the pleadings. Supplementary evidence (confined to the said two material facts) and Wong’s rebuttal evidence, if any, should be adduced.

Conclusion and Orders

28.  I believe I should accede to the application for amendments with some qualifications for the foregoing reasons. First, I note that the Proposed Amendments contain many unnecessary matters such as references to evidence and legal submissions in breach of the rules of pleadings. The amendments I allow should be strictly restricted to the Alleged Oral Tenancy (including its approximate termination date) and the common ownership of the Two Lots and the Disputed Land at all the material times. That would suffice to give rise to the presumption for Wong to rebut.

29.  As such, some irrelevant matters in paragraphs 6E, 6F, 6G of the draft should be excluded. Other than that, I allow all other proposed amendments.

30.  I am also of the view that for this additional issue to be resolved at trial, as indicated by Mr Suen, Hilder basically relies on the  allegations of Wong only. The said two material facts are already in the evidence and I see no reason why Hilder needs to file substantial supplementary evidence to establish the said two material facts. On this basis, I cannot accept that further expert evidence should be adduced for the purpose of the presumption.

31.  Whilst I accept it is only fair to let Wong file his supplementary evidence (factual) to rebut the presumption of encroachment, I do not allow Wong to adduce additional expert evidence without first being persuaded as to how his rebuttal evidence should require expert evidence.

32.  In the premises, to dispose of the two summonses, I first make an order in terms of paragraph 1 of the summons for amendments save that the draft proposed amendments have to be modified in accordance with my observations in paragraphs 28 and 29 hereof. Further, I allow 7 days from the date hereof for Hilder to comply with the same.

33.  Secondly, I grant Wong leave to file and serve his Reply to Hilder’s Defence to Counterclaim if so advised within 21 days thereafter.

34.  Thirdly, I grant leave to Wong to file and serve witness statement(s), the contents of which being strictly confined to the matters relevant to the presumption of encroachment, within 35 days from the date hereof.

35.  Fourthly, Hilder’s summons for expert evidence be dismissed with costs to Wong in any event. I should make it clear that such costs should be minimal since it was not really in the centre of the debate.

36.  Fifthly, the pre-trial review hearing fixed on 23 March 2015 be vacated and the parties do submit agreed directions for the preparation of trial on or before 23 March 2015.

37.  As regards the costs of the summons for amendments, though apparently Hilder asked for indulgence, the amendments are in my view necessary and Wong is not free from blame for the necessity and urgency of the application. I thus make an order nisi that the costs of and occasioned by the application for amendments be in the cause.

38.  I also order that Wong’s own costs of and occasioned by these applications be taxed in accordance with the Legal Aid Regulations.

39.  It remains for me to thank both counsel for their helpful assistance in this matter.