NORMAN GUY DONALD AND OTHERS v. LI PAK HUEN in his capacity as executor of the estate of LI PAK WING AND OTHERS

HCMP 1836/2017

[2024] HKCFI 3096

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1836 OF 2017

_________________________________

_________________________________

BETWEEN

_________________________________

_________________________________

DECISION

_________________________________

1.   Introduction

1.1  This is my decision on Pak Huen’s application for stay of execution pending his appeal (“Present Application”) against the order made by B Chu J (“Trial Judge”) dated 8 March 2024 (“Order”) after trial which took place in August 2023 (“Trial”)[1].

1.2  These proceedings, which were initially commenced by Lynette, Michael and Colleen (“Initial Plaintiffs”), are concerned with the estate of the Deceased and specifically with the Family Property. Following a contested hearing which took place on 19 December 2018 and 18 January 2019, by the Removal Judgment, Daisy was removed as the sole executrix of the Estate. Subsequently, the Plaintiffs were appointed as the Administrators of the Estate and they “replaced” the Initial Plaintiffs as the plaintiffs in the proceedings.

1.3  The Initial Plaintiffs had, in addition to an order to remove Daisy as the executor, also sought an order for the sale of the Family Property, which application was adjourned pending the determination on whether Daisy should be removed, with liberty to restore. Upon the appointment of the Administrators, the application for Order for Sale was restored.

1.4  In the trial which led to the Order for Sale Judgment, the disputed factual issues which required the Trial Judge were those set out at Order for Sale Judgment §§27-28, namely:

(1) Issue 1: Whether the Family Arrangement as alleged by Pak Huen existed and bound the Administrators;

(2) Issue 2: Whether Pak Huen had acquired a possessory title over any part of the Family Property;

(3) Issue 3: Whether Tsang had acquired a possessory title over any part of the Family Property; and

(4) Issue 4: Whether vacant possession of the Family Property should be given to the Administrators and whether the Family Property should be sold and on what terms.

1.5  Issue 3 was further refined and expanded by Tsang, namely:

(1) Issue 3(a): Whether Tsang has acquired a possessory title and/or beneficiary interests over any part of the Family Property; and

(2) Issue 3(b): Whether Pak Wing’s promise (“Promise”) as alleged by Tsang existed and the Promise was made on behalf of the Deceased/Estate, and if so, whether Tsang suffered detriments in reliance on the Promise.

1.6  Issue 3 (and its reformulation by Tsang) does not concern Pak Huen. The Trial Judge decided (1) Issues 1 and 2 against Pak Huen, (2) Issue 3 against Tsang and (3) in favour of the Administrators on Issue 4. Insofar as relevant to the Present Application, by the Order, it was ordered (1) Pak Huen do deliver vacant possession of 2/F East Wing and 1/F West Wing of the Family Property to the Administrators on or before 31 July 2024 and (2) the Family Property be sold with vacant possession at market price in the manner directed in the Order. The Present Application only seeks a stay of the order for possession (ie Order §1).

1.7  The Present Application was to be determined by the Trial Judge and she gave directions for the Present Application to be disposed on the papers. Subsequently, Tsang also lodged an application for stay of execution pending appeal (“D11 Application”) which is to be determined by this court. The parties to the D11 Application agreed that the D11 Application should be dealt with by the same judge who determines the Present Application. After discussion with the Trial Judge, it was decided that I should determine both applications.

1.8  The Present Application is opposed by the Administrators, Michael and Cheryl. In this application, the Administrators are represented by their trial counsel Mr Eugene Fung SC (leading Ms Bonnie YK Cheng) and Cheryl by her trial counsel Mr Anson Wong SC (leading Mr Justin Lam). Michael continues to act in person. At the Trial, Pak Huen was represented by Mr Edward Chan SC (leading Mr Abel Lam). In this application, Pak Huen is represented by Ms Ann Lee.

2.  The Order for Sale Judgment

2.1  As noted at Order for Sale Judgment §21, the parties who opposed the Order for Sale were Pak Huen and Tsang. The issues which were identified by the parties for the Trial Judge’s determination have already been set out at §§1.4 and 1.5 above.

2.2  The Trial Judge made a number of observations on the witnesses. In particular, she recounted, inter alia, that:

(1) Mr Guy Norman (“Mr Norman”) one of the Administrators did attend trial for cross examination (§29);

(2) Michael, who supported the Order for Sale, was present during the Trial but was not required for cross examination (§31);

(3) Pak Huen was scheduled to attend the Trial for cross examination, but after Mr Norman gave his evidence, Mr Chan (trial counsel for Pak Huen) informed the court, to the Trial Judge’s surprise, that Pak Huen would not be called. As a result, Cheryl, who was supposed to give evidence to address Pak Huen’s, was also not called (§§32, 38 and 41);

(4) The Trial Judge especially noted that she had previously made an order on 7 November 2022, to the effect that all deponents should attend the Trial for cross examination, failing which such deponents’ affidavit evidence would not be admitted without the leave of the court (§37); and

(5) No leave or direction was sought to admit any part of Cheryl’s or Pak Huen’s affidavit evidence, and all closing submissions were made on the basis that Pak Huen’s 3 affirmations and Cheryl’s affidavit were not admitted (§42).

2.3  At Order for Sale Judgment section F.2, the Trial Judge set out her reasons for deciding Issue 1 against Pak Huen, which was in any event not pursued by Mr Chan. No appeal arises therefrom.

2.4  Issue 2 is dealt with at Order for Sale Judgment section F.3:

(1) The Trial Judge set out the applicable legal principles on adverse possession, in particular the established principle that the burden is on a claimant to proof (1) factual possession and (2) animus possidendi. In the particular circumstances of the present case and the arguments advanced, she expressly reminded herself that to constitute possession for the purposes of limitation, the claimant must show that he took possession of the land in his own right and not as a licensee or representative of another person, even if that person is not the true owner or an agent acting on behalf of the true owner (§51);

(2) In the light of the fact that Pak Huen did not attend the Trial, the Trial Judge noted at §52 that, without Pak Huen’s affirmations being admitted, there was no evidence from him to support his case for adverse possession (§52);

(3) Although leading counsel for the Administrators (Mr Fung) and Cheryl (Mr Wong) submitted at the Trial that Issue 2 should no longer be an issue and/or Pak Huen’s case should be rejected in limine (§53), on a fair reading, I do not believe the Trial Judge had accepted their proposition. This is because Mr Chan had submitted that there was adequate evidence before the Trial Judge to make a finding on Pak Huen’s case, based on the objective and undisputed evidence, and absent any prima facie case to the contrary, there was no basis for the Trial Judge to resort to the drawing of adverse inferences (§54);

(4) The Trial Judge dealt with what she considered to be the objective and undisputed evidence at §§55 to 64, and found that there was no evidence to support Pak Huen’s case on factual possession in respect of 1/F West Wing;

(5) Conversely, in respect of 2/F East Wing, it was common ground that Madam Chau (Pak Huen’s mother) and Pak Huen were residing in that apartment until her death in 2020, and thereafter Pak Huen has continued until now to occupy the apartment with his family members;

(6) However, for the reasons set out at §§66-70, the Trial Judge concluded at §71 that Pak Huen’s occupation of the Family Property (whether 2/F East Wing and/or 1/F West Wing) was with the knowledge and permission of the executors of the Estate, prior to the appointment of the Administrators; and

(7) Still further, the Trial Judge was of the view that there was no evidence to show that Pak Huen had intended to exclude the world at large including the Estate, namely the owner of the Family Property, whether in relation to 1/F West Wing or 2/F East Wing (§72).

2.5  For the above reasons, the Trial Judge concluded that Pak Huen was not able to demonstrate that he has acquired possessory title over any part of the Family Property and dismissed his claim for adverse possession (§73). .

3.  The Notice of Appeal (“NOA”)

3.1  In Pak Huen’s NOA filed on 10 April 2024, Pak Huen only challenges the Trial Judge’s determinations on Issue 2.  He seeks (1) a declaration that he has been in adverse possession of 2/F East Wing and 1/F West Wing since 2002 and (2) an order that there be no order for sale of the Family Property.  As I understand Pak Huen’s case, the appeal against the order for sale is only consequential upon him succeeding in overturning the Trial Judge’s conclusion on the issue of adverse possession.

3.2  9 appeal grounds are advanced in the NOA. As explained by Ms Lee, Grounds 1 to 3 are directed principally at 1/F West Wing and Grounds 4 to 9 at 2/F East Wing.

3.3  Grounds 1 and 2 complain that the Trial Judge, in her analysis carried out at Order for Sale Judgement §§55-64, had taken into account inadmissible evidence.

3.4  Ground 3 is directed at §60, by which, it is said, the Trial Judge (1) was wrong to have rejected the evidence of Daisy that the keys to 1/F West Wing were with Pak Huen, (2) failed to appreciate that Pak Huen, as someone in adverse possession, could not have been expected to hand over the keys to the Administrators and the fact that the Administrators could not get the keys from Pak Huen was evidence in support of Pak Huen’s adverse possession of 1/F West Wing.

3.5  Ground 4 is directed at §65. It complains that the Trial Judge failed to appreciate adequately or at all that Madam Chau was herself an executor and that under the Will of the Deceased, Madam Chau was entitled to reside in the Family Property for life.

3.6  Grounds 5 and 6 are directed at (§70) and in particular the Trial Judge’s finding that Pak Huen’s occupation of 2/F East Wing was pursuant to a licence granted to him by Madam Chau which did not terminate upon her death automatically.

3.7  Ground 7 is directed at the Trial Judge’s reliance on the fact that the Estate had paid for the government rates, electricity and water bills of all the disputed units since at least 2000 and that the Estate had made payment of HK$200,000 in 2005 to Pak Huen for repairs of 2/F East Wing (§67). It is said that the foregoing do not ipso facto show that there was any licence granted to Pak Huen. In any event, Pak Huen’s undisputed occupation of 2/F East Wing to the exclusion of any other members of the family is strong evidence form which Pak Huen’s animus possidendi may be inferred.

3.8  Ground 8 is directed at §66, against the Trial Judge’s finding that Pak Huen must have received the keys to the gate from the then executors of the Estate, as the Trial Judge had misunderstood the Tsang’s evidence.

3.9  Ground 9 is a catchall ground and does not add to the analysis.

4.  The applicable principles

4.1  The parties agree that the applicable principles are those set out at Star Play Development Ltd v Bess Fashion Management Ltd [2007] 5 HKC 84 §§6-10. In the light of the detailed submissions made by the parties on the merits of the grounds advanced in the NOA, it is perhaps useful to reiterate the observations made in Ming Hsieh v Xu Zhe & Ors [2018] HKCA 390:

“ [8] Five broad grounds are raised in the notice of appeal: there is no evidence of actual damage caused by the injunction (grounds 1 and 2); there is no basis to hold there was loss of opportunities to sell the shares caught by the injunction (ground 3); the 2nd defendant had failed to mitigate her loss (ground 4); and the period for assessing loss is erroneous (ground 5). Ms Chan contended there are strong merits in the appeal. Mr Victor Dawes, SC argued to the contrary that the grounds of appeal do not have a reasonable prospect of success.

[9] We do not propose to set out their arguments. This is not a dry run of the appeal. It is well established that for the purpose of this application, the court only needs to form a preliminary view on the merits. It would be impractical and even undesirable for the court to go deeply into the strengths of the appeal and it should refrain from embarking upon detailed discussion and analysis of the grounds of appeal.

[10] For the grounds of appeal to be regarded as very strong such that the existence of these grounds by themselves would constitute a good reason for stay of execution, it is well established that the requisite strength must be such that the court takes the view that “something has grievously gone wrong with the process of law in the court below”, or in other words, the appellant is “almost bound to succeed” in the appeal. If all that can be demonstrated is that the appeal is arguable or even that good arguments exist, something more needs to be shown by the appellant to obtain a stay of execution.

[11] The grounds of appeal in this instance plainly do not reach that level of requisite strength. We agree with the judge this appeal is arguable. The minimum requirement for considering whether a stay should be granted is met, but additional reasons would need to be provided by the plaintiff why a stay is justified.” (emphasis added)

4.2  See also Smart Edge Limited v HG Property Investment HK Limited [2024] HKCA 744 at §§21 to 25.

5.  Analysis

(i) Merits of the appeal

5.1  In my view, Grounds 1 to 3, which are directed at the Trial Judge’s findings in respect of 1/F West Wing, do not amount to an arguable appeal.

5.2  In respect of Grounds 1 and 2, Ms Lee’s submissions boil down to a criticism that the “analysis of the objective and undisputed evidence turned out to be clouded by unadmitted and inadmissible evidence”: D3’s Reply Skeleton §7 in particular §7(2).

5.3  It is clear that the Trial Judge was acutely aware that Pak Huen’s evidence had not been admitted (Order for Sale Judgement §52). I agree with Mr Wong that Grounds 1 and 2 cannot possibly impugn the Trial Judge’s factual findings in the light of the evidence before her:

(1) Putting aside whether it is appropriate to refer to the content of the Removal Judgment (§§57 and 58), the fact remains that the occupation status of the Family Property in 2017 was reflected in Michael’s 1^st affirmation. In this regard, Ground 2.2, which contends that Michael’s evidence is inadmissible, is plainly wrong. As noted at §2.2(2) above, Michael did attend the Trial but was not required to be cross examined. In other words, Michael’s evidence was not disputed at the Trial;

(2) As set out at §§57 and 58, even disregarding Pak Huen’s evidence which led to the findings in the Removal Judgment, the undisputed evidence of Michael is that the 1/F of the Family Property was previously occupied by the Deceased and Madam Cheung and her children, and Pak Leung and his family later occupied the 1/F, and after Pak Leung’s death, Daisy continued to occupy the 1/F with 2 of her 4 children. The NOA does not assert that Michael’s evidence is not of the foregoing effect;

(3) The Trial Judge was clearly entitled to take into account the questionnaire completed by Pak Huen’s former solicitors sent to the Administrators which stated that he and his son were occupying the 2/F East Wing only (§59); and

(4) The fact that Pak Huen only first claimed that he occupied 1/F West Wing in a letter dated 12 December 2022 from his present solicitors (§61).

5.4  I agree with Mr Wong that the complaints made in Grounds 1 and 2 do not come close to showing that the Trial Judge’s finding that Pak Huen had failed to prove factual possession for the requisite period (which on the authorities is required to be proved by compelling evidence) was plainly wrong.

5.5  In these circumstances, I am unable to see how Ground 3 takes the matter further.

5.6  Conversely, in respect of the appeal relating to 2/F East Wing, although I do not regard the merits to be strong, I am unable to conclude, have conducted a preliminary review, that it is not arguable.

5.7  Very briefly:

(1) It seems to me that Ms Lee’s argument on Ground 6 (directed at §70) cannot be dismissed at this stage;

(2) At §70, the Trial Judge found that any licence granted by Madam Chau would have been granted by her in her capacity as one of the named executors of the Estate, and on behalf of the estate and that such licence would not be automatically terminated. On a fair reading of §70, it seems to me that the Trial Judge had placed reliance on the fact, following the demise of Madam Chau, the remaining executor was Pak Leung followed by Daisy. The Trial Judge then pointed out that Daisy was aware of Pak Huen’s occupation as she had had discussions with Pak Huen and that Pak Huen had indicated to her that he wanted to continue to live in the Family Property, and he was alleging the Family Arrangement at that time;

(3) The parties resisting the Present Application place reliance on §66, on the finding that the executors (except for the Administrators) had been living in the Family Property and were members of the same family. However, as pointed out by Ms Lee, it appears to be the position that, silent passive inactivity on the part of the landowner amounting merely to acquiescence is not enough to stop the limitation period from running. In order to establish a licence, there must be communication, in writing by spoken words or by overt and unequivocal conduct, that was intended to be understood and was understood as a permission to do something that would otherwise be an act of trespass: Chan Wing Tong v Kam Chung Building (Jaffe Road) (IO) [2024] 2 HKLRD 1 §§123-124;

(4) In my view, it is at least arguable that §70 has stopped short of making the necessary findings to support the finding of a licence, in that it only sets out (1) Daisy’s awareness and (2) discussions between Daisy and Pak Huen without making the necessary findings of communication by Daisy that was intended to be understood and was understood by Pak Huen as a permission; and

(5) I am also of the view that I cannot at this stage dismiss the arguability of Ms Lee’s submissions at D3’s Reply Submissions §§9(3) and (4) in respect of Ground 7, namely that in the context involving an apartment, retention of the keys for access and refusal to provide the same to other people and thereby controlling access to it, may be sufficient for satisfying both factual possession and animus possidendi.

5.8  I am therefore of the view that there is an arguable appeal in respect of 2/F East Wing.

6.  Whether appeal rendered nugatory without a stay

6.1  Pak Huen is an elderly gentleman in his 80s and there is no dispute that he has lived in 2/F East since the Deceased’s death (in 1954) and has continued to live there ever since (§44). Given the nature of the Order, it can be readily appreciated that an appeal would be rendered nugatory without a stay of execution. I do not believe it has been seriously suggested otherwise. As I understand the evidence, the intention is to sell the Family Property en bloc with vacant possession for redevelopment.

6.2  In my balancing exercise, it remains necessary for me to focus on the relative prejudice that may be caused to the appellant and to the respondent by a stay of execution. The parties resisting the Present Application point to the following matters:

(1) The beneficiaries have an interest in the due and expeditious administration of the Estate and there is grave prejudice to the beneficiaries of being deprived of their fair share in the value of the Family Property;

(2) Significant costs and expenses which the Estate has been and will be unnecessarily made to bear by reason of the delay in the sale of the Family Property caused by Pak Huen;

(3) At the time of the Order for Sale Judgment, the Trial Judge had then observed that there appeared to be a general decline in property prices in Hong Kong in recent years (§98);

(4) The Deceased died 69 years ago and Madam Chau had passed away for 21 years and the Estate has still not yet been wound up and this could not be fair to other residuary beneficiaries (§99); and

(5) As pointed out by Mr Wong, there is no avenue for Cheryl to obtain any compensation from Pak Huen.

6.3  I agree that the above factors are all valid, but at the end of the day, they are predominantly monetary considerations. In response, Pak Huen has offered to undertake (1) to prosecute his appeal expeditiously and with diligence and (2) pay to the Estate the market rent and utilities (in accordance with the utilities bills in relation to the 1/F West Wing and 2/F East Wing) for his use of 1/F West Wing and 2/F East Wing of the Family Property for the duration of the order of stay in the event that his appeal is unsuccessful, provided that if there is any disagreement on the then prevailing market rent, such market rent shall be determined on the basis of a valuation report prepared by a surveyor to be jointly appointed by Pak Huen, the Administrators and Cheryl at the costs of Pak Huen (“Undertaking”).

6.4  Whilst the Undertaking does not have the effect of compensating any loss (if any) in the delayed sale of the Family Property, as pointed out by Ms Lee, the Present Application only seeks a stay of Order §1 (delivery of vacant possession). I believe I am entitled to take into account that (1) the Trial Judge’s view on the declining property market was simply an observation as at the time of the Order for Sale Judgment and (2) the property market does not remain static. The evidence before me is that since the Order for Sale Judgment, the property market in Hong Kong has not deteriorated further and may be said to be trending mildly upwards.

6.5  It seems to me that the Undertakings should be further modified along the lines suggested by Mr Wong, in that the payments to be made thereunder by Pak Huen should be deducted and paid out by the Administrators from the distribution payable to Pak Huen from the sale of the Family Property (“Modified Undertaking”). I do not understand this is objected by Ms Lee.

7.  Conclusion

7.1  I will therefore grant a conditional stay of Order §1 upon the Modified Undertaking but only in respect of 2/F East Wing. The parties are to submit a draft order for the court’s approval.

7.2  For completeness, even had I found that there was an arguable appeal against 1/F West Wing, I would not have exercised my discretion to grant a stay, given that 1/F West Wing is only used as a storage room.

7.3  I also make a costs order nisi that (1) 70% of the costs of the Present Application be in the cause of the appeal and (2) Pak Huen is to pay to the Administrators, Cheryl and Michael 30% of the costs of the Present Application in any event, to be taxed if not agreed, with a certificate for 2 counsel.