The Incorporated Owners of San Po Kong Mansion v. Shine Empire Ltd

FACV No. 16 of 2006

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 16 OF 2006 (CIVIL)

(ON APPEAL FROM CACV NO. 19 OF 2005)

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Between:

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Court : Mr Justice Bokhary PJ, Mr Justice Chan PJ, Mr Justice Ribeiro PJ, Mr Justice Nazareth NPJ and Lord Millett NPJ

Date of Hearing and Decision: 30 April 2007

Handing Down of Reasons : 31 May 2007

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J U D G M E N T

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Mr Justice Bokhary PJ :

1.At the conclusion of the hearing we dismissed the appeal for reasons to be handed down later.  The appellant did not resist costs, and we awarded costs to the respondent.  We now hand down our reasons, which are given by Mr Justice Nazareth NPJ for the Court.

Mr Justice Nazareth NPJ :

2.The main issue in this appeal is whether the appellant/1st defendant, the Incorporated Owners of the San Po Kong Mansion, dispossessed the respondent/plaintiff and paper title owner of the right to possession of the roof of the twenty-storey building known as the San Po Kong Mansion (“the building”), by virtue of its own conduct and the use of the roof by individual owners of residential units in the building.

3.The building was completed in 1968.  The developer reserved the roof, which was 16,800 square feet in area, to itself.  This was achieved by the undivided 16 of 800 shares (“the 16 shares”) allocated to the developer who owned the land upon which the building was erected, and by the Deed of Mutual Covenant (“the DMC”), executed in the same year, 1968.  The DMC provided for the entitlement of the holder of the 16 shares to exclusive possession of the roof, and to erect one or more additional floors, subject to a right of way for the Manager and also for maintenance workmen to have access to water tanks, cooling towers and pipes located on the roof.  There are also two machine rooms and two lift shafts with machine rooms above them.  The 16 shares were assigned a few times before the respondent acquired them in 1987.  The appellant, the Incorporated Owners of the building, was statutorily incorporated upon registration under the Building Management Ordinance (Cap. 344). 

4.The developer and its assigns did not prevent access to the roof; they could not lawfully have done so as the right of way ran across the middle of the roof.  They made regular, although perfunctory inspections of the roof, at least since the respondent acquired the 16 shares.  Their staff had free access and did not notice anything that would have led them to believe that the respondent’s title had in any way been called into question.  Individual owners of residential units began to make use of the roof in various ways.  The appellant under the DMC assumed responsibility for management and maintenance of the building upon the departure of the original manager.  In 1995 the appellant began to give licences to telecommunications companies (the 2nd to 6th defendants) to install equipment on the roof for cell phone transmissions, and to receive substantial amounts as licence fees, details of which it declined to disclose to the respondent when the latter became aware of the substantial amounts the appellant was receiving as licence fees.

The Proceedings

5.The respondent then commenced proceedings in August 2001, seeking possession of the roof, the sum of $2,540,490 from the appellant, being the known licence fees paid by the telecommunications companies from April 1998 to 30 June 2001, damages and mesne profits to be assessed against all defendants, an account or enquiries as to the permitted fee, licence fees and/or income received by the appellant from the telecommunications companies and others.

6.Primarily, the appellant counterclaimed a declaration that it had dispossessed the respondent for the requisite period of 20 years under sections 7(2) and 17 of the Limitation Ordinance, Cap. 347, and that it was entitled to ancillary orders for vesting and registration.  Alternatively, the appellant counterclaimed payment and reimbursement of fees and expenditure incurred if the respondent were adjudged “the true owner of the roof”.

The Law

7.The principles for the application of ss. 7(2), s.17 and the associated provisions of the Limitation Ordinance are well settled.  They were formulated and set out by Slade J in Powell v McFarlane [1977] 38 P & CR 452, approved by the House of Lords in JA Pye (Oxford) Ltd v Graham [2003]1 AC 419, and adopted by this Court in Wong Tak Yue v Kung Kwok Wai (1997-98) 1 HKCFAR 55.  Their application has not been disputed in these proceedings, and they have been relied upon by both parties.  The authorities mentioned, not only approve those principles, but provide explanation of them and guidance in their application. Of particular relevance to dispossession are the following passages in Slade J’s judgment in Powell :

“	(1)	…
	(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 conclusive 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…acts of possession done on parts of land to which a possessory title is sought may be evidence of possession of the whole.  Whether or not acts of possession done on parts of an area establish title to the whole area must, however, be a matter of degree….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 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.
		…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 is why the slightest acts done by or on behalf of an owner in possession will be found to negative discontinuance of possession.  The 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 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 treat him as not having had the requisite animus possidendi and consequently as not having dispossessed the owner.” (pp470-472)

8.In November 2004, the action came before Deputy Judge Mayo.  The only evidence adduced by the appellant to show factual possession and the requisite intention to possess was that of two witnesses.  The first, Mr Wong, the Chairman of the Management Committee was discredited, and held by the Judge not to be a reliable witness. The appellant did not rely upon his evidence in this Court. In any case his evidence went nowhere near showing possession or the requisite intention to possess.  The other, Miss Liu a long-time resident and recent member of the Managing Committee, seemed to the Judge to be a much better witness.  She testified to the practice of residents to go on to the roof for parties, to gathering to celebrate the Mid-Autumn Festival there and to the large number of “fishbone” antennae the residents had installed on the roof, mostly on the parapet wall thereof.  She herself never considered it necessary to obtain permission to install antennae on the roof.  Extensive work had been done on the building, including replacement of gutters on the roof and repairs in respect of water seepage through the roof, and that to the best of her knowledge all the expenditure had been borne by the appellant and none by the respondent.  (It is pertinent to mention here that paragraph 14 of the DMC purported to exclude the owner of the 16 shares from liability to pay for such expenditure.)  Illegal structures, Miss Liu said, on the roof had to be demolished and it was the appellant that initiated the relevant action.

9.To begin with the Judge seemed favourably impressed with Miss Liu’s evidence.  But in concluding his summary and assessment of it, he emphasized that it had to be of very limited value when concerned with the time before she became actively involved in the affairs of the appellant in the year 2000.  Prior to that her evidence would for the most part have be hearsay and she would have had little or no direct knowledge concerning the intentions and policies of the appellant, in his view.  There were also some inconsistencies in her evidence, he added.  She referred to the lamentable state of affairs which existed on the roof when derelicts and other undesirable persons had frequented it and that she considered it to be unsafe to go there.  All of that was inconsistent with the drift of her evidence that the appellant was exercising control over the roof.  He inclined to the view that it was only in the more recent years that the appellant exercised any meaningful control such as refusing access to non-residents.  He certainly did not think the gate to control access to the roof was installed more than 20 years before the respondent issued their writ in these proceedings.  He added that virtually all the actions Miss Liu referred to, as having been taken by the appellant over the years appeared to him to be consistent with the duties normally undertaken by Incorporated Owners, and that they did not indicate to him that the respondent had necessarily relinquished its ownership of the roof.  Having thus disposed of the issue of relinquishment, which is no longer in issue, he proceeded to the next issue he had to determine.

10.This was whether the appellant had established adverse possession for 20 years, the limitation period that was not in dispute.  He set out the legal principles formulated by Slade J in Powell as those relevant, referred to the periodic inspection of the roof by the respondent’s employees not disclosing anything which would necessarily have put them on notice of attempted usurpation of their employer’s rights.  Taking that in conjunction with the paucity of first hand evidence concerning the actions and intentions of the appellant, he observed that it was difficult not to conclude that all the appellant claims to have done come within the ambit of the activities which are normally undertaken by Incorporated Owners.  He said he was satisfied for those reasons that the appellant did not obtain any right by virtue of adverse possession of the roof or parapet walls.  There can be little doubt that the reference to the paucity of evidence of what the appellant claims to have done related to the result of the Judge’s rejection of most of Miss Liu’s evidence which the appellant relied upon; and likewise that the reference to activities normally undertaken by Incorporated Owners, pointed to those as indicative of an intention other than to possess the roof and exclude the world at large, including the owner, thus falling short of the requisite intention, as explained in the passage he quoted from Powell. Upon that basis the Judge held the respondent’s claim fully justified. 

11.The appellant appealed to the Court of Appeal, making a very wide range of submissions in the context of three scenarios, failure to take possession, relinquishment and dispossession, all of the roof.  In a judgment with which Rogers VP and Le Pichon JA agreed, Yuen JA dismissed the appeal, after fully addressing the individual acts of dispossession pleaded and rejecting them.

The Acts of Dispossession

12.Yuen JA listed the acts of dispossession and the evidence at trial in the following way:

“	(a)	‘allowing’ residents to use the roof for drying clothes, blankets and quilts and installing television aerials (referred to as ‘fishbone antennae’) on the parapet walls of the roof-according to Miss Liu’s evidence at trial, this commenced in the ‘1970’s and 1980’s’, although the fishbone antennae were replaced by a central antenna installed on top of a water tank in 1995-6;
	(b)	holding gatherings for residents during Mid-Autumn Festival and fireworks nights – according to Miss Liu’s evidence, this started in 1994-5;
	(c)	licensing occupiers of a structure at areas of the roof above units D3 and D4 on the 19th floor – the evidence from Miss Liu in support of this allegation  (Transcript p.46) turned out to be hearsay evidence and guesswork which the judge did not accept;
	(d)	maintaining sewage pipes and gutters and carrying out water proofing work – according to Miss Liu’s evidence, this was done in 1982-3;
	(e)	building the management office on part of the roof – the evidence at trial was that this was mainly on the right of way and occurred in 1996.
	The installation of a gate at the roof which was locked from midnight to 7 am was not pleaded.”

13.The Judge at first instance having rejected the appellant’s claim to dispossession because of the lack of evidence did not proceed to examine the individual acts of possession.  Yuen JA who did not proceed on that basis appropriately did comprehensively consider the acts of possession both those pleaded and others which emerged in the course of the trial.  Giving convincing reasons, she rejected all of them.  Beginning with the gate this was, Yuen JA said installed only in 1984, less than 20 years before the issue of the writ in 2001 and the Judge held correctly that this evidence did not advance the appellant’s case.

14.Also, the building of the management office on the roof (although mainly on the right of way), Yuen JA thought, might well have been an act of dispossession but it only took place in 1996 consistent with the Judge’s finding that it was only in more recent years that the appellant exercised any meaningful control.

15.Yuen JA next referred to a letter the appellant wrote to the Wong Tai Sin Civil and Administration Office in January 1981, more than 20 years before the writ was issued in August 2001, asking the District Lands Office to investigate and remove illegal structures on the roof. The letter referred to the need to “maintain a good living environment for our tenants,” and to the appellant’s concern that illegal structures pose potential fire hazards to the structure of the building.  Yuen JA commented that in other words the appellant’s act was not unequivocally done in the capacity of possessor of the roof, but possibly (and on an objective reading of the letter, probably) in the capacity of the representative of concerned neighbours.

16.Yuen JA added that the need for acts to be unequivocal was set out in Powell v McFarlane (p472) as quoted and referred to in Pye (paras 76-77):

“	76.	…It is in cases where the acts in relation to the land of a person claiming title by adverse possession are equivocal and are open to more than one interpretation that those acts will be insufficient to establish the intention to possess. …
	77.	The conclusion to be drawn from such acts by an occupier is recognized by Slade J in Powell v McFarlane, at p.472:
		‘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 treat him as not having had the requisite animus possidendi and consequently as not having dispossessed the owner’. ”

17.Turning to the question whether the appellant had taken physical control with the intention of using and occupying the land as its own, Yuen J proceeded to examine the alleged acts of dispossession as was necessary. She noted from the acts pleaded, which were listed by her, that most took place after 1981.  The only acts which according to Miss Liu’s evidence took place before 1981 were the drying of clothes, blankets and quilts on the roof and the installation of fishbone antennae on the parapet walls.  She did not accept that the drying of clothes, blankets and quilts were acts of possession, as by their very nature, these were temporary activities (especially the sunning of blankets and quilts), trivial acts of trespass of individuals intended to last for as long as it took the clothes to dry.  She concluded the acts were not done with the intention of dispossessing the paper title owner, relying upon Lord Browne-Wilkinson’s pertinent words in Pye:

“…there is no doubt in my judgment that there are two separate elements in legal possession. So far as English law is concerned intention as a separate element is obviously necessary. Suppose a case where A is found to be in occupation of a locked house. He may be there as a squatter, as an overnight trespasser or as a friend looking after the house of the paper owner during his absence on holiday. The acts done by A in any given period do not tell you whether there is legal possession. If A is there as a squatter he intends to stay as long as he can for his own benefit: his intention is an intention to possess. But if he only intends to trespass for the night or has expressly agreed to look after the house for his friend he does not have possession. It is not the nature of the acts which A does but the intention with which he does them which determines whether or not he is in possession”(para 40).

18.As for the fishbone antennae, which she observed had been fixed on the parapet walls, which were about 10 inches wide she concluded that she would not consider that to be an assertion of physical control of the floor space of the roof, which occupied an area of about 16,800 sq. ft.  Besides no owner was called to testify to his intention as to the bit of the parapet wall to which he fixed his antenna.  By the very nature of the act his intention would presumably have been to occupy the spot where he installed his antenna for his own purposes, not for the benefit of co-owners.  Far from intending to make it a common part, he would have been intending to exclude other owners.  That would also follow from Miss Liu’s evidence that it was “every man for himself.”  The appellant itself did not assert the control of an owner over the parapet walls until 1995 when it required the fishbone antennae to be taken off to be replaced by a central antenna on top of the water tank.  Yuen JA added that in her view the erection of the fishbone antennae was no more than individual acts of minor trespass to the parapet walls.  She was entitled to conclude that this did not warrant a finding that the appellant had dispossessed the respondent.

19.As for the illegal structures on the roof the respondent had through its lawyers itself written to the authorities seeking removal of them.  The management office was built mainly on the right of way but there was no evidence of how long it took to build it and the extent of the respondent’s knowledge about it before the building work was completed.  As to the telecommunications equipment on the roof, the respondent’s evidence was that it did not at first know what the structures were.  One of its staff who tried to make enquiries of the appellant as to what they were and why they were there received no assistance.  The chairman’s attitude was in fact obstructive.

20.With leave of the Court of Appeal granted by consent, to which the appellant was in any case entitled as of right by reason of the known licence fees for the installation of telecommunication equipment, amounting to $2,540,490, the appellant appealed to this Court.

The Appellant’s Case

21.The appellant’s case is that its distinguishing feature is that the appellant is a statutory corporation formed under statute, with statutory rights and obligations.  The corporation, it asserts, comprises the owners for the time being of the building and represents them for all purposes concerning the common parts of the building pursuant to s. 16 of the Building Management Ordinance.

22.The duties and powers of the corporation, it says, are set out in s. 18 of that Ordinance, the more significant of which are that the corporation shall maintain the common parts and the property of the corporation in a state of good and serviceable repair and clean condition; carry out work ordered or required in respect of common parts by public officers or public bodies in exercise of statutory powers; do all things reasonably necessary for the enforcement of obligations in the DMC for the control, management and administration of the building; and that in its discretion the corporation act on behalf of the owners in respect of any other matter in which the owners have a common interest.

23.That feature in particular, it is contended, places the acts of possession rejected by the courts below, upon a different basis, i.e. physical control of the roof as a common area which the Judge and the Court of Appeal did not address, so that these findings below that the appellant had not dispossessed the respondent are open to review by this Court. Reliance upon that basis appears in a number of submissions in the appellant’s case.

24.The different basis of possession is outlined in that part of the appellant’s case entitled: “Rights in common/ Incorporated Owners” in the following terms:

“…. there is no inconsistency between individual owners asserting a right in common and the beneficiary of that right being the Incorporated Owners.  The corporation comprises the owners for the time being and it represents them; the owners by their individual acts assert their right to what they consider a common part of the building.  The assertion of those rights and the physical control thereby exerted satisfy the requirement for factual possession.  The decisions in Powell and Pye recognize that although there must be a single and exclusive possession, there can be a single possession exercised by or on behalf of several persons jointly.  (Pages 470-471 and paragraph 41 of the reports respectively).  That requirement, it is respectfully submitted, is satisfied where co-owners exercise by their several acts their joint possession as co-owners.  The second requirement which is their intention to possess is also satisfied because the intention on the part of the individual owners must be that they exercise their factual possession for the benefit of themselves as co-owners, and hence for the benefit of the Incorporated Owners which represents them.

There is therefore no contradiction between the Incorporated Owners acquiring title by the above process, and their statutory remit to manage common areas and ensure compliance with the DMC, contrary to the view expressed by Yuen JA.”

Consideration of Appellant’s case

25.It has first to be noted that the appellant’s case below has been that it was the appellant itself which had acquired possession of the roof.  That remains its pleaded case as the respondent points out, i.e. that the (appellant) “has been continuously and still is in exclusive possession of the Roof”.  The particulars pleaded are consistent only with possession by the appellant i.e. allowing the residents to use the roof, itself holding gatherings there, licensing structures thereon, maintaining sewage pipes and gutters, carrying out roof repairs, building thereon and using the management office.  The respondent submits that it is not open to the appellant to make it’s new submissions.  While we see no flaw in the respondent’s contention we do not find it necessary to rely upon it.

26.Turning to the “distinguishing feature” of the appellant’s case and the related basis of possession in the belief that the roof was a common part, what has to be said of this novel submission is that it does not displace in anyway Slade J’s principles in Powell.  To dispossess the respondent the owners would have to establish possession by an appropriate degree of physical control and the requisite intention to possess i.e. an “ intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner”: per Slade J approved by Lord Browne-Wilkinson in Pye.  If they were to succeed in doing so, then they would establish possession for themselves and not for the corporation.

27.What clearly show that the appeal must fail are the alleged acts of possession relied upon. It can be seen from the judgment of Yuen JA that these plainly do not constitute or demonstrate the necessary factual possession or requisite intention to possess.  The result is fatal however creative or inspired associated legal submissions may be.

28.It remains to say that we did not refer to the respondent’s Supplementary Submission, which was filed late.

Sir John Swaine SC (instructed by Messrs Y.C. Lee, Pang & Kwok) for the appellant

Miss Vivian Chih (instructed by Messrs Huen & Partners) for the respondent