Yeung Mau Cheung and Another v. The Incorporated Owners of Ka Ming Court, Castle Peak Road

HCA 615/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 615 OF 2010

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J U D G M E N T

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1.These proceedings concern the common parts of the building situate at Section A and Remaining Portion of New Kowloon Inland Lot No. 2611, also known as Ka Ming Court, Nos. 688-690 Castle Peak Road, Kowloon (“the building”).

2.The defendant was registered on 11 February 1985 as the incorporated owners of the building.

3.Upon the incorporation of the defendant, the rights, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by and the liabilities of the owners in relation to the common parts of the building shall be enforceable against the defendant to the exclusion of the owners (section 16 of the  Building Management Ordinance Cap. 344 ).  

4.The plaintiffs’ claim is for possessory title to two portions of the common parts on the ground floor of the building (“the suit portions”). The suit portions consist of the part edged in red and the part edged in green as shown in the amended ground floor plan annexed to the amended statement of claim (“the plan”).

5.The plaintiffs claim that their occupation and possession of the suit portions have been adverse to the defendant and its predecessor in title and that prior to the commencement of this action the defendant’s title to the suit portions was extinguished under the Limitation Ordinance Cap. 349(“the LO”).

6.The defendant denies that its title to the suit portions has been extinguished under the LO.

7.The defendant further relies on the provisions of the Deed of Mutual Covenant dated 1 April 1970 (“the DMC”) in respect of the building.

8.The defendant counterclaims for an order for vacant possession and injunctive relief in respect of the suit portions.

9.Although the defendant also sought damages and mesne profits from the plaintiffs, this was later abandoned by Ms Becky Wong, for the defendant, in her closing submissions.

10.There was also a counterclaim for vacant possession and injunctive relief in respect of a loading bay area on the ground floor of the building.

11.On the first day of trial, the parties resolved their dispute in respect of the loading bay area. By a consent order made on 22 July 2013 I made an order that:

(1) the plaintiffs be restrained from placing or continuing to erect and/or place tables, chairs, objects, materials and fans (“the chattels”) at the area coloured pink on the plan attached to the order (“the loading bay area”);

(2) the plaintiffs do remove the chattels at the loading bay area and reinstate the loading bay area to its original state;

(3) the plaintiffs do deliver up vacant possession of the loading bay area to the defendant;

(4) costs be reserved.

The agreed issues

12.The agreed issues are:

(1) Since when was the title of the defendant and its predecessor in title to the suit portions extinguished by virtue of sections 7(2) and 17 of the LO?

(2) Whether the plaintiffs, who were not owners of the building or privy to the DMC would be bound by the DMC and/or section 34I of the Building Management Ordinance Cap. 344 (“the BMO”)?

(3) If the title of the defendant and  its predecessors in title to the suit portions has been extinguished before 1993 when section 34I was added to the BMO, whether section 34I would bar the plaintiffs’ claim for possessory title?

(4) If the 1^st plaintiff had taken possession of the suit portions before the date when the DMC was executed, whether the right created under the DMC would also be extinguished by virtue of section  9(3) of the LO?

(5) Whether the alleged breach of Government lease by reason of the plaintiffs’ occupation of the suit portions would bar the plaintiffs from claiming possessory title? and

(6) Whether the defendant and its predecessors in title have been estopped from claiming or have waived their right under the DMC or have acquiesced in the alleged breach of the DMC on the plaintiffs’ part?

The witnesses

13.On behalf of the plaintiffs, I heard evidence from the 1^st plaintiff, the 2^nd plaintiff and Ng Shui San (“Ng”), a friend of the plaintiffs. I also heard evidence from Clarence Yu Chak Man (“Yu”), the senior management officer of Chevalier Property Management Ltd, who gave evidence on behalf of the defendant. The witnesses were, in my view, honest and truthful witnesses.

14.It seems to me that the first question to consider is whether the plaintiffs have established that they have acquired a possessory title to the suit portions. If so, then the crucial issues are whether the plaintiffs are bound by the provisions of the DMC and section 34I of the BMO and whether section 34I would bar the plaintiffs’ claim for possessory title to the suit portions.

15.If the plaintiffs are bound by the provisions of the DMC and section 34I of the BMO, then it will be necessary to consider the other issues. However, if they are not so bound, it seems to me that the other issues do not arise and it is not necessary to consider them.  It is only if the plaintiffs were subject to the provisions of the DMC and section 34I of the BMO would it then be necessary to consider issues (3) to (6). This is not disputed.

Background

16.The background facts are largely undisputed. 

17.The 1^st plaintiff gave evidence that his mother had been operating a refreshment store since around 1965 at the site where the building was later erected.

18.The occupation permit for the building which permitted the occupation of factories in the building was issued on 29 October 1969.

19.There is no dispute that since about October 1969 the 1^st plaintiff and his mother had exclusive possession of the suit portions.

20.After the completion of the building in 1969, the 1^st plaintiff and his mother occupied the space under the staircase on the ground floor of the building to run a refreshment store (“the store”). This is the area edged in red in the plan. They also used the area edged in green in the plan as a storage area (“the storage area”) where they also kept a refrigerator.

21.There is no dispute that from 1969 onwards the 1^st plaintiff and his mother have been operating the store and using the storage area.

22.In or about 1983 the 2^nd plaintiff took over from the 1^st plaintiff’s mother in running the store.  Since then both plaintiffs have been running the store together.  The store is called Ching Kee Store.

23.The store and the storage area were enclosed by wooden boards initially to separate the areas from the rest of the ground floor of the building. Later on, the wooden boards were replaced by metal gates as shown in the photographs in evidence.  The photographs also show that there were tables, chairs and stools in the loading bay area which were used by patrons of the store.

24.In order to establish that they have acquired a possessory title to the suit portions the plaintiffs must show that they have been in factual possession of the suit portions with the requisite intention to possess for the relevant period. This has been referred to as the animus possidendi. As Slade J said in Powell v McFarlane and another (1979) 38 P & CR 452 at page 471:

“What is really meant, in my judgment, 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.”

The relevant period under the LO

25.By section 7(2) of the LO no action shall be brought 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.

26.By section 38A of the LO the time for bringing proceedings to recover any land which accrued before 1 July 1991 shall, if it has not then already expired, expire at the time when it would have expired apart from the provisions of the Limitation(Amendment) Ordinance 1991.

27.Section 17 of the LO provides that at the expiration of the period prescribed by the Ordinance for any person to bring an action to recover the land, the title of that person to the land shall be extinguished.

28.It is common ground that the relevant limitation period to consider in determining whether or not the defendant’s right of action to recover the suit portions is barred is 20 years.

29.On the evidence, it seems to me that the plaintiffs have established that they have been in adverse possession of the suit portions with the requisite intention. I am satisfied, and find, that the 1^st plaintiff and his mother have had exclusive possession of the suit portions from about October 1969. From about 1983, the 2^nd plaintiff took over from her mother-in-law and since then, both plaintiffs have had exclusive possession of the suit portions. The dispossession of the defendant and its predecessor in title to the suit portions has been continuous with the necessary intention. It is evident that the store and the storage area were enclosed by wooden boards initially and later on by metal gates. In operating the store, the plaintiffs had their own water and electricity supply.

30.As regards issue (1), I am satisfied that the plaintiffs have acquired a possessory title to the suit portions and that the defendant’s right to recover possession of the suit portions was extinguished 20 years after the right of action accrued namely, by about October 1989.  By section 17 of the LO the defendant’s title to the suit portions was extinguished by about October 1989.

31.In or about 2009 the ground floor of the building was converted to a large shopping arcade consisting of a number of clothing and accessories shops. It was at about that time that the defendant started to take action against the plaintiffs in respect of the suit portions and the loading bay area.

32.On the evidence, it is clear that the defendant did not take any action against the plaintiffs at any time until about 2009.  By that time, the defendant’s title to the suit portions had been extinguished, as I have found.

33.In response to an enquiry by the managers of the building, Chevalier Property Management Ltd (“Chevalier”), by a letter dated 13 November 2008 from District Lands Office, Kowloon West to Chevalier, the District Lands Office, Kowloon West informed Chevalier that the store may be an unauthorized structure and that they had referred the matter to the Buildings Department for follow up.

34.By a letter dated 18 November 2008 from District Lands Office, Kowloon West to Chevalier, Chevalier was informed that the use of the store was a breach of the Conditions of Sale which restricted the building to industrial use only. Chevalier was also informed that in the event of persistent breach of the Conditions of Sale their department may take necessary enforcement action.

35.No enforcement action has yet been taken by Government in respect of the store.

The DMC and section 34I of the BMO

36.The DMC was executed by the 1^st owner and the 1^st purchaser on 1 April 1970.

37.The defendant relies on the relevant provisions of the DMC as pleaded in the re-amended counterclaim and on section 34I of the BMO.

38.Section 34I is in Part VIA of the BMO which deals with Deeds of Mutual Covenants. Section 34I provides:

“34I. Common parts

(1) No person may ––

(a) 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 (if any);

(b) Use or permit to be used the common parts of a building in such a manner as ––

(i) unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or

(ii) to cause a nuisance or hazard to any person lawfully in the building.

(2)  Any person who contravenes subsection (1) shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building.”

39.Ms Becky Wong submitted that notwithstanding the fact that the plaintiffs are not parties to the DMC they are still bound by the DMC.  It was submitted that section 34I of the BMO would bar the plaintiffs’ claim for possessory title to the suit portions.

40.Ms Becky Wong relied on the Court of Appeal decisions in The Incorporated Owners of Man Hong Apartments v Kwong Yuk Ching & others [2001] 3 HKC 116 (“Man Hong Apartments”), Incorporated Owners of No 27A Chatham Road Kowloon v Mr Lee or Unlawful Occupier (Lee Kai Kong) & another (CACV 2238/2001, 2 August 2002) (“Chatham Road”) and The Incorporated Owners of Mountain View Mansion v Heart Cuisine & others [2012] 5 HKC 361 (“Mountain View Mansion”). She submitted that the court should not follow the recent decision of the Court of Appeal (Yuen JA, Lam JA, and Au J) in Wong King Lim v Incorporated Owners of Peony House [2013] 4 HKC 295 (“Wong King Lim”).

41.I am unable to accept Ms Becky Wong’s submissions.

42.The recent case of Wong King Lim is an important decision. It dealt with the question of adverse possession and the effect of section 34I of the BMO. The court was also dealing with adverse possession of a common part of a building.  In that case, it was a lane.

43.At trial, it was held that the Incorporated Owners (“the IO”) had ceased to have any right of action to recover possession of the lane.

44.The IO’s argument on appeal was that adverse possession was not a valid defence to an action started by an IO for an injunction under section 34I of the BMO.

45.The Court of Appeal rejected the submission that there could not be adverse possession of a common part of a building.

46.As Yuen JA said at paragraphs 14 to 15.2:

“14. Put briefly, the IO’s argument on appeal is that adverse possession is not a valid defence to an action started by an IO for an injunction under s 34I BMO. Its case is that so long as the subject property had been designated a common part, there could not be adverse possession at all, whether by a co-owner or a stranger to the DMC.

15.1 That is a surprising proposition which should not be adopted unless the legislation admits of no other interpretation. Take the case of a squatter whose structure straddles two pieces of land, ‘A’ belonging to a single owner and ‘B’ a common part of a piece of land managed by an IO. It would be curious if, after the required number of years, the squatter could succeed in an adverse possession claim in respect of that part of his structure on A, but not the part on B, even though the IO was throughout aware of the squatting and had done nothing to protect the rights of the owners of B.

15.2  In my view, the purpose of s 34I BMO is to incorporate into every DMC a provision to enable the IO to regulate the use of common parts where there are no express provisions in the DMC. It would be surprising if by a side-wind, the legislation has resulted in a change in the law with the surprising consequences set out above. Counsel for the IO has not referred us to the Hansard or any briefing papers to the legislature to support his argument.”

47.Yuen JA then analysed and distinguished the three judgments of the differently constituted Court of Appeal in Man Hong Apartments, Chatham Road, and Mountain View Mansion.

48.As regards Man Hong Apartments, she dealt with this at paragraphs 17 to 20.

49.As Yuen JA pointed out at paragraph 19, the plaintiff was never a party to the Deed of Mutual Covenant and had never covenanted to use the lane only in common with the owners of the building.

50.That is the same position here. The 1^st plaintiff, his mother and the 2^nd plaintiff were never co-owners of the building. They had never covenanted to use the common part namely, the suit portions only in common with the owners of the building.

51.And at paragraph 20 Yuen JA said :

“20. As for the IO’s argument under s 34I(2) BMO, the purpose of that subsection in my view is simply to enable the IO to take appropriate steps to stop private conversion of common parts as that restriction has been incorporated under s 34I(1). It does not, in my view, create a new statutory cause of action which overrides a possessory title obtained by adverse possession just because the land happens to have been held by incorporated co-owners.”

52.As regards Chatham Road, Yuen JA dealt with this at paragraphs 21 to 26.

53.As regards Mountain View Mansion, Yuen JA dealt with this at paragraphs 27 to 35.

54.Having referred to the obiter dicta of Cheung JA in Man Hong Apartments and having examined Re Nisbet and Potts Contract [1906] 1 Ch 386, Yuen JA said at paragraph 34:

“34. ….The owners of the Building had covenanted only with one another to possess the Lane in common and not exclusively. The plaintiff was not a party to the DMC. The learned judge found that as far as possession of the Lane was concerned, the plaintiff’ intention was to exclude all the owners (and the IO) of the Building. Accordingly at the end of the relevant period under the Limitation Ordinance, the plaintiff extinguished the title to the Lane which was adverse to his own, ie the title of all the owners of the Building (and the IO). By then it did not matter what were the restrictions imposed on the use of the Lane by the owners under the express provision in a deed of mutual covenant, or by the IO under the incorporated provision of s 34I BMO. Once their title to the Lane was extinguished, the owners (and the IO) no longer had any right to it which they could enforce against the plaintiff …”

55.In Wong King Lim, the IO’s appeal was dismissed.

56.Lam JA agreed with the judgment of Yuen JA.  And at paragraphs 43 and 44 Lam JA said:

“43. ……upon adverse possession by the Plaintiff being established over the Lane, the Defendant IO ceased to have any interest over the dispossessed land to be protected by the covenants in the DMC. In this connection, I respectfully agree with the analysis of my Lady that the DMC was made to govern how the co-owners of the Building were to exercise their right of possession (as an incidence of their co-ownership), including the possession of the common parts. Unlike what happened in Re Nisbet and Potts Contract, the covenants in the DMC was not made by an owner of an adjoining piece of land in favour of his neighbour. The land intended to be affected by the DMC is the land subject to co-ownership. The Plaintiff has never been a co-owner. As explained, upon dispossession for the requisite period of time, the Plaintiff acquired an independent title whilst the Defendant IO ceased to have any right to enforce any claims, including claims based on the covenants, in respect of that portion of land.

44.  My Lady has already explained the rationale of Re Nisbet and Potts Contract. I would only add that in contrast with the position of the covenantee in that case, the Defendant IO’s right under the DMC (and the deemed obligation under the DMC created by Section 34I) has been infringed from the very beginning of the dispossession by the Plaintiff over the portion of the land in question. Thus, the basis of the judgment of Collins MR in that case (viz time should not start to run until the right of the covenantee is affected) has no application to our case. The extinguishment of the title to the land under s 17 of the Limitation Ordinance (Cap 347) encompasses the title to enforce the DMC in respect of that portion of the land.”

57.And at paragraph 45 Lam JA said:

“45. Section 34I of the BMO has to be construed against such common law background. Section 34I(2) stipulates the legal consequence for a contravention of sub-section (1): the person in contravention shall be deemed to be in breach of an obligation imposed on him by the DMC in respect of the building. If the DMC cannot be enforced against a squatter (by reason of the extinguishment of title on the part of the IO), Section 34I does not confer upon the IO any additional right of action.”

58.Au J agreed with the judgments of Yuen JA and Lam JA.

59.I respectfully agree with the judgments of Yuen JA and Lam JA in Wong King Lim.  In any event, Wong King Lim is authority which is binding on me. Man Hong Apartments, Chatham Road and Mountain View Mansion are distinguishable and they were distinguished in Wong King Lim.

60.In my judgment, the plaintiffs are not bound by the provisions of the DMC or by section 34I of the BMO. Section 34I of the BMO, in my judgment, does not bar the plaintiffs’ claim to possessory title of the suit portions.  Issues (2) is resolved in favour of the plaintiffs.

61.That being so, the remaining issues do not arise.

62.I give judgment to the plaintiffs for the declarations sought namely,

(1)  A declaration that the defendant has lost its right to bring any action to recover the suit portions or any part thereof by virtue of section 7(2) of the LO;

(2)  A declaration that by virtue of section 17 of the LO the title of the defendant has been extinguished; and

(3)  A declaration that the plaintiffs have acquired a possessory title to the suit portions.

63.I dismiss the counterclaim.

64.I also make an order nisi that the costs of the claim and the counterclaim be costs to the plaintiffs and to be paid by the defendant, such costs to be taxed if not agreed.