FASTWAY (H.K.) INVESTMENT LTD v. WING BO MOTOR CO (a firm)

DCCJ 3507/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3507 OF 2008

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J U D G M E N T

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Introduction

1. In this action the plaintiff claims against the defendant for the delivery of vacant possession of land situated on the Remaining Portion of Lot No 197, the Remaining Portion of Lot No 198, the Remaining Portion of Lot No 210, Section B of Lot No 211 and Section Lot No 213AB in Demarcation District 12 and known as G/F, No 45 Ha Hau Village, Ting Kok Road (with adjourning land), Tai Po, New Territories, Hong Kong (“the Premises”).

2. The plaintiff is a limited company which acquired the Premises by virtue of an Assignment dated 30 March 2007 and executed by the 9 co-owners of the Premises (“the Vendors”).  One of the directors of the plaintiff is Lee Moon, now in his late seventies, who also gave evidence at the trial.  The purpose of the acquisition was for redevelopment as residential units.

3. The coverage of the Premises can be seen on a Lot Index Plan of 1 February 2008.  There is no dispute that the area coloured green represents the extent of the Premises.  From that document it can be seen that separated from, and to the west of the main portion of the land sold is a smaller parcel of land.  This is part of Lot No 197 RP, which I shall call “the western part of Lot 197 RP”.  The rest of Lot 197 RP forms part of the main portion of the land sold.

4. The Premises were sold subject, on the plaintiff’s case, to an existing tenancy which was an oral monthly tenancy in favour of 永寶車行 at a monthly rental of $9,000 payable on the 1^st day of each month commencing on 1 April 2002.

5. According to the defendant’s business registration in 2002, the defendant was a sole proprietorship carrying on a motor-car repair and service business, in the name of one Lee Kwok Wai. Despite the business registration, it was his older brother Lee Chi Man (“Lee”) who has been running the garage business at the Premises or parts thereof since the early 1980s.

6. The Vendors were all related to one another, being members of an extended family by the surname Lee.  I shall refer to that extended family as “the Lee family”.  Although both Lee Moon of the plaintiff and Lee Chi Man of the defendant also bear the same surname, they are not members of or, as far as we know, related to, the Lee family.  One of the Vendors was Lee Sun.  He is very much part of the narrative in the events leading to the present dispute, having had direct dealings with both Lee Moon and Lee, and in the sale and purchase of the Premises.  At one stage a statement was prepared by the plaintiff’s solicitors for him to sign, which he never did.  Subsequently, he made an affirmation and a witness statement for the defendant.  However, at the trial he was not called by the defendant to give evidence.  Another member of the Lee family whom I shall introduce at this stage was Lee Fat.  He was Lee Sun’s uncle, and one of co-owners of the Premises until his death sometime in the early 1990s.  Another co-owner was Lee Shui Wah.  He took part in certain discussions with Lee Moon about the sale of the Premises, and at one stage along with Lee Sun asked Lee to pay rent for the land that Lee was occupying, which led to an oral tenancy in 2002.

7. By a notice to quit dated 27 December 2007 served on the defendant, the plaintiff purported to terminate the tenancy and demanded the defendant to quit the Premises by 31 January 2008. The defendant has refused to do so.

Re-Amended Defence and Counterclaim

8. At the trial, the defendant’s case, as reflected in the Re-Amended Defence and Counterclaim, was in summary that the plaintiff was not entitled to have vacant possession of certain parts of the Premises on the ground of adverse possession against the plaintiff and its predecessors-in-title.  This latest version of the defence case needs further amplification.

9. According to the defence case, erected on the Premises was a house which was partitioned into 4 separate or independent units, known as Houses Nos 45, 46, 47 and 48, Ha Hau Village, Ting Kok Road respectively.  The remainder of the Premises was land either adjacent to or in the vicinity of these 4 Houses.

10. The defendant alleges that Lee, trading as Wing Bo Motor Co, has been in occupation of the Premises as if the same were his own land and without the consent of the plaintiff’s predecessors-in-title since around 1980.  However, in 1984, Lee entered into a written tenancy agreement with Lee Fat, in respect of House 45 for a term of 3 years from 15 October 1984 at a monthly rental of $1,300.  Lee paid the rent to Lee Fat or his wife from 1984 to around 1992, when he stopped paying rent, but he continued to occupy House 45.  By about 1995, Lee had been in occupation of an area marked A, delineated in blue boundaries (“Area A”) on the plan attached to the Re-Amended Defence and Counterclaim, in addition to Houses 45 to 48, and the land directly in front of Houses 45 and 46, without the consent of the owners.

11. However, towards the end of 2001, Lee Sun and Lee Shui Wah (being 2 of the co-owners) approached Lee purportedly on behalf of all the co-owners and requested him to pay rent for the use of the Premises.  In about February 2002, these two gentlemen and Lee came to an oral tenancy agreement in respect of House 45 inclusive of farmland (and the land in front) and House 46 (and the land in front), at a monthly rental of $9,000 for House 45 and the farmland, and $2,000 for House 46, for a fixed term of 10 years.

12. The farmland, so the defendant’s case goes, referred to a small strip of land adjacent to and to the west of House 45.  The agreement included a term that if the two gentlemen were to terminate the tenancy before the expiry of its term, Lee shall be paid a sum of $1,000,000 as compensation.  It is an essential part of the defence case that the 2002 tenancy did not include House 47, House 48 or Area A, in respect of which he refused to pay rent.

13. In about May 2007 Lee was informed by Lee Sun and/or Lee Shui Wah that the Premises would be sold to the plaintiff subject to the tenancy, that the plaintiff had full knowledge of the tenancy, that rent should in future be paid to the plaintiff and the rent would be reduced to $9,000 a month, and that the plaintiff had agreed to pay the compensation sum of $1,000,000 should the plaintiff wished to terminate the tenancy prior to February 2012.

Counterclaim

14. By the time of this trial, even on the defence case of a 10-year lease, the tenancy of Houses 45 and 46 had expired, and possession would have to be delivered to the plaintiff.  Therefore what the defendant is now laying claim to as an adverse possessor comprises Houses 47 and 48 and Area A, in respect of which the defendant has sought in the counterclaim a declaration for a possessory title.

15. From the pleadings and after clarification and confirmation by Mr Nelson Miu, counsel for the defendant, the defendant’s case and the basis of the counterclaim is that since about 1995 until April 2008 when proceedings were taken by the plaintiff against the defendant, the defendant had been in adverse possession of Houses 47 and 48 and Area A for a period of not less than 12 years and therefore the plaintiff’s claim has been barred under ss 7 & 17 of the Limitation Ordinance (Cap 347).

16. The plan annexed to the Re-Amended Defence and Counterclaim  (Plan A) on which Area A was delineated in blue is in fact a copy of an aerial photo of the site in question.  Area A was not properly demarcated by way of land survey co-ordinates, and there was otherwise no other evidence of such demarcation.  At the beginning of the trial, I raised the potential problem with Mr Miu that in the event that judgment was to be given in favour of the defendant, any declaratory order could not be properly made or enforced without precise professional delineation of the area in question.  As it happened, I was informed that the necessary information was already in the possession of a surveyor instructed by the defendant.  This led to an application by Mr Miu for adducing a land survey plan for that purpose, and despite objections by Miss Gekko Lan, counsel for the plaintiff, I allowed the application but reserved costs thereof.

17. Included in the counterclaim is a claim for damages for breach of the 2002 tenancy by the plaintiff in disturbing the defendant’s quiet enjoyment under the tenancy by granting a right of way to various parties over part of the Premises, being part of Lot 197 RP, under 2 Deeds of Grant of Right of Way both dated 29 May 2008.  By these 2 Deeds, owners of certain lots of land in the neighbourhood granted rights of way to other land owners in the vicinity over parts of their respective land for the purpose of access from the main road to the grantees’ land.  The area affected by this right of way in both Deeds is the same and falls within the western part of Lot 197 RP only.  This part of the counterclaim was never seriously pursued on behalf of the defendant.  However, I shall refer to this dispute later in this judgment in the context of the defendant’s evidence.

Main Issue

18. The main issue in this case, as both counsel agree, is whether the 2002 tenancy covered only House 45 and the small piece of farmland adjacent thereto, House 46, and the land in front of Houses 45 and 46, as alleged by the defendant, or whether it covered all the land being used by the defendant for the garage business, which would have included Houses 47 and 48 and Area A.

History of the Proceedings

19. Before I deal with the evidence, it may be convenient to refer to the history of these proceedings and the pleadings filed on behalf of the defendant, which formed an important part of Miss Lan’s cross-examination of Lee.

20. The proceedings started life as a Notice of Application (filed on 16 April 2008) in the Lands Tribunal by the plaintiff as landlord for possession of the Premises, after the notice to quit.  By a Notice of Opposition dated 22 April 2008 filed by Christopher KY Wong (“CKYW”), the then solicitors for the defendant, the defendant alleged that in February 2002 there was an oral tenancy between “the then Landlord” and the defendant in respect of the Premises, for a fixed term of 10 years, at a rent of $11,000 per month, and if the Landlord was to terminate the tenancy prior to February 2012, the Landlord would have to pay the defendant a sum of $1,000,000.  In reliance on the tenancy, the defendant had caused substantial works to be done to the Premises and for building up his garage business, which it would not have spent if not for the 10-year tenancy.  In May 2007, the defendant was informed by the then Landlord that the Premises would be sold to the plaintiff, that the plaintiff had full knowledge of the tenancy, the rent would be reduced to $9,000 per month, and that the plaintiff expressly agreed to abide by the $1,000,000 compensation term for early termination.

21. By an Amended Notice of Opposition and Counterclaim dated 26 June 2008, which was signed by counsel, the defendant adopted the same case as before, but adding a counterclaim for $1,000,000 in the event the defendant was required to vacate the Premises.

22. On 25 July 2008, the case was ordered to be transferred to the District Court.  The Statement of Claim was filed on 3 September 2008.

23. A Defence and Counterclaim was then filed on behalf of the defendant, again signed by counsel.  The defence case remained the same as in the Lands Tribunal.  The counterclaim now included a claim for damages for breach of the tenancy by the plaintiff by granting the rights of way referred to above.  At this stage, the defendant’s solicitors remained CKYW.

24. By 31 March 2011, the parties had exchanged or filed witness statements, one from Lee Moon and one from Lee.  At this stage, the defendant was represented by Kent Tam & Co. Lee Sun made an affirmation dated 1 March 2011 for the defendant, but it was not filed until 28 July 2011.

25. By an Amended Defence and Counterclaim dated 16 June 2011, signed by Kent Tam & Co, important changes to the defence case were made, as can be seen in paragraphs 5 and 6.  For the first time on the pleadings, it was alleged that the defendant had been in adverse possession of the Premises since around 1980, the only interruptions being the 1984 written tenancy “with the Landlord” in respect of House 45 (under which the defendant paid rent from 1984 to about 1992), and the 2002 tenancy “between the Landlord and the Defendant” which the defendant now alleged was only in respect of House 45 inclusive of farmland (for a monthly rent of $9,000) and House 46 (for a monthly rent of $2,000).

26. The trial of the action was originally scheduled to start on 5 December 2011.  About 3 weeks before the trial, the defendant applied for legal aid which was granted.  The defendant was now represented by Tang and So on the instructions of Legal Aid.  Shortly before the trial, further statements were filed, from Lee, Lee Sun and one Yim Chi Keung.  On the first day of the trial before HH Judge Chow, Mr Miu applied for further amendments to the defendant’s pleaded case, which was granted, and the trial was adjourned.  After that, a third statement of Lee was filed.

27. The Re-Amended Defence and Counterclaim further refined certain aspects of the defendant’s case.  The important changes appear in paragraphs 5 to 6A of the Re-Amended pleading.  The 1984 tenancy was now alleged to have been made with Lee Fat.  There was now a specific averment that by 1995, Lee had occupied Area A in front of Houses 47 and 48.  In respect of the 2002 tenancy, it was now alleged that Lee Sun and Lee Shui Wah purportedly on behalf of all the owners requested Lee to pay rent for the entirety of the Premises and that the tenancy which then came about was made by Lee with Lee Sun and Lee Shui Wah.  Most importantly, in the new paragraph 6A, it was now alleged specifically that the 2002 tenancy did not include Houses 47 and 48 and Area A, in respect of which Lee refused Lee Sun and Lee Shui Wah’s request to pay rent.  The amendments relating to the 2002 tenancy are particularly significant.  It was not a matter of chance or oversight that the 2002 tenancy did not include Houses 47 and 48 and other land.  Nor was it for want of trying on the part of the owners.  It was because Lee specifically refused.

EVIDENCE

The Plaintiff’s Evidence

28. Apart from relying on the documentary evidence adduced by the parties in this case, the plaintiff called 2 witnesses, Mr Lee Moon who is a director of the plaintiff, and Miss Winnie Wong, a conveyancing clerk at Rene Hout & Co, solicitors for the Vendors in the Assignment, who personally handled the conveyancing transaction.  The defendant’s only witness was Lee.  Neither Lee Sun nor Yim Chi Keung was called.

Lee Moon

29. Lee Moon is a director of the plaintiff, aged 78 when he gave evidence.  He made a witness statement dated 31 March 2011, which he adopted as his evidence.  He explained that he had known some of the Lee family members for a few decades.  Sometime in 2006, he was minded to purchase the Premises for residential redevelopment.  In his discussion with Lee Shui Wah, one of the co-owners, he was informed by the latter that the land was being let to the defendant under an oral monthly tenancy commencing on 1 April 2002, for $9,000 per month, and that he could purchase the Premises subject to the tenancy, which could be terminated on one month’s notice.  The purchase price was in the end agreed to be $5,800,000, and the sale was completed on 30 March 2007.

30. By letter dated 10 April 2007 from the plaintiff’s solicitors Li Wong & Lam (“LWL”), the plaintiff gave notice to the defendant of the change of ownership and requested the defendant to pay the monthly rent of $9,000 to the plaintiff.  Shortly after that, Lee Sun told Lee Moon that Lee had learnt that the plaintiff was desirous of redeveloping the Premises, and had asked Lee Sun to tell Lee Moon that Lee wanted $1,000,000 as removal compensation.  Lee Moon considered the demand too high.  In around June or July 2007, Lee Moon went to the garage to speak to Lee.  Lee told him that Lee had received a lot of orders and it would take him 2 to 3 years to move out, and that if the plaintiff wanted him to leave immediately, he would require $1,000,000 as compensation.  Lee Moon counter-offered $200,000 to $300,000, which Lee refused.

31. By letter dated 2 October 2007, LWL demanded arrears of rent from the defendant for the 6-month period from 1 April to 1 October 2007, in the sum of $63,000.  The demand was made for rent in respect of “G/F, No 45, Ha Hau Village, Ting Kok Road (with adjoining land), Tai Po, NT”.  He explained that he had been told by the Lee family members that that was the simple or shorthand description used by them for the land let to the defendant.  By letter dated 8 October 2007, CKYW replied on behalf of the defendant that the defendant had not been aware of the change of ownership and had been paying rent to the previous owners.  The defendant was “surprised” to receive the letter of demand and asked LWL to provide evidence to prove the change of ownership.  On 16 October 2007, LWL replied that the previous owners had indeed received 2 cheques for rent payment which they had returned, and had not received any further cheques.  LWL also informed CKYW that they had sent an earlier letter of 10 April 2007 informing the defendant of the change of ownership, attaching a copy of the said letter.  On 18 October 2007, CKYW enclosed with their letter a cheque in the sum of $63,000 in settlement of “all outstanding rent and costs”.

32. On 27 December 2007, LWL served a notice to quit by 31 January 2008 on the defendant, using the same description of the Premises in the caption as in previous correspondence.  On the same day, CKYW replied to the effect that the defendant would only quit the Premises upon receiving “removal compensation of $1,000,000 as stipulated in the tenancy agreement”.

33. Lee Moon produced Exhibit P1 which was a fax copy of a copy of a rental receipt dated 1 March 2006, with additional handwriting on it.  The property was referred to as “G/F, No 45 Ha Hau Village, Ting Kok Road, and farmland”.  He received the copy of the rental receipt from Lee Sun sometime in late 2006 or early 2007.  He then wrote down what Lee Sun told him, which was that the tenancy was for a term of 3 years from 1 March 2002, with a 10% increase in rent after the expiry of the term, but the tenant did not keep the promise about the increase in rent.  He also wrote that at the time the two parties had a draft tenancy agreement at the solicitors’ firm Raymond Hung & Co but later the tenant did not keep the promise to sign the agreement.

34. P1 bore a fax mark in the name of Sunnyman Ltd, and a date of 29 January 2007.  He explained that Sunnyman Ltd was his and his children’s company, and that at some stage he faxed the document with his handwriting to someone else in the company.  This faxed copy, P1, was the copy he managed to retrieve.

35. Lee Moon also produced Exhibit P2 which was a book of rental receipt stubs, which covered the period 1 March 2002 to 1 July 2006, given to him by Lee Sun for safekeeping and for his record.

36. Under cross-examination, he explained that he had a meeting with Lee Sun and Lee Shui Wah at a restaurant in late 2006 or early 2007.  The meeting lasted an hour or so during which they agreed the purchase price for the Premises at $5,800,000, and the completion date.  He added in re-examination that there had been prior negotiations prior to the restaurant meeting.

37. He confirmed that he received the copy of the rental receipt dated 1 March 2006 (the faxed copy of which became Exhibit P1) from Lee Sun personally, and wrote down what he was told by Lee Sun about the tenancy.  He did not complain to Lee Sun that the receipt was “outdated”, as put to him by Mr Miu, being about 9 months old when he received it.  Nor did he complain that the receipt referred only to “House 45 and farmland”, or that it did not appear to cover all 4 houses.  He said that he was told by Lee Sun that the houses were collectively referred to by one number.  He did not go to see Lee Chi Man to clarify the terms of the tenancy before the purchase of the Premises.

38. Lee Moon’s attention was drawn to Exhibit P2, the book of rental receipt stubs.  When asked how P2 came to be produced, he answered that he was reminded about P2 when the defendant’s solicitors produced some rental receipts for use in the case.  He confirmed in re-examination that it was shortly before the adjourned trial that the defendant produced the rental receipts.  He said that he received P2 from Lee Sun after the sale and purchase of the Premises, and did not really look through P2 after he received it.

39. He was asked about a particular rental receipt stub dated 1 June 2006, which described the property of the tenancy as “Nos43, 44, 45, 46, Ha Hau Village, Ting Kok Road, and farmland”.  He confirmed that all the other receipt stubs referred only to House 45, he said he had no idea why there was a difference in description on this particular stub, and had no personal knowledge of who wrote these stubs.

Winnie Wong

40. Miss Wong Yee Man, Winnie was a conveyancing clerk at Rene Hout & Co, who handled the conveyancing transaction on behalf of the Vendors.  She was subpoenaed by the plaintiff to give evidence and no witness statement had been filed with the court prior to her evidence.  She explained that she was first contacted by Lee Sun who gave her instructions to act for the Vendors in the transaction.  Her firm received a letter of offer, subject to contract, dated 1 February 2007 from LWL.  The letter set out the main proposed terms of agreement between the parties, including the term that the property was to be sold subject to the existing tenancy at a monthly rental of $9,000.  She then took instructions from Lee Sun, including checking with him the parcels of land which were to be included in the sale, with the assistance of a surveyor.  Then followed drafts prepared by her of the Sale and Purchase Agreement, deposit and requisitions.

41. Miss Wong explained that some of the 9 co-owners of the Premises resided overseas and in order to accommodate them, the arrangement was for the Vendors including the overseas co-owners to execute both the Sale and Purchase Agreement and the Assignment in one go, and the 10% of the purchase price was to be treated as earnest money while LWL could conduct their investigation of title.  The transaction was completed on 30 March 2007.  It was in those circumstances that the Sale and Purchase Agreement and Assignment bore the same date.

42. She was responsible for taking instructions from Lee Sun in respect of the transaction, and for explaining the contents of the Sale and Purchase Agreement and the Assignment to all the co-owners, and no one objected to the particulars of the tenancy.

43. When asked in cross-examination why the particulars of tenancy in the Sale and Purchase Agreement made no mention of the area covered by the tenancy, she answered that clause 4 of the agreement provided that the property was sold subject to the tenancy, which meant that all the land the subject-matter of the sale was covered by the tenancy, those being Lee Sun’s instructions.  When asked if she independently checked the correctness of that information, she confirmed that she did not.

The Defendant’s Evidence

Lee Chi Man

44. Lee made 3 witness statements, the accuracy of which he confirmed.  The first one dated 30 March 2011 was largely in a form similar to what was to later become the Amended Defence and Counterclaim filed in June 2011.  According to his second witness statement dated 29 November 2011, he started his unauthorised occupation in the Premises in 1980 running a garage business.  He and his wife started their unauthorised occupation of Houses 46, 47 and 48 and the land in front of and adjacent to those houses for storing tools and as a workshop for the garage. He had also cleared some grassland and trees in order make room for the workshop.  As the business grew, he also expanded the area of his unauthorised occupation.  A government aerial photo for 1995 showed, according to him, that by 1995 the area had covered Area A as marked on the photo.  From the photo, it could be seen that he had erected canopies as cover for his workshop.  The areas marked with green boundaries constitute the area of the Premises.  Up to 1995, no one from the Lee family had given him any permission to use the land or any interference. Nor did he make any payment to anyone for the use of the land.  He treated the land as his own property.  The only exception was in relation to House 45, for which he did pay rent to Lee Fat, and to his wife after his death, from 1984 to 1992 when they stopped coming to collect the rent.

45. He had also been in adverse possession of House 46 which he had been using for storing his tools and equipment.  But in 2002, he agreed to pay Lee Sun $2,000 month as rent for the storing of tools.

46. In 1997, he and his wife began their divorce proceedings, and the business registration which until then was in his wife’s name ceased, but he continued the operation of the garage business as before.

47. In about 2002, after a number of negotiations with Lee Sun, they finally came to an oral agreement for a tenancy of Houses 45 and 46, and the piece of undeveloped farmland adjacent to House 45.  As for Houses 47 and 48 and the surrounding land, despite “their” demand for rent, he did not agree to paying rent, and thereafter “they” did not pursue their demand.  The farmland in question was the area marked “Little Farmland” on the aerial photo for 2002, covered with grass and trees.  Afterwards, he had the area cleared for use in the business.

48. In his third witness statement dated 21 December 2011, he produced further aerial photos from 1980 to 2009. He referred to an aerial photo for 4 November 1980.  He said that at that time he and Lee Sun began running “Sunny Garage” outside House 46, but not long after that, Lee Sun stopped operating the garage due to lower back pain.  He then started moving the operation to Houses 47 and 48, the land in front of and adjacent to those units.  Area A as marked on the photo was the area in the Premises which his garage gradually covered in later years.

49. An aerial photo for 4 August 1981 showed an area with orange boundaries which Lee said was the area around Houses 47 and 48 which his garage business occupied.  He had also started to occupy Area A for placing garage tools or equipment and for vehicular access.

50. In 1982, he started occupying Houses 45 and 46 and the areas in front of those units (marked “Frontage” on the aerial photo of 1982).  He had also erected a canopy for the area adjacent to House 48.

51. By 1983, Lee had extended and repaved the area in front of House 47 and made an extended driveway, so marked on the aerial photo for 1983.  He had also cleared some trees directly in front of the canopy next to House 48 to make more room.  It is to be noted that the area allegedly occupied by Lee had extended to land outside the boundaries of the Premises.

52. By 1984, he had further expanded the extended driveway and the extended open area on which he had constructed another canopy.

53. On 14 October 1984, Lee Fat started letting House 45 to Lee.  When asked by his counsel, he added in his evidence that Lee Fat was the owner of the land.

54. The gradual expansion continued. He went on to expand the “Working Area” until 1991 and continued thereafter to occupy the land surrounding the houses as shown on the aerial photos.

55. He also produced copies of intermittent rental receipts in respect of the 1984 tenancy, ranging in time from 15 January 1987 to 15 July 1992.  The property was described as “No 45 Village House, Ha Hau Village”.  In respect of the 2002 tenancy, he produced 3 rental receipts: two dated 1 April 2002 and 1 June 2002, each for the amount of $9,000, in which the property was described as “G/F, No 45 Ha Hau Village, Ting Kok Road”, and one dated 1 October 2002, for the amount of $16,000 for the months of March to October 2002, in which the property was described as “G/F, No 46 Ha Hau Village, Ting Kok Road”.

56. Under cross-examination, he denied having received the LWL letter dated 10 April 2007 informing the defendant of the change of ownership, and also denied having received the LWL letter dated 2 October 2007 sent to the defendant demanding the payment of outstanding rent from April to October 2007, even though the defendant’s then solicitors CKYW sent a reply dated 8 October 2007.  His answer was that it was a member of staff or clerk in CKYW by the nickname “KK” who called him up one day and told him about the plaintiff’s demand for rent.  He maintained that no one contacted KK and it was KK who contacted him first, but had no explanation how KK got hold of the letter of demand which was sent to the defendant.

57. He confirmed, however, that it was his instructions to KK that he did not know about the change of ownership of the Premises, and hence the 2^nd paragraph in the CKYW letter dated 8 October 2007.  This contradicted his own evidence in his witness statements and his pleaded case that sometime in May he was informed by Lee Sun or Lee Shui Wah about the sale of the Premises, the reduction of rent to $9,000 only, and the need to pay rent to the new owner.

58. When asked why he stopped paying rent after May 2007, after the last 2 cheques he sent to the previous owners were returned to him, he answered that Lee Sun told him that House 45 and the adjoining piece of farmland had been sold to the plaintiff, and he understood that Houses 46 to 48 and the remaining land had not been sold.

59. He claimed that when he agreed to pay the outstanding rent to the plaintiff, he was paying rent for only House 45, and that Lee Sun had told him that the $2,000 rent for House 46 need no longer be paid.  He understood that House 46 belonged to Lee Sun and maintained that Lee Sun told him that only House 45 was sold.  This again contradicted his own evidence in the witness statements and pleaded case that he was told by the previous owners that the Premises had been sold.  When pressed by Miss Lan as to why he no longer needed to pay $2,000 to Lee Sun or anybody if it remained unsold, he changed his evidence and said that he was told that House 46 had also been sold, but there was no need to pay $2,000, only $9,000, to the plaintiff. He was then asked why on his case he need not pay the $2,000 rent for House 46 to the new owner, he said that the truth was he had been in unauthorised occupation of House 46 before the 2002 tenancy but it was only after Lee Sun’s persistent demands and pestering that he agreed to pay rent for House 46, and that in May 2007 when Lee Sun told him he need no longer pay the $2,000, he did not ask why.  He disagreed with the suggestion that the $9,000 was for all of the land owned by the Vendors that he had been occupying and with the suggestion that the $2,000 was money he paid to Lee Sun privately.

60. He agreed that Lee Shui Wah came with Lee Sun when they went to Lee to ask for rent, and they asked for rent not only for Houses 45 and 46, but also for Houses 47, and 48 and the land.  He agreed that his case was that the reason he stood firm and refused to pay rent for Houses 47 and 48 was that he thought that he had acquired some sort of interest as a squatter at that time.

61. When asked about the notice to quit, he said that he understood that he was being required by the plaintiff to vacate House 45, the land in front and the little farmland only, and he did tell KK about this.

62. He was then asked about the Notice of Application in the Lands Tribunal which he agreed referred to all 5 lots in the Premises, but he maintained that he had not met with anyone in the CKYW for the purpose of discussing how to prepare the Notice of Opposition which admitted that the defendant was a tenant of the Premises, but he could not recall how the Notice of Opposition was prepared.  He maintained that he had told KK that he was a tenant of House 45 but not of all the other land, and the Notice of Opposition was filed without a meeting with anyone from CKYW and without consulting him, and the document was never explained to him.  However, he confirmed that paragraphs 3 and 4 of the Notice of Opposition, relating to the substantial works he had caused to be done in relation to the garage in reliance on the tenancy and the amount of $800,000 spent thereon, were in accordance with his instructions.  But the solicitors got it wrong in saying that the 10-year fixed tenancy covered all 5 lots.

63. In relation to the Amended Notice of Opposition, he remembered that KK or someone from CKYW had mentioned to him that he was required to vacate all 5 lots, and that at one stage KK did raise the issue as to why the Notice of Application referred to all 5 lots and not just House 45 before meeting counsel, and Lee did take the chance to clarify it with counsel, and told counsel everything including the fact that the tenancy covered House 45 only.  However, the Amended Notice of Opposition, which continued to admit that the defendant was a tenant of all 5 lots and made no distinction between the houses, was again on Lee’s evidence filed without his confirmation.

64. When asked about the letters sent by CKYW on behalf of the defendant complaining about the grant of a right of way over the western part of Lot 197 RP, he explained that he had long been using that part of the land as well since 1996 for parking vehicles.  It was on a site inspection with KK that he noticed that the land had been fenced off or walled off.  He agreed that he told KK that he had the right to use it, but not as a tenant.  When it was put to him that it was the first time that this alleged occupation of the western part of Lot 197 RP was ever mentioned, he agreed that he had not told his current solicitors about it, but he did tell CKYW.

65. The Amended Defence and Counterclaim, where the claim of adverse possession first appeared, was filed by a new firm Kent Tam & Co on behalf of the defendant, although it was pointed out to Lee by Miss Lan that Kent Tam was a consultant at the previous firm CKYW.  Lee denied the suggestion that it was the same legal team and said it was David Ng, a clerk at Kent Tam & Co, who took instructions from him, but he did agree that David Ng was also at CKYW, the previous firm.  Lee explained that the Amended Defence and Counterclaim was filed in June 2011 on the advice of a new counsel, even though it was not signed by counsel.

66. When asked why he was claiming a possessory title to the whole of the Premises, he gave a similar answer as before, that the documents were hardly explained to him, but he maintained that his instructions to David Ng was to make a claim in respect of Houses 47 and 48, Area A and the orange area on what was to become Plan A.

67. Lee said that he would not use the old legal teams any more because they had not put his case properly.  But when pointed out to him that Kent Tam & Co was still acting for him up to about the end of February 2012 in another action DCCJ 2979/2010 in which he was making a claim based on adverse possession against another owner, by which time he must have realised that the previous legal teams had not put his case correctly, he denied the suggestion that the reason he stopped using Kent Tam & Co was not because of his alleged complaints against Kent Tam & Co, but because he ran out of money.

68. In relation to Lee Sun, Lee said that in 1982 Lee Sun was operating a garage, and he was working as a welder in Lee Sun’s garage.  Lee said under cross-examination that it was in 1982 that Lee Sun stopped operating the garage because of back pain.  Lee then started running his own garage from 1982 or 1983.  He was also adamant that the 1984 tenancy only covered House 45.

69. He was asked about the business registration certificate dated 1 May 2002, where the place of business was described as Houses 43 – 47.  He agreed that he did not run his business from House 43, and explained that in villages and rural areas, building numbers were referred to in very general or loose terms in relation to letter boxes, for example, building No 1-5, written together collectively.

70. In relation to the rental receipts, he explained that for the $2,000 rent, sometimes he got a receipt, and sometimes not, but the $9,000 rent always came with a receipt.

71. On why the defendant did not call Lee Sun, Lee confirmed that Lee contacted Lee Sun about a month before the trial, and that Lee Sun was willing to give evidence, but it was upon advice from his legal team that they decided not to call Lee Sun.

Analysis

72. Even on its own case, the defendant had acknowledged the Vendors’ title to Houses 45 and 46, the land directly in front of those units, and the “little farmland” under the 2002 tenancy.  The tenancy having expired, the defendant must deliver vacant possession of that area to the plaintiff.  Given also that the claim based on adverse possession is limited to Houses 47 and 48 and Area A, it must follow that the defendant must deliver vacant possession of any land within the Premises, subject to the issue of adverse possession.

73. Both counsel agree that the main question for the court’s decision is what the 2002 tenancy covered geographically. While that is the main issue, it is still incumbent upon me to be satisfied that the defendant has been in adverse possession of the relevant area, an allegation which the plaintiff has not accepted.

Adverse Possession

74. To establish adverse possession, a party has to prove, not only that he has been in possession of the land under dispute for the necessary period, but also that such possession carried with it the necessary animus possidendi, over the same period: see Wong Tak Yue v Kung Kwok Wai (No 2) (1997-98) 1 HKCFAR 55.

75. The burden is on the party alleging adverse possession to prove these elements, and the evidence he has to adduce must be compelling evidence: see Wu Yee Pak v Un Fong Leung [2005] 2 HKLRD 169, a principle which is not disputed by Mr Miu.

Possession

76. At the trial, the plaintiff had prepared a separate bundle of the relevant aerial photos in a larger size than the defendant’s copies, and I have looked at both sets of photos.  From the aerial photos, one can definitely see an expansion of Lee’s garage from time to time, but while these photos are helpful to some extent, the view is an aerial one taken from some height, and the state of occupation, if any, on the ground may be blocked by the canopy of trees.  This problem was highlighted in relation to Lee’s evidence that he had been using Area A.  When it was put to him by Miss Lan that substantial parts of Area A were covered by trees, Lee said that the garage business activity could not be viewed from the photos. Another problem is that certain areas which appear in earlier photos to have been cleared of vegetation have become in later photos obscured by vegetation, so that it cannot be determined from the photos whether the areas have been abandoned or simply obscured from view by overhanging vegetation.

77. It appears from the July 1995 and September 1996 aerial photos that by around 1995 and 1996, while certainly the areas in front of the houses had been cleared with evidence of garage activities such as the parking of vehicles and man-made constructions, it is not clear from those photos themselves that the area within Area A to the east of House 48, dense with vegetation from the aerial view, was being occupied by the garage.  Naturally there remains Lee’s evidence that he had occupied the whole of Area A by 1995 which I would have to evaluate.  However, there is little doubt that Lee had been occupying land that he did not own, within the Premises.

The 1984 Tenancy

78. Whether it was in 1980 (according to Lee’s witness statements) or 1982/1983 (on Lee’s cross-examination) that Lee started his unauthorised occupation of land within the Premises, it was after Lee Sun gave up his garage business, and Lee started his own.

79. The next event was the 1984 tenancy.  Lee maintained that it was only in relation to House 45 only.  In re-examination, Mr Miu tried to elicit from Lee whether it was Lee Fat who first approached him to talk about the tenancy or whether it was the other way round.  He then answered that he was about to get married, and Lee Sun introduced Lee Fat, Lee Sun’s uncle, to Lee because Lee Fat had House 45 to let for Lee and his wife to live in.  This was at variance with the evidence in his third witness statement that he began his unauthorised occupation of House 45 in 1982, but for present purposes this variance is not important.  Nor is it important who initiated the discussion about the tenancy.  The important point is that by 1984, on Lee’s evidence, he had been in unauthorised occupation, ie without a tenancy or licence or other permission from the Lee family, of Houses 46, 47 and 48 and some of the surrounding land.  He insisted that the 1984 tenancy did not cover any of the land within the Premises except House 45. Lee’s occupation by then of land within the Premises could not have escaped anyone, including Lee Sun and Lee Fat.  Lee’s was a recently established garage business but one which had been growing and taking up more land.  This would mean, on Lee’s case, that even though Lee Sun and Lee Fat must have known about the occupation of their houses and land, they were quite prepared to offer him further accommodation by way of House 45 and asking for rent for it, but were quite content to leave the rest of the houses and land in a state of unpaid, unauthorised occupation by Lee, without laying some form of claim thereto, either by asking for rent for, or at least giving their express permission for Lee to use, what was their own land.  Lee Fat and Lee Sun simply made no comment on Lee’s occupation of their land.

80. Lee tried to explain this by saying that he believed that House 45 belonged to Lee Fat, and House 46 to Lee Sun, and that Houses 47 and 48 did not belong to anyone.  The implication is that Lee Fat could only have been interested in House 45 and not the other houses. Mr Miu in his final speech developed a submission in a similar vein, based largely on some land searches which show the history of title among the Lee family members, that there must have been some form of internal arrangement or division among the co-owners, that Lee Fat and his descendants were entitled to use House 45 and any profits or rents from it, and Lee Sun (or his father or whoever it was from whom he in the end inherited his interest in the Premises) was entitled to use House 46, so that Lee Fat would not have been in a position to grant a tenancy in respect of the other houses.

81. This so-called internal arrangement, the exact nature and legal effect of which was never specified, was highly speculative and nebulous, for which there was little if any evidence. As Miss Lan rightly pointed out, it was never raised in any of the defendant’s pleadings and so was never properly dealt with in evidence.  It is simply not open to the defendant to rely on such a case for the first time in final submissions.

82. Even if there had been such an internal arrangement, Lee Fat would have remained a co-owner of the land other than the 4 units, which he must have appreciated was being occupied by Lee. The question remains why he never bothered to ask for rent for the remaining land of which he was a co-owner, or say anything about it.  By the same token, House 46 belonged to Lee Sun or his father, accordingly to this theory, in which case it is still hard to understand why Lee Sun would get Lee Fat and Lee together so they could discuss the possibility of a tenancy for House 45, without asking Lee for rent for the use of House 46 and the land being occupied by Lee.  The same considerations apply to Lee’s evidence and explanation that House 45 belonged to Lee Fat, and House 46 belonged to Lee Sun.

83. Under cross-examination, Lee was never able to give a credible or plausible explanation why Lee Fat never mentioned anything about the other houses and land which Lee was occupying.

The 2002 Tenancy

84. Lee stopped paying rent from about 1992 onwards, after Lee Fat’s wife stopped going to collect rent from him. Then around the end of 2001 or beginning of 2002, Lee Sun and Lee Shui Wah went to him to ask for rent for all the houses and land he had been occupying.

85. Lee confirmed in cross-examination that by 2002, he believed that he had acquired some rights over Houses 47 and 48 and some of the surrounding land.  Therefore he stood firm and refused to pay rent to the owners.  However, his evidence was that from the beginning of his own garage business, he had been in unauthorised occupation of House 46 and the land in front, uninterrupted by the 1984 tenancy.  Whatever his basis was for believing that he had acquired some rights over Houses 47 and 48, surely he would have thought the same about House 46 and the land in front, and he admitted as much in cross-examination.  The natural question is why in that case he would agree to pay rent for House 46 and the land in front of it.  The only explanation he could give was that Lee Sun “kept bugging” him and it was such a nuisance, so that Lee finally relented.

86. If he had genuinely believed that he had acquired rights over House 47 and 48, and was able to stand firm in the face of Lee Sun’s and Lee Shui Wah’s demands for rent, it is difficult to understand why he would have given way to Lee Sun’s demand, albeit persistent and bothersome accordingly to Lee.  His answer also begs the further question why Lee Sun did not pester Lee for rent for the other land occupied by Lee, of which Lee Sun was a co-owner, in the same way he persisted in bothering Lee about House 46.

87. In an attempt to find an explanation or justification for the Lee family or Lee Sun agreeing to restrict the 2002 tenancy to Houses 45 and 46, Mr Miu relies again on the “internal arrangement” hypothesis, in summary form as follows.  If Lee Sun could persuade Lee to agree to pay $2,000 for House 46, Lee Sun was entitled to receive that amount since he was entitled to the rent or profit from that house according to the already speculative internal arrangement.  If he could further persuade Lee to agree to pay another sum of $9,000 for rent, it would be in Lee Sun’s interest to restrict the tenancy to House 45 because he could simply pocket the $9,000 without paying it over to the descendants of Lee Fat (who were entitled to the profits of House 45 under the internal arrangement hypothesis) who were probably in England.  Mr Miu submits that the risk of Lee Sun having to account to them for the rental for House 45 was small, whereas if the tenancy were to include Houses 47 and 48, he would have to pay over part of the $9,000 to other members of the Lee family.  This is speculation upon speculation, a flight of fancy, not based on evidence and not pleaded, which came out of the blue in Mr Miu’s final submissions.  In any event such a scenario would have involved Lee Sun telling the other co-owners (other than the descendants of Lee Fat) that the tenancy related only to Houses 45 and 46 and therefore they were not entitled to receive any rent.  Not only was Lee Sun not called, but also there was no evidence that none of the other co-owners received any of the $9,000 monthly rent since 2002, including Lee Shui Wah who, it is not disputed, joined forces with Lee Sun to demand for rent from Lee, and who was obviously interested in receiving rent.  This further refinement of the defendant’s case would have required pleading and further evidence.  It also runs counter to the evidence of Winnie Wong of Rene Hout & Co that when she explained the particulars of the tenancy to the co-owners before completion, none of them objected to the tenancy.  None of the co-owners queried why the tenancy was not described as covering only Houses 45 and 46, as they would have had to be so told by Lee Sun, if Lee Sun were to avoid paying part of the $9,000 rent to all or some of the co-owners, as Mr Miu submitted.

Rental Receipts and Stubs

88. Mr Miu also relies on the rental receipt for House 46 (produced by Lee) which showed a rent of $2,000 per month for 8 months, when over the same period, there were rental receipts issued for House 45, for a monthly rent of $9,000.  There was also a rental receipt stub within Exhibit P2 for House 46, for the month of January 2004.  Mr Miu argues that the plaintiff’s case, that the description of the property rented in the other rental receipts as “G/F No 45, Ha Hau Village, Ting Kok Road” was a shorthand description of all the houses and land occupied by Lee, cannot be right because if the tenancy and the payment of $9,000 covered everything, including House 46, then there would not have been a need for a rental receipt for House 46, and a separate payment of $2,000.  It also suggests that the reference in the majority of the rental receipts or stubs to House 45 did not include Houses 47 and 48 and the rest of the land.

89. There is some force in this argument as a matter of logic.  On the other hand, there was also the rental receipt stub for 1 June 2006, which oddly referred to “House 43, 44, 45 and 46 and farmland”.  The stub for 1 July 2006 referred to “House 45 and 3 houses and farmland”.  Lee Moon’s evidence was that he received Exhibit P1, on which he wrote down what he was told by Lee Sun about the 2002 tenancy, at the end of 2006 or beginning of 2007.  Mr Miu suggested in his final submissions that what probably happened was that Lee Moon received P1 not at the end of 2006 but in April or May 2006, and that “after setting out the house numbers in the receipt stub for June 2006, someone might have discovered that the numbering was wrong, … , so a further change was made [for the July 2006 stub]”.  In essence Mr Miu is submitting that the changes were made to assure the plaintiff that the tenancy included all the 4 houses.  It was never suggested to Lee Moon in cross-examination that he received P1 in April or May 2006, and I have no reason to disbelieve Lee Moon on this issue.  Be that as it may, the changes could have been made after or in anticipation of an agreement on the sale of the Premises.  It is still open to Mr Miu to make the point that these 2 receipt stubs were uncharacteristic and provide little if any support for the plaintiff’s case, which I would agree.  The inescapable fact remains that the majority of the property description was No 45 and farmland.  The changed descriptions could have been untrue, in an act to mislead, or could have been made out of a realisation that the conventional description could have been clearer.  The best person to explain the inconsistency in the description of the property in the receipt stubs would have been Lee Sun who, despite having made an affirmation and a witness statement for the defendant, was not called to give evidence for the defendant.

“Farmland”

90. As to the reference to the “farmland” in the rental receipts and stubs, the plaintiff argues that it must mean the land within the Premises which Lee was occupying.  Lee insists that it means the small piece of undeveloped land adjacent to House 45.  Lee pointed out that it was after the 2002 tenancy was agreed that this piece of land was cleared by him for the garage business.  It does appear from the aerial photos that the area in question had not been cleared until 2002.  The implication of his evidence is that it was because the tenancy included that piece of land that he started to develop it.

91. Lee has given no evidence of how the initial demand from the co-owners for rent for all the land Lee was occupying turned into a discussion and finally an agreement on the letting of this small piece of land so specifically.  The lack of such evidential details is particularly telling when, as Miss Lan submits, the area of the piece of land was so small, compared to the rest of the land that Lee had been occupying, and when Lee had hitherto not chosen to expand into this area over the course of 2 decades, even though this piece of land was right next to House 45.  One would expect, for example, that Lee Sun or Lee Shui Wah might have offered it to Lee as further incentive for agreeing to pay any rent at all, or that Lee had specifically mentioned a desire to use it.  In addition, the co-owners originally wanted rent for all the land occupied by Lee.  They could not get rent for much of it but were prepared to let Lee have more land under the tenancy hitherto unoccupied.  Miss Lan also submits that given Lee believed that he had by 2002 acquired some rights over Houses 46, 47 and 48 and much of the land within the Premises, Lee could have continued his garage business without House 45 and without paying any rent at all.  All in all, with all these doubts which Lee could not satisfactorily explain, Lee’s version of events remained unconvincing.

Changes in the Defendant’s Case

92. I now deal with the issue of the defendant’s changes of its case on the pleadings.  It is a significant element of Lee’s case and his evidence that by 2002 he appreciated that he had acquired some rights to Houses 46, 47 and 48 and much of the land in the Premises because of his unauthorised occupation; that was why he refused to pay rent for those parts; that was why the 2002 tenancy covered only Houses 45 and 46 (Lee having given in to Lee Sun’s pestering about House 46).  If so, as soon as he received a demand from the plaintiff to quit land in the Premises not included in the 2002 tenancy, one would expect him to tell the plaintiff that the plaintiff had no right to ask him to quit because of his rights as an adverse possessor, just as he stood firm against Lee Sun and Lee Shui Wah’s demand for rent in 2002.

93. That indeed was his evidence.  He said that he thought that in the initial correspondence the plaintiff was only referring to House 45 – although even then, with a new owner coming in, alarm bells ought to have been ringing for him and one would expect him perhaps to take the opportunity to set things straight with the plaintiff, but I am prepared to leave this consideration aside.  On his own admission, Lee became aware that the plaintiff was seeking to repossess all 5 lots of land in the Premises by the time the plaintiff issued proceedings in the Lands Tribunal in 2008, and he maintained that he made it clear to KK of CKYW that the 10-year tenancy covered only House 45.  Yet the Notice of Opposition admitted that the defendant was a tenant of the entire Premises, without drawing a distinction between the different houses, and failed to refer to Lee’s adverse possession. The defence then was that the 2002 tenancy was a 10-year tenancy and early termination by the landlord entailed a payment by the landlord of $1,000,000 in compensation under the tenancy.

94. Certainly before the Amended Notice of Opposition was filed, he had been made aware that the plaintiff was asking for more than House 45, this time because KK specifically, on Lee’s evidence, raised the issue that the plaintiff was asking for all 5 lots and the matter was therefore fully explained to counsel in conference.  That was another chance for the legal representatives to get things right.  Yet again there was no reference to the defendant’s essential case.

95. Lee maintained that he had told the same story to the previous legal teams as he had told his current team, but the previous teams had failed to plead his case correctly.  Most of the documents filed with the court at different stages had not been explained to him, until the current legal team came into the picture.

96. Mr Miu submits that it is not unusual for legal advisers to fail to detect a good case.  Lee’s ability to express himself clearly is limited, in line with his education and background. It is not infrequent that legal advisers fail to get the full picture because they have not asked the right questions.  But that in my view is not the case here.  Lee’s evidence was not that he failed to appreciate the significance of his occupation and therefore failed to tell his solicitors.  His evidence was that when he became aware that he was being sued for possession of the entire Premises, he made it a point, more than once, of telling his legal representatives all the relevant facts about this very specific defence.  I find it inconceivable that if Lee had truly and so specifically told his legal team about his current case, his legal team could have failed successively to plead any of it in the Notice of Opposition, both in its original and in its amended form.

97. The other matter was the counterclaim for damages for breach of the 2002 tenancy over the plaintiff’s grant of a right of way over the western part of Lot 197 RP.  It came to Lee’s notice on a site inspection with KK.  He told KK he had the right to use this land not because he was a tenant, but because he had been using that land for a long time.  Yet again the solicitors got it wrong.  The complaints in the CKYW letters and the counterclaim in the Defence and Counterclaim in the District Court were made on behalf of the defendant as tenant of the Premises, not as an adverse possessor.  In none of his previous statements, including those prepared by his current team, had he ever mentioned that he had been occupying the western part of Lot 197 RP.  The first time this came up was in cross-examination. The aerial photos do not support such long-time use.  It was something which Lee made up in the middle of cross-examination.  I do not accept Lee’s evidence on this matter.

98. One thing the solicitors did get right, according to Lee, was the reference to the 10-year fixed term for the 2002 tenancy, and the $1m compensation clause.  I agree with Miss Lan that the amount would seem extremely high for a tenancy that covered a couple of village houses with a small area of land, and disproportionately onerous when compared to the amount of rent being charged.  It is true that parties are free to enter into onerous contracts, but the picture painted by Lee of the co-owners originally wanting rent for all the land occupied by Lee, not having their demand met, and then offering a new patch of land next to House 45 hitherto unoccupied as part of a tenancy of Houses 45 and 46, and on top of that agreeing to a long-term lease with an onerous compensation clause, is an unlikely scenario.

Failure to Call Lee Sun

99. Miss Lan has also urged me to draw inferences against the defendant for failing to call Lee Sun.  I have been able to come to a conclusion in this case without relying on these inferences. However, in deference to counsel’s submissions, I will deal with the issue.

100. I should mention at this stage that Lee Sun, before filing statements for the defendant, has met 3 times with the plaintiff’s solicitors LWL (the last time being 15 March 2011) who as a result prepared a draft witness statement for him to sign, which Lee Sun never did.  On 18 March 2011 Kent Tam & Co wrote to LWL asking LWL not to contact Lee Sun any longer, enclosing a letter in Chinese handwritten by Lee Sun dated 17 March 2011 to the effect that he had already made an affirmation for the defendant, that he had been emotionally distressed by the plaintiff’s requests that he give evidence for the plaintiff, that he refused any further contact with the plaintiff, and that any inquiries should be conducted through Kent Tam & Co.  In reply, LWL wrote to Kent Tam & Co putting it on record that as a result of their meetings with Lee Sun, a draft witness statement had been prepared, reserving the right to rely thereon at trial on the question of Lee Sun’s credibility.

101. Lee Sun made an affirmation on 1 March 2011 (but filed on 28 July 2011) and a witness statement dated 29 November 2011 for the defendant, the latter while the current legal team were acting for the defendant.  His potential evidence was going to be that the Lee family leased only House 45 to Lee in 1984; the Lee family did not take action to stop Lee’s occupation of Houses 46 to 48 and the surrounding land because they were not in need of the land; and they did not press Lee for rent after 1992 because they were not in need of money or the land.  In relation to the 2002 tenancy, his potential evidence supported the defendant’s case, that the tenancy covered only Houses 45 and 46, and included the term for compensation for early termination.

102. This is in contrast with the draft witness statement prepared by LWL in which Lee Sun was expected by LWL to say that he had no personal knowledge about the terms of the 1984 tenancy, and that by 2002, Lee had been occupying much of the land in the Premises without paying rent for a long time.  In 2002, the Lee family finally managed to come to an agreement with the defendant for a tenancy of the land the defendant was occupying, for a term of 3 years commencing on 1 March 2002 at a monthly rent of $9,000, with an increase of 10% after the end of 3 years.  A draft tenancy agreement was drafted and sent by Raymond Hung & Co to the defendant, who then declined to sign it because of lack of knowledge of English.  Thereafter the defendant paid the rent, but after 3 years, refused to pay the increased rent, but continuing to pay the old rent.  This is a version largely in line with what Lee Moon said in evidence he was told by Lee Sun in relation to Exhibit P1.

103. For the record, as Lee Sun was never called, none of Lee Sun’s statements, signed or unsigned, formed part of the evidence in this case save for the present arguments.

104. Miss Lan submits that clearly on the face of the statements of Lee Sun filed on behalf of the defendant, Lee Sun’s evidence would be favourable to the defendant.  However, the defendant chose not to call him, not because Lee Sun was unwilling or unavailable, but upon legal advice. Miss Lan relies on the cases Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434, and Telings International Hong Kong Ltd v John Ho, unrep, CACV No 10 of 2010, 22 October 2010 (Court of Appeal), for the proposition that where a party fails to call as a witness a person who he might reasonably be expected to call and whose evidence would be favourable to him, then the court may draw an inference that the party fears to do so, and that the witness, if called, would expose facts unfavourable to the party, or would not support the party’s case.

105. Mr Miu on the other hand submits that there is no property in a witness and it was open to the plaintiff to call Lee Sun, especially when Lee Moon of the plaintiff has known Lee Sun for decades.  In answer to Miss Lan’s submission that the defendant’s decision not to call Lee Sun was only announced in court on the first day of the trial, making it impossible for the plaintiff to subpoena Lee Sun, Mr Miu replies that it was not impossible, as the case was adjourned after the first day (5 April 2012) due to the Easter holidays, resuming on 10 April 2012, giving the plaintiff enough time to apply for and serve the subpoena on Lee Sun.  I am not sure Mr Miu is correct on this point, as a subpoena has to be served not less than 4 days before the attendance of the witness is required, and under Order 3, general holidays are excluded in calculating a period of 7 days or less.  In any event, Lee Sun has by his handwritten letter expressed a reluctance if not animosity towards giving evidence for the plaintiff and subsequently given statements in support of the defendant, the last one having been filed on 29 November 2011, just days before the trial was originally scheduled to start. Therefore, he was not a witness whom in these circumstances the plaintiff could reasonably have been expected to call.

106. Mr Miu further submits that in the Telings case, the Court of Appeal in referring to the adverse inferences which may be drawn, has added that the failure to call a witness and the inferences to be drawn “are also open always to explanations by circumstances which make some other hypothesis a more natural one than the party’s fear of exposure.”  These circumstances include the matters mentioned in the previous paragraph, and in addition, that Lee Sun, so Mr Miu submits, was not a totally honest person and may have cheated some of the other co-owners out of their share of the rent.  This last part of the defendant’s “case” appearing in Mr Miu’s final submission, as I mentioned previously, was not pleaded and was not fully explored in evidence, and as a result I am not in a position to give any view responsibly that Lee Sun had acted dishonestly.

107. But whether Lee Sun had been dishonest or not, Mr Miu could have made the point that Lee Sun appeared to have made statements for both parties which were contradictory and diametrically opposed to each other (assuming he did make the statements to LWL). He might also have an interest to serve.  If he were to give evidence in support of the plaintiff’s case, then the question would be what the $2,000 payment was for and what he had done with the money.  If he were to give evidence in support of the defendant’s case of a limited 2002 tenancy and adverse possession, then the question would be why he had failed to mention important matters to the plaintiff relating to title.  On any view he would be subject to severe cross-examination.  From the perspective of either party, calling Lee Sun could well have been a forensic hostage to fortune.

108. Had the matter stopped there, I might have been more sympathetic to the defendant’s position in not calling Lee Sun.  However, despite these considerations, the defendant had until the first day of the trial, continued to put forward Lee Sun as its own witness, with knowledge of Lee Sun’s limitations as a witness.  Lee Sun’s affirmation was made on 1 March 2011 but not filed until July 2011, by which time Kent Tam & Co had already been informed by LWL that Lee Sun had met with LWL 3 times with a view to preparing a signed witness statement.  It also could not have escaped the attention of the defendant’s various legal representatives that Lee Sun’s support of the defendant’s case (on any of the defendant’s pleadings) would have been at variance with what Lee Sun as one of the Vendors had agreed in the conveyancing transaction about the terms of the tenancy.  Yet the defendant continued to put him forward as its witness (and I would add, a witness of truth), including filing a further witness statement dated 29 November 2011.  The expectation must have been that Lee Sun would be called as a witness and would be in a position to give evidence in support of the defendant’s case, and give an explanation (innocent or otherwise) of his failure to tell the plaintiff about the full details of the 2002 tenancy and Lee’s adverse possession.

109. Only on the first day of the trial were the court and the plaintiff informed that the defendant would not be calling Lee Sun.  Then in his final submissions, Mr Miu put forward the case that Lee Sun must have, on the one hand, agreed to grant a tenancy to Lee over only Houses 45 and 46, pocketing most if not all of the rent, and on the other, misled the plaintiff about the terms of the tenancy.  This final spin on the defence case, if I may use this informal expression, was not pleaded; no notice was given to the plaintiff, and no sufficient opportunity was given to the plaintiff to explore the evidence more fully or to find out what Lee Sun might have said had he known that this accusation was to be levelled against him.  In these circumstances, I take the view that the failure to call Lee Sun in the end was out of fear that Lee Sun would not support the defendant’s case, with or without the final spin.

Conclusion

110. Before my conclusion I would make the observation that the evidence presented in this trial was far from perfect, both legal teams at trial having had to conduct the case within certain limitations. My task is to make a decision on such evidence as was adduced before me.

111. The plaintiff was purchasing a property which to the knowledge of Lee Moon was subject to an oral tenancy. Yet no attempt was made to verify the terms of the tenancy with the defendant, or the potential interests of occupants.  This matter was however not explored in the cross-examination of Lee Moon.  We do not know therefore whether it was a calculated commercial risk that the plaintiff was prepared to take or whether there were other reasons upon which I cannot speculate, given that Lee Moon was not cross-examined upon it.  The consequence is that the plaintiff’s interest in the Premises would be subject to whatever interests the tenant or occupants might have in the Premises, which is in any event not in dispute.

112. The description of the property under the 2002 tenancy in the majority of the rental receipts was G/F No 45 Ha Hau Village, Ting Kok Road with farmland.  The plaintiff’s case is that the reference only to No 45 was a convenient or shorthand description of the 4 houses, and the reference to “farmland” was to the land occupied by Lee.  Yet the existence of the separate rental receipt and receipt stub for House 46 would tend to detract from that contention.  Although there was evidence of the June and July 2006 rental receipt stubs which referred to 4 houses, the existence of such receipts begs the question why a different description was used when previously and thereafter the simple reference to the property as No 45 and farmland was deemed sufficient.

113. Although Lee Moon has given evidence, in relation to Exhibit P1, of what he was told by Lee Sun about the terms of the existing 2002 tenancy, that evidence remains hearsay, as was Winnie Wong’s evidence about the instructions from Lee Sun.  Neither Lee Moon nor Winnie Wong, whose evidence I accept, was challenged on their evidence that they were so told by Lee Sun, and so at least the fact that they were so told was not in dispute.

114. On the other hand, the defendant’s case is fraught with problems.  I have dealt with many of the questions over Lee’s evidence in the course of this judgment and I need not repeat them.  I do not find him a credible witness.  Furthermore, while making allowance for his education and background and the passage of time, these limitations cannot explain many aspects of Lee’s evidence which make his version of events, in my view, inherently implausible.

115. His case that Lee Fat, one of the co-owners of the entire Premises back in 1984, was prepared to grant him a tenancy over House 45 (the house only), while making no observations, comments or demands in respect of the rest of the houses and land which he must have known Lee was occupying, was difficult to believe.  However, for the purpose of this case, it is strictly not necessary for me to make any finding of fact in relation to the 1984 tenancy, although I am inclined to think that the 1984 tenancy included all the land that Lee was occupying.

116. As to the defendant’s case of adverse possession of Houses 47 and 48 and Area A, it is not disputed that the defendant has the burden of proving, with compelling evidence, both the fact of possession and the necessary animus possidendi.  I accept that the defendant since about 1995, the defendant has been in possession of Houses 47 and 48, but I am not satisfied on the balance of probabilities that the defendant has been in possession of the whole of Area A since 1995 or even 1996.  The aerial photos from July 1995 and September 1996 show that large parts of Area A were thick with vegetation.  Although Lee has given oral evidence that the garage activities over Area A were hidden from view by the canopy of trees, given my view on his credibility and on the plausibility of his version of events, it is not evidence I am prepared to accept in the absence of more compelling evidence.  The consequence is that I do not find that the defendant had been in possession of the entirety of Area A for not less than 12 years by the time the plaintiff issued proceedings on 16 April 2008.

117. In relation to the defendant’s intention to possess, I am not satisfied that his unauthorised occupation of Houses 47 and 48 and Area A was uninterrupted by the 2002 tenancy.  I have come to this conclusion not just in reliance on the lack of credibility of Lee as a witness, but also more importantly on the inherent implausibility of his version of events.

118. He could not satisfactorily explain why he was prepared to pay rent over House 46, in respect of which he had been in unauthorised occupation for just as long as Houses 47 and 48, and over which he believed on his own evidence had also acquired rights as an adverse possessor.

119. In the absence of any evidential details at all, of how the parties to the 2002 tenancy came to include the little piece of farmland next to House 45, Lee’s story simply did not ring true.  I agree with Miss Lan’s submission that Lee’s current case, that the reference in the rental receipts to House 45 with the “farmland” meant the small piece of land next to House 45, was an opportunistic defence taking advantage of the lack of clarity of these receipts.

120. I also reject his evidence that he had given specific instructions to CKYW about his current case, as I find it inconceivable that both solicitors and counsel acting for him at the time could have failed to plead the defendant’s current case when Lee, as he claimed, had given them such specific instructions twice.  I find that Lee gave no instructions to CKYW about the limited coverage of the 2002 tenancy and about his alleged adverse possession.  The reason was that no such case existed, and that he believed that the tenancy covered all the land in the Premises which he was occupying.

121. The complaints and the counterclaim about the alleged breach of tenancy by the plaintiff in granting the right of way show that Lee was content, at that stage, to make an incidental counterclaim against the plaintiff as tenant of the entire Premises.  This reinforces my conclusion that at the time he considered himself a tenant of the land which he was occupying within the Premises.

122. As to the existence of the rental receipt produced by Lee for House 46 and the receipt stub for House 46 in Exhibit P2, this evidence is itself not free from doubt.  The receipt stub for House 46 dated 1 January 2004 appears out of sequence in P2.  Besides, on Lee’s own evidence, sometimes he got receipts for House 46 and sometimes not, and sometimes the payment of $2,000 was made not monthly, but in a batch for several months.  Contrast it with the rental receipt stubs for House 45, where payment was made every month, and a receipt issued for each payment.  If there had been a genuine separate tenancy over House 46, one wonders why there had been such different treatment in the payment of rent and the issue of receipts.  Given the state of the evidence in this case, I am not in a position to make any finding as to what exactly that payment of $2,000 was for and whether any of it went to the other co-owners.  The important point is, I am not persuaded by this evidence, when it is considered along with the overall evidence in this case, that the 2002 tenancy covered only Houses 45 and 46 as claimed by the defendant.

123. I also reject Lee’s evidence that the 2002 tenancy was for a term of 10 years and included a compensation clause for early termination, for reasons I referred to earlier in dealing with this evidence and the general view I take of Lee’s evidence.  As to the original duration of the 2002 tenancy, the only other evidence came from Lee Moon and P1, being hearsay evidence of what he was told by Lee Sun, the fact of such communication not having been challenged.  I also note that Winnie Wong was not told that the original tenancy was a 3-year tenancy, although to be fair, by the time of conveyancing transaction, the tenancy, if it was indeed a 3-year tenancy, would have become a monthly one after the expiry of the original term.  In the absence of other credible and acceptable evidence from the defendant or otherwise, I find on the balance of probabilities that the 2002 tenancy was a 3-year tenancy which by the time the plaintiff acquired the Premises had become a monthly tenancy, which was terminated by the notice to quit.

124. What in my view is more likely based on the evidence in this case is that the 2002 tenancy covered all the houses and land which Lee was occupying, for a rent of $9,000 per month, and the reference in most of the rental receipts and stubs to House 45 was a shorthand description of all the houses, and the reference to “farmland” was to all the other land which Lee was occupying.  By the time the plaintiff acquired the Premises, the tenancy had become a monthly tenancy, and Lee was simply playing tough in refusing to vacate the Premises, and demanding $1,000,000 to which he had no entitlement, effectively holding the land for ransom.  The initial defence of a 10-year term with a hefty early termination compensation sum was no more than a ruse to delay matters for the plaintiff.  By 2011, that initial defence could no longer serve his purpose, as even the alleged 10-year tenancy would be expiring in early 2012, and Lee came up with an entirely new case of a limited tenancy and adverse possession.

125. For the above reasons, I will give judgment for the plaintiff for the delivery of vacant possession of the Premises by the defendant, and mesne profits of $9,000 from 1 February 2008, with interest.  I will also dismiss the defendant’s counterclaim.

126. As to the time for the delivery of vacant possession, the notice to quit expired on 31 January 2008 and proceedings were taken in April 2008.  The defendant has had very long notice that he would have to quit the Premises, and I am not minded to give too much indulgence in terms of the time within which to vacate the Premises.  However, since I have not heard submissions from either party on this issue, I will make an order for the delivery of possession within 28 days from the date of the judgment, with liberty to both parties to apply within 14 days from the date of the judgment to vary such time.

Costs

127. In respect of the defendant’s application at the trial to adduce a surveyor’s evidence on the demarcation of the alleged Area A, although I allowed the application in my discretion, this was something which ought to have been done along with the application for re-amendments by the defendant, without which it would not have been possible to enforce any order I might have made in favour of the defendant.  Had this been done, the application before me in the middle of the trial, with the interruptions it caused, would not have been necessary.  The application was made for the purpose of the counterclaim, and therefore I make an order nisi that the defendant pay the plaintiff’s costs of and occasioned by the application to be taxed if not agreed, with certificate for counsel.  The trial was adjourned in the morning of the first day of trial till 3 pm in the afternoon for Mr Miu to consider the need for the application, and thereafter Miss Lan was given time to consider the application overnight while Miss Lan made her opening in order to save time.  Thereafter arguments spilled over to the 2^nd and 3^rd days of the trial.  I assess the total time taken up by the application to be one day of hearing.

128. In relation to the action and the counterclaim, the plaintiff is entitled to its costs to be taxed.  Ever since the Amended Defence and Counterclaim, the focus of the proceedings has become the issue of adverse possession raised by the counterclaim.  While there remained an issue of defence based on the allegation of a 10-year lease, that defence became progressively insignificant and by the time of the trial had completely fallen by the wayside.  In any event that defence was really part and parcel of the defendant’s case on adverse possession on the counterclaim.  I would therefore apportion three-quarters of the costs in these proceedings to the counterclaim.

Orders

129. The orders I make are as follows:

(1)  that there be judgment for the plaintiff on its action for the delivery of vacant possession of the Premises by the defendant within 28 days from the date of the judgment, with liberty to apply to both parties within 14 days from the date of the judgment to vary the time for the delivery of vacant possession;

(2)  that the defendant do pay mesne profits in the sum of $9,000 per month from 1 February 2008 until the date of delivery of vacant possession, with interest thereon from 16 April 2008 until judgment at the rate of 1 percent above the prime rate, and thereafter at the judgment rate until payment;

(3)  that the counterclaim be dismissed;

(4)  that there be a costs order nisi that the defendant do pay the costs of and occasioned by the defendant’s summons filed on 5 April 2012 in respect of the counterclaim, with certificate for counsel, such costs to be taxed if not agreed, the time occasioned by the summons being assessed at one day of hearing, and that the defendant’s own costs in the summons to be taxed in accordance with the Legal Aid Regulations; and

(5)  that there be a costs order nisi that the defendant do pay the costs of the plaintiff in the action and in the counterclaim to be taxed if not agreed, with certificate for counsel, with three-quarters of the costs in these proceedings being apportioned to the counterclaim, and that the defendant’s own costs in the action and counterclaim to be taxed in accordance with the Legal Aid Regulations.