The Incorporated Owners of Kin Yuen Mansion v. Chan Tin Kwong and Others

DCCJ 5673/2021

[2025] HKDC 573

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5673 OF 2021

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BETWEEN

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JUDGMENT

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INTRODUCTION

1.This is a case involving a building management dispute. The Plaintiff is the incorporated owners of the building known as Kin Yuen Mansion, No 139 Caine Road, Hong Kong (“the Building”), and the 1^st, 2^nd and 3^rd Defendants are the registered owners as joint tenants of Flat 1105 on the 8^th Floor of the Building (“the Unit”).

2.The 1^st Defendant is the father of the 2^nd and 3^rd Defendants. The action against the 4^th Defendant was discontinued subsequent to her death.

3.The Plaintiff, incorporated in 1973, is claiming against the Defendants for, inter-alia, the delivery of vacant possession of the lift shaft that is next to the Unit which has since the late 1970s been converted into a store room (“the Store Room”) by (1) erecting a floor slab (“the Floor Slab”) at the lift shaft; and (2) altering the adjoining partition wall which was a fire-resistant lift shaft wall (“the Partition Wall”) of the common corridor into a door opening into the Store Room.

4.There is no dispute that this was done without approval of the Building Authority. By an order issued by the Building Authority on 20 September 2018 (“the Building Order”), the Plaintiff was ordered to reinstate the Partition Wall in accordance with the approved building plans. It was stated that the opening thereto was an unauthorised building work. The Building Order is however not related to the Floor Slab.

THE PLAINTIFF’S CASE

5.The Plaintiff has called one witness, Mr Wat Mong Wai (屈網威) (“Mr Wat”), who has been the vice-chairman and treasurer of the Plaintiff. He has been residing in Unit 708 on the 4^th floor of the Building since 1975, and was assigned the title to the unit by his parents in May 1995. He gave an account of the background related to the construction of the Building and the conversion of the lift shaft on the various floors into store rooms, including the Store Room in question.

6.According to the Plaintiff, the Defendants’ predecessors had allowed and converted the lift shaft space into the Store Room without prior approval and consent of the Building Authority and the Plaintiff. In particular, the Store Room (including the space of the lift shaft and the Partition Wall) is a common part of the Building, and is now being occupied by the Defendants and constitutes an illegal structure.

7.As mentioned above, the Building Order was issued by the Building Authority on 20 September 2018, by which the Plaintiff was ordered, inter alia, to reinstate the Store Room in accordance with the approved building plans.

8.The Plaintiff says that despite requests, the Defendants have failed or refused to return vacant possession of the Store Room to the Plaintiff, and have failed to take any action to abate or remedy the situation, which amounts to:

(i) a breach of Clauses 3(e), 3(f), 4(c), 4(k)(iii), 4(q)(i) and (iii) and 10(a) of the relevant Deed of Mutual Covenants dated 18 December 1972 (“the DMC”);

(ii) a breach of section 34I of the Building Management Ordinance (Cap 344) (“the Ordinance”); and

(iii) obstruction of the Plaintiff in the discharge of its obligation under s 18(1)(b) and s 18(1)(c) of the Ordinance and Clause 4(k)(iii) of the DMC to comply with the Building Order.

9.On the basis of the above case, the Plaintiff claims against the Defendants for injunctive relief, an order for reinstatement and delivery up of vacant possession of the Store Room, and damages.

THE DEFENDANT’S CASE

10.The Defendants called the 2^nd Defendant, Chan Ho Yuen Houston (“Houston Chan”). The Defendants’ case is that in or about 1963, the land on which the Building was built was assigned to one Sun Fat Company Limited, the original developer. In or about 1968, the original developer was wound up and the building works were left incomplete. Subsequently in about 1972 to 1973, after the winding up of the original developer, the Official Receiver as liquidators completed the building works of the Building.

11.There is no dispute that on 8 July 1974, the Unit was assigned to Cheung Hon Ying and Cheung Lau Kin as joint tenants for the consideration of HK$87,500.

12.According to Houston Chan, enquiries made by him revealed that in or about 1978, the Plaintiff notified the owners of the Building that the space adjacent to the “05” units on the various floors, which was the original lift shaft, was available for sale for HK$3,280, with priority given to owner of the “05” unit of each floor. Subsequently in March 1978, Cheung Hon Ying and Cheung Lau Kin purchased the space adjacent to the Unit, ie space now being used as the Store Room, and had been using and occupying it exclusively for storage without any interference. The Defendants rely on a receipt dated 19 March 1978 (“the Receipt”), which was signed by the then Chairman of the Plaintiff, Mr Chow Sai Ki (Kee) (周世琪) (“Chow”) with an accompanying chop of the Plaintiff. In this regard, the Defendants also rely on the purchases of the similar spaces on other floors (as evidenced by the receipts dated 22 February 1978 for Flat 505, 25 February 1978 for Flat 408, and 1 March 1978 for Flat 105), which were also for the consideration of HK$3,280 each, and signed by Chow with an accompanying chop of the Plaintiff. In this regard, it is pertinent to note that notwithstanding the Receipt is not disputed by the Plaintiff, the Plaintiff’s case is that no title or proprietary interest in the Store Room has been created, as:

(i) There is no record that a resolution had been passed in connection with the alleged sale of the Store Room;

(ii) No undivided share with the right of exclusive possession of the Store Room has been created; and

(iii) No assignment of the alleged sale of the Store Room had been executed or registered in the Land Registry.

13.Subsequently, Cheung Hon Ying passed away in about 1989, and Cheung Lau Kin became the sole owner of the Unit as the surviving joint tenant.

14.Houston Chan testified that later in 1991, the Defendants (ie his parents, himself and his younger brother) purchased the Unit from Cheung Lau Kin as joint tenants for the consideration of HK$830,000. They were informed by the seller, Ms Cheung Lau Kin that the Unit would include the Store Room which was originally a part of the lift shaft that had been converted because the Plaintiff at that time did not have sufficient funds to renovate the Building, and did not want to waste the space in the lift shaft, so that the Plaintiff had decided back then to convert the lift shaft into various store rooms on each floor and sell them out. She reminded the Defendants to keep the Receipt issued to her by the Plaintiff.

15.It is the Defendants’ case that since then, they had been using and occupying the Store Room exclusively and without any interference from the Plaintiff. It is averred that the Plaintiff’s title of the Store Room has been extinguished on the ground of adverse possession.

16.The Defendants also allege that the Plaintiff had negligently or recklessly caused the Store Room to be constructed and induced or allowed the then owners to purchase the same when the Plaintiff knew or ought to have known that the Store Room was constructed without approval, as the case may be, from the Building Authority. The Defendants also say that if the Building Order has to be compiled with, the Plaintiff should bear all costs and expenses. This part of the Defendants’ case is also denied by the Plaintiff.

17.It is also further alleged by the Defendants that alternatively, the Plaintiff is not entitled to any relief by reason of waiver, acquiescence, or estoppel. In this regard, it is also pertinent to note here that the Plaintiff’s case is that the wrongful occupation of the Store Room involves not only an encroachment of common parts of the Building, but also maintaining the unauthorised building works which the Plaintiff had no power to waive or to acquiescence in. I shall return to this.

18.On the above basis, the Defendants counterclaim for possessory title of the Store Room based on adverse possession, and for related declarative relief as well as damages for loss of use of the Store Room to be assessed.

ISSUES IN DISPUTE

19.The parties have tried to prepare an Agreed Statement of Issues in Dispute. Most issues have been agreed subject to some issues that the Defendants say should not be included as underlined below:

(1) Whether the Store Room forms part of the common parts of the Building under Schedule 1 to the Ordinance and Clauses 3(a) and 4(q) of the DMC;

(2) Whether the Store Room is an illegal structure;

(3) If either Issue 1 or 2 is answered in the affirmative, whether the Defendants’ occupation of the Store Room is in breach of any of paragraphs 3(e), 3(f), 4(c), 4(k)(iii), 4(q)(i) and (iii) and 10(a) of the DMC or section 34I of the Ordinance; and obstructing the Plaintiff from complying with section 18(1)(b) and section 18(1)(c) of the Ordinance in its attempt to enforce the Building Order;

(4) Whether the Defendants, being co-owners of the Building holding 1/97 undivided shares, is entitled to claim adverse possession over the common area of the Building; and whether the Defendants have established adverse possession;

(5) Whether the Plaintiff has full knowledge that the owners of the Unit has been occupying the Store Room since around March 1978. If so, whether the lack of interference by the Plaintiff for the past 40 years or so gives rise to waiver or acquiescence or estoppel;

(6) Whether the Plaintiff had negligently or recklessly caused the Store Room to be constructed and induced or allowed the predecessors-in-title of the Defendants to purchase the same from the Plaintiff in around 1978. If so, whether the Plaintiff shall bear all consequences including all costs and expenses associated therewith;

(7) If the Defendants are found to have established adverse possession in issue (4) above, whether declaratory relief of possessory title should (or should not) be granted in favour of the Defendants in that they had to rely on their own illegal act (if the Store Room is found to be an illegal structure) to establish adverse possession; or that any declaratory relief will serve no useful purpose in any event in view of the Building Order, the compliance of which shall result in removal of the Floor Slab and the sealing off of the door opening to the Store Room.

20.I shall deal with and consider the various issues bearing in mind the Defendants’ stance that the underlined parts are not agreed by them to be the relevant issues in this case.

ANALYSIS

Who built the Store Room?

21.There is little dispute over the objective facts in this case, including the purchase of the Store Room by the Defendants’ predecessors and the issue of the Receipt by the Plaintiff as mentioned above.

22.The most obvious factual dispute in the present is who built the Store Room. The Defendants’ case is that it was built by or at the initiative of the Plaintiff. This is denied by the Plaintiff. However, as the Defendants have pointed out, neither Mr Wat for the Plaintiff nor Houston Chan, the 2^nd Defendant had personally witnessed the construction of the Store Room. There is thus no direct evidence suggesting that the Store Room was built by the Defendants or their predecessors. In fact, in all probabilities, I do find that the Store Room was built by or at the initiative of the Plaintiff. The reason is that firstly, the Defendants have produced the Receipt, which has not been challenged, stating that the Plaintiff had received HK$3,280 for the Store Room including its construction cost (“電梯位承讓及建築費”). The Receipt is corroborated by the various similar receipts issued in relation to other units around the same time. Secondly, Houston Chan did refer to hearsay evidence from Ms Cheung that the Store Room was indeed built by and sold by the Plaintiff to her.

23.Based on what has been set out above, on the balance of probabilities, I find that the Store Room was indeed built by, or at the initiative of the Plaintiff prior to it being sold to Cheung Hon Ying and Cheung Lau Kin, ie the Defendants’ predecessors, as mentioned above in March 1978.

Whether the Store Room is a common part of the Building

24.There is no dispute that the Store Room was formed by constructing the Floor Slab inside the lift shaft and altering the fire resistant Partition Wall of the common corridor by the installation of a door opening.

25.Under section 2 of the Ordinance:

“(a) the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner; and

(b) unless so specified or designated, those parts specified in Schedule 1.”

26.Under Schedule 1 to the Ordinance, “common parts” include “[w]alls enclosing passageways, corridors and staircases” and “[l]ifts, escalators, lift shafts and machinery and apparatus used in connexion therewith and the housing thereof”[1].

27.According to Clause 3(a) of the DMC, each owner has:

“(a) Full right and liberty to go pass and repass over and along the entrances staircases landings and passages in the said Building and the roads and footpaths within the said premises and to use the lifts for all purposes connected with the proper use and enjoyment of his part of the said Building.”

28.Further, according to Clause 4(q) of the DMC:

“(q) The commons parts services and facilities referred to in this deed shall include the following:

(i) The entrances yards staircases landings and passages which are not included in any part of the Building exclusively owned by one owner or several co-owners as specified in the First Schedule hereto.

…

(ii) The lifts.”

29.There is no dispute that the Partition Wall is a common part of the Building. However, the Defendants submit that since no lift was installed at the space or void in the lift shaft, the space does not fall within the definition of a “lift shaft” under Schedule 1 to the Ordinance. After the conversion of the space into the Store Room, and the sale of the same, such a space or void is no longer the lift itself, and it does not fall within the definition of Clauses 3(a) and 4(q) of the DMC.

30.I do not agree with the above submission. It is obvious, as accepted by the Defendants, that under section 2 of the Ordinance, the lift shaft is a common part of the Building that was not exclusively owned by any owner as specified in the Schedule 1 to the DMC. The conversion of the lift shaft into the Store Room would not alter the fact that the space or void was originally created as a lift shaft under the original building plans. The fact that no lift was eventually installed inside the lift shaft would not detract from that.

31.I also agree with the Plaintiff’s submission that since there has been no instrument of the sale of the Store Room in 1978 registered in the Land Registry providing for the exclusive use by the purchasers and their successors in title, and there was no alteration of the provisions of the DMC concerning the change of use of the lift shaft and Partition Wall, these have remained, at least on the record, as common parts of the Building.

32.Therefore, I am of the view that plainly, the space or void which is now the Store Room has been, and remains as a common part of the Building.

33.Also, I should note that there is little dispute that the Partition Wall has also remained as a common part of the Building.

Whether the Store Room is an illegal structure

34.The Defendants say this should not be an issue that ought to be resolved in this case. They say that building orders are not conclusive as to illegality as they are subject to appeal under section 47 of the Buildings Ordinance, Cap.123, and there could be public law challenges such as legitimate expectation (see, e.g. Lo Yin Ming v Appeal Tribunal (Buildings) [2011] 3 HKLRD 586). If they succeed in these proceedings against the Plaintiff, then a new building order has to be issued to the Defendants, and it would only be appropriate then that the validity of the new building order, hence the issue whether there is illegality, would become relevant.

35.As the issue of illegality is also relevant to issues (3) and (7) set out above, I shall come to those parts below. However, it suffices for me to say at this stage that it is not disputed that the construction of the Floor Slab and the alteration of the Partition Wall had not been approved by the Building Authority. Thus, they amounted to illegal structures in the sense of unauthorised building works under section 14 of the Buildings Ordinance. The Plaintiff says the position regarding the alteration of the Partition Wall is further reinforced by the issue of the existing Building Order, which has not been appealed against.

Whether there is any breach of the DMC and statutory duties

36.The Plaintiff submits that the Defendants are in breach of the following clauses of the DMC, or are obstructing the Plaintiff from its compliance with its statutory duties under the following provisions in the Ordinance:

(1) Clause 3(e) of the DMC: this is concerned with the right of the co-owners to access the common parts, allowing them to “enter into and upon the other parts of the said Building and the common areas thereof for the purposes of carrying out any work necessary for the maintenance and repair of the said Building”.

(2) Clause 3(f) of the DMC: this is concerned with the right of the manager of the said Building to access for repairing any parts of the Building, and to “enter into and upon each part or unit of shop or flat of the said Building for purposes of rebuilding, repairing, renewing, maintaining, cleansing, planting or decorating the said Building or any part or parts thereof”.

(3) Clause 4(c) of the DMC: under this clause, it is “the duty of the Manger to manage and provide service in respect of the said building … and repairing renewing maintaining and cleansing of the common parts services and facilities”.

(4) Clause 4(k)(iii) of the DMC: this gives the manager of the Building the power to “remove any structure or installation in the said Building which is illegal or contravenes the terms of this Deed and to demand and receive from owner by whom such structure or installation was erected or installed the costs and expenses of such removal”.

(5) Clause 4(q)(i) and (iii) of the DMC: this is the clause which defines the “common parts” of the Building as discussed above.

(6) Clause 10(a) of the DMC: this is the covenant of the co-owners “not to make any structural alterations in his part of the said building which may damage the other parts thereof or cause any inconvenience to other occupiers … and not to cut or injure the cement concrete flooring columns beams or girders of the said building or to do anything whereby the structural strength thereof may be affected”. The Plaintiff says, in particular, that the Partition Wall serves the purpose of fire resistance (paragraph 2 of the Building Order), and the Defendants’ obstruction to the Plaintiff’s compliance with the Building Order creates a danger in case of fire, infringing on the safety and economic interests of other co-owners.

(7) Section 34I of the Ordinance: this section contains the prohibition of any person to “convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee”.

(8) Section 18(1)(b) and (1)(c) of the Ordinance: under these provisions, the Plaintiff has a statutory duty to:

“(b) carry out such work as may be ordered or required in respect of the common parts by any public officer or public body in exercise of the powers conferred by an Ordinance;

(c) do all things reasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant (if any) for the control, management and administration of the building.”

37.As the Plaintiff has pointed out, there is no denial that the construction of the Store Room amounts to a breach of the above clauses of the DMC and the aforesaid sections of the Ordinance. Rather, the Defendants rely on their defence of waiver, acquiescence and estoppel, which will be dealt with below.

Adverse possession

The general principles

38.Before going into questions of waiver, acquiescence and estoppel, I shall deal with the defence and counterclaim based on adverse possession first. The law regarding adverse possession is trite.

39.Section 7(2) of the Limitation Ordinance, Cap.347 provides:

“No action shall be brought by any … person to recover any land after the expiration of 12 years [2]from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person …”

40.Section 8(1) provides:

“Where the person bringing an action to recover land, or some person through whom he claims, has been in possession thereof, and has while entitled thereto been dispossessed or discontinued his possession, the right of action shall be deemed to have accrued on the date of the dispossession or discontinuance.”

41.Sections 13(1) provides:

“13(1) No right of action to recover land shall be deemed to accrue unless the land is in the possession of some person in whose favour the period of limitation can run (hereafter in this section referred to as adverse possession) and where under the foregoing provisions of this Ordinance any such right of action is deemed to accrue on a certain date and no person is in adverse possession on that date, the right of action shall not be deemed to accrue unless and until adverse possession is taken of the land.”

42.Section 17 further provides:

“17… at the expiration of the period prescribed by this Ordinance for any person to bring an action to recover land … the title of that person to the land shall be extinguished.”

43.The general principles as articulated in JA Pye (Oxford) Ltd v Graham [2000] Ch 676 (HL) are well established, as have been summarised by in J Alston & Sons Ltd v BOCM Pauls Ltd [2008] EWHC 3310 at paras.59-60:

“59. Again, both parties are agreed that the general law on this topic is stated in JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419 ("Pye"), and it is necessary to consider this case, as the most authoritative recent statement of the law, in some detail. A convenient starting point is its approval of the judgment of Slade J in Powell v McFarlane (1977) 38 P&CR 452. There, Slade J formulated four propositions, at pp 470-471

“(1) In the absence of evidence to the contrary, the owner of land with the paper title is deemed to be in possession of the land as being the person with the prima facie right to possession. The law will thus, without reluctance, ascribe possession either to the paper owner or to persons who can establish a title as claiming through the paper owner.

(2) If the law is to attribute possession of land to a person who can establish no paper title to possession, he must be shown to have both factual possession and the requisite intention to possess ("animus possidendi").

(3) Factual possession signifies an appropriate degree of physical control. It must be a single and [exclusive] possession, though there can be a single possession exercised by or on behalf of several persons jointly. Thus an owner of land and a person intruding on that land without his consent cannot both be in possession of the land at the same time. The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed. .... Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no-one else has done so.

(4) The animus possidendi, which is also necessary to constitute possession, was defined by Lindley MR in Littledale v Liverpool College ... as the intention of excluding the owner as well as other people"... what is really meant ... is that the animus possidendi involves the intention, in one's own name and on one's own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as is reasonably practicable and so far as the processes of the law will allow”

60. In Pye Lord Browne Wilkinson, delivering the leading speech, deprecated the reintroduction into the law of the label "adverse possession" because of its misleading connotations (Paragraph 35). In principle, "adverse" possession is simply possession in the ordinary sense of the word. It is possession which is, as a matter of description, "adverse" to the interests of the true owner in a legal sense, it does not have to be "adverse" in a factual sense. Connotations of conflict or confrontation are wrong and unhelpful[:]

“36. ...The question is simply whether the defendant squatter has dispossessed the paper owner by going into ordinary possession of the land for the requisite period without the consent of the owner.

37. It is clearly established that the taking or continuation of possession by a squatter with the actual consent of the paper title owner does not constitute dispossession or possession by the squatter for the purposes of the Act...”

44.The capacity of the person in possession is important. What is required is possession “as of wrong” as opposed to possession “as of right” (see Buckinghamshire County Council v. Moran [1990] Ch 623 at 644D, Slade L.J.). If the possession was as of right, or that the person in possession had a right to remain in the Property, obviously he is not a squatter, hence not a person in whose favour the limitation period can run (see also Ashe v. National Westminster Bank plc [2008] 1 WLR 710 (CA)).

45.Here, there was no dealing between the Plaintiff and the Defendants when the latter purchased the Unit including the Store Room from their predecessors. This was different from when the Defendants’ predecessors had purchased the Store Room from the Plaintiff. Obviously, the Plaintiff had then consented to the purchase and hence occupation by the Defendants’ predecessors of the Store Room, and there was no question of adverse possession by them. The Defendants’ situation is different in that no such express consent was so given by the Plaintiff.

46.On the facts, the Defendants have indeed demonstrated that they have had exclusive possession and the intention to possess the Store Room since 1991. They have had exclusive use of the Store Room to the exclusion of all, including the Plaintiff. The Plaintiff has not elicited any evidence that substantially contradicts the Defendants’ evidence in this regard. The Defendants also submit, which I accept, that these elements could be established by a person who mistakenly believed he had good title or was a lawful tenant and did not realise he was trespassing on another’s land (Cheung Kwong Yuen v Sun Hui Fang [2016] 1 HKLRD 464 at para.11).

Illegality

47.The Plaintiff argues that even if adverse possession is established, the Defendants cannot rely on their own illegal act as the Store Room is an illegal structure. The Court should decide as to whether the maxim of ex turpi causa has application in a particular case after examining all the relevant factors set out in the range of factors approach (see Monat Investment Ltd v All Person(s) in Occupation of Part of No 16 Ma Po Tsuen [2023] 2 HKLRD 1311 at paras.58-61.2). On the other hand, the Defendants say illegality should not be a relevant issue in this case.

48.In this regard, I agree with what Deputy Judge Kenneth KY Lam has said in his decision dated 11 July 2023 made in respect of the Plaintiff’s application in the present action for leave to adduce expert evidence on illegality, where the learned Deputy Judge said at paras.27 to 28:

“27….When one speaks of “illegality”, or “ex turpi causa non oritur actio”, or “no action arises from a disgraceful cause” in the context of defending an allegation of adverse possession, one must be referring to a criminal act, a quasi-criminal act, a non-criminal act which engaged the public interest, or an infringement of rules enacted for the protection of the public (together, “Relevant Offensive Acts”), instead of an ordinary civil wrong. The mere occupation of a structure, legal or illegal, without more, is not one of these Relevant Offensive Acts. While Cap 123, by its Section 40, created a large number of criminal offences, in the absence of an allegation that the parties to a civil action had themselves committed any of these offences, they are irrelevant in that civil action.

28. In our case, P never alleged, in its pleadings or otherwise, that Ds committed any specific criminal offence. There was no suggestion that Ds built the structures themselves or instructed any worker to do so. That being the case, the legality of the structures would have no bearing on the counterclaim either.”

49.The Court of Appeal in Monat said in paras.60.4, 62.2 and 62.4:

“60.4. The English Court of Appeal affirmed the judge’s decision. Sales LJ (now Sales JSC) examined the respective public policy considerations underlying the 2002 Act and the 2012 Act, appearing from their own terms [94] and also from the government’s consultation papers for the 2012 Act. He noted (§71):

“The stated objective of s.144 was to provide deterrence and practical on-the-ground assistance for home-owners in removing squatters from their property. Disruption of the law of adverse possession was not mentioned as an intended effect of the provision, nor was it suggested that it was being introduced to try to re-balance the rights of property owners as against those of adverse possessors with respect to the entitlement to be treated as the title holder in relation to property”. (Emphasis added).”

...

62.1. Although the judge was, in my view, too sweeping in his statement that the ex turpi causa maxim “has no application to the law of adverse possession whether under the reliance approach or the proportionality approach” [97], he also found as a fact that applying the Patel test, the maxim did not apply. At §80, he held:

“If it becomes necessary to balance interest and public policy consideration behind the Building Ordinance and the government lease against those behind the Limitation Ordinance, I would find in favour of the squatter. The fact that the authorities have taken no enforcement action in the past 40-odd years suggests that on the facts of this particular case there is little public interest or public policy to be served in enforcing the prohibition. Enforcement action, which the authorities have failed to take in all these 40-odd years, could be taken against the 2^nd defendant at any time. The public interest and public policy in protecting the squatter prevail. There is no reason why the paper owner should have the benefit of the windfall caused by the illegality and be spared of the consequence of the Limitation Ordinance”.

62.2. The judge did not articulate what he considered to be the underlying purpose of s.14 BO (the first consideration in Patel). I tend to agree with the 2^nd defendant’s submission that it was to ensure public safety in the construction of buildings by ensuring that plans are submitted and approved before building takes place. In our case, the brick house was built by the father, not by the mother or by the 2 ^nd defendant. The plaintiff has not proved that mere occupation by the mother and the 2^nd defendant would be in breach of s.14 BO. In any event, implicit in the judge’s focus on the lack of enforcement action over the past 40 years is the concept that the underlying purpose of the BO was not to penalize squatters. A person can of course be in adverse possession of property without erecting a building on it. Erecting or maintaining a fence would be sufficient. The underlying purpose of adverse possession (the second consideration) is plain and has been articulated by the judge in §62 of the Judgment. In light of the first two considerations, he was clearly entitled to hold in favour of the 2^nd defendant on the third consideration.” [underline added]

50.As can be discerned from the judgment in Monat, the Patel test is derived from the 2016 UKSC case of Patel v Mirza, which involves the following considerations:

“36.4 At §101, Lord Toulson held that, in place of a merely mechanistic proces, a court should consider the following “trio of necessary considerations” found in case law to determine whether it would be harmful to the integrity of the legal system to allow a claim involving an illegal act:

“(a) consider the underlying purpose of the prohibition which has been transgressed [e.g. in our case, s.14 BO];

(b) consider conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim [e.g. in our case, the justification of adverse possession in the use of land as a natural resource, and in discouraging stale claims];

(c) keep in mind the possibility of overkill unless the law is applied with a due sense of proportionality”.”

51.The Plaintiff submits that Monat is distinguishable from the present case in that there is indeed the Building Order. Upon compliance with it, the door opening to the Store Room will be sealed off. It means there will be no longer any possible occupation of the Store Room as it will not exist anymore. On the other hand, if it is not to be complied with, pursuant to section 40 of the Buildings Ordinance, Cap.123, it is a criminal offence for failing to comply with such order without reasonable excuse.

52.It is said that the Court should also take note the nature of the illegality where the Partition Wall serves the function of fire resistance.

53.In this regard, firstly, I do not think that there is the Building Order issued in this case would make any difference, as section 14 of the Buildings Ordinance envisages the issuance of building orders in any event. As stated in para.62.2 of the judgment in Monat, I agree that the underlying purpose of section 14 is to ensure public safety in the construction of buildings by ensuring that plans are submitted and approved before building takes place. Further, as I have found above, the Store Room was not built by the Defendants, but by or at the initiative of the Plaintiff, and the Plaintiff has not proved that mere occupation by the Defendants would be in breach of section 14 of the Buildings Ordinance. Finally, it would in my view be out of proportions if the Defendants were to be penalised as squatters of the Store Room that was not built by them, but by the Plaintiff or at their initiative.

54.I therefore hold that the maxim ex turpi causa does not apply in the present case.

55.In any event, as the Defendants have pointed out, in the recent case Chui Majorie Che Ying & Another v Appeal Tribunal (Buildings) & Another [2024] HKCA 873, the Court of Appeal found at paras.38-41 that separate Building Orders are to be served to individual owners rather than the incorporated owners if the Building Authority requires their maintenance or repair:

“38. … the plain and objective purpose of s 28(3) is to provide an effective remedy and enforcement scheme for defective drains or sewers of a building, which are identified by the BA to be inadequate or in a defective condition, to be maintained and repaired by serving a repair order on the relevant owner to carry out such maintenance and repair.

39. In this respect, it must be objectively within the minds of the legislature (as it is common sense) that there will likely be situations where only a particular part of the whole drainage or sewage system, which exclusively serves a particular unit or part of the building, is found to be defective or inadequate. In such circumstances, the purpose of the provision will be best served and facilitated if the owner of this specific unit or part of the building is to be required to carry out the necessary maintenance and repair of the identified defective or inadequate drain or sewer.

40. Third, as a matter of language, the words “of any building” in the phrase “the drains or sewers of any building” can also mean the “drains or sewers” serving the building as the use of the particle “of” can also mean, in the appropriate context, “appurtenant to”. For the same reason, the word “building” in the subsequent phrase “the owner of such building” should also mean the owner of the part of the building which is served by the identified defective drains or sewers.

41. Fourth, in our view, this construction is the correct one since:

(1) It best facilitates and reflects the abovementioned purpose of this provision, as:

(a) it would enable an effective method to require the specific owner of the part of the building which is served by the defective drain or sewer to be responsible for repairing it. This is also consistent with the common and practical sense that it is the owner who uses and enjoys the benefits of the identified drain or sewer that should be responsible for its maintenance and repair;

(b) if there are more than one units or parts of the building which are served by the identified defective drain or sewer, then, that drain or sewer would be, for the purpose of s 28(3), regarded as the drain or sewer of those units or parts of the building, and their respective owners could be served with a repair order;

(c) this construction will similarly cover the situation where if the identified defective drains or sewers serve the whole building or the common parts of the building, in which case all the co-owners of the building shall be required to carry out the maintenance and repair.”

56.The Defendants say in the event they succeed in their counterclaim, they will deal with the Building Authority after receiving any building order against them. Thus this would take away the concern of illegality.

57.Given my finding that illegality as alleged by the Plaintiff here is not a relevant bar to the defence of adverse possession, and in light of my findings on the defence above, I hold that the Defendants have established adverse possession.

Adverse possession not a defence to the claim for enforcement of the DMC

58.However, as the Plaintiff has pointed out, even if the Defendants could establish adverse possession, that would not constitute a valid defence to a claim to enforce the DMC as the law now stands. This is because they are co-owners of the Building and are bound by the DMC, the enforcement of which is not subject to any time limitation (see Incorporated Owners of Man Hong Apartments v Kwong Yuk Ching [2001] 3 HKC 116 (at 122I-123F)). The position has been confirmed by the Court of Appeal in The Incorporated Owners of Po Hang Building v Sam Woo Marine Works Limited [2016] 2 HKLRD 1068. In other words, the restrictive covenant in a deed of mutual covenant prohibiting co-owners from occupying common areas for their own use would remain enforceable by the incorporated owners of a building, regardless of any proof of adverse possession. The Defendants, in their submissions, seem to have also accepted this position, stating that “the Defendant shall succeed in claiming possessory title as a counterclaim when they are able to raise successful defences to the Plaintiff’s equitable right based on enforcement of [the] DMC”. I shall therefore deal with the related arguments below with regard to the Defendants’ case on proprietary estoppel, waiver and acquiescence, and laches.

Proprietary Estoppel

59.The Defendants submit, and there is little dispute, that there are three elements for proprietary estoppel as stated in Snell’s Equity (34^th Ed) at para.12-033:

“(a) General formulation.

In Thorner v Major, Lord Walker noted the scholarly consensus that proprietary estoppel:

‘is based on three main elements ... a representation or assurance made to the claimant; reliance on it by the claimant; and detriment to the claimant in consequence of his (reason-able) reliance.’”

60.The learned authors further state that there are two types of proprietary estoppel. Firstly, a definition of such estoppel arising by acquiescence can be found at para.12-034:

“(b) An acquiescence-based principle.

In Fisher v Brooker, Lord Neuberger stated that: “The classic example of proprietary estoppel, standing by whilst one’s neighbour builds on one’s land believing it to be his property, can be characterised as acquiescence”. The principle is certainly long-established: its operation can be seen, for example, in The Earl of Oxford’s Case. It applies where B adopts a particular course of conduct in reliance on a mistaken belief as to B’s current rights and A, knowing both of B’s belief and of the existence of A’s own, inconsistent right, fails to assert that right against B. If B would then suffer a detriment if A were free to enforce A’s right, the principle applies. It therefore operates in a situation in which it would be unconscionable for A, as against B, to enjoy the benefit of a specific right. The application of the principle can be seen in Lord Carnworth LC’s statement in Ramsden v Dyson that:

“[i]f a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own.””

61.Secondly, a definition of estoppel arising by representation was proffered at para.12-035:

“(c) A representation-based principle.

The three-part formulation set out by Lord Walker in Thorner v Major seems to be modelled on the operation of the general doctrine of estoppel by representation, discussed at para. 12-005.

The representation-based strand of proprietary estoppel consists of the application of this general principle to representations relating to A’s property. For example, in Hopgood v Brown, an estoppel by representation arose as a result of A’s representations as to the location of a boundary and, as a result, A would have been precluded from asserting its true location as against B. It had been argued that no estoppel arose as A, when making the representation, had been unaware of that true location. Lord Evershed MR rejected that contention, stating that the requirement that A be aware of the true state of affairs between the parties is “addressed to and limited to cases where the party is alleged to be estopped by acquiescence” and so does not apply to “any case of estoppel by representation”. The drawing of a distinction between the acquiescence and representation-based principles was thus crucial to his Lordship’s reasoning. The representation-based strand thus consists of a true form of estoppel, as its effect is to preclude A from denying the truth of A’s representation.

...

If, however, B has independently acquired a title to a particular item of tangible property through taking possession of it, and an estoppel by representation then precludes A’s assertion of A’s better title, the estoppel thus protects B’s title. It has also been suggested that estoppel by representation generates a cause of action when A is prevented from denying the authority of a third party who sold A’s goods to B, although such cases may better be seen as examples of ostensible authority, so that B acquires “a real title and not merely a metaphorical title by estoppel”. On the view taken here, then, if B wishes to use proprietary estoppel as a cause of action, B needs to show that the requirements of either the acquiescence or promise-based strands have been met, for example by showing that, given the context in which it was made, A’s statement that “this land is yours”, amounts to a commitment that A will not seek to assert an inconsistent right to that land.”

62.The Defendants submit, and it is obvious, that the Receipt was a clear representation from the Plaintiff to the predecessors of the Defendants of the sale of the Store Room. The signature of the then Chairman of the owners’ committees of Plaintiff together, with the Plaintiff’s chop on the Receipt can be viewed, so the Defendants submit, as the approval of conversion even under the current Section 34I(1)(a) of the BMO (which was introduced in 1993). In this regard, I accept the Defendants’ submission that on the balance of probabilities, the owners’ committees of the Plaintiff at that time must have approved of the sale, in light of the fact that the Plaintiff had apparently received the payment and issued the Receipt. The predecessors of the Defendants then relied on the Plaintiff’s representation and paid HK$3,280 as the stated purchase price for the Store Room.

63.Based on the above, the Defendants say the facts of the present case satisfy both types of estoppel, that is, estoppel by acquiescence and estoppel by representation. The proprietary estoppel is not a mere personal right and it runs with the land (see Grand Power International Ltd v Chan Sing Hoi Enterprise Ltd [2020] 2 HKLRD 142 paras.47-49).

64.On the other hand, the Plaintiff submits that insofar as the Defendants rely on the sale of the Store Room in 1978, any equity that arose in favour of the Defendants’ predecessors is personal between the Plaintiff and the Defendant’s predecessors and does not run with the land. The Plaintiff refers to The Incorporated Owners of Chungking Mansions v Shamdasani, Murli Pessumal CACV 199/1991, 26 February 1993. In that case, a number of additional units (including the “A” units) were illegitimately created within the common parts of the building, without being assigned any undivided shares. The dispute arose when the appellant reached an agreement to purchase Shop 65 as part of a lot including the A units. The purchase, however, was objected to by the incorporated owners for breach of the deed of mutual covenants, and the appellant relied on proprietary estoppel. The Court of Appeal dismissed the appeal and found that the incorporated owners had done nothing to induce the appellant that he would be allowed to continue to occupy the units in question as his predecessor had done. The Court of Appeal stated at p.8:

“So the appellant’s case fails at the first hurdle. The respondent did not, in any way at all, induce the appellant to believe that, if he purchased the A units, he would be allowed to continue to make the same use of them as Maidstone, and before Maidstone, Mr Tiampo had been allowed to do. The respondent was not responsible for the way in which the appellant acted. The appellant had had no dealings of any sort with the respondent before he chose to enter into the Agreement of 14th March 1986, which, as we have seen, he did with his eyes open but his mind closed to the difficulties which had been drawn to his attention. Whatever representation the respondent might have been held to have made to Mr Tiampo, or to Maidstone, there is no warrant for holding that any such representation was made to them, not only for their own benefit, but also for the benefit of their successors in interest ...” (underline added)

65.The Plaintiff further relies on Grand Power International Ltd at para.47, where the Court of Appeal held that any antecedent equity will bind a successor only if it amounted to a proprietary interest or otherwise the equity was purely personal and will not bind successors.

66.Here, the Plaintiff submits, and I agree, that the Defendants are only relying on their own act to establish the equity that they are now claiming. The situation is similar to that in The Incorporated Owners of Chungking Mansions, as the Plaintiff had had no dealing with the Defendants before they chose to purchase the Unit from their predecessor. I agree with the observation of the Court of Appeal in that case, that whatever representation the Plaintiff might have made to the Defendants’ predecessors, there is no warrant for holding that any such representation was made to them, not only for their own benefit, but also for the benefit of their successors. It was a matter of conscious choice on the part of the Defendants to purchase the Unit in 1991.

67.I therefore hold that there had been no proprietary estoppel.

Waiver and acquiescence

68.The Plaintiff refers to Hollywood Shopping Centre Owners Committee Limited v The Incorporated Owners of Wing Wah Building Mongkok Kowloon, HCA 1582/2007, 16 August 2010 at para.57 where the court held that whilst an owners’ incorporation has the power to approve, waive or acquiesce in a conversion of common parts, it does not have any power to approve erection or retention of illegal structures as held by the Court of Appeal in Incorporated Owners of Champion Court v Pang Ping Fan Peter, CACV 317/2006, 23 May 2008 at para.15:

“15. In any event as the judge rightly pointed out, it is the statutory duty of the Plaintiff to enforce the provisions of the DMC and unlike the breach of a covenant which incorporated owners are capable of acquiescing (e.g. painting the lift lobby outside an owner’s flat in a colour of the owner’s choice), the Plaintiff cannot acquiesce in the retention of illegal structures.

…

17. Secondly, that incorporated owners cannot acquiesce in the retention of illegal structures is by now well-established. The rationale is that since it is not within the power of incorporated owners to expressly permit illegal structures to be constructed, it is consequently not within their power to acquiesce in their retention…” (underline added)

69.The Plaintiff further relies on section 34I(1)(b)(ii) of the Ordinance which provides:

“No person may use or permit to be used the common parts of a building in such a manner as to cause a nuisance or hazard to any person lawfully in the building.”

70.The Plaintiff says that as stated clearly in the Building Order, the removal of the Partition Wall has contravened “Regulation 90 of the Building (Construction) Regulations which requires the building to be designed and constructed so as to inhibit or provide adequate resistance to the spread of fire and smoke and to maintain stability of the building in case of fire”. Thus, the use of the Store Room amounts to nuisance, if not hazard.

71.The Plaintiff says that the approval as alleged to use the Store Room is not just approval for occupation of a part of the common area simpliciter, since the occupation hinges on the retention of the illegal structure which is not within the power of the Plaintiff to approve at all. Pausing here, I must say I only partly agree with this insofar as it relates to the illegal structure in this case. However, the alleged approval does extend to occupation of a common part.

72.In this regard, the Defendants rely on Hollywood Shopping Centre Owners Committee Limited at para.66, where it was held that the ultimate position could be the same based the facts of the particular case:

“66. Before I move on further, I should add this. The above discussion is confined to the defence of acquiescence. The plaintiff’s case also covered waiver and laches. As correctly observed by the defendant’s counsel in his closing submissions, the plaintiff did not distinguish these similar, but technically different, lines of defence. However, insofar as the question of whether the defence of waiver, acquiescence or laches is available as a defence in the present case is concerned, I am of the view that the position is ultimately the same in the present case, viz. , adopting the analysis discussed above, they are in law available to the plaintiff by way of defence to the defendant’s counterclaim for breaches of mutual covenants provided the facts can support them.” [underline added]

73.It is further stated at para.76 of the judgment that:

“76. In Spry, The Principles of Equitable Remedies, 8^th edn., the learned author explained (at p. 440) that the defence of acquiescence arises if two conditions are satisfied: first, there must, on the part of the plaintiff, be an assent or lying by in relation to the acts of another person; and secondly, in view of that assent or laying by and consequent acts it must be unjust in all circumstances to grant the specific relief that is in question.”

74.The Defendants say the above principles apply to the present case. The Plaintiff allowed their exclusive use of the Store Room without any intervention since 1991 after the Defendants purchased the Unit and the Store Room, for a total of 27 years until 2018. The Store Room was caused to be built by the Plaintiff itself and sold to the predecessors of the Defendants. The evidence shows that there had been at least 2 renovations of the Building done in 1994 and 2008 respectively, with the 2008 renovation being ordered by the Building Authority. However, Mr Wat admits that he himself as a member of the then management committee had inspected the Building to see what had been renovated in 2008. According to his inspection, the Management Office itself, which was found to be an illegal structure in 2008, was demolished, but the Store Room was not.

75.Therefore, the Defendants say the facts of the present case clearly support the defence of acquiescence and waiver, and it is unjust in all circumstances to grant the reliefs now sought by the Plaintiff. It would be unconscionable or unjust to enforce the provisions of the DMC now, after so many years of silence and laying by.

76.However, I agree with the Plaintiff’s submission that when it comes a time with the external intervention (namely the issuing of the Building Order) not being caused by the promisor that the land can no longer be used for the original intent, it would no longer be unconscionable for a party to enforce his strict legal right (see Clark v Clarke [2006] EWHC 275 (Ch) at para.44, cited in Megarry & Wade The Law of Real Property, 10^th Ed, at para.15-020).

77.As the Defendants have pointed out, the Plaintiff could waive the breaches of the DMC as private rights, referring also to Hollywood Shopping Centre Owners Committee Limited, a case relied upon by the Plaintiff, where it was held that:

“57. However, not every breach of a mutual covenant is beyond the incorporated owners’ power to approve, waive or acquiesce. There are breaches of mutual covenants that an incorporated owners can and does have power to approve, waive or acquiesce. There are breaches of mutual covenants that an incorporated owners can and does have power to approve, waive or acquiesce. Section 34I(1)(a) of the BMO contemplates such one of such situations as it refers to approval of conversion of common parts by way of resolution of owners’ committee ...”

78.However, in my view, any waiver or acquiescence in this regard could only have been related to the private right to sole occupation of the Unit being a common part, now said to be in breach of the provisions of the DMC, but not so extended to the retention and use of the illegal structures.

79.The Defendants have relied on Yick Fung Holdings Ltd v Sandwood Ltd [2009] 2 HKLRD 573 for their proposition that the Court of Appeal held that contravention of the Buildings Ordinance was a matter for the Buildings Department, and illegality does not preclude a defence of acquiescence:

“21. But as Ms Rachel Lam (who appeared for the defendant) very ably put it in her persuasive argument, the position of the incorporated owners is very different because they are under a statutory duty to enforce the DMC. The incorporated owners are not in a position to acquiesce in breaches of the DMC because of the duties imposed on them by s.18(1)(c) of the Building Management Ordinance (Cap.344). The plaintiff, as the owner of private rights, namely, the exclusive possession of the exterior walls, is at liberty to waive any infringement of its rights and there is nothing to prohibit it from so doing. In my view, the general social policy argument does not arise on the facts and, certainly, no case has been made out for extending the policy considerations behind s.18 of the Building Management Ordinance to private parties.

...

23. Focusing on the pleaded claim, it is at once apparent that the complaint is about breaches of the DMC, specifically, of para.13 of the Fourth Schedule (as to which see para.9 above) and not about contraventions of s.14 of the Buildings Ordinance or, for that matter, of any of the regulations made thereunder. In any event, any contravention of the Buildings Ordinance would be a matter for the Building Authority and not the plaintiff.

24. The defence to the plaintiff’s claim for breach of para.13 is acquiescence. Assuming (without deciding) that the installation of the doors contravened s.14 of the Buildings Ordinance, the fact that that illegality emerges as part of the background will not preclude a party from raising a defence such as acquiescence so long as that party is not forced to plead or rely on the illegality as part of its defence. See Tinsley v Milligan [1994] 1 AC 340 at pp.376C-E, 377A-C. The defendant finds itself in that position. It is therefore not precluded from raising acquiescence as a defence.” [underline added]

80.What I understand the Court of Appeal to be holding in Yick Fung Holdings Ltd was that the fact that there may be contravention of the Buildings Ordinance in itself, which may arise as a background, may not preclude a defence of acquiescence of private rights covered under a deed of mutual covenants, unless reliance is placed on the very illegality of the act itself as a defence. As such, I do not think the reliance by the Defendants on Yick Fung Holdings Ltd would make any difference to my observations above.

81.More importantly, however, I agree with the Plaintiff’s contention that waiver may only be established when the enforcing party has made is “a clear, unambiguous and unequivocal statement” to waive its legal right (see Wellfit Investments Ltd v Poly Commence Ltd & Anor [1997] HKLRD 857 at 861A-D). Such a statement is absent in the present case insofar as the Defendants’ occupation of the Store Room after 1991 is concerned. On this ground, I hold that there had been no waiver.

82.Given my findings and observations above, I find that there had been acquiescence insofar as the private right to sole occupation of the Store Room is concerned.

Laches

83.In Man Hong Apartments, the Court of Appeal stated at 123I-124E that:

“What next needs to be considered are the principles applicable to a claim made in equity. These principles are helpfully set out in Chapter 3 of the 30^th Edition of Snell’s Equity, Sweet & Maxwell 2000. The commentary at 3-19 is particularly relevant:

“(c) Claims outside the Statute. The principles which equity applies to cases not covered by a statutory period have been stated thus:

‘Now the doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material.’

Laches essentially consists of a substantial lapse of time coupled with the existence of circumstances which make it inequitable to enforce the claim. Delay will accordingly be fatal to a claim for equitable relief if it is evidence of an agreement by the claimant to abandon or release his right, or if it has resulted in the destruction or loss of evidence by which the claim might have been rebutted, or if the claim is to a business (for the claimant should not be allowed to wait and see if it prospers), or if the claimant has so acted as to induce the defendant to alter his position on the reasonable faith that the claim has been released or abandoned. But apart from such circumstances delay will be immaterial. ...”” [underline added]

84.Snell’s Equity, 35^th Ed. also refers to the equitable maxim of laches at para.5-011:

“This maxim must also be treated with caution. It can be seen as underpinning, in a general sense, the doctrine of laches, which acts as a bar to equitable relief. That doctrine is not based, however, on the mere fact of delay. Something more than mere delay, more even than extremely lengthy delay, is required before B will be denied equitable rights under the doctrine of laches, as the question is whether the lapse of time has given rise to circumstances that now mean it would not be inequitable to deny relief to B. The principal example occurs where, perhaps as a result of having relied on a mistaken belief that B has no relevant right, A would now suffer an irreversible detriment, as a result of B’s delay, if B were permitted relief. The doctrine will therefore apply if the delay has resulted in the destruction or loss of evidence by which B’s claim might have been resisted, or if B can be said to have released or abandoned any right.”

85.The Defendants submit that the Plaintiff’s delay in enforcing its equitable rights will be fatal in the present case. This, I agree with the Defendants insofar as it relates to the occupation by the Defendants of the Unit as a common part of the Building. This is particularly so when the whole situation was initiated by the Plaintiff itself back in 1978, and the Plaintiff is likely to have had knowledge of the purchase and occupation of the Unit by the Defendants over the years, without taking any action until the commencement of this action. There had indeed been years of delay before the Plaintiff sought to enforce the DMC. However, similar to what I have said above, I also do not take the view that this would apply to the demolition of illegal structures under the Building Order.

Purchaser for value without notice

86.The Defendants refer to Snell’s Equity which provides an overview of the effects of being a bona fide purchaser for value without notice, at para 4-018:

“If V sold to P land over which W had a legal right of way, P took the land subject to W’s right even if he was ignorant of it. But, historically, it was different for equitable rights: a bona fide purchaser for valuable consideration who obtained a legal estate at the time of his purchase without notice of a prior equitable right was entitled to priority in equity as well as at law. He took free of the equitable interest. In such a case equity followed the law; the purchaser’s conscience was in no way affected by the equitable right so there was no justification for invoking the jurisdiction of equity against him.”

87.The Defendants submit that they are purchasers for value without notice of the breaches of the DMC since the Store Room was sold at a value by the Plaintiff in 1991 and now can be seen as an approval by the Plaintiff under Section 34I(1)(a) of the BMO, and the Plaintiff therefore lost its equitable rights to the Defendants in respect of the use of the Store Room.

88.I do not agree with this submission. To put it simply, the approved plans of the Building is a matter of constructive notice. There can be no question here that the Defendants did have constructive notice of the illegal structures at the time when they purchased the Unit together with the Store Room.

CONCLUSION

89.By reason of the above, I therefore find that the Plaintiff has succeeded in its claim insofar as it relates to the breaches of the identified provisions of the DMC concerning the removal of illegal structures in the Store Room being occupied by the 1^st to 3^rd Defendants. As I have found, the Plaintiff is seeking to enforce the DMC in respect of the removal of illegal structures, which is currently required under the Building Order. There is no room for consideration that a separate building order may be issued against the 1^st to 3^rd Defendants in future. I therefore order that the 1^st to 3^rd Defendants do forthwith allow the Plaintiff to reinstate the Store Room at the cost of the Plaintiff, including the adjoining Partition Wall and the floor slab therein, in accordance with the building plans approved by the Building Authority, and in compliance with the Building Order.

90.The above order is made providing for the Plaintiff to cater for the costs of the reinstatement of the Store Room in compliance with the Building Order as the Plaintiff has already indicated their agreement, at the commencement of the trial, to bear such costs which it indicated was without prejudice to their conduct of the trial, and was purely for the sake of saving time and costs as the task would involve appointment of professionals and dealing with the Building Authority.

91.In any event, since I have found on the balance of probabilities that the illegal structures were erected by or at the initiative of the Plaintiff, it would only be fair that the Plaintiff shall bear such costs of reinstatement now required under the Building Order.

92.I dismiss the rest of the Plaintiff’s claim.

93.As for the counterclaim of the Defendants, in light of my findings above, I allow the Defendants’ counterclaim to the extent that I make the following orders:

(i) a declaration that the Plaintiff’s title to the Store Room had been extinguished and the Plaintiff is debarred from recovering possession, and

(ii) a declaration that the Defendants have acquired a possessory title over the Store Room.

94.The Plaintiff has submitted that I ought not make any declarative relief even if I find that the Defendants have established adverse possession, as eventually the Store Room will have to be removed as illegal structures. However, whilst this may be so, since I have found that the Defendants have established adverse possession, the making of the above declarations would only place the parties in a clearer position as to their respective responsibilities. Therefore, I have made the above declarations, nevertheless.

95.As for costs, since neither party has fully succeeded in their respective cases, I make an order nisi that there be no order as to costs of this action. I can only say that regrettably, the parties have not been able to agree on a more pragmatic way to resolve their differences.

96.I would like to thank counsel on both sides for their assistance.

Mr Ross Yuen, instructed by Ho, Tse, Wai & Partners, for the Plaintiff

Mr Solomon Lam, instructed by Hastings, for the Defendants