Mun Hing Investment Co Ltd v. Kwok Lau Sang and Another

DCCJ 4992/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4992 OF 2002

------------------------

BETWEEN

------------------------

Coram:  Deputy District Judge Anthony Chow in Court

Dates of Hearing:  4^th to 7^th September 2006

Date of Handing down of Judgment:  19^th September 2006

------------------------

JUDGMENT

------------------------

Background:

1.The late Mr. Lai Pak Man was an important man in the village of Lo Wai, Tsuen Wan. He was consultant of the village communal office and the vice-chairman of the Lo Wai Public School. Mr. Lai Pak Man also owed land in Lo Wai. On or about 19/12/1946, he purchased properties in the village, including lot 147 in D.D. 447 (the “Disputed Land”).

2.Mr. Lai Pak Man passed away in 1970, but a few years before his death, in 1966, he transferred his land holdings to the plaintiff company. The directors and shareholders of the plaintiff company were in fact Mr. Lai Pak Man (who was also known as Lai King Ha) and his 3 sons, Mr. Lai Chiu Yu, Mr. Lyen Eng U and Mr. Lai Kwun Yu. In effect, the plaintiff company is simply a holding company for the Lai family properties.

3.Mr. Kok Hok on the other hand was a farmer who arrived in Hong Kong sometime in the mid 1940’s and took up farming in the village of Lo Wai.

4.Mr. Kwok Lau Sang (the “1^st Defendant”), was born on the mainland, his father died when he was 10 years old. In 1947, the mother of the 1^st Defendant, Ms. Fung Ngor, came to Hong Kong from her village on the mainland and for all intends and purposes lived with Mr. Kok Hok as husband and wife.

5.In 1962, the 1^st Defendant came to Hong Kong and lived with Mr. Kok Hok and his mother in Lo Wai. The 1^st Defendant assisted Mr. Kok Hok and his mother in their farming activities. Part of the land farmed by the 1st Defendant was the Disputed Land.

6.On or about 19/9/2000, the plaintiff company caused its solicitors to issue a Notice of Confirmation of Surrender of the Disputed Land to the defendants. On or about 14/11/2001, the plaintiff caused its solicitors to issue a Notice to Quit to the defendants. The defendants refused to vacate and the plaintiff brought this action to recover possession, mense profit, rates and interest.

7.The defendants’ case is that the plaintiff’s title to the Disputed Land had been extinguished by section 7 and 17 of the Limitation Ordinance, Cap 347. The defendants counterclaimed for a declaration that the plaintiff’s right to the Disputed Land had been extinguished and a vesting ordering that title to the Disputed Land be vested in the 1^st Defendant.

The Plaintiff’s Case:

8.The plaintiff did not dispute that the Disputed Land was in possession of the defendants; however, it alleged that in 1970, there was an oral lease, at the yearly rent of HK$500.00 exclusive of rates, between the plaintiff and the 1^st Defendant.

9.In the ensuring years, the Lai family scattered, leaving Mr. Lyen Eng U in Hong Kong to deal with the family property. Mr. Lyen Eng U passed away in 1989, leaving his daughter Mabel Lai to deal with the family property.

10.In 2002, Mr. Lai Kwun Yu, who immigrated to Canada, returned to Hong Kong, the family gathered together and discussed the family properties. The Lai’s decided to visit the 1^st Defendant to collect rent and look into the issue of possession of the Disputed Land.

11.Mr. Lai Kwun Yu, who knew the 1^st Defendant, telephoned and made an appointment with the 1^st Defendant. On 27/5/2000, Mr. Lai Kwun Yu, his daughter Ms. Lai Har Suen, her husband Mr. Mak Yuk Ming, Mr. Tenly Lai, the son of the late Mr. Lai Chiu Yu and Ms. Mabel Lai, the daughter of the late Mr. Lyen Eng U, visited the 1^st Defendant in Lo Wai.

12.The Lai’s were greeted by the 1^st Defendant and his wife and were invited into the Kwok’s home. The 1^st Defendant’s son, Mr. Kwok Wan Nam also jointed in the conversation. Mr. Tenly Lai raised the issue of government rates. The Government began levying rates on the Disputed Land in 1997 and Mr. Tenly Lai stated the responsibility for payment should be passed on to the 1^st Defendant. Mr. Kwok Wan Nam commented that the levy was unreasonable and that the 1^st Defendant was too old to farm and wanted to return the land to the Lai’s.

13.On or about the same time, Mrs. Kwok took out a piece of paper and stated the rent had been paid up to 1996 and handed out four HK$500.00 bank notes to cover rents for the period between 1997 to 2000.

14.Ms. Lai Har Suen was going to collect rents from their own tenants in the afternoon and had a booklet of rental receipts with her, so she gave the booklet to her husband to write out a receipt. Mr. Mak wrote out the receipt and the counterfoil. The original receipt was left with the Kwok’s and the counterfoil was submitted into evidence. There were also some discussions on the boundary of the Disputed Land and then the Lai’s left.

15.There were further discussions among the Lai’s and on 10/6/2000, they called on the 1^st Defendant again to discuss termination of the lease. On this occasion, the 1^st Defendant wanted the Lai’s to discuss all matters with Mr. Kwok Wan Nam. Mr. Kwok Wan Nam wanted the Lai’s to appoint a representative and demanded a formal notice. Mr. Kwok Wan Nam also stated that he had to consult his brothers before he could decide on the repossession issue.

16.When the Lai’s returned on 17/6/2000 with a formal company broad resolution, Mr. Kwok Wan Nam stated although the Lai’s could have the farm lands back, the Kwok’s family house must be retained and again he had to consult his brothers in any event. At the end nothing came out of that meeting.

The Defendants’ Case:

17.Mr. Kok Hok first possessed the Disputed Land in 1945, when he came to Hong Kong and continuously farmed the Disputed Land. When Ms. Fung Ngor arrived in 1947, she lived with Mr. Kok Hok and helped in his farming activities. When the 1^st Defendant arrived in 1962, he also assisted Mr. Kok Hok in his farming activities. 

18.Through out the years, there had never been anyone who came to enquire about the land, Mr. Kok Hok and the 1^st Defendant had never entered into any lease agreement nor paid any rent to anyone for the occupation of the Disputed Land.

19.Prior to 27/5/2000, the 1^st Defendant had never met nor heard of the Lai’s. On 27/5/2000, a group of intruders came to the Kwok family home. At the time only the 1^st Defendant and Mr. Kwok Wan Nam were home. One of the intruders, being chubby, stated he was a representative of the landowner and demanded several hundred dollars as yearly rent and if the 1^st Defendant refused to pay, they will have to get out. The 1^st Defendant replied that he had lived on that property for decades without paying any rent and asked for proof that the intruders were representing the landowner. The chubby intruder showed the 1^st Defendant a draft lease agreement and asked him to sign it. The 1^st Defendant refused and asked the intruders to leave. The intruders left.

20.Two days later, four of the intruders returned, the chubby one said, if the 1^st Defendant felt the rent was too high, it could be reduced. Even one dollar is rent and the 1^st Defendant could decide when to pay the rent. The 1^st Defendant again refused to sign and asked the intruders to leave.

21.The 1^st Defendant alleged that he had never paid the Lai’s HK$2,000.00 on 27/5/2000 and all documents submitted by the Lai’s were forged by the plaintiff. The intruders returned one more time and threatened Mr. Kwok Wan Nam with a lawsuit.

The Law:

22.The defendants did not dispute the fact that the plaintiff is the title owner of the Disputed Land, the defence and counterclaim are based on the allegation that the plaintiff’s title had been extinguished by operation of the Limitation Ordinance, Cap. 347.

23.Section 7(2) of the Limitation Ordinance states:

“No action shall be brought by any other person to recover any land after the expiration of 12 years 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 : …”

24.This section of the Limitation Ordinance was amended by the Limitation (Amendment) Ordinance 1991. Prior to the amendment, 20 years occupation was needed before the owner is statute barred. The amendment was not retroactive and as a result, an action for the recovery of land is statute barred after 20 years from the date that the right of action accrued where that right accrued before 1/7/1991, and 12 years where that right accrued after that date.

25.The date that the right of action accrued is defined in section 8 of the Limitation Ordinance. Section 8 provides as follows:

“(1) Where the person bringing an action to recover land, or some person through whom he claims, has been in possession, the right of action shall be deemed to have accrued on the date of the dispossession or discontinuance.”

26.The defence is based on three periods of adverse possession:

(1) From 1945 or 1947 by Mr. Kok Hok.

(2) From 1962 or 1966 by the 1^st Defendant.

(3) If there was an oral lease as alleged by the plaintiff, from 1971 when the 1^st Defendant failed to pay rent.

27.For the limitation period to accrue, the defendants must show that they had both possession and the requisite intention to possess. In Wong Tak Yue v. Kung Kwok Wai David & Anor [1998] 1 HKC 1, the Court of Final Appeal held:

“… A person claiming to be in adverse possession must be shown to have both possession and the requisite intention to possess….”

28.As to what constitutes the requisite intention to possess or animus possidendi, quoting Slade J.’s (as he then was) holding in Powell v. McFarlane and Anor. [1989] 3 WLR 152 with approval, the Court of Final Appeal stated in Wong Tak Yue:

“…the intention to possess requisite for adverse possession ‘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 process of the law will allow.’ The question of intention to possess, as with any other question of intention is one of fact. Whether it can be established depends on an assessment of all the circumstances in a particular case.”

29.In Buckinghamshire County Council v. Moran [1990] 1 Ch. 623, the English Court of Appeal held that the requisite intention to possess was only an intention to exclude all others. Slade L.J. stated:

“What is required for this purpose is not an intention to own or even an intention to acquire ownership but an intention to possess-that is to say, an intention for the time being to possess the land to the exclusion of all other persons, including the owner with the paper title.”

30.In Powell v. McFarlane and Anor., Slade J. held that clear and affirmative evidence is required for a trespasser to show the world at large that he intended to exclude the rightful owner from the land. Slade J. stated:

“The question of animus possidendi is, in my judgment, one of crucial importance in the present case. An owner or other person with the right to possession of land will be readily assumed to have the requisite intention to possess, unless the contrary is clearly proved. This, in my judgment, is why the slightest acts done by or on behalf of an owner in possession will be found to negative discontinuance of possession. This position, however, is quite different from a case where the question is whether a trespasser has acquired possession. In such a situation the courts will, in my judgment, require clear and affirmative evidence that the trespasser, claiming that he has acquired possession, not only had the requisite intention to possess, but made such intention clear to the world. If his acts are open to more than one interpretation and he has not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will not treat him as not having had the requisite animus possidendi and consequently as not having dispossessed the owner.”

31.Slade J. gave us further guidance on what may constitute the requisite animus possidendi. In Powell v. McFarlane and Anor, he further stated:

“There are a few acts which by their very nature are so drastic as to point unquestionably, in the absence of evidence to the contrary, to an intention on the part of the doer to appropriate the land concerned. The ploughing up and cultivation of agriculture land is one such act : ….”     

32.Accordingly, the burden of proving there was the requisite animus possidendi is squarely on the defendants and the defendants can do so by showing either Mr. Kok Hok or the 1^st Defendant farming the Disputed Land continuously, for 20 years before 1/7/1991 or 12 years after that date, without the permission of the plaintiff.

Analysis:

33.I will deal with the defendants’ allegation of adverse possession in two periods, those by Mr. Kok Hok and those by the 1^st Defendant.

“By Mr. Kok Hok”

34.The defendants submitted numerous documents on when Mr. Kok Hok and Ms. Fung Ngor came to Hong Kong, the birth of their children, the address of their resident and that their children went to school in Lo Wai; however, there was no evidence that Mr. Kok Hok had cultivated the Disputed Land.

35.The aero photographs of Lo Wai submitted by the defendants only showed the area around Lo Wai and of no assistance to the court.

36.First, it is a known fact that topography changes over time. There is no way to determine where the Disputed Land is located in these photographs without a proper ground survey. Although Mr. Kwok Wan Nam testified that from the photographs he could see his family’s fields, but he is not trained in map reading and the crucial photograph [page 387 of the bundle] was taken in 1945, long before Mr. Kwok Wan Nam was born. There is no possibility that Mr. Kwok Wan Nam could tell where lot 147 was on this 1945 aero photograph.

37.Second, even if the cultivated land identified by Mr. Kwok Wan Nam was lot 147, it did not necessary mean that Mr. Kok Hok cultivated it. As succinctly put by Mr. Yee, counsel for the plaintiff, the aero photograph surely did not show Mr. Kok Hok working the fields.

38.The only evidence left is the 1^st Defendant’s testimony. The 1^st Defendant testified that when he first came to Hong Kong in 1962, he asked Mr. Kok Hok whose land it was and Mr. Kok Hok said he had been cultivating the land since he arrived in Hong Kong.

39.The first problem with this part of the 1^st Defendant’s testimony is that he is Fung Ngor’s son from a prior marriage, therefore with a lowly status in traditional Chinese society. Coming to Hong Kong as dependant of his stepfather, I highly doubt he had the courage to question Mr. Kok Hok, his stepfather, about the ownership of the land he was farming.

40.In any event, from his cross-examination, it was clear that the 1^st Defendant has great difficulties in remembering events that were much more recent. For example, when asked if his solicitors had read the plaintiff’s witnesses’ statements to him, he said no. If that was true, the defendants’ solicitor was grossly negligent. When asked by Mr. Ho, the defendants’ counsel, if paragraph 16 of his witness statement contained all of the conversation between the intruders and him or just the jess of it, he insisted it contained the whole conversation, when during cross-examination he added details not contained in his statement. To say that the 1^st Defendant could remember a casual conversation he had with Mr. Kok Hok more than 30 years ago simply is unbelievable.

41.This leaves the defendants without any evidence to support the allegation that Mr. Kok Hok had cultivated the Disputed Land since 1945 or 1947. The first part of the defendants’ case therefore failed.

“By Mr. Kwok Lau Sang”

42.The fact that the 1^st Defendant had been cultivating the Disputed Land since 1962 was not disputed. The defendants’ case is based on the 1^st Defendant’s testimony that he has never entered into any lease agreement or paid any rent.

43.The plaintiff’s main evidence to challenge the 1^st Defendant’s testimony was a rent receipt and acknowledgement of tenancy dated 29/3/1981, purportedly signed by the 1^st Defendant and Mr. Lyen Eng U (the “1981 Receipt”)[page 166 of the bundle].

44.The 1981 Receipt clearly acknowledged receipt of HK$500.00 rent for a piece of farmland in Lo Wai Village, Tsuen Wan near the 圓玄學院and the 1^st Defendant agreed to pay HK$500.00 rent per year thereafter.

45.The 1^st Defendant contested the authenticity of his signature. Clearly the burden of proofing that the 1^st Defendant signed this document is on the plaintiff. Mr. Ho, in his final submission, suggested that there are 4 conventional ways to prove the authenticity of signed documents.

46.First, call the writer. This is of course not possible, since Mr. Lyen Eng U died in 1989. Second, by calling a witness, this is of course not possible because there was none. Third, by calling a witness who had acquired knowledge of the writing. This is again not possible because Mr. Tenly Lai testified that this document was only discovered amongst Mr. Lyen Eng U’s old files when Ms. Mabel Lai was moving home. Fourth, by comparing the signature with other documents signed by the party. Mr. Yee attempted to do so by directing my attention to the similarity of the signature on the 1981 Receipt and the various report cards of the 1^st Defendant’s children.

47.Whilst the signatures are similar, I am not a handwriting expert and cannot determine the authenticity of a signature simply by visual examination. To determine whether the 1^st Defendant signed the 1981 Receipt, I must look at the totality of the evidence. One of the determining factors is whether the 1^st Defendant paid any rents.

48.The plaintiff submitted the audited accounts of the company for the years ending 1986, 1987, 1990 and a handwritten receipt, on an envelope, in relation to rent for 1991 to 1996.

49.Disregarding the handwritten receipt on the envelope, the audited accounts clearly showed rental incomes of HK$500.00 per year from 1985 to 1990. Mr. Ho argued that the plaintiff did not disclose vouchers or receipts for these accounting records and therefore they are not trustworthy. I disagree; these are audited accounts after a certified accountant had verified the accounts in accordance with generally accepted accounting principles. If a professional accountant was satisfied the plaintiff had received rental income of HK$500.00 a year for the relevant years, I will require much more than Mr. Ho’s speculation from the bar table before I start to question the accuracy of these audited accounts.

50.Mr. Ho also raised question on whether the HK$500.00 rent was from the rental of other lands owned by the plaintiff. Whilst the plaintiff did own other lots in DD 447, these however were of no commercial value. Plaintiff’s evidence included a series of 6 letters exchanged between Mr. Lai Pak Man and the District Officer for South District between 13/4/1953 and 25/6/1958.

51.Mr. Ho objected to the authenticity of these 6 letters as well. The reason for his objection as stated in his final submission was the Government had no record of these letters.  My review of the reply letter dated 9/5/2005, from District Land Office Tsuen Wan and Kwai Tsing Lands Department, however reveals that their reply was: “We cannot trace the file ref.: NT 10/176/53 in our office. I regret that we cannot offer further assistance on this matter”. Not being able to trace the relevant file, especially after half a century, is a far cry from Mr. Ho’s allegation that the Government had no record.

52.I have carefully inspected copy of these 6 letters, they were all typed with an old style manual typewriter and written in old colonial English. The copies clearly showed soiling from age and lines where the letters were folded for years. I find as a matter of fact that these 6 letters were genuine.

53.In the letter to the District Officer dated 13/4/1953, Mr. Lai Pak Man stated he purchased the lands to erect a bungalow, but part of the lot was within the waterworks’ catchment area and cultivation was prohibited. In the letter dated 23/4/1958, Mr. Lai Pak Man proposed to exchange lots 78, 80, 81, 84, 119, 123, 130 and 132 in DD 447 for another piece of land with the government. In letter dated 29/5/1958, the District Officer wanted to include lot 147 in the land exchange, but in his reply dated 19/6/1958, Mr. Lai Pak Man rejected the District Officer’s suggestion and stated: “As regards Lot 147 in particular, it is now under full cultivation, and I have no wish to include it in the exchange.”

54.These letters clearly showed that all of the other lots owned by the plaintiff could not be cultivated and as a result of no commercial value. At the very least, no reasonable person would pay rent for them. The only rentable land in the plaintiff’s property was lot 147 and therefore the only source of rental income must be from lot 147. Accordingly, I also find as a matter of fact that the plaintiff received rent from lot 147 for the years 1985 to 1990.

55.The authenticity of the 1981 Receipt now finds support in the fact that the plaintiff received HK$500.00 a year rent, the same amount of rent as state on the 1981 Receipt.

56.Further support for the 1981 Receipt came from Mr. Mak’s testimony. Mr. Mak testified that before Mr. Lyen Eng U’s death in 1989, he twice accompanied his father-in-law to collect rent from the 1^st Defendant. These were three to four years apart, which would place it some time in the early or mid 1980’s.

57.Mr. Ho attacked the creditability of Mr. Mak’s testimony by referring to two last minute amendments he made to his witness statement. Mr. Mak deleted the part about rental payment would be made once ever 4 years, and he changed the person who produced the piece of paper to proof rent had been paid up to 1996 from the 1^st Defendant to Mrs. Kwok.

58.Last minute changes to witness statement are not desirable, because it casts an unfavourable light on the memory of the witness; however in this situation, Mr. Mak may be excused from these errors. First, the last time Mr. Mak accompanied his father-in-law to collect rent was a long time ago, because he went with him 3 to 4 years apart, he formed the incorrect impression that rent was only payable once ever 4 years. As this litigation progressed, he realized he was in error. What can he do about it? His witness statement was prepared a long time ago, Mr. Mak, not being a member of the plaintiff company, did not have direct access to the plaintiff’s lawyers, the normal tendency is to leave it. Until at the trial when Mr. Mak was reminded by counsel to tell the truth, that would have been the first opportunity to reveal the incorrect impression contained in his statement to plaintiff’s lawyers.

59.As far as the change from the 1^st Defendant to Mrs. Kwok, again the meeting occurred on 27/5/2000, Mr. Mak made his statement on 3/9/2004, almost 4½ years later. Mr. Mak was not directly involved in the Lai family business and being just a minor figure, it was natural for him not to pay much attention to the exchange between the Kwok’s and the Lai’s. This type of mistake is understandable.

60.In fact contrary to Mr. Ho’s allegation that these errors made Mr. Mak’s testimony unbelievable, I think these made his testimony all the more genuine. If Mr. Mak and Mr. Tenly Lai conspired to fabricate the facts of the 27/5/2000 meeting, one would expect their statements to dovetail completely. These minor discrepancies showed that Mr. Tenly Lai and Mr. Mak were genuinely attempting to recall the event as best they could, instead of trying to make up a story.

61.Finally, I have carefully observed Mr. Mak’s demeanour when he testified and I find him an honest witness. I accept Mr. Mak’s testimony as the truth.

62.To summarize, the 1981 Receipt is supported by rental payments from lot 147 for the years 1985 to 1990. It was also supported by Mr. Mak’s testimony that sometime in the early or mid 1980’s, he twice accompanied his late father-in-law to the 1^st Defendant’s home to collect rent. I find the 1981 Receipt was genuine and the signature was the 1^st Defendant’s signature.

63.Having found the 1^st Defendant had paid rent and acknowledged the tenancy in 1981, even if 1^st Defendant commenced adverse possession of the Disputed Land in 1962, the chain of possession would have been broken in 1981, long before the 20 years period required to extinguish the plaintiff’s interest in the Disputed Land.

64.Having also found that the last time 1^st Defendant paid rent for the use of lot 147 was in 1990, section 12(2) of the Limitation Ordinance states:                          

“A tenancy from year to year or other period, without a lease in writing, shall, for the purposes of this Ordinance, be deemed to be determined at the expiration of the first year or other period, and accordingly the right of action of the person entitled to the land subject to the tenancy shall be deemed to have accrued at the date of such determination:

Provided that, where any rent has subsequently been received in respect of the tenancy, the right of action shall be deemed to have accrued on the date of the last receipt of rent.”

65.Accordingly, even without considering the hand written receipt and the further payment of rent on 27/5/2000, the first possible date that the plaintiff’s right of action could accrue was on 1/1/1991 and under the pre–amended statute, the limitation period would not expire until 31/12/2011. If the defendants took advantage of the 1/7/1991 amendment, the plaintiff’s right to recover the Disputed Land would not expire until 30/6/2003. This claim was filed on 9/8/2002, well before the expiry date. The 1^st Defendant’s claim for adverse possession must therefore fail.

66.Although there is no need for me to determine the facts surrounding the 27/5/2000 meeting, but for completeness, I have carefully considered the testimonies of Mr. Tenly Lai, Mr. Mak, the 1^st Defendant and Mr. Kwok Wan Nam. For reasons stated above, I prefer the testimonies of Mr. Lai and Mr. Mak against the testimonies of the Kwok’s. Accordingly, I also find as a matter of fact that during the 27/5/2000 meeting Mrs. Kwok did paid HK$2,000.00 rent to the plaintiff.

67.As to the plaintiff’s claim for rates, there was no evidence that the defendants had at any time agreed to pay rates, the plaintiff’s claim on this item is therefore dismissed.

Orders:

Representation:

Mr. Kent Yee, instructed by Messrs Authur Au & Co., for the Plaintiff

Mr. Peter Ho, instructed by Messrs W.M. Lo & Company (assigned by D.L.A.), for the 1^st Defendant

The 2^nd Defendant, unrepresented, absent