HONG KONG KAM LAN KOON LTD v. REALRAY INVESTMENTS LTD

HCA 15824/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 15824 OF 1999

______________________

______________________

______________________

J U D G M E N T

______________________

1.  Kam Lan Koon (金蘭觀) is a member of the Hong Kong Taoist Association and its temple is situated at Tong Yan Sun Tsuen, Ping Shan, Yuen Long. One could trace back its history to 1831 when a Kam Lan Shrine was founded at Chaozhou (潮州). The first Kam Lan Koon Temple was built in 1900 at Mount Dimao (帝帽山), Dahao Port (達濠埠), Chaozhou. Subsequently, the Koon’s development took its root in Hong Kong. After it had moved to Hong Kong, for many years the Koon only had a shrine in Kowloon City without a temple.

2.  Dr Cheung Kung Leung and his wife owned several pieces of land in Tong Yan Sun Tsuen. Those lots were acquired over the years (from 1949 to 1970). They grouped the same under a big estate called Cheung Tak On Yuen (張德安園). In about 1964, Dr Cheung Kung Leung agreed to donate a piece of land within Cheung Tak On Yuen [“CTOY”] for Kam Lan Koon to build a temple there. The donation was effected by having the land (Lots 533 and 534A in Demarcation District 121, subsequently the lot number was changed to Lot 1943 by way of surrender and re-grant in 1966) assigned to seven people holding the same for Kam Lan Koon. 

3.  At that time Kam Lan Koon was not incorporated and as such not a legal entity that could hold any property in its own name. In 1972, the Koon was incorporated. For present purposes, for reasons I have fully set out in my judgment of 26 July 2005 in this action, the Plaintiff is the relevant entity and I shall continue to refer to it as the Koon.

4.  Access on foot to Lot 1943 in 1965 was by a footpath [“the Old Footpath”] built in 1965. Construction of the temple started in 1966 and Occupation Permit was issued in April 1967. In terms of vehicular access, visitors had to enter through the main gate of CTOY and make use of the private road within the same. That was how building material was transported to the site for construction of the temple. 

5.  Unfortunately, the parties fell out with each other in 1967.  Dr Cheung caused the Old Footpath to be sealed off. The internal decoration of the temple could not be proceeded with. In September 1968, the parties reached an agreement [“the Footpath Agreement”] by which the Koon was permitted to construct a new footpath [“the Footpath”] leading to the newly constructed temple on certain terms and conditions. The New Footpath was to be built mostly on land in CTOY owned by Dr Cheung or his wife.

6.  The Footpath was built in 1969. The grand opening of the temple took place in 1970. 

7.  Notwithstanding the compromise reached in the form of the Footpath Agreement, Dr Cheung and members of the Koon were not on good terms with each other. Dr Cheung wrote letters to the District Office complaining about the use of Lot No.1943 for purposes not authorized by the Government lease and the presence of unauthorized structures. The Koon entered into negotiation with the Government and lawyers were instructed to represent the Koon. Modifications of the Government lease were discussed but the Government required joint application by all 7 co-owners to be made. Since the 7 co-owners included Dr Cheung and his wife and his employee, their co-operation was required. When consent from the three of them was not forthcoming, the four co-owners who were members of the Koon issued legal proceedings in HCMP 209 of 1971 on 10 September 1971. The other three co-owners, the District Commissioner and the Attorney General were named as defendants to the proceedings.

8.  In the meantime, Dr Cheung and his wife had assigned their interest in Lot No.1943 as well as CTOY to his brother Cheung Kung Wing [“CKW”]. The assignment regarding Lot No.1943 was executed on 23 June 1971. The assignments of the other lots in CTOY were executed on the same date, except that for Lot 548A which was executed on 11 September 1972.

9.  Eventually, the Government accepted the application for modification and the Koon paid the premium. There is a dispute as regards the extent to which CKW assisted in achieving that. CKW said he had signed a letter dated 6 November 1973 with the four Koon co-owners informing the Government that he supported the construction of the kitchen and toilets at the Koon and requested the District Office to disregard the disputes between the co-owners in the past. CKW also said after he signed the letter, it was given to the Koon for their handling.

10.  On the other hand, the Koon said CKW retained the letter because he had promised to procure the signature of the remaining co-owner Cheung Yuk Kwai and he had failed to do so. As a result, the Koon could not use the letter. In his deposition before the Registrar, CKW agreed that he did not procure the signature by Cheung Yuk Kwai even though he said in his witness statement that he had undertaken to do so. The letter of modification was not formally executed notwithstanding that premium was paid and accepted by the Government on 30 August 1974.  Further, a letter dated 15 August 1974 from the New Territories Administration to the co-owners still referred to Dr Cheung and his wife as co-owners. On the balance of probabilities, I find that the Koon had not been able to produce the letter to the District Office.

11.  But it does not follow that the relationship between the Koon and CKW was bad.  Judging from the position of the signature of CKW in the letter (in the middle with two signatures of the Koon co-owners on each side) I believe CKW signed the letter at the same time as the Koon co-owners and they were grateful for his signature. Whilst CKW had failed to procure the signature of Cheung Yuk Kwai, I do not believe that was because he wanted to frustrate the lease modification exercise. It is more probably due to his lack of concern over the matter and I do not think such failure marred his relationship with the Koon. The evidence in fact shows that they were on friendly terms during that period.

12.  I would now say something about the use by the Koon of the land of CTOY in the vicinity of Lot No.1943. For the purpose of this judgment, I shall adopt the colour scheme set out in a plan put forward by the parties during the course of the trial to identify the various pieces of land which form the subject matters of this action. I annex to this judgment a copy of the plan for ease of reference.

(a)	Immediately adjacent to Lot No.1943 at the southeast is an area hatched red on the plan which is paved. A skeletal frame supporting a canopy has been erected. This area occupies a large part of Lot No.543 RP. I shall call this the Red Land;
(b)	In front of the Koon is a strip of land coloured yellow on the plan. Part of it is the footpath. Over the years the walls of that part of the footpath were demolished and the adjacent slope had been leveled. I shall call this the Yellow Land;
(c)	To the northeast of the Yellow Land is an area identified as the amenity area on the plan where there are some concrete stools and tables. There are also two gates. I shall call this the Amenity Area;
(d)	Adjacent to the Red Land to the southeast is a small area identified by green dots on the plan. It is the remaining part of Lot No.543 RP. Next to it is an area identified by purple dots on the plan. Having considered the issues raised in the evidence and the submissions of the parties, I think the two areas could be considered together and I shall call these two areas collectively the Inner Garden Area;
(e)	To the immediate west of the Koon and extending to the southwest is an area coloured orange on the plan. I shall call this the Orange Land. Further to the south is an area coloured blue on the plan. I shall call this the Blue Land. I shall also call the Orange Land together with the Blue Land collectively as the Outer Garden Area;
(f)	The footpath leading from the main entrance to the Yellow Land is hatched blue on the Plan. I shall refer to this strip of land as the Footpath although it has to be borne in mind the original footpath included part of the Yellow Land.

13.  The Koon as plaintiff in this action is claiming against the Defendant (who is the current registered owner of these areas, having acquired the various lots in the 1990’s) declaratory relief. In a nutshell, the Koon said it has acquired an indefeasible adverse possessory title which is good against the Defendant because of the effect of the Limitation Ordinance and its occupation of the areas for more than 20 years without the consent of the registered owners.

14.  There are disputes as regards how the Koon used these areas and under what circumstances the Koon came to use the same. The most reliable evidence is the aerial photographs. Both sides have engaged surveyors to prepare reports based on what can be observed from these photographs. Since the surveyors did not refer to anything which this court cannot observe by examining the aerial photographs with naked eyes, there is no reason why this court should hear from these surveyors as to their different interpretations of or different inferences to be drawn from the aerial photos or the different emphasis each of them may have on the same photograph. Expert evidence should be confined to subjects on which the court needs the assistance of experts because a proper understanding of such subjects require special knowledge or experience. I do not think the observations made by the surveyors in the present case come within that category. The parties have wisely decided not to call the surveyors to give evidence at the trial.

15.  I shall discuss the factual disputes below. In view of the legal submissions made before me, I wish to dispose of some legal issues first. In the present case, it is useful to consider the following issues before I embark on a detail discussion of the factual disputes,

(a)	Whether the Limitation Ordinance is invalid by reason of the Basic Law;
(b)	What acts on the part of a trespasser would be sufficient to constitute possession and to what extent is the immediate intention as to the use of the land by the owner relevant;
(c)	What is the requisite intent for adverse possession, in particular the significance of a subjective intention on the part of an occupier to pay rent.

Adverse possession and the Basic Law

16.  Article 6 of the Basic Law provides,

“	The Hong Kong Special Administrative Region shall protect the right of private ownership of property in accordance with law.”

17.  The first part of Article 105 of the Basic Law provides as follows,

“	The Hong Kong Special Administrative Region shall, in accordance with law, protect the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property.”

18.  The Defendant relies on these articles and the decision of the European Court of Human Rights in JA Pye (Oxford) Ltd v United Kingdom [2005] 3 EGLR 1 to contend that the extinguishment of its title by reason of adverse possession is contrary to the Basic Law. Thus, it is said that Section 7 of the Limitation Ordinance is therefore invalid by reason of Article 8 of the Basic Law. Similar argument had been advanced before Deputy Judge Saunders (as he then was) in The Hong Kong Buddhist Association v The Occupiers HCMP 4108 of 2003, 8 September 2006 and His Lordship concluded that Section 7 of the Limitation Ordinance is inconsistent with the Basic Law. When the case was considered by the Court of Appeal, the court did not find it necessary to deal with this issue though Rogers VP observed that there is considerable force in the conclusion reached by the judge.

19.  JA Pye (Oxford) Ltd v United Kingdom [2005] 3 EGLR 1 is not a final decision. Pursuant to a request from the United Kingdom Government in accordance with Article 43 of the Convention, the European Court of Human Rights held a Grand Chamber hearing on 8 November 2006. That case was decided with reference to Article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms. That article provides,

“	Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
	The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

20.  This article refers to a person being “deprived of his possessions” and Article 105 of our Basic Law refers to “lawful deprivation of property”.  In Para.54 of the judgment in JA Pye (Oxford) Ltd v United Kingdom [2005] 3 EGLR 1, the court came to the following findings,

“

In the present case, the court finds that application of section 15 of the 1980 Act, when read with section 75 of the 1925 Act, clearly had such an effect upon the applicants’ property rights, the effect of the provisions being to deprive the applicants of their beneficial interest in the land, which was thenceforth to be held on trust for the Grahams.”

Then, at Para.55,

“	…the combined effect of the provisions was both to deprive the applicants of their substantive property rights and to preclude them from lawfully repossessing the land …”

At Para.56,

“	It was the legislative provisions alone that deprived the applicants of their title and transferred the beneficial ownership to the Grahams and that thereby engaged the responsibility of the state under Article 1 of the First Protocol.”

21.  In short, the European Court found contravention by reason of deprivation of possession.

22.  However, the deprivation of property in Article 105 of the Basic Law is a much narrower concept. This is plain if one reads the Chinese text of the Basic Law. Article 105 is as follows,

“	第一百零五條香港特別行政區依法保護私人和法人財產的取得、使用、處置和繼承的權利,以及依法徵用私人和法人財產時被徵用財產的所有人得到補償的權利。徵用財產的補償應相當於該財產當時的實際價值，可自由兌換，不得無故遲延支付。企業所有權和外來投資均受法律保護。”

23.  The Chinese text refers to “徵用” (in simplified Chinese “征用”). Literally, the expression means resumption, expropriation or compulsory acquisition by the state for public purposes. Mr Chong referred this court to various provisions in the Constitution of the People’s Republic of China to make good this interpretation. Article 13 of the 1954 Constitution provided,

“	第十三条 国家为了公共利益的需要，可以依照法律规定的条件，对城乡土地和其他生产资料实行征购、征用或者收归国有。”

Then, in Article 6 of the 1975 Constitution,

“	第六条 国营经济是国民经济中的领导力量。
	矿藏、水流，国有的森林、荒地和其他资源，都属于全民所有。
	国家可以依照法律规定的条件，对城乡土地和其他生产资料实行征购、征用或者收归国有。”

In Article 10 of 1982 Constitution, which is also the current one,

“	第十条 城市的土地属于国家所有。农村和城市郊区的土地，除由法律规定属于国家所有的以外，属于集体所有；宅基地和自留地、自留山，也属于集体所有。
	国家为了公共利益的需要，可以依照法律规定对土地实行征收或者征用并给予补偿。
	任何组织或者个人不得侵占、买卖或者以其他形式非法转让土地。土地的使用权可以依照法律的规定转让。
	一切使用土地的组织和个人必须合理地利用土地。”

24.  The dictionary meaning of the expression  “徵用” also confines it to situations where title, possession, control or use of the property has been acquired by the government (see Albert Chen, The Basic Law and the Protection of Property Rights (1993) HKLJ 31 at p.60 n.32 and 35).

25.  In a decision of the Standing Committee of the National People’s Congress on the English text of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China adopted on 28 June 1990, it is stated that the English translation of the Basic Law shall be the used in parallel with the Chinese text. In case of discrepancy between the two texts in the implication of any words used, the Chinese text shall prevail.

26.  In the abovementioned article written in 1993, Professor Chen suggested that the discrepancy could be traced back to the Joint Declaration. In the article, the professor suggested it is arguable that the court should, instead of simply relying on the Decision of the Standing Committee, attempt to adopt an interpretation which, as far as possible, reconciles the two versions.

27.  In Lau Kong Yung v Director of Immigration [1999] 3 HKLRD 778, the Court of Final Appeal examined the legal effect of a Decision of the Standing Committee on the interpretation of the Basic Law. The authority of the Standing Committee to interpret laws stems from Article 67(4) of the Constitution as well as Article 158(1) of the Basic Law. It was held that the Standing Committee’s power of interpretation is in general and unqualified term and not restricted or qualified in any way by Article 158(2) and 158(3) of the Basic Law. It was further held that an interpretation by the Standing Committee is binding on the courts in Hong Kong.

28.  Although the Decision of the Standing Committee on the English text of the Basic Law was made before the Basic Law came into effect, the authority of the Standing Committee to interpret law under the Constitution had been provided for under Article 67(4). This court must therefore regard the Decision as binding.

29.  In any event, Section VI of Annex I to the Joint Declaration refers to protection in terms of “compensation for lawful deprivation” of property. Reading in context, the lawful deprivation referred therein is consistent with the narrower concept of “徵用” in the Chinese version.

30.  In Weson Investment Ltd v Commissioner of Inland Revenue [2007] 2 HKLRD 567, Tang VP said at Para.79,

“	‘Deprivation’, in BL 105, is used in the sense of expropriation, which is the expression used in its original Chinese. In my opinion, BL 105 concerns essentially a taking, as under eminent domain.”

31.  I therefore hold that on proper construction, the protection of right to compensation for lawful deprivation of property under Article 105 of the Basic Law does not extend to a case in which a paper title owner of land lost his right to assert his title against a squatter by reason of the Limitation Ordinance. The rationale of the European Court in JA Pye (Oxford) Ltd v United Kingdom [2005] 3 EGLR 1 cannot be applied in connection with our Article 105.

32.  The other parts of Articles 6 and 105 of the Basic Law relied upon by the Defendant protects the rights of private ownership of property in accordance with the law. In the context of ownership of landed property, it is important to bear in mind that the land title system in Hong Kong is an unregistered title system. Registration of title deeds or instruments under the Lands Registration Ordinance per se does not confer any title upon the person who registered. It only confers priority over other person deriving title from an instrument that is registered later. But such priority cannot assist if the instrument registered first in time is invalid in conveying title. The title of an owner is derived from his title deeds. If there is any defect in the title deeds, registration under the Lands Registration Ordinance cannot assist in terms of curing the defect.

33.  There is a fundamental difference between a registered title system and unregistered title system. The point was highlighted in paragraphs 130 to 131 and 140 in the judgment of Deputy Judge Nicholas Strauss QC in Beaulane Properties v Palmer [2006] Ch 79. The Law Commission explained in the 1998 Consultative Document on Land Registration (Cm 4027) the background to Section 75 of the Land Registration Act 1925 and said the following regarding title to unregistered land,

“	Title to unregistered land is relative and depends ultimately upon possession. The person best entitled to the land is the person with the best right to possession of it.”

See also Gray, Element of Land Law, 4^th Edn. Paras.6.4 to 6.7.

34.  For unregistered land, possession can be a root of title, see Gray, Element of Land Law, 4^th Edn. Paras.3.23 to 3.26. A possessory title is a title. Hence, a squatter can sue a stranger to the land for trespass if the former’s possession is interfered with. However, a squatter’s possessory title is defeasible by the superior title of the paper title owner until the former has successfully dispossessed the latter for 12 years under the current Limitation Ordinance. After the expiry of the limitation period, the paper title owner can no longer recover possession from the squatter and the possessory title of the squatter becomes superior to the paper title owner.

35.  But it does not mean the paper title owner loses everything. He still has a good title against the whole world except this particular squatter and his successor in title, see St Marylebone Property Co Ltd v Fairweather [1963] AC 510. The Limitation Ordinance does not effect a parliamentary conveyance passing the title from the paper title owner to the squatter. Hence, if the squatter abandons the property, the paper title owner has a good title to it that cannot be defeated by others.

36.  Notwithstanding the Land Registration Ordinance, the land title system in Hong Kong is similar to the system for unregistered land in England. Therefore, when one considers the protection of private ownership of property under the Basic Law, it is not only the paper title owner’s rights that have to be considered. The squatter also has right stemming from his possessory title that the law recognizes.

37.  It should be noted that JA Pye (Oxford) Ltd v United Kingdom [2005] 3 EGLR 1 was decided in the context of registered land in England. The conclusion of the court on contravention of Article 1 is directed against the cumulative effect of the Limitation Act 1980 and the Land Registration Act 1925. Section 75 of the 1925 Act provides that upon expiry of the limitation period, the estate of paper title owner shall be deemed to be held by him for the time being in trust for the squatter and the squatter having acquired that title may apply to be registered as proprietor of the land.

38.  We do not have the equivalent of Section 75 of the 1925 Act in Hong Kong. Although Section 17 of the Limitation Ordinance stipulates that the title of the paper title owner shall be extinguished upon the expiry of the limitation period, it was held in St Marylebone Property Co Ltd v Fairweather [1963] AC 510 that the extinguishment only has effect as between the paper title owner and the squatter. See also Chan Tin Shi v Li Tin Sung (2006) 9 HKCFAR 29 at Paras.19 and 20.

39.  Hence, under our system, in a dispute between a squatter who claimed to have established full adverse possession and a paper title owner, the court is adjudicating between two competing titles. The issue is which one has a better right to possession. The effect of the Limitation Ordinance is to prescribe that if the squatter has dispossessed the paper title owner for the full limitation period, his title would become superior.

40.  In many instances, the court has to adjudicate upon competing proprietary claims to the same piece of property or the same sum of money. After applying the relevant legal rules or principles (and some of them are statutory, e.g. Land Registration Ordinance prescribing the priority of registered instrument over unregistered instrument; Bankruptcy Ordinance providing for the avoidance of certain dispositions), the court will have to decide which competing claim prevails. In consequence, the losing party’s interest in the property cannot be effectively exercised. But it has never been suggested, nor can it be suggested, that in such circumstances there is a contravention of Articles 6 or 105 in respect of the property rights of the losing party.

41.  I do not see why the same analysis cannot be applicable in the context of the competing claims between the possessory title of a squatter and the paper title of the owner.

42.  In my view, Sections 7 and 17 of the Limitation Ordinance do not contravene Articles 6 or 105 of the Basic Law.

43.  Mr Chan did not rely upon the access to court in Article 35 of the Basic Law. In Stubbings v United Kingdom (1996) 23 EHRR 213, the European Court decided that limitation period for sexual abuse claims does not contravene Article 6(1) of the Convention. With reference to Ashingdane v United Kingdom (1985) 7 EHRR 528, the court set out the relevant principles at para.48 at p. 233,

“

However, [the right of access to the court] is not absolute, but may be subject to limitations; these are permitted by implication since the right of access by its very nature calls for regulation by the State. In this respect, the Contracting States enjoy a certain margin of appreciation … It must be satisfied that the limitations applied do not restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired. Furthermore, a limitation will be incompatible with Article 6(1) if it does not pursue a legitimate aim and if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.”

44.  The European Court went on to hold that the limitation period in that case satisfied these criteria. In Para.49, it held that limitation periods serve important purposes, namely to ensure legal certainty and finality, to protect potential defendants from stale claims which might be difficult to counter, and to prevent the injustice which might arise if courts were required to decide upon events which took place in the distant past on the basis of evidence which might have become unreliable and incomplete because of passage of time.

45.  It also held that the rules applied were proportionate to the aims sought to be achieved.

46.  Whilst counsel did not analyse the matter with reference to Article 35, I have heard submissions on the legitimate purpose of the rules regarding adverse possession. In Pye (Oxford) v Graham [2001] Ch 804, Mummery LJ identified the justifications as follows at Para.43,

“	Such conditions are reasonably required to avoid the real risk of injustice in the adjudication of stale claims, to ensure certainty of title and to promote social stability by the protection of established and peaceful possession of property from the resurrection of old claims.”

47.  In Beaulane Properties v Palmer [2006] Ch 79 at p.130-3, Deputy Judge Nicholas Strauss QC referred to some additional purposes for limitation period: facilitation of conveyancing, protecting certainty of title, avoidance of hardship to the adverse possessor and discouraging the waste of land as a resource. His Lordship examined all these in the context of registered land and concluded that the doctrine of adverse possession did not strike the right balance.

48.  However, one should also note the following observations regarding the legitimacy of such a doctrine in an unregistered land regime. In Paras.176 and 177 of the judgment, these views of the Law Commission were quoted,

“	While the present law can be justified as regards unregistered land, it cannot in relation to registered title” because “unregistered title is possession-based whereas the basis of registered title is the fact of registration.”
“	The main weakness of the law was that the principles determining whether the registered proprietor would lose title by adverse possession were developed for a possession-based system of title and not one founded on registration.”

49.  More significantly for our purposes, the Law Commission said this at para.2.73 regarding the role of adverse possession in the context of unregistered title conveyancing,

“

In relation to land with unregistered title, there are cogent legal reasons for the doctrine. The principles of adverse possession do in fact presuppose unregistered title and make sense in relation to it. This is because the basis of title to unregistered land is ultimately possession. The person best entitled to the land is the person with the best right to possession of it. As we explain below, the investigation of title to unregistered land is facilitated (and therefore costs less) because earlier rights to possess can be extinguished by adverse possession.”

50.  As mentioned above, the existing land title system in Hong Kong is in substance akin to unregistered title. In the context of conveyancing, subject to Section 13 of the Conveyancing and Property Ordinance, a vendor still has to trace his title back to the root of title. Section 13(1)(a)(ii) modifies that by requiring the production of a chain of title of not less than 15 years. The underlying rationale for such a rule is that it would in any event be safe to disregard earlier title deeds by reason of the rules under the Limitation Ordinance and the doctrine of adverse possession.

51.  Hence, the doctrine of adverse possession does serve a legitimate purpose. In the present case, the applicable limitation period is 20 years. Given the very long period allowed for the registered owner to commence legal action, it is not surprising that Mr Chan did not deem it appropriate to submit that the limitation period is disproportionate.

52.  I therefore hold that the doctrine of adverse possession is not inconsistent with the Basic Law.

53.  Since the writing of the earlier part of this judgment, the Grand Chamber of the European Court of Human Rights by a majority of 10 to 7 held on 30 August 2007 that the English law on adverse possession does not violate Article 1.  The majority held that it is not a case of deprivation of property, instead it is a case of control of use of land (para.66 of the judgment). Applying Stubbings v United Kingdom (1996) 23 EHRR 213, it was held that the English law on adverse possession pursues a legitimate aim in the general interest. Further, it was held that the margin of appreciation available to the legislature in implementing social and economic policies should be a wide one and the European Court will respect the legislature's judgment as to what is 'in the public interest' unless that judgment is manifestly without reasonable foundation. At para.74, the majority of the Grand Chamber observed,

“

It is a characteristic of property that different countries regulate its use and transfer in a variety of ways. The relevant rules reflect social policies against the background of the local conception of the importance and role of property. Even where title to real property is registered, it must be open to the legislature to attach more weight to lengthy, unchallenged possession than to the formal fact of registration. The Court accepts that to extinguish title where the former owner is prevented, as a consequence of the application of the law, from recovering possession of land cannot be said to be manifestly without reasonable foundation. There existed therefore a general interest in both the limitation period itself and the extinguishment of title at the end of the period.”

54.  A fortiori, the same must be true for unregistered land.

55.  Even though it is a case of control of use, the Grand Chamber held that the proportionality test has to be satisfied. Thus, the following approach was adopted at Para.75,

“

In other words, the Court must determine whether a fair balance has been struck between the demands of the general interest and the interest of the individuals concerned. In determining whether a fair balance exists, the Court recognises that the State enjoys a wide margin of appreciation, with regard both to choosing the means of enforcement and to ascertaining whether the consequences of enforcement are justified in the general interest for the purpose of achieving the object of the law in question.”

56.  The majority was of the view that a requirement of compensation for the situation brought about by a party failing to observe a limitation period would sit uneasily alongside the very concept of limitation periods, whose aim is to further legal certainty by preventing a party from pursuing an action after a certain date (Para.79). It was further observed at para.83,

“

In the present case, too, whilst it would be strained to talk of the “acquired rights” of an adverse possessor during the currency of the limitation period, it must be recalled that the registered land regime in the United Kingdom is a reflection of a long-established system in which a term of years' possession gave sufficient title to sell. Such arrangements fall within the State's margin of appreciation, unless they give rise to results which are so anomalous as to render the legislation unacceptable. The acquisition of unassailable rights by the adverse possessor must go hand in hand with a corresponding loss of property rights for the former owner.”

57.  Again, the same applies a fortiori to the unregistered land regime in Hong Kong.

58.  The majority therefore concluded that the fair balance required under Article 1 has not been upset under the English regime.

59.  In view of this judgment, there cannot be any doubt that my above conclusion as to the constitutionality of our Limitation Ordinance is correct.

Acts of possession on the part of squatters which may constitute adverse possession

60.  In Lau Wing Hong v Wong Wor Hung [2006] 4 HKLRD 671, Recorder McCoy SC held that there is a divergence between Hong Kong and English law regarding what constitutes adverse possession. According to the learned judge, such divergence stems from the Court of Final Appeal’s decision in Wong Tak Yue v Kung Kwok Wai (No.2) (1997-98) 1 HKCFAR 55 and the decision of the House of Lords in JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419. In the House of Lords decision, Lord Browne-Wilkinson reviewed the development of the law and the relevant cases concerning the concept of “non-adverse possession” and clarified English law on the topic in several aspects and disapproved some earlier English Court of Appeal decisions.

61.  In his closing submissions, Mr Chan SC contended that under Hong Kong law, the Plaintiff has to establish four elements in order to succeed in establishing a indefeasible possessory title against the registered owner,

(a)	physical possession: open, single and effective exclusive control;
(b)	intention to possess / animus possidendi: subjectively so intend and objectively so manifested;
(c)	adverse: in its own right, as of wrong;
(d)	these 3 elements were continuous for over 20 years.

62.  On the first element, factual possession, Lord Browne-Wilkinson in Pye (at para.41) approved the following statement of the law set out in the judgment of Slade J in Powell v McFarlane (1977) 38 C & PR 452 at p.470-1,

“

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. In the case of open land, absolute physical control is normally impracticable, if only because it is generally impossible to secure every part of a boundary so as to prevent intrusion. ‘What is a sufficient degree of sole possession and user must be measured according to an objective standard, related no doubt to the nature and situation of the land involved but not subject to variation according to the resources or status of the claimants’: West Bank Estates Ltd v Arthur [1967] AC 665 at 678-9 per Lord Wilberforce. It is clearly settled that 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. It is impossible to generalize with any precision as to what acts will or will not suffice to evidence factual possession. … 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.”

(In view of the facts of the present case, I have set out the judgment of Slade J at greater length than Lord Browne-Wilkinson.)

63.  Mr Chan asked this court to bear in mind proposition (1) of Slade J in Powell v McFarlane (1977) 38 C & PR 452 at p.470 and His Lordship’s observations regarding the difference between acts of the registered owner and acts of a squatter at p.472. The latter was said in the context of the requisite intention on the part of a squatter and making such intention clear to the world, hence perhaps more relevant to the second element than the first. At this juncture, I would only quote the following observations of Slade J at p.472,

“

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. The position, however, is quite different from a case where the question is whether a trespasser has acquired possession … If [a squatter’s] 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.”

64.  I shall come back to the second element in the next section. At this juncture, I shall examine the first element and consider the implication of the third element on it.

65.  In the light of the judgment of Lord Browne-Wilkinson in Pye, I think it may not be too helpful to regard the third element as a separate element. If it only serves to highlight the requirement that the possession must be without the consent of the registered owner, this can be simply be considered as part of the first element. Treating it as a separate element has a risk of reviving the old abandoned concept of non-adverse possession. After tracing the development of the English law on adverse possession since the statute of James I to the Limitation Act 1980 in Paras. 32 to 35 of the judgment in Pye, His Lordship concluded at Para.35,

“

In my judgment the references to ‘adverse possession’ in the 1939 and 1980 Acts did not reintroduce by a side wind after over 100 years the old notions of adverse possession in force before 1833. Paragraph 8(1) of Schedule I to the 1980 Act defines what is meant by adverse possession in that paragraph as being the case where land is in the possession of a person in whose favour time ‘can run’. It is directed not to the nature of the possession but to the capacity of the squatter. … Although it is convenient to refer to possession by a squatter without the consent of the true owner as being ‘adverse possession’ the convenience of this must not be allowed to reintroduce by the back door that which for so long has not formed part of the law.”

66.  It is also important to note that the primary question posed by the phase ‘adverse possession’ for the purpose of the Limitation Ordinance is whether time has started to run in favour of a person in occupation. In other words, the test is whether the owner could have successfully brought an action for possession against that person to which he did not have any valid defence. This makes perfect sense because it would be unfair to the paper title owner to hold that time has started to run from a date when he could not have claimed successfully for possession against the occupier. 

67.  Paragraph 8(1) of Schedule I to the 1980 Act is in similar terms to Section 13(1) of our Limitation Ordinance which is based on the 1939 Act. The only significant difference between the 1980 Act and our Limitation Ordinance is that we do not have the equivalent of Paragraph 8(4) of Schedule I to the 1980 Act which reads,

“	For the purpose of determining whether a person occupying any land is in adverse possession of the land it shall not be assumed by implication of law that his occupation is by permission of the person entitled to the land merely by virtue of the fact that this occupation is not inconsistent with the latter’s present or future enjoyment of the land.
	This provision shall not be taken as prejudicing a finding to the effect that a person’s occupation of any land is by implied permission of the person entitled to the land in any case where such a finding is justified on the actual facts of the case.”

68.  But Lord Browne-Wilkinson’s conclusion on the meaning of “adverse possession” was not based on Paragraph 8(4) although that paragraph fortifies that conclusion for an analysis in the context of the 1980 Act. If I may respectfully say so, His Lordship’s conclusion was based on a sound review of the developments since 1833 and must be highly persuasive even in the context of our Limitation Ordinance.   

69.  The old notion of non-adverse possession which Lord Browne-Wilkinson regarded as heresy under the modern law has its origin in the judgment of Bramwell LJ in Leigh v Jack (1879) 5 Ex D 264 at p.273. It was applied by the English Court of Appeal in Wallis’s Cayton Bay Holiday Camp Ltd v Shell-Mex and BP Ltd [1975] QB 94. See paras.44 and 45 of the judgment in Pye. The principle was considered by the English Court of Appeal in Buckinghamshire County Council v Moran [1990] Ch 623 and Slade LJ identified it as the doctrine of implied licence at p.637,

“

that in one special type of case there would be implied in favour of the would be adverse possessor, without any specific factual basis for such implication, a licence permitting him to commit the acts of possession upon which he sought to rely; the effect of implying such a licence would, of course, be to prevent the squatter’s possession from being ‘adverse’. That special type of case was broadly one where the acts of an intruder, however continuous and far-reaching, did not substantially interfere with any plans which the owners might have for the future use of undeveloped land.”

70.  Slade LJ had some conceptual difficulties with this doctrine and His Lordship had already raised his doubts in Powell v McFarlane (1977) 38 C & PR 452. In Moran, Slade LJ criticized the doctrine as too broadly formulated and not justified as an adaptation of the literal application of the statutory provisions, see p.639-640. See also the criticism of Nourse LJ in Moran at p.644 –647.

71.  I refer to the views expressed in Powell v McFarlane (1977) 38 C & PR 452 and Buckinghamshire County Council v Moran [1990] Ch 623 because both cases were cited with approval by the Court of Final Appeal in Wong Tak Yue v Kung Kwok Wai (No.2) (1997-98) 1 HKCFAR 55.

72.  In Pye, Lord Browne-Wilkinson characterized the doctrine of implied licence as heresy insofar as it is applied as a proposition of law. But His Lordship did not rule out the possibility of a finding of fact as to the lack of intention to possess on the part of squatter if the evidence and the facts of case so justify. At para.45 at p.438C,

“

The highest it can be put is that, if the squatter is aware of a special purpose for which the paper owner uses or intends to use the land and the use made by the squatter does not conflict with that use, that may provide some support for a finding as a question of fact that the squatter had no intention to possess the land in the ordinary sense but only an intention to occupy it until needed by the paper owner. For myself I think there will be few occasions in which such inference could be properly drawn in cases where the true owner has been physically excluded from the land. But it remains a possible, if improbable, inference in some cases.”

73.  This echoed the observations of Slade LJ in Moran at p.639H to 640A,

“

If in any given case the land in dispute is unbuilt land and the squatter is aware that the owner, while having no present use for it, has a purpose in mind for its use in the future, the court is likely to require very clear evidence before it can be satisfied that the squatter who claims a possessory title has not only established factual possession of the land, but also the requisite intention to exclude the world at large, including the owner with the paper title, so far as is reasonably practicable and so far as the processes of the law will allow. In the absence of clear evidence of this nature, the court is likely to infer that the squatter neither had had nor had claimed any intention of asserting a right to the possession of the land.”

74.  Hence, as a matter of English law, the doctrine of implied licence stemming from Leigh v Jack is no longer good law although the rejection of that doctrine should not be taken as barring the court from assessing the intention of the squatter in the light of the known intention of the paper owner regarding future use of the land. The latter is a question of fact.

75.  Moreover, the rejection of the doctrine of implied licence as a matter of law should not be taken as barring the court from making a specific finding of fact of a permission impliedly granted by the registered owner if the circumstances and the facts of the case so warranted. This is clearly borne out by the second part of Paragraph 8(4) of Schedule I to the 1980 Act. Hence, Slade J emphasized that the error of the doctrine was to imply a licence as a matter of law “without any specific factual basis for such implication”. In short, one should not imply a licence simply because the use made by the squatter does not conflict with the intended future use of the land by the registered owner. But if there are other facts and circumstances supporting a finding of fact that the owner had impliedly permitted the land to be used by the squatter, the court must consider whether such a finding is warranted based on all the evidence.

76.  Mr Chan referred to the English case of Ellett-Brown v Tallishire (29 July 2002, unreported, CA) as an instance where a finding of implied licence was made on the facts of the case, including the good relationship between the neighbours. Counsel urged this court to have regard to the following observations of Lloyd LJ,

“

The paper title owner is not to be displaced too readily. It would be a sad day for the law if the courts were to attach overmuch legal significance to acts which pass for nothing between good neighbours. It would lead to this, that adjoining owners would have to be continually on the watch in case their rights were being infringed, and would then have either to stand on their rights, or grant an express licence for fear of losing their paper title. This could do nothing but harm in an area where, as all experience shows, once good relations have broken down, bitter enmity so often sets in. Anyone who has ever tried a typical boundary dispute, with all the expense of spirit which such disputes invariably entail, not to mention the expenditure of time and money, will recognize at once what I mean.”

77.  I entirely share the sentiment expressed in these observations. However, whether a finding of implied licence can be made must depends on the facts and evidence of each case. Mr Chong submitted that the facts of the present case do not justify an inference of implied licence. I shall discuss the question of implied licence when I deal with the facts of the case in details.

78.  How about the position in Hong Kong? In Wong Tak Yue, the Court of Final Appeal regarded the law set out by Slade J in Powell v McFarlane (1977) 38 C & PR 452 as correct, see p.68F. Factual possession was not an issue in that case. I do not discern anything said in that judgment as being inconsistent with the current position of the English law on factual possession discussed above.

79.  The Chief Justice did refer to adverse possession as “possession as of wrong” at p.68H. But His Lordship was actually quoting from Nourse LJ in Moran. As discussed above, the Court of Appeal in Moran categorically rejected the doctrine of implied licence as a principle of law. The observation of Nourse LJ on possession as of wrong was made in the context of contrasting prescription with limitation at p.644D to E. The point that was made was that whilst in a case of prescription it was the intention of the true owner that is decisive, in the case of limitation it was the intention of the squatter which is decisive. The Chief Justice was adopting the observation in the context of a discussion on the requisite intent. It is impossible to read that as an endorsement of the Leigh v Jack line of cases.

80.  In addition to Wong Tak Yue, Mr Chan relied on two other Court of Final Appeal’s decisions regarding his third element: Wu Yee Pak v Un Fong Leung (2004) 7 HKCFAR 498 at Para.10 and Common Luck Investment Ltd v Cheung Kam Chuen (1999) 2 HKCFAR 229 at p.235-6. Having read these judgments carefully, I do not discern anything which suggests Hong Kong law on factual possession should be different from the English law as set out by Lord Browne-Wilkinson.

81.  In his closing submissions, Mr Chong referred to a dicta of Cockburn CJ in Seddon v Smith (1877) 36 LT 168 and its reference by Hunter JA in Ho Hang Wan v Ma Ting-cheung [1990] 1 HKLR 649. What was actually said by Cockburn CJ was,

“	To my mind it makes no difference whether there be enclosure or not. Enclosure is the strongest possible evidence of adverse possession, but it is not indispensable.”

That was said in the context of a case where a farmer used part of an oblong strip of land as part of his farm. There were ancient hedges on the two sides of the land and some evidence as to gates being erected at the two other sides.

82.  Hunter JA only made a passing reference to this dictum when His Lordship discussed the significance of animus possidendi in Ho Hang Wan at p.652H.

83.  I do not think these references could be regarded as authorities for a proposition of law that once a squatter proved enclosure, adverse possession is established regardless of how the enclosure came to be erected and the relationship between the parties at the material times. The case of Wu Yee Pak v Un Fong Leung HCMP 3773 of 1998, 11 Feb 2002, Yeung J (as he then was) is an illustration to the contrary. The decision was upheld by the Court of Appeal and the Court of Final Appeal (2004) 7 HKCFAR 498. To be fair to Mr Chong, I do not think he intends to go that far.

The requisite intent: animus possidendi

84.  I now turn to the intention to possess. The necessary intent is an intention to possess and it is not necessary to show that the squatter had an intention to own or even an intention to acquire ownership: see Moran (1988) 86 LGR 472 at p.479; adopted in the Court of Appeal [1990] Ch 623 at p.643E and approved by Lord Browne-Wilkinson in Pye at [2003] 1 AC 419 para.42.

85.  In Powell, Slade J explained the requisite intention as follows,

“	…  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.”

86.  This statement was endorsed by the Chief Justice in Wong Tak Yue (at p.68J) as well as by Lord Browne-Wilkinson in Pye at para.43.

87.  The point of divergence between Wong Tak Yue and Pye is whether such intention could be established if the squatter was willing to pay rent if asked. In Wong Tak Yue the Court of Final Appeal held that willingness to pay rent is completely inconsistent with the intention to possess. At p.69F, the Chief Justice said,

“

The fourteenth defendant’s intention to pay rent if the owners had requested payment demonstrated that he was not intending to exclude the owner with the paper title but showed that he was treating himself as enjoying possession under a lawful title from the owners. His intention to possess was not ‘as of wrong’ but was ‘as of right’. Such intention is similar to the occupier’s offer to pay rent in R v Secretary of State for the Environment, ex p Davies (1990) 61 P &C R 487…”

88.  In Pye, Lord Browne-Wilkinson held otherwise. It was held that R v Secretary of State for the Environment, ex p Davies (1990) 61 P &C R 487 was wrongly decided and the judgment of Lord Diplock in Ocean Estates Ltd v Pinder [1969] 2 AC 19 at p.24 was to be preferred. At para.46, Lord Browne-Wilkinson said,

“

Once it is accepted that the necessary intent is an intent to possess not to own and an intention to exclude the paper owner only so far as is reasonably possible, there is no inconsistency between a squatter being willing to pay the paper owner if asked and his being in the meantime in possession. An admission of title by the squatter is not inconsistent with the squatter being in possession in the meantime.”

89.  This court is bound by Wong Tak Yue and the contrary view of Lord Browne-Wilkinson does not represent Hong Kong law. Mr Chong accepted that I must apply Wong Tak Yue.

90.  Intention has to be manifested and proved. In Pye Lord Hope said at para.70,

“	But acts of mind can be, and sometimes can only be, demonstrated by acts of the body. In practice, the best evidence of intention is frequently found in the acts which have taken place.”

To the same effect is the dictum of Sachs LJ in Tecbild Ltd v Chamberlain (1969) 20 P & CR 633 at p.643,

“	In general, intent has to be inferred from the acts themselves.”

91.  I have already quoted the observations of Slade J in Powell (at p.472) concerning the implication of equivocal acts on the lack of animus possidendi. At p.476, Slade J further alluded to the difference between a trespasser and a squatter with the intention of dispossessing the paper title owner. Then at p.480, the following remarks were made,

“

In view of the drastic results of a change of possession, however, a person seeking to dispossess an owner must, in my judgment, at least make his intentions sufficiently clear so that the owner, if present at the land, would clearly appreciate that the claimant is not merely a persistent trespasser, but is actually seeking to dispossess him.”

Mr Chan invited this court to adopt the same approach and referred also to the judgment of Peter Gibson LJ in Prudential Assurance Co Ltd v Waterloo Real Estate Inc [1999] 2 EGLR 85 at p.87,

“

It would plainly be unjust for the paper owner to be deprived of his land where the claimant had not by his conduct made clear to the world including the paper owner, if present at the land, for the requisite period that he was intending to possess the land. The claimant must of course be shown to have the subjective intention to possess the land but he must also show by his outward conduct that that was his intention.”

92.  At p.476, His Lordship observed on the lack of evidential value of self-serving statements by a squatter as regards his intention in contrast with a declaration that he did not have the requisite intention. The same observation was made by the Chief Justice in Wong Tak Yue.

The Footpath

93.  Turning now to the specific areas in contention, I shall apply the above general principles of law in determining the Koon’s claim for adverse possession. I start by considering the position regarding the Footpath. There is no dispute that the Koon had been using the Footpath as the means of access from its main entrance at the public track since its construction. It is now made up of two areas: the Footpath and the Yellow Land. I shall focus on the Footpath first.

94.  As mentioned, the Koon was originally permitted to construct and use the Footpath pursuant to the Footpath Agreement. To decide on the Koon’s claim and the Defendant’s claims, the following issues have to be resolved,

(a)	Whether the Koon had possession of the Footpath without the consent of the then registered owner for a continuous period of more than 20 years;
(b)	Whether the Koon had the requisite animus possidendi regarding the Footpath;
(c)	If the Footpath Agreement was still subsisting in 1992 or at any time thereafter, whether the Defendant was at liberty to terminate the Footpath Agreement by notice or it was estopped from doing so by proprietary estoppel. If the Defendant was at liberty to do so, has it done so?

95.  On issue (a), under the Footpath Agreement, the occupation and use of the Footpath by the Koon was non-exclusive and with the permission of CTOY. It was non-exclusive because although the agreement provided for the building of walls along the two sides of the Footpath, Clause 5 expressly provided for a pair of gates to be erected near to a pond to facilitate CTOY’s transportation of agricultural produces. There is no provision limiting the duration of the Footpath Agreement. The Koon had undertaken to construct the Footpath and pay for all electricity and water charges regarding the Footpath.

96.  In the album of aerial photos, there are photos taken in 1964 and 1969. The photo of 1969 was taken at a higher altitude and the relevant lots are at the top right hand corner of the photo. Whilst it may not be easy to pick up the fine details, one can have a fair idea of the various lots of agricultural fields in CTOY and the vicinity of the Koon and the Footpath. A comparison with the aerial photo No.5240 taken in December 1964 shows that the general topography and landscape in that area had not changed much between 1964 and 1969. This is reinforced by comparing the survey maps of 1964, March 1968 and July 1973.

97.  The Footpath was constructed on land situated in Lots 548 s.A, 546, 545, 544 and 556. In 1968, Dr Cheung and his wife were the respective owners of these lots except Lot No.545. That lot was owned by Tang Mui Pan Tso.

98.  At the time of the Footpath Agreement, the Koon would not have any use of this pair of gates. On the other hand, people of CTOY would have reasons to use the gates for access to the adjacent lots. There was also a flight of stairs leading from Lot No. 544 to one of the gates. Mr Wong Tung Wing, one of the representatives who signed the Footpath Agreement on behalf of the Koon admitted in his evidence that the gates were built at the request of the Cheung Family to serve their purposes. On the evidence, I find that the gates were built to facilitate access by people of the CTOY. It was therefore envisaged by the parties to the Footpath Agreement that CTOY could use the Footpath for purposes unconnected with the Koon. In other words, the Koon did not have exclusive occupation or control of the Footpath.

99.  Mr Chong did not suggest that there was any adverse possession when the Footpath was occupied under the Footpath Agreement. However, counsel submitted that the Footpath Agreement was terminated upon the transfer of ownership to CKW. Counsel also relied on the fact that Lot No.545 had never been owned by the Cheung Family.

100.  I can deal with the last point shortly. It is quite plain that at the time of the making of the Footpath Agreement, all parties believed Dr Cheung or his wife could grant permission for use of Lot No.545 for the purpose of constructing the Footpath. There were two possible scenarios: (1) Dr Cheung or his wife was authorized by the true owner of Lot No.545 to grant such permission; or (2) they were not authorized but were encroaching on Lot No.545 themselves. On scenario (1), the position of Lot No.545 would be the same as the other parts of the Footpath. On scenario (2), since the occupation of Lot No.545 stemmed from the permission granted by CTOY, viz. Dr Cheung and his wife, the occupation by the Koon would enure for the benefit of CTOY on the presumption of encroachment unless a different intention is shown by the conducts of the parties, see Kingsmill v Millard (1855) 11 Exch 313; Smirk v Lyndale Developments [1975] 1 Ch 317. I do not find any evidence of contrary intention. Since the Defendant had acquired the paper title from the owner of Lot No.545 as well as CKW, the paper title and the possessory title (vested on CKW by reason of presumption of encroachment) had merged subject to the argument regarding the termination of the Footpath Agreement.

101.  Mr Chong submitted that a licence is terminated upon an assignment by the registered owner. Counsel relied on Kung Wong Sau Hin v Sze To Chun Keung [1996] 2 HKC 616 at p.627.  In that case, Le Pichon J (as she then was) was dealing with a bare licence. It was held that the principle of Coleman v Foster (1865) 1 H&N 37 was applicable,

“	[A licence] conveys no interest whatever. If a man gives a licence and then parts with property over the privilege is to be exercised, the licence is gone.”

Her Ladyship further said at p.627C,

“	A purchaser who buys land with notice of a licence is not bound by it unless the circumstances are such that his conscience is affected. In such cases, he may be compelled to give effect to the licence through the mechanism of a constructive trust.”

102.  I can make these points in connection with this submission.

(a)	I respectfully agree with what Her Ladyship said in the context of a bare licence. However, as I shall discuss below, we are not dealing with such a case here;
(b)	CKW was not a purchaser. The land was assigned to him by way of gift. In the eyes of equity, a volunteer always takes subject to any equitable rights attaching to the property at the time when the legal interest was transferred to him, see Snell’s Equity 31st Edn. p.68;
(c)	If there are circumstances making it unconscionable for a successor in title to act in a manner inconsistent with the licence, the court may restrain him from doing so. Constructive trust, proprietary estoppel and irrevocability of licence acted upon can be regarded as different facets of this underlying precept.

103.  On the evidence, it is quite plain that the common understanding of CKW and the Koon was that the Footpath Agreement remained in force notwithstanding the assignment of the land to CKW.

104.  CKW testified that the Footpath Agreement was given to him when the land was assigned to him. He was aware that the Footpath was essential to the Koon as it was the only means of access given that the Old Footpath had been blocked by Dr Cheung. He regarded it as a convenience for the local residents to facilitate access to the Koon.(Bundle C p.76 to 78). In his cross-examination, Mr Chong did not suggest to CKW that the Footpath Agreement had been terminated upon the assignment in 1971. Having regard to the CKW’s testimony on the Footpath and the Footpath Agreement and the objective conducts of the parties over the years, it can readily be inferred that CKW did regard himself as being bound by the Footpath Agreement.

105.  Despite the hostility between Dr Cheung and the Koon, CKW had kept a good relationship with the Koon. He signed the consent letter of 6 November 1973 and the Koon conferred an honorary title to him as a chairman. A plaque was presented to him and he was invited to the functions of the Koon. It is also not in dispute that in 1974, the Koon had tried to lease a piece of land from CKW although the exact location of the piece of land is disputed. If the relationship between CKW and the Koon was as bad as Mr Chong tried to depict, I do not believe that the Koon would have done so.

106.  Mr Chong relied on several matters to contend that CKW was not on good term with the Koon. Counsel referred to the hostilities between Dr Cheung and the Koon. However, the consent letter of 6 November 1973 showed that CKW was able to reach a compromise with the Koon. Moreover, the consent letter is good contemporaneous evidence showing that CKW had accepted the Koon to be its neighbour. I have already dealt with Mr Chong’s submission regarding the failure to procure the signature of Cheung Yuk Kwai.

107.  The Koon also referred to the barbecue incident. I think the significance of that incident had been exaggerated. There was no suggestion that the Koon had complained to CKW about the incident. In paragraph 69 of his witness statement Wong Tung Wing said the cause of resentment was that the holding of a barbecue near the Taoist Temple or at its garden was a deliberate attempt to harass or embarrass the Koon. He then said in paragraphs 71 and 72 that this caused the Koon to decide to prevent people from “intruding into its garden”. The barbecue incident took place in 1971. However, the aerial photos of 16 November 1972, 20 February 1973 and 6 November 1973 clearly show that in 1971, the Koon had not begun to encroach upon land in the vicinity by turning the same into a garden attached to the Koon in any shape or form. It was only in July 1975 that the Koon resolved to go ahead with the gardening works and made an appeal for donation from members, see the minutes of the Koon at Bundle F(1)B at p.400423. 

108.  In his witness statement, Chan King Tak also pinpointed the harassment occasioned by the barbecue as the cause of extensive works by the Koon. When he was cross-examined, Chan King Tak admitted that the barbecue incident was not the cause of the 1975 works though he tried to explain his statement by saying that these things happened in sequence and there had been discussion on the construction of the fencing system a the Orange Land since 1972. If that incident had caused so much concern on the part of the Koon, it would be surprising that there is not a shred of evidence regarding protestation being made to CKW or his servants. Further, if the Koon did not know that the Orange Land were part of CTOY and regarded that they were entitled to object barbecue being held there as it was part of their garden, the most natural thing for them to do was to erect the fencing system in 1972 when they did some leveling works there. The consent letter shows that at least by 1973, CKW was on talking terms with people in the Koon. If the Koon was still bothered by an incident a few years ago (and there is no evidence of any incident of harassment after that occasion in 1971), I see no reason why they did not raise its concern with CKW.

109.  I find that after CKW had become the owner, the relationship between him and the Koon was a cordial one. It was further improved after the mother of CKW had moved to live at the Cheung Family House. She had paid visits to the Koon as a worshipper and the Cheung Family had on several occasions donated oil to the Koon. This is admitted by Wong Tung Wing and corroborated by the testimony of Fong Ying Woo as well as contemporaneous document (see the receipt of 15 November 1983 at Bundle F(2) C p.500961).

110.  The good relationship between CKW and the Koon extended all the way to the 1980’s. In 1991, the Koon still issued invitation to CKW to its function. In a telephone conversation between Kwan Yau Hang and CKW (which was taped by the Koon without any knowledge on the part of CKW), CKW said he had been friendly with the last generation of the Koon members and he knew them all. In the telephone conversation, CKW also said he would not wish to offend anybody and he had not acceded to a request by the Defendant. That was hardly the attitude of a person who had been hostile to the Koon.

111.  Mr Chong had seized on parts of the evidence by CKW during cross-examination to submit that CKW was actually unfamiliar with those at the Koon. I agree with Mr Chan that was quoting the evidence out of context. CKW had clarified elsewhere that he only knew the name of Wong Tung Wing but not the names of the others in the Koon due to the lapse of time. 

112.  Thus, the objective evidence was that CKW was content with the continuation of the Footpath Agreement and he had not taken any action inconsistent with it.

113.  Mr Chong referred to the acts of sabotage on the part of Dr Cheung and his wife and their expulsion from the Koon. I do not see how such matters could be elevated to acts of termination of the Footpath Agreement. There is no suggestion whatsoever that Dr Cheung and his wife had obstructed or prevented the Koon from using the Footpath. Nor had they demanded the Koon to cease using the Footpath. Even though they were not friendly with the Koon, I do not find any acts on their part that can in law be taken as action for determination or repudiation of the Footpath Agreement.

114.  Wong Tung Wing said in his own evidence that despite the assignment of the land to CKW, the licence was bound to continue.

“	問 ： 但係張恭良醫生轉咗名畀張恭榮之後，嗰個協議書你認為仲有冇效？
	答 ： 一定有效。
	問 ： 一定有效。即係你認為張恭榮醫生--張恭榮都會繼續係應該履行嗰個1968年嘅協議，繼續畀你哋用？
	答 ： 應該係。
	問 ： 但係畀你哋用，唔係永久畀咗你哋，都係佢哋嘅物業嚟，係咪？
	答 ： 即係佢一定要有條路畀我哋用嘅。”
(Evidence of 5 October 2004 at p.464 of Transcript)

He confirmed this in his re-examination, see Transcript at p.572-3. He regarded the Koon to have the right to use the Footpath for access forever.

“	問 ： 你哋個目的係點樣呀，唔係擁有嗰笪地？
	答 ： 唔係擁有，但係我有權永久都可以出入嘅。
	問 ： 用嗰個行人小徑？
	答 ： 用嗰個行人小徑出入，因為經過嗰陣時咁多人嘅協議，又寫咗呢個協議書。”

115.  According to the understanding of Wong Tung Wing, although the Koon was given the right to use the Footpath, the land was not given to the Koon. So long as the Koon could exercise its right of access, it had no intention of barring the owner from entering or using the footpath as well (See p.469 of Transcript).

116.  Several witnesses called by the Plaintiff told this court that the pair of the gates were locked by the temple keeper of the Koon. However, there is also contradictory evidence that the gates were not locked (see Para.13 of witness statement of Wong Nam Kwong; Para.13 of the witness statement of Kwan Yau Hang; evidence of Chan King Tak on 20 October 2004 at p1172 E of the Transcript though he said it was locked at a later stage).

117.  Wong Tung Wing put the matter ambivalently in his supplemental witness statement, stating in paragraphs 10 and 11,

“	This metal gate was installed with a bolt and a ring so as would enable the same to be locked from the side of the new footpath.”

Chan King Tak’s witness statement said the same in paragraphs 52 and 53.

118.  For the defence, Cheung King Fung testified that though there were bolts at the gates, there was no lock. Cheung King Nam testified that there were locks on the CTOY sides of the gates but not the other side. However, I do not find Cheung King Nam’s evidence on this aspect to be reliable. He said he was responsible for the maintenance of the gates. Yet he did not repair them notwithstanding they were clearly out of repair. 

119.  On the whole, I do not find the evidence as regards the locking up of the two gates by the Koon to be satisfactory. I find it difficult to understand why if they had actually witnessed the locking up of the gates, they did not say so in their witness statements. And some of them even made contradictory statements in their witness statements. I find that these witnesses had embellished their evidence in the witness box in order to bolster up the case of the Plaintiff. Further, given the avowed purposes for the construction of the two gates as set out in Clause 5 of the Footpath Agreement and confirmed by Wong Tung Wing in his evidence, I do not believe the Koon had locked up the gates during the time when the Cheung Family was the owner of CTOY. 

120.  I accept the evidence of the defence witnesses that at all time when the Cheung Family was there, people of CTOY could have free access to the Footpath and the Koon had never prevented them from doing so. Given that the Cheung Family did not need to use the Footpath for access to their own house, there is not much evidence about their use of the Footpath. There were occasions after the purchase of the land by the Defendant that its representatives used the Footpath for inspection of the land. Those were occasions in 1992 and afterwards. Cheung King Fung also gave evidence about his gaining access to the Orange Land through the Yellow Land and the Red Land during the period between 1974 and 1985. The Yellow Land was part of the new footpath.

121.  The interest of the Koon (or at that stage, the unincorporated association) under the Footpath Agreement is clearly more than that of a bare licensee. It was at least a contractual licence supported by consideration on the part of the Koon in terms of the promise to construct the Footpath and the gates and to pay for the water and electricity charges. A contractual licence may in some instances give rise to an equitable interest by way of constructive trust or proprietary estoppel binding upon a successor in title other than a purchaser in good faith without notice, see E R Ives Investment Ltd v High [1967] 2 QB 379 contra. Ashburn Anstalt v Arnold [1989] Ch 1and also Gray, Elements of Land Law, 4^th Edn., paras.12.222 to 12.234 and 12.363 to12.371.

122.  The Footpath Agreement was not executed as a deed, hence there cannot be any easement by express grant. But there could be an easement by implied grant arising out of necessity. In considering the case of easement, I think one should not confine to what happened after the making of the Footpath Agreement. Although there is not much evidence as regards the circumstances under which Dr Cheung granted permission for the construction of the Old Footpath in CTOY, I can infer that it was granted in conjunction with the grant of Lot No.1943 to the seven persons. Since Lot No.1943 would not be accessible without any footpath, the grant of permission to use the Old Footpath can be construed as an implied grant of easement. The blocking of the Old Footpath by Dr Cheung necessitated a new access road to be provided. In those circumstances, the Footpath should be regarded as a substitute for the Old Footpath and the Footpath Agreement should be taken as the variation of the route by agreement under an easement impliedly granted when the lot was granted to the representatives of the Koon. I can take the law from para.8.131 of Gray, Elements of Land Law, 4^th Edn.,

“

The classic case of necessity is provided by the ‘landlocked close’. If V transfers land to P which has no legally enforceable means of access except across land retained by V, it is clear that the courts will imply in favour of P an easement of access even though the transfer to P made no express reference to such a right. This implication of rights plainly emanates from the principle against derogation from grant. It is for V to select the particular route of access, but once nominated this route cannot later be varied without agreement.”

123.  Upon the blocking of the Old Footpath, Lot No.1943 became landlocked again. That unilateral act of blocking was in breach of the Koon’s right under the easement. Instead of seeking relief in court, the Koon managed to come to term with Dr Cheung under the Footpath Agreement. In the circumstances, the correct interpretation in law must be that there was an agreement by the parties to change the nominated route. Hence, the right of the Koon in respect of the Footpath is a right stemming from the same implied easement granted originally when the land was granted to the representatives of the Koon in 1964. Hence, the exchange in 1965 (where the various lots acquired by the representatives by way of gift were exchanged with a new lot number being granted as Lot No.1943) is a matter of no moment regarding the position between Dr Cheung and the Koon. Likewise, the existence of the Old Footpath is neither here nor there.

124.  A lacuna in the easement analysis is Lot No.545. There cannot be any derogation of grant regarding the owner of Lot No.545 since that owner had not been the owner of Lot No.1943. Hence, in respect of the portion of the Footpath falling within Lot No.545, one must regard it as a licence. But it is a licence coupled with an interest in land. Such a licence could not be revoked during the subsistence of the easement, see Gray, Elements of Land Law, 4^th Edn., para.4.94; Megarry & Wade. The Law of Real Property, 6^th Edn. Para.17-005. 

125.  Mr Chan argued that it is a case of implied licence, viz. upon assignment to CKW, by reason of the conducts of the parties, CKW impliedly granted a similar licence to the Koon regarding the Footpath.

126.  The following matters are relied upon by the Defendant to put forward a case of implied licence,

(a)	Good relationship between CKW and the Koon;
(b)	Use of the Footpath in the same way as before;
(c)	CKW’s grant of permission to the Koon to use other land within CTOY.

127.  Passive acquiescence is not enough to establish implied licence. There must be some overt acts on the part of the licensor referable to a licence having been granted to give rise to an implication by conduct, see R (Beresford) v Sunderland City Council [2004] 1 AC 889, in particular Paras.76 to 83.  

128.  Between 1974 and 1990, the mother of CKW lived at CTOY with some servants. Hence, CKW must have had clear knowledge about the Koon’s use of the Footpath. The good relationship between the parties had to be considered in that light. In my judgment, against such background, it could be readily infer a licence having been impliedly granted by CKW based on some overt acts indicating consent given to the Koon to use the Footpath. For reasons given below, my finding is that CKW had actually granted permission to the Koon to use the Red Land and the Inner Garden Land. Since these were adjacent to the Footpath (the Yellow Land was part of the Footpath) and were accessible to the Koon through the Footpath, it must have been implicit in the grant of such permission that the Koon could continue to use the Footpath. 

129.  Further, though the consent letter of 6 November 1973 did not expressly referred to the use of the Footpath, the consent should be understood against the background that the Footpath was the only means of access to the Koon. It would be absurd to suggest that CKW was willing to compromise with the Koon as manifested in the consent but at the same time he withheld permission to the Koon to use the Footpath. In my view, had a bystander asked CKW during his ownership of CTOY whether he permitted the Koon to continue to use the Footpath, he would have said, “Of course I did.” Likewise, if someone were to ask those in the Koon whether they had the permission of CKW to use the land, they would have answered, “Of course we did.” That was exactly the response of Wong Tung Wing when he was cross-examined about the validity of the Footpath Agreement after CKW became the owner of CTOY. The matter was so clearly understood between the parties that nobody had deemed it necessary to raise it. 

130.  Even though some overt acts were required, there is no need to have an overt act that spelt out the licence in express terms. Otherwise, it would be a case of express licence rather than implied licence.

131.  Therefore, I am of the view that there were overt acts from which an implied licence can be inferred. Given the common understanding of the parties, the relationship between them and their conducts throughout the course of CKW’s ownership of CTOY regarding the Footpath, I am satisfied that the case of implied licence has been made out.

132.  Moreover, the Koon had incurred substantial expenses in the construction and maintenance of the Footpath. Even after CKW had become the owner of CTOY, the Koon had done extensive works in terms of the building and consolidation of the retention wall supporting the Footpath and the landscaping at the Yellow Land which formed part of the Footpath. My finding is that during the period, both CKW and the Koon were operating under the belief that the Footpath Agreement remained in force. The Koon had improved the Footpath on such basis. In such circumstances, it would be unconscionable for CKW to deny that the Koon continued to have permission to use the Footpath as per the Footpath Agreement notwithstanding the assignment of the land to him and he would be estopped from doing so in accordance with the principle set out in Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] 1 QB 133 (note) and Tong Tim Nui v Hong Kong Housing Authority [1999] 4 HKC 466. 

133.  As discussed above, the critical test is whether CKW could have succeeded in an action for trespass and ejectment against the Koon regarding the Footpath at any time between 1971 and 1992. In my judgment, he could not. The Koon would have been able to defeat such claims on the following grounds,

(a)	irrevocable licence coupled with an easement;
(b)	implied licence; or
(c)	proprietary estoppel.

134.  Hence, as regards the occupation and use of the Footpath by the Koon, no right of action has been accrued to CKW between 1971 and 1992 and time did not start to run. There was no adverse possession by the Koon for the purpose of Section 13(1) of the Limitation Ordinance.

135.  By reason of my finding on the access of the Cheung Family members and their servants to the Footpath and the use of the Footpath for access by those acting for the Defendant for the purpose of inspection of the land, the Koon had not acquired any possession to the exclusion of the paper title owner. Mr Chong submitted that this court should take into account of the open nature of the Koon in the consideration of its exclusive control of the land. In my judgment, that is a red herring. The access of the Cheung Family and their servants to the Footpath was not based on their right to visit the Koon as members of the public. Instead, it is based on CKW’s ownership of the land and the terms on which the Koon was permitted to use the Footpath.

136.  It also follows from the above analysis that the Koon did not have the requisite animus possidendi to dispossess CKW in respect of the Footpath. The Koon had not made its intention sufficiently clear so that CKW would clearly appreciate that it was not merely exercising its right to use the Footpath under the Footpath Agreement but was actually seeking to dispossess him.

137.  Thus, the Koon’s claim for a declaration of superior adverse possessory title over the Footpath must fail.

138.  The next question is whether the Defendant is entitled to recover possession of the Footpath from the Koon. I have found that the Koon had acquired rights against CKW regarding the use of the Footpath under three different routes. Implied licence simpliciter would not be binding on the Defendant as purchaser of CKW. However, the irrevocable licence coupled with an easement and proprietary estoppel could be operative against a successor in title. An easement, being an incorporeal hereditament, is a species of real property. Being proprietary in nature, it is binding on a successor in title.

139.  As regards proprietary estoppel, Mr Chan relied on Mark Pawlowski, The Doctrine of Proprietary Estoppel  (1996) p.130-141 to contend that until the right is crystallized by a court order, it is an inchoate equity. Even so, counsel has to accept the following observations of the learned author at p.134-5,

“	… an estoppel-based (inchoate) equity will be binding on a purchaser of the legal estate who takes with notice of the circumstances giving rise to the equity. …There is also support for the view that constructive notice will suffice for this purpose.”

140.  An up-dated discussion of the problem can be found in Gray, Elements of Land Law, 4^th Edn., Paras.12.233 to 12.234 and Paras.12.368 to 12.371. For my part, I will adopt the approach of the Vice Chancellor in IDC Group v Clark [1992] 1 EGLR 187,

“	35.	The result, as it seems to me, is that in the normal case a conveyance of land subject to or with notice of prior incumbrances or prior interests will not operate so as to make enforceable under a constructive trust such prior incumbrances or interests which would otherwise be unenforceable. However, in certain circumstances equity raises a constructive trust because it is unconscionable for the person having received such property not to give effect to the terms on which he received it. …
		It is important always to bear in mind that it is of the greatest importance that the title to land should be capable of being ascertained in accordance with well-known procedures. To raise constructive trusts which do not fit into the conveyancing machinery currently operating, thereby giving rise to liabilities of which purchasers might otherwise not be aware, is a dangerous course to pursue.
	36.	In my judgment, the decision in Ashburn Anstalt does not warrant the creation of a constructive trust unless there are very special circumstances showing that the transferee of the property undertook a new liability to give effect to provisions for the benefit of third parties. It is the conscience of the transferee which has to be affected and it has to be affected in a way which gives rise to an obligation to meet the legitimate expectations of the third party.”

141.  In the present case, there are good grounds for holding that the Defendant should be bound by the proprietary estoppel. As Mr Chong pointed out, the agent of the Defendant had inspected CTOY before completing the purchase. The agent was fully aware of the Footpath being used as the means of access by the Koon. The Defendant had all along been content with letting the Koon to use the Footpath since 1992. Since 1992, the Koon had incurred substantial expenses in maintaining the Footpath.

142.  Given that the Footpath Agreement only permitted the Koon to use the land concerned as non-exclusive footpath, there is no material difference between the right acquired by the Koon under the two alternative routes except in one respect. If the Koon were only successful in its contention of proprietary estoppel, I do not think equity requires that the Koon be allowed to use the Footpath for an indefinite period. However, since the Koon also succeeds on easement, the question of relief to be granted for proprietary estoppel becomes academic. 

143.  However, whether its rights stem from easement or proprietary estoppel, the Koon has not contended it has any right to use Footpath other than for ingress and egress. This would be more relevant to the Yellow Land, which I shall consider below. Neither is the Koon entitled to the exclusive occupation of the Footpath. As a matter of law, an easement must not exclude the grantor from possession, see Gray, Elements of Land Law, 4^th Edn., Paras.8.71 to 8.74; Copeland v Greenhalf [1952] Ch 488.  At para.8.73, Gray summarize the position as follows,

“	An easement cannot be allowed to become ‘the equivalent of ownership’ of the entire servient tenement.”

And at Para.8.74,

“

An easement, properly so called, may not assert a degree of possessory control which sterilizes a significant proportion of the land claimed as servient. … The user asserted must not represent an unacceptable ‘invasion of the servient land’, leaving the servient owner with ‘no more than a shadow of ownership and possession’.”

144.  Mr Chan submitted that even if there is an easement, the court should still grant possession of the Footpath to the Defendant subject to the easement. An order of possession would evict the Defendant from the Footpath and I am not sure this is the right relief in the particular circumstances of the present case. I have not come across an order for possession with a rider that its enforcement be subject to an easement of right of way in favour of the person to be evicted. It would be confusing to the bailiff if a writ of possession were issued in those terms.

145.  It seems to me it would be more appropriate to grant declaratory relief and/or injunctive relief to clearly identify the extent to which the Koon should be permitted to use the Footpath in the future. Mr Chong formulated the following relief in his Counterclaim to Counterclaim,

“	A declaration that the Defendant is bounded by the Plaintiff’s proprietary/ equitable interest of and in that part of the land forming the said footpath and it is not entitled to recover possession of the same so long as the same remains used as means of ingress to and egress from Lot 1943.”

146.  Mr Chan submitted that such a declaration suggests that the Defendant’s right of possession is curtailed by the Plaintiff’s proprietary/equitable interest and could give rise to an implication that the Koon had a better right of possession to the footpath.

147.  In my judgment, the proposed declaration will be unobjectionable if, (1) it is clearly spelt out that the Koon’s proprietary or equitable right to use the Footpath is confined to the use of the same for ingress and egress; and (2) instead of referring to the Defendant not being entitled to recover possession, it shall declare that the Defendant is not entitled to obstruct the Koon from using the Footpath for ingress and egress from Lot 1943.

148.  At the same time, I do not know whether the Defendant wishes to ask for more specific restrictions as regards the Koon’s activities at the Footpath to be set out in some declarations and/or injunctive relief.

149.  I shall hear parties on the appropriateness and the terms of such relief in the light of the above findings and conclusions.   

The Yellow Land

150.  The Yellow Land was part of the Footpath. Over the years, the Koon had demolished the walls on the two sides and constructed planters and some other landscape features there. The aerial photos showed that the planters and landscape features were not there in December 1974 but were definitely in place in December 1976. The aerial photos of December 1975 were taken at a higher altitude and I cannot tell by such photos whether the works had been completed in 1975. In the context of the present case, it does not matter much whether such works were completed in 1975 or 1976. 

151.  The analysis with regard to the Footpath should equally be applicable to the Yellow Land. Even though the Koon had expanded the user to recreational use instead of merely using it for access, the expanded use did not impose any substantial increase in burden on the servient land since the maintenance of the Yellow Land was done by the Koon. I do not think  such expanded use is so drastically out of line with the permitted use for access that it constituted a repudiation of the Footpath Agreement. It is understandable that CKW did not find that objectionable. The Koon remains as a place of worship. Applying the law set out in McAdams Homes Ltd v Robinson [2005] 1 P & CR 30, the easement is not lost on account of such change of use. The relevant test is set out in Paras.50 and 51 of the judgment of Neuberger LJ,

“	50.	The authorities discussed above appear to me to indicate that that issue should have been determined by answering two questions. Those questions are:
		(i)	whether the development of the dominant land, ie the site, represented a "radical change in the character" or a "change in the identity" of the site (as in Wimbledon, and indeed as in Milner's and RPC Holdings) as opposed to a mere change or intensification in the use of the site (as in Glass and Cargill, and indeed in Giles);
		(ii)	whether the use of the site as redeveloped would result in a substantial increase or alteration in the burden on the servient land, ie the cottage (this test being that laid down in Harvey and in Wimbledon and applied in Milner's and RPC Holdings).
	51.	In my opinion, the effect of the authorities in relation to the present case is that it would only be if the redevelopment of the site represented a radical change in its character and it would lead to a substantial increase in the burden, that the dominant owner's right to enjoy the easement of passage of water through the Pipe would be suspended or lost.”

152.  Even though the areas of that portion of the Footpath had been increased significantly by reason of the construction of a terrace and re-alignment of the retention wall since about 1972, given my finding on the relationship between the parties and the indisputable knowledge of CKW regarding the same, I am of the view that it is a clear case of implied licence by which the Koon was permitted to expand the Footpath in that manner.

153.  Admittedly, the easement of necessity does not extend to recreational uses. Is there any other right the Koon could rely upon to assert a right of such use against the Defendant?

154.  In the pleadings, apart from the case based on adverse possession, the Plaintiff only advanced a case of easement and proprietary estoppel for using the Footpath as a means of access, see Para.58A and 58B. Hence, it is not Mr Chong’s contention that the Koon shall continue to have any right to use the Yellow Land for recreational purposes even if the Plaintiff failed on its case of adverse possession. Submissions were made by counsel on this basis.

155.  In view of that, it would not be right for this court to adjudicate the matter on any other basis. Once I reach the conclusion of dismissing the Koon’s case based on adverse possession, the Koon is restricted to the right to use the Yellow Land for ingress and egress.

156.  For the same reasons that I give regarding the Footpath, I think it is not appropriate to order possession. It is more apposite to grant declaratory and/or injunctive relief.  I will also hear parties on the terms of such relief.

Knowledge of the Koon as to the ownership of the adjacent land 

157.  At this juncture, I digress a little to consider the issue of the Koon’s awareness as to who were the owners of the land in the adjacent areas. The Koon’s case is that they only knew that the basketball court was part of CTOY. Apart from the footpath, they said they thought the other disputed lands were not owned by anyone. In particular, they said they were not aware that CKW had title to most of the disputed lands.

158.  Mr Chan submitted that the requirement of having a pair of gates at the Footpath under the Footpath Agreement showed that the Koon was aware that the land in the vicinity belonged to Dr Cheung and his wife. On the other hand, witnesses from the Koon testified that they had no idea as regards the ownership of the Red Land, the Amenity Area, the Inner Garden Area and the Outer Garden Area. Wong Tung Wing said in his evidence that he thought the Footpath was built at the boundary of the land of CTOY.

159.  At the same time, Wong Tung Wing also said that the pair of gates were to facilitate people of CTOY getting water at the Blue Land for their vegetables (Transcript p.377C). In the 1960’s, there were two small ponds at Lot No.566 near to the pair of gates. Based on the evidence before me, I find those to be the ponds which supplied water for the agricultural produces for CTOY. Hence, members of the Koon were aware of the use of at least part of Lot No.566 by people of CTOY.

160.  The survey maps showed that by 1968, there was a wire mesh fencing system enclosing the land occupied by CTOY. Part of the enclosed land (e.g. Lot No.545) was not actually owned by Dr Cheung or his wife. However, the only exit to that fencing system was the main gate of CTOY. Several witnesses of the Koon testified to the existence of the fencing system or at least the part around the disputed land. They said the fence appeared to be erected by different persons as they were not uniform. In my view, it does not matter whether the whole fencing system was erected by the same person. So long as there was a complete enclosure with only one opening at the main gate of CTOY, the owner of CTOY could reasonably regard his land as being secured.

161.  I do not believe the Koon had no knowledge that the land in the vicinity of the Footpath belonged to CTOY. After the blocking of the Old Footpath, the Koon would naturally find other means of access to their site. If there was abandoned land in the vicinity that could provide access, I believe they would have used such land for constructing their footpath. Hence, if they found the land beyond the Footpath to be abandoned, I cannot understand why the Koon would take the trouble of seeking indulgence from Dr Cheung to use his land for the construction of a new footpath given the hostility between the Koon and Dr Cheung at that stage.

162.  It is inherently unlikely that when the route of the new footpath was designated and when discussion was made for a provision for the pair of gates that nothing had been said about the ownership of the land in the immediate vicinity.  Given that the mother of CKW had been residing at CTOY with some servants from mid 1970’s to 1990 and having contacts with people of the Koon, it is also inherently unlikely the Koon did not learn from her that the disputed lands were owned by the Cheung Family.

163.  Some members of the Koon parked their cars near to the water tower which had always been there. It was just adjacent to the Amenity Area. I find it unlikely that they had no idea that the Amenity Area was part of CTOY. Their cars had to gain access through the gate of CTOY. Chan King Tak admitted that he knew the water tower was part of CTOY. There was simply no credible basis for them to come to the view that the land immediately adjacent to the water tower was not part of CTOY. As Chan King Tak himself testified on 19 October 2004 (Transcript p.1100), one would naturally acquire some knowledge regarding ownership of land in the vicinity.

“	問 ： 點解你又知道紅色交叉嗰度係張家嘅地方，而行過啲又覺得唔係張家嘅地方，橙色嗰個地方？
	…
	答 ： 係，我泊車嗰度，係。呢樣就點樣答你好，即係你喺嗰度行走咁耐，你好自然會知，即係好自然會--點樣講，即係聽嚟聽去會知道咁樣樣，即係唔係話刻意性有邊個講畀我聽，咁但係好自然就會知。”

164.  In my view, it is disingenuous for the witnesses of the Koon to suggest that they had no idea regarding who owned the land in the vicinity. They admitted that they knew the water tower and the basketball court were part of the land of CTOY. They also knew that Lot 1943 was originally part of CTOY. They knew that there were fencing at the outer parameters of CTOY and they knew that the only means of access before the construction of the footpaths was the main gate of CTOY. They approached CKW or his mother for the use of the land in the vicinity (and I shall discuss the dispute regarding the subject matter of the 1974 agreement below). They also knew that the land at the front of the Koon on which the Footpath was built (which was subsequently converted to the Yellow Land) belonged to CTOY. The Amenity Area was just the continuation of the same piece of land leading to the water tower (which they also knew to be part of CTOY). Under such circumstances, it is incredible that they had not acquired some idea over the years as to who owned the land in the vicinity. 

165.  Given the enclosure of the land of CTOY with its main gate as the only exit and the admitted knowledge as regards the use of at least part of the land in Lot No.566, and the evidence as regards the seeking of permission from the Cheung’s Family to use the Inner Garden Land which I shall refer later on, I find on the balance of probabilities that the Koon was aware that the Cheung Family was the owner of the land in the vicinity.

The Amenity Area

166.  In 1975, a gate was built between the Amenity Area and the Yellow Land to facilitate the keeping of the dogs at the Amenity Area by the Koon. A concrete table and some stools were also built there. A storage annex of 40’ x 8’ x 11’ was constructed. Occasionally, the Koon used the Amenity Area as temporary kitchen.  

167.  There is a dispute regarding whether one could gain access to the Koon by walking from the water tower straight across the Amenity Area before 1999. The Koon also called witnesses who testified that at the same time, iron mesh was built between the Amenity Area and the water tower. According to Hui Ka Cheung, the Koon fenced up the Amenity Area in 1975. The evidence of Chan King Tak was less certain. He said part of the Amenity Area was fenced by iron mesh whilst there were hedges at some other parts at the eastern boundary of the Amenity Area.

168.  At one point, Chan King Tak agreed that at some point in the past, supplies for vegetarian feasts were delivered by trucks parking near the water tower with the materials brought to the Koon through the Amenity Area though he qualified that by saying that the materials had to be passed along over the top of the iron mesh. I must say I find the suggestion of materials being delivered over the top of the iron mesh unbelievable. On the other hand, it makes sense for delivery to be done through the Amenity Area if there was no iron mesh there.

169.  A number of witnesses called by the Defendant testified that before 1999, there was no iron mesh between the water tower and the Amenity Area. Thus, Cheung King Fung said he could walk from the Cheung Family House to the Koon via the Amenity Area. The conveyancing clerk who conducted the inspection of CTOY in April 1992 and Cheung King Nam also testified the same.

170.  On this point, I prefer the evidence of the defence witnesses. The conveyancing clerk was aware that the Amenity Area was part of the land sold to the Defendant in 1992. It is inherently unlikely that he would make no complaint if the whole area were fenced off. Notwithstanding Mr Chong’s cross-examination, I find him to be a truthful witness in telling the court the route he took at the time of inspection.

171.  On the other hand, I have reservations about the credibility of the Koon’s witnesses by reason of their untruthfulness regarding the knowledge as to the ownership of the adjacent land, the 1985 parking incident and the subject matter of the 1974 licence discussed below.

172.  Mr Chong asked this court to examine a photo taken in 1976 (exhibit P-27) closely. Counsel suggested that a concrete pillar supporting the iron mesh at the far side of the Amenity Area (not the one immediately behind the lady shown in the picture) could be seen. I have examined the photo several times, particularly paying close attention to the spot identified by counsel. I am afraid I do not find the photo of much assistance in terms of proving the existence of iron mesh separating the water tower and the Amenity Area in 1976.

173.  On the evidence before me, I find that at all time up to 1992, the Koon did not completely fence up the Amenity Area. As I said previously, members of the Cheung Family were able to have free access to the Footpath and I accept the evidence of Cheung King Fung and Cheung King Nam that they could walk straight from the water tower to the Koon through the Amenity Area without any obstacle.

174.  I accept that the Koon had used the Amenity Area for keeping dogs and storage. They also used the Amenity Area occasionally as temporary kitchen area and for recreational purposes. However, I also find that  members of the Cheung Family could use the Amenity Area whenever they wished. Apart from the storage annex, I do not regard the other users as demonstrating clearly to the world including CKW that the Koon was intending to possess the land exclusively. Temporary uses as kitchen, meditating or resting at the concrete table and stools and keeping of dogs (without any dog houses or cages) were ambivalent transient activities that could not be regarded as acts of possession by a trespasser. Whilst the building of the concrete table and stools were acts of more permanent nature, it was more like the improvement of the land for the common benefit of the Koon as well as the Cheung Family (given both could have used the same) than an act of possession by the Koon.

175.  The storage annex is different. Since its construction, it was used by the Koon exclusively. There is no suggestion that CKW had granted any express permission for the Koon to do so. Neither am I satisfied that it is a case of implied licence. It is more probable to be a case of a minor encroachment by a neighbour which CKW did not find it worthwhile to pay much attention to it. In my view, the Koon should be regarded as having adverse possession of the storage annex since 1975.

176.  Hence, the Koon succeeds on its claim of superior possessory title in respect of the storage annex, but not as regards the other parts of the Amenity Area. Since the Koon had fenced off the Amenity Area in 1999, the Defendant is entitled to an order for possession regarding the area except the storage annex.

The Red Land: pre-1975 uses

177.  Witnesses for the Koon testified that they had started to use a small corner of the Red Land adjacent to the Koon for burning incense since 1972. The aerial photos seem to corroborate that. However, it is a matter of little moment. Applying the principles of law set out above, I do not think the occasional use of a small corner of the Red Land for the purpose of burning incense can be regarded as exercising sufficient degree of exclusive physical control to qualify as possession.

178.  The evidence of the aerial photos show that the paving of the Red Land and the erection of the frame for the mobile canopy were done at the same time as the works at the Yellow Land and the landscaping of the Inner Garden Area. These took place in 1975 to 1976.

What happened in 1974-6?

179.  CKW said the Red Land was the subject matter of an oral licence in 1974. This oral licence was partly evidenced by an unsigned draft tenancy agreement of 1974 prepared by the Koon at Bundle F(2) p.500894. On the other hand, the Koon said this was in respect of a licence to use the basketball court for parking purposes.

180.  In my judgment, the genesis of this document and the true arrangement agreed between CKW and the Koon in 1974 are critical to the determination of the claims of the Koon regarding not only the Red Land, but also the Outer Garden Area and the Inner Garden Area.

181.  There are conflicting versions regarding the subject matter of the licence in 1974. Having considered all the evidence, my conclusion is that neither CKW nor the witnesses called by the Koon had told this court the whole truth.

182.  To find out the truth, given my views on the unreliability of the witnesses, it is necessary to start from the incontrovertible evidence. The first item of incontrovertible evidence is the draft tenancy agreement of 1974. It should be noted that the Koon’s witnesses made no reference to this document (nor did they refer to the Footpath Agreement) in their earlier round of evidence even though they should be quite aware of the document since it emanated from them. The document was first alluded to by CKW in his Second Affirmation of March 2003. The document is a draft tenancy for some land within CTOY. In the draft agreement, the Koon was to lease the land for gardening and landscaping purposes.

183.  Wong Tung Wing dealt with this document in his supplemental witness statement of 7 October 2003 at paras.32 to 44. The Koon’s case was that they had approached CKW’s mother for permission to park at the basketball field. The document was drafted with that purpose in mind, see para.36,

“	Therefore, on a day in May 1974, I prepared a draft lease setting out the terms upon which the Plaintiff would be willing to rent the ‘basketball field’ within [CTOY] from CKW for a term of 5 years.”

184.  He went on to explain why the document was not signed but permission was actually granted for such use on a gratuitous basis. He also referred to the attempt to renew the permission to use the basketball field in 1979 at Para.43.

185.  As regards the garden and landscape features in the vicinity of the Koon, Wong Tung Wing referred to them in Para.47 of the supplemental witness statement,

“

The term [CTOY] has been a term used commonly to describe the low lying land comprising, inter alia, Lots 544, 545 and 546 and 1944 [viz. the basketball field and the Cheung Family House]. At no time has the Taoist Temple and its private garden (i.e. the subject matter of dispute between the Plaintiff and the Defendant) be considered or called [CTOY].”

186.  Hence, the witness was trying to paint a picture that CTOY had nothing to do with the garden and landscape features and as far as the approach for permission in 1974 was concerned, it was only about the parking of cars at the basketball field.

187.  Hui Ka Cheung’s witness statement of 6 October 2003 and Chan King Tak’s witness statement of 7 October 2003 were to the same effect.

188.  These statements were adopted by the witnesses as their evidence in chief at the trial. However, it is quite plain that this version of the defence case does not tally with the documents. In the draft tenancy agreement, the intended land use by the Koon was specifically stated to be for developing a garden and the building of pavilion (“開闢園林花圃及建設亭閣之用”). There is no reference to the use of the basketball court for parking purposes.

189.  Though the document was not signed, I have no doubt that permission was actually granted by CKW to the Koon to use some of the land in CTOY for garden purposes. In a minutes of the Koon in April 1979 (Bundle D(2) p.300354), there is a clear reference to the such permission going to expire in May 1979. That was exactly five years from 1974. It refers to “園地”, garden land.

190.  The documents of the Koon show that the Koon proceeded with development of the garden in 1975. On 23 July 1975, the Koon passed a resolution to go ahead with the development and funds were collected from members for that purpose. The bi-monthly income and expenditure statement of the Koon showed that expenses regarding construction works for the garden started to be incurred in July to August 1975. From the aerial photos, it can be seen that the works in 1975 were very extensive, covering the Red Land, the Yellow Land as well as the Inner Garden Area and the Outer Garden Area. Para.25 of the witness statement of Low Sai Hong of 28 May 2000, Paras.72 and 73 of the first witness statement of Wong Tung Wing and Para.47 of the witness statement of Hui Ka Cheung identified the works carried out by the Koon. Subject to my specific finding against the Koon regarding the fencing system at the Amenity Area, I accept their evidence that these works were executed by the Koon. Except some works relating to the retaining wall or the prevention of landslip underneath the Footpath along the side of the Yellow Land, it can be seen from the aerial photos that these works were actually carried out in 1975.

191.  I have not overlooked CKW’s evidence that he was responsible for the building of the iron mesh and gate at the northern side of the Orange Land. His evidence was taken by way of deposition before the Registrar. Having considered his evidence carefully, I do not find his evidence on this point to be reliable. As Mr Chong pointed out in his submissions, CKW gave different versions at different stages of his evidence as regard the timing and the person who built the fencing system at the Orange Land. On any one of his different versions (all prior to 1975), the timing is not right. The aerial photos show clearly that the fencing system was not there prior to 1975. CKW professed to build the fencing system for his car-park. Yet he did not apply for a permit to operate any car-park until 1981 and that was in respect of another lot (Lot No.522) which he only acquired in 1978.

192.  On the dispute about the fencing system at the Orange Land, I prefer the evidence of the Plaintiff’s witness to that of CKW. I find that the fencing system was built in 1975 by the Koon as part of the garden project. It can be seen from the aerial photos that the fencing system was built at the same time as other works carried out by the Koon in 1975.

193.  In another minutes of the Koon in respect of a meeting in February 1976, there was a resolution for the employment of a gardener. It can therefore be inferred that the construction works regarding the garden was more or less completed by then.

194.  For some reasons, the audited financial statement of the Koon for 1974-75 is unavailable. However, we do have financial statements for other years. There is no record of any gardening expenses prior to 1975. The gardening expenses since 1975-76 (the financial period ended on 30 June of each year), as recorded in the audited financial statements, were as follows,

Year	Amount
1975-6	$	33,227.20
1976-7	$	596.00
1977-8	nil
1978-9	$	5,000.00
1979-80	nil

Starting from 1980-81, the item disappeared from the financial statements. The Koon produced some vouchers and receipts to evidence some expenses regarding the maintenance of the garden in respect of cutting of grass since 1983 and the repair works in 1996, 1997 and 1999 in Bundle F(1)B.

195.  The expenses incurred by the Koon for the garden were substantial. During the financial year of 1975-6, the total income of the Koon was $123,068.31. The money spent on the garden was more than a quarter of the yearly income. Hence, it is unlikely that the Koon had not considered whether it had the right to use the land for building its garden before it embarked on the exercise.

196.  Wong Tung Wing gave the following evidence regarding the Koon’s consideration in the building of the new Footpath,

“	問 ： 你金蘭觀唔係話啲睇落去荒地就可以攞嚟用嘅咩，你哋唔係咁嘅心態嘅咩？
	…
	答 ： 係同--佢哋同意，然後先可以嚟起㗎嘛。
	問 ： 唔，即係你哋金蘭觀理事嘅心態，就係要物主、業主或者當地控制咗當地圍住嘅人嘅同意先至會用啲地？
	答 ： 唔係，呢個你當然要，即係你--人哋送--唔係，你點樣起廟呢？人哋唔送，唔畫個地出嚟，你點樣做呢？”
“	問 ： 因為你哋金蘭觀理事嘅諗法，係唔會諗住係唔同業主傾，自己以為荒蕪冇人，就會攞嚟用，冇咁諗嘅，係咪？請坐，黃生。有冇咁諗？
	答 ： 呢個問題就諗唔通，應該就冇咁樣咁嘅諗法。
	問 ： 你哋金蘭觀嘅理事嘅諗法係咪要用一啲地方，一定徵求當地嘅業主或者圍網圍起咗嘅擁有人嘅同意先至會用，唔會就咁就攞嚟用？
	答 ： 呢個梗係喇，你一定要經過人哋，即係經過人哋同意，即係冇嚟質詢你，你先可以用。
	問 ： 即係話業主如果隨時出現質詢你，你就一係畀番業主，一係就同佢傾租約或者傾畀佢--佢畀你繼續用，係咪咁？
	答 ： 如果有人嚟質詢你，佢如果唔同意，當時你就唔可以用，嗰啲……
	問 ： 即係金蘭觀從來冇諗住，你嚟質詢，我都唔理你，我都係要用，你嚟告我。冇咁諗過，係咪咁？
	答 ： 應該就冇咁樣諗。
	問 ： 即係話金蘭觀一貫嘅作風、一貫嘅諗法，以為嗰度荒蕪冇人理嘅，用住先。但係如果業主一出現，就會畀番佢或者會同佢傾，或者會徵求佢嘅同意，係咪咁？
	答 ： 呢個當然，如果你係業主出現，出現，佢話即係地係佢，即係佢有嚟質詢你，你梗係呢啲--呢啲你梗係要依手續同人哋做。”

197.  I see no reason why the Koon would suddenly change their attitude with regard to the garden and landscaping works in 1975. Wong tried to explain why the Koon regarded the Inner Garden Area, the Outer Garden Area and the Red Land as abandoned by referring to the Koon’s activities in 1971 to 1975. I do not think that explanation holds any water. As shown by the aerial photos, there is a world of difference between the pre-1975 activities and the 1975 works undertaken by the Koon. The pre-1975 activities can hardly be regarded as acts of possession and were transient in nature. The 1975 works were very extensive.

198.  Further, it is my finding that the Koon was aware of CKW’s ownership of these areas in 1974.  Wong Tung Wing admitted that the Koon knew of the transfer of title of CTOY to CKW in 1974. For the same reasons I have given earlier regarding the Amenity Area, I do not believe that the Koon had no idea that the Red Land, the Inner Garden Area and the Outer Garden Area were part of CTOY. I find Wong Tung Wing less than forthcoming in telling the court how the Koon came to know of the transfer to CKW. The Koon was represented by solicitors at that time and it can be inferred that they had at least consulted the solicitor about the transfer even if they did not first learn about the transfer from the solicitor.

199.  Given that the Koon had to invest substantially in the 1975 works, it is incredible that they did not find out the ownership of the land on which such works were to be executed before doing so. Since madam Cheung was living in CTOY, it would not be difficult for the Koon to enquire with CKW through her. Further, if the Koon wished to verify, they could have asked their solicitor to do a land search. Wong Tung Wing fudged the question by saying he was not the person responsible for doing so when he was cross-examined as to the steps taken by the Koon to check the ownership of the land in 1975. Hui Ka Cheung and Chan King Tak testified that since the Koon had been using the land for their purposes, they regarded the land as theirs. I have already explained why I rejected this assertion. I also rejected Hui’s evidence about the Koon growing plants at the Inner Garden Area prior to 1975. It is clearly contradicted by the aerial photos of 1973 and 1974.   

200.  In his evidence given in the witness box, Wong Tung Wing admitted that the Koon had approached CKW through madam Cheung for leasing land to the Koon for its garden.  However, he said the intended leased area was the basketball field. Chan King Tak also testified to the same effect in the witness box. But neither of them referred to the approach to CKW for garden land in their witness statements. They were cross-examined about the glaring omission. Neither of them could give satisfactory reply to account for not telling the whole story in their statements.

201.  Further, Wong Tung Wing was cross-examined as regards the 1979 minutes which clearly refers to garden as opposed to car-park. He acknowledged it was so written but he could not offer any explanation why it was so recorded if the permission from CKW in 1974 was for car-park as opposed to garden.

202.  Wong Tung Wing had personal involvement in the discussion with madam Cheung in 1975 and 1979. He tried to give an account for the genesis of the 1974 draft tenancy and how it ended up with a permission for parking at the basketball field. But his account was very confusing and different versions were put forward at different stages of his evidence.

203.  At first, on 4 October 2004, he said he was not present when the matter was discussed with madam Cheung in 1974 and it was Wong Lung who contacted madam Cheung for a lease of garden land. He also said before Wong Lung went, he had draft the 1974 document to be brought along. About two or three days later, madam Cheung told Wong Lung that the land could not be leased. The Koon resolved to appoint Wong Lung to request for permission to park at the basketball field. Mr Chong also got the impression that Wong Tung Wing was not present at the discussion with madam Cheung, see p.408H of transcript. Wong Tung Wing also emphasized he learnt all these from Wong Lung, see p.411D and 411S to 412B.

204.  On the next day, 5 October 2004, Wong Tung Wing changed his evidence. He said he was appointed as one of the three representatives of the Koon to discuss with madam Cheung, see p.423J to 424A. He testified that though he initially was not there, he joined the discussion later (p.424J to L). When it was pointed out to him that he had testified on the previous day that he was not present, he said he could not remember after such a long time and he retracted his evidence a few moments ago. At p.426M, he switched back to the case that it was Wong Lung who discussed with madam Cheung about the parking. Later on, Wong Tung Wing reverted back to the story that he was present, see p.444J to N.

205.  On 5 October 2004, Wong Tung Wing also testified that the draft agreement was only prepared after madam Cheung had told them of CKW’s permission to park at the basketball field  (p.436B). If that were so, it is difficult to understand why the draft agreement referred to the use of the land as garden and for building pavilion as opposed to permission to park cars.

206.  The other witnesses called by the Koon did not participate in the process and their evidence shed little light on how the matters were discussed with CKW in 1974.

207.  In my judgment, the reason for Wong Tung Wing’s confusion is that what he testified about parking at the basketball field is not the truth. What actually happened was that after the Koon learnt of the transfer of CTOY to CKW, they approached CKW for permission to use some of the land in the vicinity for gardening purposes in 1974. CKW gave them permission to do so and with the owner’s blessing, the Koon undertook extensive works in 1975.

208.  The 1974 permission had nothing to do with car-parking at the basketball field. It is quite clear to me that the car-parking story is a poor attempt to account for the 1974 draft document which the Koon initially did not think the Defendant would be able to produce. Whilst there was reference to decoration of the car-park in some of the minutes of the Koon, I do not think they are of relevance. There is no independent evidence as regards the location of the car-park referred to. In any event, the 1979 minutes clearly referred to garden land as opposed to car-park.

209.  I also reject the Koon’s story that when they approached CKW for lease of garden land, they asked for land in the basketball field. If the Koon had regarded the Outer Garden Area and Inner Garden Area as their land already in 1974, there was more than enough land for developing their garden and they would not have needed to ask for more land from CKW. This point is clearly borne out by the fact that from 1975 to 1992, even though the Koon had fenced up the northern boundary of the Outer Garden Area, the development of the garden and landscaping mainly took place at the Inner Garden Area and the Yellow Land. The evidence also shows that even though members of the Koon might have used the Outer Garden Area for large gatherings occasionally, most of the time there was not much activity there. As testified by the surveyors called by the Defendant, the grass at the Outer Garden Area were allowed to grow to such a height which made access to the area rather difficult. The Koon simply did not need so much land for their garden.    

210.  Though CKW’s evidence was that he only gave permission to the Koon in 1974 to use the Red Land, I think he did not tell the court the full picture. It is inherently unlikely that if the permission was confined to the Red Land, he did not raise objection to the more extensive works at the Inner Garden Area and the construction of the fencing system at the northern boundary of the Orange Land. I have already explained why I reject CKW’s evidence regarding his construction of that fencing system. CKW was obviously quite confused at some parts of his evidence. I have to bear in mind that he was an old man giving evidence about events which took place a long time ago and he was suffering from illness at the time of his deposition. I do not think one should take all his evidence at its face value.

211.  In my judgment, the permission granted by CKW encompassed the Red Land, the Inner Garden Area as well as the Outer Garden Area. Hence, the Koon’s works in 1975 covered all these areas in addition to the Yellow Land.

212.  Since the occupation and use of these areas by the Koon between 1974 to 1979 were with the permission of CKW, there could not be any adverse possession during these years.

What happened after 1979?

213.  The 1979 minutes suggests that the permission granted in 1974 expired in May 1979. The Plaintiff’s witnesses testified that CKW refused to extend the permission because he had other plans for the land. But their evidence was premised on their story of permission to park at the basketball field and I do not believe in that story.

214.  It is not seriously disputed that the Koon had used the Red Land and the Inner Garden Area without objection being raised by CKW even after 1979. The fencing system at the northern side of the Orange Land was allowed to remain there. The following are the key issues in relation to the Koon’s post-1979 use and occupation of these areas,

(a)	Whether the Koon had possession for the purpose of the Limitation Ordinance, bearing in mind that such possession has to be exclusive;
(b)	Whether the use and occupation was with the permission of CKW, whether express of implied;
(c)	Whether the Koon had the requisite animus possidendi.

215.  Before I deal with these issues specifically, it is necessary to consider briefly CKW’s use of CTOY during these years. Apart from his mother living at the Cheung Family House and his weekend visit since 1974, CKW also made other uses of CTOY. He was able to produce contemporaneous documents as evidence of these activities.

216.  In October 1972, CKW applied to the District Commissioner for modification of the Crown Lease to allow him to maintain some temporary structures in CTOY. Those structures included several chicken sheds. The permission was granted in consideration of the payment of an annual fee. CKW had duly paid the annual fee during his ownership of CTOY.

217.  In May 1974, CKW granted a tenancy of part of CTOY to one Chan Yung Sang for chicken farming. In the tenancy agreement, there was reference to fruit trees in CTOY at clause 13. The leased area shown on the plan attached to the agreement was at Lot No.532 and 533 RP. Another tenancy agreement was executed in September 1977 for a tenancy to Chan Yung Sang up to 31 May 1980 (wrongly dated as 1970 though the stamp chop indicated that it should be 1977). Although the subject matter of that agreement seems to cover lots other than Lot Nos.532 and 533 RP, that was obvious a mistake. Lot 1944 was the land on which the Cheung Family House was. Lot No.548A and 546 was the slope where the entrance and part of the Footpath was situated. There was not suggestion that Chan Yung Sang had ever used these pieces of land for his chicken rearing business. That mistake was rectified in 1980 when another tenancy for one year was executed between CKW and Chan Yung Sang.

218.  In June 1978, CKW acquired Lot 522 to extend the area of CTOY by 58,370 square feet. He obviously had plans for making good use of CTOY. In February 1981, CKW engaged a contractor to carry out extensive works at CTOY for the construction of a circular private road to facilitate vehicular traffic within CTOY. In September 1981, he applied to the Commissioner for Transport for permission to use Lot No.522 as a car-park. That application was turned down because the lot was an agricultural lot. CKW did not give up. He applied to the District Land Office in November 1982 for modification of the lease conditions to enable him to use Lot No.522 as a car-park for his Wing Lee Transportation business. In July 1983, the District Lands Office granted him permission to use Lot No.522 for open storage of vehicles and construction materials. Thereafter, CKW renewed his request to the Transport Department on 13 July 1983.

219.  In 1982, CKW engaged another contractor to do some renovation works at the Cheung Family House and the basketball field. There were other receipts for other works carried out at different times.

220.  In 1984, CKW let a stone house and a wooden hut to a Mr Fei for rearing of dogs for a period of three years. In 1989, he applied for a permit for eel farming at Lot No.522.

221.  CKW also kept some newspaper clips regarding the development of the land in Tong Yan Sun Tsuen area and other news regarding land in the New Territories like the Government’s compensation rate for resumption of land in the New Territories, the Government’s policy regarding the fixing of premium. He also kept records about the sizes of his land in CTOY. One of such handwritten records was made on a piece of paper with the letterhead of his company Telecom Service Ltd. (Bundle F(2) C at p.501082). That was obviously CKW’s record (as opposed to Dr Cheung’s) because it includes Lot No.522. The significance of this document lies in the fact that Lot Nos.540, 541, 542, 543 RP and 556, viz. the lots which cover most of the Red Land, the Inner Garden Area and the Outer Garden area, were included. Hence, CKW was quite aware of his ownership of these pieces of land.

222.  Thus, the picture emerges from these activities of CKW is that he was knowledgeable and concerned about his landholdings in CTOY. He had plans for the use of lands within CTOY and had indeed invested in acquiring new land and the maintenance and upkeep of the same. Is it likely that such a landowner would simply let his neighbour to dispossess him for a long period of time without doing anything? In my judgment, this is extremely unlikely.

223.  Another relevant consideration is the relationship between CKW and the Koon during this period. I have alluded to this issue above. I also note that in his cross-examination of CKW in the deposition taken before the Registrar, Mr Chong did not dispute that the Koon had bestowed an honorary chairmanship on CKW and CKW had donated oil to the Koon. Counsel tried to undermine CKW’s evidence as regards the gratitude of the Koon by referring to the failure of CKW to procure the signature of Cheung Yuk Kwai. With respect, counsel was missing the point. There is no dispute that the title had been bestowed. If the Koon wished to minimize the significance of the honorary chairmanship, they should offer credible evidence to explain why such title was bestowed upon CKW despite the bad relationship between the Koon and the Cheung family. But as far as I can discern from the evidence, the Koon had failed to come up with a satisfactory answer.

224.  As discussed above, the cordial relationship was maintained up to the end of CKW’s ownership of CTOY. Though CKW ceased to be the honorary chairman in 1979 because his office expired according to the rules of the Koon, he still donated oil to the Koon occasionally. The Koon presented a congratulation gift to CKW in 1982 when he moved his office. Further, madam Cheung was still residing at CTOY and CKW had visited her regularly. There must have been contacts between members of the Koon and the Cheung family, especially when the only vehicular access to the immediate vicinity of the Koon was through the main gate of CTOY. Chan King Tak referred to trucks delivering supplies for vegetarian feasts gaining access to the Orange Land. To facilitate that, the Koon had to have the consent of CKW to use the vehicular access in CTOY through the main gate.

225.  The relationship between the Koon and CKW is further highlighted by the episode in 1985 concerning the storage of goods vehicles at the Outer Garden Area by Fong Ying Wo. Fong was a friend of CKW and he had visited CTOY in the 1970’s and 1980’s. He gave evidence on the permission given by CKW for him to use the Orange Land and Blue Land for parking his vehicles in 1985.

226.  The parking of the vehicles at the Orange Land and Blue Land were also evidenced by aerial photographs taken in 1985. Mr Chong did not challenge Fong’s evidence that those were his vehicles. Fong said he had a business for importing these vehicles into mainland China and after they arrived at Hong Kong, he needed to arrange for their storage. He had several sites for such storage and one of those was the Orange Land and Blue Land at CTOY. He said he obtained the permission of CKW for that.

227.  In this respect, the disputed issue is whether Fong obtained permission from CKW or from the Koon. The Koon’s case is that by 1985, CKW did not have possession of the Orange Land and Blue Land since the Koon had built the Orange Land Gate in 1975 which effectively prevented people from CTOY to have unauthorized access to the Orange Land and Blue Land. Mr Chong suggested to Fong that he had in fact obtained the permission of a Mr Tsui of the Koon to enable him to park there. This was denied by Fong.     

228.  There is an inherent implausibility in the Koon’s case on this issue. By 1985, even assuming that the Koon had actually made use of the Orange Land and Blue Land for its own purposes, the Koon could not have used the land to the exclusion of CKW to such extent to give rise to an adverse possessory title good against CKW. In 1985, the limitation period for action to recover land was 20 years. The Koon’s grand opening was on 10 November 1970. The aerial photographs showed very little activity at the Orange Land and Blue Land apart from some cars being parked there (probably abandoned) prior to 1975. As I found above, the Orange Land fencing system was only built by the Koon in 1975. Hence, even assuming for a moment that there was adverse possession by the Koon, the earliest date from which such adverse possession could have arisen was 1975. Further, for reasons given above, the occupation between 1975 to 1979 was actually with the consent of CKW.

229.  Therefore, if CKW needed to use the Orange Land and Blue Land in 1985 and if he was prevented by the Koon from doing so, he could have sued the Koon for recovery of those pieces of land. Bearing in mind my finding on CKW’s knowledge of his ownership of these areas, it is unlikely that CKW would have told Fong that he had no control over the Orange Land and the Blue Land and suggested Fong to approach the Koon for permission.

230.  The Koon was in no position to demand CKW’s authorized friend to stop storing vehicles at the Orange Land and Blue Land. In this connection, Hui Ka Cheung and Mok Chun Hing gave evidence that after a “spiritual writing from Master Kung” of 3 October 1985, the Koon forbade people from storing vehicles there. But Hui said he did not know how it was done as the matter was left to Tsui Ka Loong to handle. Chan King Tak also testified that Tsui had apologized to the committee of the Koon for allowing such parking. If the Koon, whether Tsui or someone else, told Fong to move his vehicles away, Fong would naturally inform CKW. There was simply no reason why CKW would allow such thing to happen.

231.  The manner in which the Koon came up with this account of Tsui acting improperly in giving permission to Fong to park at the Outer Garden Area does not do them much credit. A representative of the Koon, Mr Yeung Tak Ming obtained aerial photos from the Map Sales Centre of the Lands Department for the purpose of this action in 1999. Mr Yeung is a civil engineer and according to himself, he has the necessary training and is competent in reading and discerning the contents of aerial photos. In April 2001, Mr Yeung made a witness statement producing the photos he obtained. At paragraph 6 of that statement, he said these photos were “the only aerial photographs taken …since 1960 and which show … the land in dispute”. He only produced one photo for 1985. That was the photo of 7 May 1985 that shows goods vehicles parked at the basketball field and at the area outside the Orange Land Gate.

232.  That is a misleading statement to say the least. It subsequently emerged that there were other aerial photos for 1985 and parties obtained the same from the Map Sales Centre in 2004. Mr Yeung was aware of those other photos but he decided to purchase the photo of 7 May 1985 only because that was the one taken at the lowest altitude. However, the other photos (taken on 18 May and 2 October 1985) were more relevant for our purposes because they actually showed there were vehicles parked at the Outer Garden Area.

233.  Mr Yeung explained that the photos he saw at the Map Sales Centre were only 1/8 the size of the photos produced to the court. He further said he was not aware of the significance of parking at the Outer Garden Area in 1999 and he only followed the instructions of the lawyer to obtain one photo for each year.

234.  The last part of his explanation does not tally with what he actually did in 1999. At paragraph 8 of his first witness statement made in 2001, Mr Yeung actually produced two aerial photos for 1995 and 1998. Hence, what he testified as the instructions from his lawyers cannot be true.

235.  Further, if the lawyer had given such instruction to him, paragraph 6 of his witness statement would not have been drafted in such terms.

236.  Whilst it is correct that in 1999 there was no indication that the Defendant would raise any issue about the 1985 parking at the Outer Garden Area, that issue was very much in the limelight after the filing and serving of the Second Affirmation of CKW on 7 March 2003 (see para.46 of that affirmation). During CKW’s deposition on 27 May 2003, he referred to the parking by Fong at the Outer Garden Area in his examination-in-chief. He gave some explanations why the vehicles were parked outside the gate on 7 May 1985: the grass at the Outer Garden Area was tall and on that occasion the vehicles would be driven away soon, it was more convenient for the drivers to park outside.

237.  Mr Chong cross-examined CKW on this topic on 20 August 2003. Counsel challenged CKW’s evidence by putting to him the aerial photos from 1977 to 1993 (including the one on 7 May 1985 but not those taken on 18 May and 2 October 1985) and suggested that none of the aerial photos showed any parking at the Outer Garden Area. That line of cross-examination would only be meaningful if the aerial photos shown to the witness were all the photos available. Also, there was no point in so cross-examining if the true contention of the Koon was not that there was no parking at the area but that such parking was the result of permission granted by Tsui. 

238.  The deposition of CKW was not completed until December 2003. Thus, there was ample time for the Koon to retrieve all the aerial photos taken in 1985 after they became aware of the dispute regarding parking at the Outer Garden Area. Since the 7 May 1985 photo has already shown some vehicles parking outside the Orange Land Gate, and given CKW’s explanation for that in his evidence-in-chief, the Koon should have been alerted to the need to obtain the other aerial photos for 1985 as well before they tied their colour to the mast in putting forward their case to CKW in cross-examination.

239.  What is more significant is the lack of reference to the alleged improper permission granted to Fong to park at the Outer Garden Area by Tsui in the cross-examination of CKW. As Mr Chan pointed out, if the public apology of Tsui had actually taken place, it must have left a great impression in the mind of the members of the Koon. It is incredible that people like Hui Ka Cheung (who allegedly had a quarrel with Tsui about the parking), Mok Chun Hing and Chan King Tak did not recall the incident when CKW raised the issue about parking at the Outer Garden Area. These people would have immediately remembered that as a matter of fact there had been vehicles parked there. Yet Mr Chong had not even put one single question to CKW about the alleged permission granted by Tsui to Fong and instead chose to cross-examine CKW on the basis that no vehicles had ever been parked there.   

240.  On 6 October 2003, Hui Ka Cheung made a witness statement in this action. By then, he should have been aware of CKW’s evidence regarding parking at the Outer Garden Area. Yet, he said nothing about Tsui’s improper permission given to Fong to park there and his quarrel with Tsui about the same. He also said nothing about Tsui being reprimanded by the “spiritual writing of master Kung” and his public apology.

241.  Chan King Tak’s witness statement was made on 7 October 2003. Instead of giving an account of the parking at the Outer Garden Area by reference to Tsui’s permission, he simply denied there was any parking at paragraph 124 of his statement.

242.  In his witness statement of Mok Chun Hing of 7 October 2003, he was equally reticent about Tsui’s involvement. At paragraph 35 of his statement, he said he only saw parking outside the Orange Land Gate.

243.  In July 2004, the surveyors engaged by the Defendant made a supplemental report. In that report, the surveyors referred to the parking at the Outer Garden Area shown on the aerial photo of 2 October 1985. This prompted a U-turn in the Koon’s case about such parking.

244.  Mr Yeung admitted under cross-examination that he was instructed to obtain more aerial photos after the Defendant had produced the aerial photo of 2 October 1985. He was able to locate the aerial photos of 18 May 1985.

245.  Chan King Tak made a supplemental witness statement on 25 August 2004 to give an account of Tsui’s involvement in the parking at the Outer Garden Area. He purported to recall that for a short period of time, lorries, vans and wooden crates were parked and stored at the Outer Garden Area with the permission of Tsui. He also referred to the “spiritual writing of Master Kung”. 

246.  Hui Ka Cheung and Mok Chun Hing also made supplemental witness statement to such effect in August 2004.

247.  I do not think the “spiritual writing” is of much assistance. It is in vague and general terms and there was no explicit reference to the parking activities at the Outer Garden Area as being objectionable. Further, I do not have any satisfactory explanation from the Koon’s witnesses about the U-turn adopted by the Koon on this issue. I do not believe them regarding the parking being improperly permitted by Tsui. As I have said before, the Koon was aware of the ownership of the Outer Garden Area by CKW and they had no basis to object to the vehicles being parked there.

248.  Mr Chong urged this court to have regard to the control of the Orange Garden Gate by the Koon and the lack of access to the Outer Garden Area without the permission of the Koon as demonstrated by the aerial photo of 7 May 1985.

249.  The photographs produced to the court show that there were bolts on both sides of the Orange Garden Gate. On the south side, viz. near to the Koon, the bolt was attached to a small gate. On the north side, there were bolts attached to both the small gate and the main gate. The Koon’s witnesses claimed the Koon have exclusive control over the locks at these gates. I do not believe so. If the bolts were installed solely for the benefit of the Koon, there was simply no reason why there should be bolts on the north side of the gates. The presence of bolts on both sides suggests that both the Cheung Family and the Koon could have locked up the gate. This is consistent with my finding that though the Orange Land Gate was built by the Koon, it was built with the permission of CKW. CKW therefore retained some control regarding the locks at the gates.

250.  Regarding the situation in 1985, I accept the evidence of Fong Ying Wo that when he parked the vehicles there, it was Cheung King Nam who unlocked the gates for him. His evidence was corroborated by Cheung King Nam.

251.  I do not accept Mr Chong’s submission that the aerial photo of 7 May 1985 shows that Fong’s vehicles did not gain access to the Outer Garden Area because of the lack of permission from the Koon. It was more likely to be due to the height of the grass at the Outer Garden Area on that particular occasion. As I said earlier, the Koon was simply not in any position to refuse access.

252.  Mr Chong referred to the different patterns shown on the aerial photos as regards the grass on the two sides of the Orange Land Gate. Counsel submitted that the grass on the Koon side were cut by the Koon whilst those outside were cut by the Cheung Family. I do not think it matters very much. Even though the grass were cut by the Koon, it does not mean the Cheung Family did not have access to the Outer Garden Area.

253.  In my judgment, the 1985 parking of vehicles by Fong serves as clear evidence that CKW could have used the Outer Garden Area even though the Koon had built a gate there and he did use it in 1985. As between the Koon and CKW, Fong’s use of the land should be regarded as CKW’s use as opposed to the Koon’s.

254.  There is other evidence regarding other uses of the Outer Garden Area after 1979. I do not pay much regard to the evidence of Tang Ngai Biu since I doubt if he had conducted any fruit collecting at the disputed areas after 1975. However, I accept the evidence of Cheung King Fung that he could freely roam around the Outer Garden Area, the Inner Garden Area and the Red Land during his visits to CTOY. Whilst his activities on the land were transient in nature, these were acts on account of CKW’s ownership of the land and tend to show that the Koon had not dispossessed CKW. See the principles of law discussed at paras.62 to 75 above.

255.  I can now come back to the three specific issues identified at para.214 above. Notwithstanding the continued existence of the Orange Land Gate and the red gate between the Amenity Area and the Yellow Land, I find on the balance of probabilities that members of the Cheung Family were able to have free access to the Red Land, the Inner Garden Area and the Outer Garden Area all the time up to 1991. I also accept the evidence from the defence witnesses that the Cheung Family had keys to the locks at those gates though I believe that the maintenance of those areas, including the cutting of the grass, was done by the Koon. Thus, members of the Cheung Family were able to use the Red Land, the Inner Garden Area and the Outer Garden Area as they wished during that time and they did use those areas occasionally. Therefore, for the purpose of the Limitation Ordinance, there was no dispossession of CKW by the Koon and no right of action for recovery of land has been accrued to CKW under Section 8(1) of the Limitation Ordinance.

256.  On the second issue, one must consider the extent to which the Koon had used the Red Land, the Inner Garden Area and the Outer Garden Area from 1979 to 1991. The aerial photos only showed that the landscape remained basically the same as that between 1975 and 1979. The Red Land was paved, the plants at the Inner Garden Area were maintained and the Orange Land Gate was there. CKW’s evidence was that he did not see much use of these areas by the Koon. Yet I must bear in mind that CKW did not live there and his weekend visits to CTOY did not last more than half a day on each occasion. At the same time, his mother lived there and CKW did pay attention to the development of CTOY.

257.  Though I do not accept CKW’s evidence regarding his plan to use the Outer Garden Area as car-park and his construction of the Orange Land Gate, there is objective evidence supporting that the Koon did not make much use of the Outer Garden Area and the incense burners shown in the photographs taken in 1999 were not there between 1975 and 1991. The surveyors engaged by the Defendant who visited CTOY in 1993 took some photos of the Outer Garden Area showing tall grasses were allowed to grown there. The aerial photos taken during this period showed that though the grasses were cut on occasions, there was not much activity there.  Some witnesses also said once every year, the Koon burnt incense at the Outer Garden Area on a large scale at the Chinese Ghost Festival.  

258.  Regarding the Red Land, the surveyor Mr Ngai was told by the woman who was apparently the keeper of the Koon that it was only used during Taoist Festivals. The Koon’s witnesses said in addition to the uses at Taoist Festivals, the Red Land was used as an exercise field for exercise purposes. The Koon organized Qi Gong classes and used the Red Land, the Inner Garden Area and the Outer Garden Area for such purposes. Wong Tung Wing also said that vegetarian feasts would be held there every Sunday.

259.  Whilst I do not doubt that these were activities carried on by the Koon at these areas in the recent years, I think the witnesses of the Koon have exaggerated as to the extent and frequency of the uses at the time when CKW was still the owner of CTOY. I have no problem in believing that even at that stage the Koon did use the areas for feasts and burning of incense during major festivals and other special occasions. But I do not believe that the Koon held Qi Gong classes at the Red Land and the Outer Garden Area as early and as frequently as the witnesses testified. Wong Tung Wing was unable to tell the court when did such classes start.

260.  I believe Mok Chun Hing who went to the Koon between 1976 and 1988 on an almost daily basis to give free Chinese medical services gave this court a fair picture when he was asked about activities at the areas by this court. At p.1073 to 1074 of the Transcript, he said,

“	問 ： 76年至到88年嗰段時間，金蘭觀除咗有你咁樣睇症之外，平日，即係閒日，即係唔係講有節期嗰啲時間，或者唔係開乩嗰啲時間，有冇其他活動，喺嗰度附近？
	…
	答 ： 唔係--唔係太多人喺嗰度。
	問 ： 即係主要都係你睇症嗰樣嘢，係咪？
	答 ： 係，主要都係我睇症，係。朝頭早佢有一班老人家成日上去個喎，即係朝頭早有班老人家，佢哋成日上去上面，佢嗰啲未必係幫--未必係幫我睇症個喎。
	問 ： 朝頭早即係幾時？即係你--你……
	答 ： 朝頭早據我所知就因為阿鳳成日--佢--我都係聽佢講，就話如果開閘開得遲，有啲老人家就嘈嘅。
	問 ： 「阿鳳」即係劉賽鳳？
	答 ： 劉賽鳳，係。佢話如果開走開得遲，有啲老人家就嘈嘅。佢有啲就上嚟拜神，有啲就--喺上面就嗰個--喺上面嗰啲空地嗰度就做運動嘅，但係嗰啲未必係睇病嘅。
	問 ： 但係嗰啲就唔係金蘭觀即係我別安排嘅活動嚟吖？
	答 ： 唔係特別安排。
	問 ： 即係佢哋上嚟嘅啫？
	答 ： 係，係。
	問 ： 即係當係出面街外人都嚟得嘅，係咪？
	答 ： 係，係，係。”

261.  It is notable that Mok did not refer to any Qi Gong classes held by the Koon during that period.

262.  On the evidence, I find that when CKW was owner of CTOY, the Koon did not use the areas in question to any significant extent apart from the occasional holding of feast or large scale ceremony there on special festivals or occasions. Of course, the Koon also maintained the gardening landscape at the Inner Garden Area and the structural frame for canopy at the Red Land. The Orange Land Gate was also there. All these were built with the consent of CKW under the 1974 licence and in 1979, CKW did not demand the Koon to remove the same. Neither was he bothered about the occasional use of the areas by the Koon for large scale activities.

263.  As I said before, despite the erection of the red gate and the Orange Land Gate, members of the Cheung Family were able to have access to the Red Land, the Inner Garden Area and the Outer Garden Area. I believe they had a set of keys to whatever locks installed at those gates though the Koon also had their own set of keys. By continuing to keep the set of keys without demanding the Koon to remove those structures or gardening features put in place by the Koon under the 1974 licence agreement, CKW must have granted an implied licence for these to be placed on his land until he notified the Koon to the contrary.

264.  Hence, the use and occupation of the areas by the Koon between 1979 and 1991 was with the implied permission of CKW.     

265.  Turning to the third issue, given that CKW had a set of keys to the locks at the gates, the Koon did not do any unequivocal act to exclude CKW from possession of the areas. The maintenance of the garden at the Inner Garden Area cannot be regarded as act of exclusion because the garden could be enjoyed by members of the Cheung Family as well as those of the Koon. The parking incident of 1985 demonstrates that the Koon acknowledged CKW’s possession of the Outer Garden Area notwithstanding the existence of the Orange Land Gate.

266.  Further, Wong Tung Wing gave evidence that if the owner demanded for rent, the Koon would be willing to pay the same. Though he later tried to retract that as a statement speaking on his own behalf, it is quite clear to me that he was talking about the attitude of the Koon when he first gave such evidence. Such attitude of the Koon was also illustrated by the 1974 licence. The Koon offered to pay a rent to CKW for the use of the areas for their garden. This is exactly the type of situation where according to Wong Tak Yue, the squatter could not have the requisite intent for adverse possession.

267.  Thus, the Koon did not have the animus possidendi in respect of the Red Land, the Inner Garden Area and the Outer Garden Area during CKW’s ownership of CTOY. 

268.  In view of the above analysis, if one were to ask what would happen if CKW had sued the Koon for possession of the Red Land, the Inner Garden Area and the Outer Garden Area at any time between 1974 and 1991, the answer is that the action must fail because firstly the Koon had not dispossessed CKW and secondly the acts done by the Koon on the land were with the consent of CKW. Therefore, time did not start to run against CKW during his ownership of CTOY.

269.  For these reasons, the Koon’s claim for adverse possession for these areas must fail. The Koon did not raise any plea by way of proprietary estoppel in respect of these areas. Whatever the position in the past, there is no doubt that since 1999 the Koon had tried to exclude the Defendant from the areas. Hence, the Defendant is entitled to an order for possession for the Red Land, the Inner Garden Area and the Outer Garden Area.

Costs

270.  The Defendant emerges as substantially successful in this action. At the same time, I bear in mind that there are discrete issues on which the Defendant failed, viz. the Chan Tin Shi point, the Basic Law point and the storage annex at the Amenity Area. I make an order nisi that the Koon shall pay the 4/5 Defendant’s costs of the action, such costs to be taxed if not agreed.

HCA 15824/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 15824 OF 1999

____________

____________

AND BETWEEN

____________

_____________

D E C I S I O N

_____________

1.  In my judgment of 26 July 2005, I made a costs order nisi against the Defendant as between the Defendant and the 2^nd Defendant by Counterclaim [“the 2^nd Defendant”].  The Defendant applied to vary the order.  This is my decision on that application.

2.  In substance, Mr C H Chan SC took three points. First, he submitted that by the application of the Elgindata principle (iii), the 2^nd Defendant should be deprived of the costs relating to the adverse possession issue.  Second, he said the 2^nd Defendant should pay the Defendant the costs of the Order 14A Summons.  Third, he said the 2^nd Defendant should pay the Defendant the costs of the striking out summons.

3.  I need not repeat what I said in my previous judgments as to the issues raised in the trial and the disposal of the same.  For the purpose of deciding the costs issue, I would start with a broad overview of the case as between the Defendant and the 2^nd Defendant.  The 2^nd Defendant was dragged into this action by the Defendant.  In view of the background recited in my July judgment, it is to say the least extraordinary for the Defendant to contend that the 2^nd Defendant continued to run the affairs of the Koon after the incorporation of the Plaintiff.  The Defendant did not have much evidence to advance such a case to start with.  But for the misconceived judicial review proceedings and certain statements made by the witnesses therein, I would have considered the contention wholly unarguable.

4.  Having joined the 2^nd Defendant as a party to the Counterclaim, the Defendant must expect to pay the costs of the 2^nd Defendant if it fails to establish the liability of the 2^nd Defendant.  Mr CH Chan however said that there was good reason why the Defendant should not be ordered to pay the costs of the 2^nd Defendant on the adverse possession issue.

5.  As I observed in the March Judgment, the real protagonists in the dispute about adverse possession were the Plaintiff and the Defendant.  That was the fundamental issue in the claim of the Plaintiff against the Defendant.  The evidence on the issue was called by the Plaintiff.  Mr F Chan had confined himself to establishing the informal dissolution of the Association in cross-examining the witnesses.

6.  The 2^nd Defendant had pleaded adverse possession in its Defence to the Counterclaim.  Given the state of law and the state of the evidence when the point was pleaded, it is impossible to suggest the 2^nd Defendant did so unreasonably or improperly.  However Mr CH Chan submitted that having taken the benefit of the evidence on adverse possession, albeit evidence called by the Plaintiff, the 2^nd Defendant had to take the costs consequence as well. Bearing in mind the relationship between the Plaintiff and the 2^nd Defendant and the same solicitors acted for the two parties, Mr CH Chan argued that the 2^nd Defendant could decide with some confidence that the issue of adverse possession would be sufficiently taken care of by the Plaintiff.  Looking from that angle, it could be a case of division of labour.

7.  Mr CH Chan further said that had the 2^nd Defendant not pleaded adverse possession, the Defendant could have asked for direction that the trial of that issue be segregated from the other parts of the trial in order to minimize the Defendant’s exposure to the costs of the 2^nd Defendant.

8.  With respect, there is no merit in the last point.  The witnesses giving evidence on adverse possession also gave evidence on the defunct of the Association and the transfer of the administration of the Koon to the Plaintiff.  The 2^nd Defendant had a legitimate interest to be present when the credibility of such witnesses was challenged by the Plaintiff.  As a matter of case management, it is unlikely that the court will accede to the suggestion of Mr CH Chan to have the trial segregated.

9.  The issue boils down to this: should the 2^nd Defendant be deprived of its costs in relation to the adverse possession issue by reason of the decision of the court on the Order 14A summons since it had also prayed in aid of adverse possession in its defence to the counterclaim.

10.  Mr CH Chan referred to the dicta of Nourse LJ in Re Elgindata Ltd (No.2) [1992] 1 WLR 1207 at p.1214.  He very properly accepted that it would be difficult to contend that the 2^nd Defendant made such a plea unreasonably and improperly.  Instead, he argued that under principle (iii) in that dicta, the court could deprive a successful party of the costs spent on a failed issue where it had contributed to significant increase in the length or costs of the proceedings.  He submitted that this principle could be evoked even though the issue had not been raised unreasonably or improperly.  He highlighted the distinction between principles (iii) and (iv).

11.  There is indeed a distinction between (iii) and (iv).  Yuen JA highlighted one aspect of it in Para.40 of her judgment in Wang Din Shin v Nina Kung CACV 460 of 2002 by reference to Order 62 Rule 7(1).  It is only where a successful party raised issues or made allegations improperly or unnecessarily that he may be ordered to pay the other party’s costs.

12.  Under this head, unlike the position regarding the two summonses, Mr CH Chan did not ask for costs in favour of his client.  He only sought an order to deprive the 2^nd Defendant of costs on the adverse possession issue.

13.  I also bear in mind what was said at Para.24 of the judgment of Lord Carswell in Seepersad v Persad [2004] UKPC 19,

“The general rule which should be observed unless there is sufficient reason to the contrary is that costs will follow the event.  Were the party who has been successful overall has failed on one or more issues, particularly where consideration of those issues has occupied a material amount of hearing time or otherwise led to the incurring of significant expense, the court may in its discretion order a reduction in the award of costs to him, either by a separate assessment of costs attributable to that issue or, as is now preferred, making a percentage reduction in the award of costs …  The Court of Appeal’s order was predicated upon the proposition that the assessment of damages for pain and suffering and loss of amenity was a separate issue from the assessment of the other heads of damage.  This was an incorrect assumption.  An issue for these purposes must be something so distinct and separate in itself that the decision of it constitutes as ‘event’.  The ‘event’ was the quantum of damages to which the appellant was entitled and he succeeded on his appeal in obtaining a higher award than the judge had given …  Their Lordships accordingly consider that the Court of Appeal had insufficient ground for reducing the award of costs made to the appellant and that he should have been awarded full costs in that court …”  (my emphasis)

14.  One therefore starts with the premise that a successful party is prima facie entitled to the full costs of the action.  The burden is on the losing party to show that there is good reason to depart from the general rule.  The exercise is a matter of discretion.  It would be wrong to read Elgindata as laying down that as a rule, the court must (instead of may) deprive a successful litigant of costs for his failure on a discrete issue which caused a significant increase in costs.  The court has to exercise its discretion to achieve a just result having regard to the circumstances of the case.

15.  In the present case, Mr CH Chan failed to persuade me that there is sufficient reason to depart from the general rule.  Although one can say that the Defendant won the adverse possession issue, that was a victory secured by a determination on a point of law and this court did not make any finding on the disputed facts.  The state of the law was uncertain at the time when the issue was raised and when the evidence was adduced.  There were conflicting first instance decisions and the Court of Appeal had yet to hand down the judgment in Chan Tin Shi.  That was the reason why the parties considered necessary and why this court permits factual evidence on the history of occupation of the land to be adduced.  As far as the disposal on the point if law is concerned, most if not all the costs pertaining thereto were incurred in the context of the Order 14A summons.  I will deal with that later.

16.  Further, irrespective of the pleadings of the 2^nd Defendant, the Defendant would have to deal with the Plaintiff’s evidence on the factual aspects of adverse possession.  The joinder took place well after the adverse possession issue had been raised by the Plaintiff.  For reasons already given, the 2^nd Defendant had a legitimate interest to be present when such evidence is tested by the Defendant.  I do not think the 2^nd Defendant had lengthened (not to mention significantly lengthened) the trial by reason of its plea of adverse possession in the Defence to Counterclaim.

17.  In my judgment, subject to what I shall say regarding the costs of the summonses, fairness in this case does not require the court to deprive the 2^nd Defendant of the costs spent at the trial on the factual disputes regarding adverse possession.  As regards the costs on the preparation for trial, in the light of the joint representation of the Plaintiff and the 2^nd Defendant by the same firm of solicitors (and by the same counsel until 14 July 2004) and the position of Mr F Chan taken at the trial, I do not think the 2^nd Defendant could suggest that additional costs had been incurred by him over and above those incurred by the Plaintiff on that issue.  The taxing master will no doubt take these observations into account if the 2^nd Defendant shall attempt to recover anything by way of costs on the pre-trial preparation on the adverse possession issue.

18.  I now turn to the costs of the Order 14A summons.  I already gave the Defendant costs of that summons vis-à-vis the Plaintiff.  Mr CH Chan also wanted costs against the 2^nd Defendant.  I shall proceed on the basis that the 2^nd Defendant was a party to the summons.  Apart from submissions on adjourning the summons pending the determination of Chan Tin Shi by the Court of Final Appeal, Mr F Chan did not advance any submissions on the merits under the summons.  Mr CH Chan submitted that was probably due to the reason that in the light of the Court of Appeal’s decision in Chan Tin Shi, there was not much that the 2^nd Defendant could say on the merits.

19.  The Order 14A summons was based on the Court of Appeal’s decision in Chan Tin Shi.  As I said in my March judgment, the real protagonists to the adverse possession issue were the Plaintiff and the Defendant.  The involvement of the 2^nd Defendant in the Order 14A was, in the circumstances, more a matter of formality than substance.

20.  An exceptional feature here is that the Order 14A was issued in the course of the trial.  By then, Mr F Chan had indicated on several occasions that the defence of the 2^nd Defendant focused on the cessation of activities by the Association on the land in question.  On 2^nd February 2005, Mr F Chan indicated that the 2^nd Defendant would abide by whatever outcome between the Plaintiff and the Defendant on the adverse possession issue.  But for the potential implications as to wastage of time in terms of hearing evidence on factual issues which would not need to be resolved, the point should have been left for argument in closing submissions.  Although technically speaking, the Defendant was successful against the 2^nd Defendant in the summons, the court must have regard to the circumstances under which the summons came to be issued in deciding whether to segregate the costs of the summons from the costs of the trial and if so, how should it exercise its discretion regarding the costs of summons in the light of the stances taken by the parties on the summons.

21.  Having regard to the justice of the matter as a whole, I think a fair order as between the Defendant and the 2^nd Defendant regarding the Order 14A summons is each of them shall bear its or his own costs.  In effect, the Defendant will get its costs from the Plaintiff.  The 2^nd Defendant will have to bear his own costs.

22.  As regards the costs of the Striking out Summons, Mr CH Chan did not have much quarrel with no order as to costs concerning the revocation of the representation order.  However, he asked for costs against the 2^nd Defendant as to the costs on striking out.

23.  Although for convenience sake I describe that summons as the Striking out Summons, the summons was issued in the wake of problems relating to the representation order and the Defendant’s pleadings.  Granted that the summons also sought to strike out the counterclaim and there were paragraphs in the skeleton submissions of Mr F Chan on the topic, the whole summons was not proceeded with as a result of notice being given to the other alleged members of the Association after the issue of the summons and the procedural fairness thereby achieved.  There were also some overlaps in the argument on striking out and the opposition by the 2^nd Defendant to the application for leave to amend by the Defendant.  It should be apparent from my March judgment that there were unsatisfactory aspects in the Defendant’s pleadings and Mr CH Chan took a number of steps to rectify the situation in the course of the summons.  The merit of the striking out application at the time when the summons was issued was quite different from the merit by the time when it was not proceeded with.

24.  Not much time was spent on the striking out part of the summons and in my judgment, a fair order for costs, particularly in the light of the final outcome of the trial between the Defendant and the 2^nd Defendant, is that each party shall bear his or its own costs for this summons.

25.  The end result is that, subject to the variations concerning the costs of the two summonses as indicated above, my costs order is made absolute.

26.  Regarding the costs of the application for variation, the Defendant succeeds in obtaining a variation regarding the costs of the two summonses, but not to the full extent.  In fact, Mr F Chan’s position at the hearing on 27 September 2005 was to accept no order for costs regarding the two summonses.  That is the same as what I order in this Decision.  The Defendant fails to persuade me to vary the costs order for the trial.  I will order the Defendant to pay - of the 2^nd Defendant’s costs of the application.

HCA 15824/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 15824 OF 1999

____________

_____________

______________

J U D G M E N T

______________

1.  This judgment deals with the question of liability as between the Defendant (as plaintiff in the Counterclaim) and the 2^nd Defendant by Counterclaim [“the 2^nd Defendant”]. As far as title to the land is concerned, it has been adjudicated in my Ruling of 30 March 2005 that the title of the Defendant had not been extinguished. I have also alluded to the nature of the Defendant’s case against the 2^nd Defendant and the stance of the 2^nd Defendant in that Ruling. Further background to the claim against the 2^nd Defendant can be found in the judgment of Deputy Judge Saunders of 23 March 2004.

2.  The outstanding issue on liability is whether the 2^nd Defendant by Counterclaim had taken part in the trespass over the land since shortly before October 1999. The infringing acts pleaded by the Defendant in Paragraph 5 of the Re-re-re-re-Amended Defence and Counterclaim are as follows,

(a)	In or shortly before October 1999, the Association and/or the Plaintiff carried out certain construction work at the Western Area and locked the Car Park Gate without the consent of the Defendant.
(b)	Sometime in or shortly before October 1999, the Association and/or the Plaintiff without the consent of the Defendant erected or caused to be erected a system of wire mesh (coloured Red on Plan-2) at the space (“the Entrance Space”) between the northern end of the Retention Wall and the Water Tower (coloured Light Blue on Plan-2) located within Lot 1944, thereby blocking access from Lot 1944 to the areas coloured Yellow and Green on Plan-2 (“the Newly Encroached Area”), and purported to occupy the Newly Encroached Area.
(c)	In around October 1999, the Association and/or the Plaintiff carried out certain construction work and by 2001 converted the Southern Area into a garden without the consent of the Defendant.
(d)	Sometime after October 1999, the Association and/or the Plaintiff installed chains on the Basketball Field Gate and locking the same and denying access from the Basketball Field to the Footpath.
(e)	As from around January 2003, works have been carried out by the Association and/or the Plaintiff within the Triangular Area which is coloured Green on Plan-2 and the Newly Encroached Area to merge the two areas into one.
(f)	Since October 1999, the Plaintiff and/or the Association has been in wrongful occupation of the Disputed Area, except the Footpath.  At or since the date of the Writ, the Plaintiff and/or the Association has been in wrongful occupation of the Footpath.

3.  At the outset, it is necessary to identify the basis on which the 2^nd Defendant is sued. Although he is sued both on his own behalf and on behalf of other members of the Association, the case run by the Defendant against him is still based on the “corporate” occupation of the land as referred to in Paragraph 23 of my Ruling of 30 March 2005 and his membership in the Association. There is no attempt by the Defendant to argue that even if they fails on such a case, the 2^nd Defendant is still personally liable as a joint tortfeasor with the Plaintiff by reason of his role in the management of the Plaintiff.

4.  Another point worth mentioning at this juncture is that though the 2^nd Defendant’s primary case is that the Association ceased to exist after the incorporation of the Plaintiff, its continued existence does not necessarily mean that it had committed the infringing acts that the Defendant complaint about. As I put to counsel in the course of final submissions, the crucial question is whether the Association took part in the infringing acts. Whether the Association had any role to play in respect of the title to Lot No.1943 in DD 121 is a separate question from whether the Association was the operator of the Koon after the incorporation of the Plaintiff. Further, the role of the Association in the title of Lot No.1943 paled into insignificance with the expiry of the Government Lease for that lot on 27 June 1997 and the grant by the Government of short term tenancy for the same piece of land to the Plaintiff as from 1 July 1997. The grant to the Plaintiff was subsequently formalized in terms of an agreement dated 1 February 2001.

The identity of the operator of the Koon after the incorporation of the Plaintiff

5.  On the evidence before me, the incontrovertible facts leading to the incorporation of the Plaintiff are as follows,

(a)	Lot No.1943 was previously known as Lot Nos. 533A and 543A of DD 121. Those were conveyed by Cheung Kung-leung to seven individuals by an Assignment dated 26 October 1964;
(b)	Those lots were surrendered and re-granted as Lot No.1943 by the Government to the seven individuals by a Memorandum of Agreement dated 6 April 1966. Of the seven individuals, three were from the Cheung family whilst the other four were committee members of the Association;
(c)	At that time, the seven individuals intended to hold the title for the operation of the Koon which was then run by the Association. This is evidenced by a letter written in 1964 by three committee members of the Association to other members appealing for contribution towards the costs of construction of the temple (Bundle F(1A) 400074);
(d)	The Koon was built on Lot No.1943 by the members of the Association between 1964 and 1970;
(e)	The first stage of construction was completed in April 1967. An Occupation Permit was issued by the New Territories District Commissioner on 12 April 1967 (Bundle F(1A) 400101);
(f)	There were disputes between Cheung Kung-leung and the Association which led to the closure of the original access. Subsequently, an agreement was reached on 22 September 1968 [“the Footpath Agreement”] for a new access road to be built by the Association;
(g)	Notwithstanding the Footpath Agreement, the Koon and Cheung Kung-leung continued with their altercation. There were problems with the land use of Lot No.1943 because Special Condition 3 of the Grant stipulated that the lot could be used only for the erection and maintenance of an ancestral temple (Chi Tong). The Koon was not an ancestral temple. Two of the registered owners from the Cheung family seized upon that and wrote a complaint letter to the District Officer on 22 January 1970. That led to enforcement action by the Government and a notice was issued pursuant to Section 13 of the Resettlement Ordinance on 24 February 1970 regarding the kitchen and toilets at the Koon;
(h)	The Koon instructed solicitors to deal with the matter. Counsel was retained. There was also a problem with the roofed over area built on the land exceeding the limit permitted under the Conditions. Modification of the Grant condition was explored. The Government was at one stage sympathetic. However, that could not be materialized because those in the Cheung family objected to the same. In the wake of threat of enforcement action, the four representatives of the Koon commenced proceedings in High Court Miscellaneous Proceedings No.209 of 1971 on 10 September 1971 seeking a declaration that modification could be effected notwithstanding opposition from those in the Cheung family who were also registered owners;
(i)	In the meantime, the grand opening of the Koon took place on 10 November 1970.

6.  PW4 Chan King Tak gave some evidence on how the idea of incorporation came about. He said it was done as a result of the advice from Messrs. Lau Chan & Ko, the solicitors acting for the Koon in dealing with the title problem. The solicitors advised that the operation of the Koon should be undertaken by a limited company to avoid disputes in the future whilst the unincorporated association should cease operation. Against the background as to the disputes between the various legal co-owners, that seems to be the kind of advice a sensible solicitor would give to the Koon.  Messrs. Lau Chan & Ko was the firm who prepared the Memorandum and Article of Association for the Plaintiff. The Plaintiff was referred to as “the Association” in the Memorandum. The objects of the Plaintiff as set out in the Memorandum were consonant with the activities of the Koon.  

7.  The Plaintiff was incorporated on 9 June 1972. The name of the Plaintiff was basically the same as the Association except the words “Hong Kong” were added at the beginning and the words “Limited” and “有限公司” were added at the end. The Plaintiff held a widely publicized inaugural ceremony for the appointment of the first board of directors on 15 August 1972. The District Officer of Yuen Long and several Justices of Peace were invited to officiate the ceremony. The ceremony and the speech by the Chairman were reported in the newspaper. Chan King Tak testified that a copy of the speech was sent to all the members of the Koon. It is quite obvious that the incorporation of the Plaintiff was regarded by those managed and interested in the affairs of the Koon as an important Koon event instead of the mere formation of a shelf company for non-operational purposes. All the members of the Association were therefore well aware of the incorporation and there was no suggestion of any objection from any one of them.

8.  After incorporation, the monies of the Koon were transferred from the Association to the Plaintiff. This is evidenced by an entry in the Plaintiff’s audited balance sheet of 30 June 1973. In my view, this is an important indicator that the operation of the Koon was no longer in the hands of the Association. Bank accounts were kept in the name of the Plaintiff. Donations received from members and others were paid into the bank account of the Plaintiff. From the accounting records included in the trial bundles, it can be seen that the activities of the Koon after 1972 were reflected in the Plaintiff’s accounts. The directors’ reports included in the financial statements of the Plaintiff stated that the principal activities of the Plaintiff were to promote Taoism, to worship Taoist gods and to provide free medical attendance. These were all activities of the Koon.

9.  Membership of the Association was also transferred to the Plaintiff. This is evidenced by the list of members of the Plaintiff produced as Annexure 1 to the second supplemental witness statement of Kwan Yau Hang and corroborated by the oral evidence of Wong Tung Wing, Hui Ka Cheung and Chan King Tak. Even though the Defendant alleged that the members continued to operate at the same time as members of the Association after the incorporation, there is no dispute that they were the members of the Plaintiff. Further, those who joined the Koon after 1972 were enrolled as members of the Plaintiff as opposed to that of the Association. Hence, Mok Chun Hing testified that he had no idea that there was a separate association behind the Koon apart from the Plaintiff. Donations by the members were paid to the Plaintiff.

10.  On 23 June 1971, Cheung Kung-leung and his wife assigned their interest in Lot No.1943 to Cheung Kung Wing. The Koon learnt of the assignment to Cheung Kung Wing in the course of the litigation. Negotiations were conducted with Cheung Kung Wing which culminated in a consent letter dated 6 November 1973 addressed to the Yuen Long District Office. Cheung Kung Wing signed that letter (Trial Bundle D2 p.300348) indicating his consent to the construction of the building on Lot No.1943 including the toilets. The letter was written on a piece of paper bearing the letterhead of the Plaintiff.

11.  The Koon has always been a member of the Hong Kong Taoist Union. As evidenced in a letter dated 2 July 1993 and another letter 3 March 1997, the incorporation of the Plaintiff was recorded by the Union and since then, the Plaintiff was regarded as the member in substitution of the unincorporated Association. The Plaintiff had applied for approval as a charitable institution under Section 88 of the Inland Revenue Ordinance and such status was granted with effect from 19 December 1999. These are cogent pointers suggesting that the Koon has been operated by the Plaintiff.

12.  There were documents bearing the letterhead of the Plaintiff as well as documents which simply used the name Kam Lan Koon after June 1972. Mr CH Chan SC for the Defendant placed some significance on the latter category of documents. Counsel submitted that since it is a legal requirement under section 93(1) of the Companies Ordinance that the words “Limited” and “有限公司” must be used, one could presume that the references to “Kam Lan Koon” simpliciter were references to a body other than the Plaintiff. Mr Chan went on to suggest that those documents bearing the name “Kam Lan Koon” simpliciter were actually documents issued by the Association and they evidenced the continued existence and activities of the Association even after the incorporation of the Plaintiff. I have no hesitation in rejecting this argument. Bearing in mind that the main activities of the Koon were religious and charitable in nature, it is not surprising that people continued to refer to the Koon without using the words “Limited” and “有限公司” even though it was operated by the Plaintiff. Whether that practice is in breach of Section 93(1) of the Companies Ordinance is beside the point. To say that because the letterheads of some documents and the name of the Koon painted at the main entrance of the temple did not bear those words, the activities must have been carried on by the Association is to put form before substance. In my judgment, the critical question is whether as a matter of fact the Association continued to operate the Koon as opposed to transferring its operation to the Plaintiff after its incorporation.

13.  In the more formal documents, e.g. audited financial statements, letter to the Government officials, the Plaintiff’s name were correctly stated. On the other hand, in some internal records, e.g. minutes of meetings and monthly financial reports, the words “Limited” and “有限公司” were omitted.  Mr CH Chan referred to the draft tenancy agreement of 1974, invoices issued by others to the Koon and pro forma receipts issued by the Koon and submitted that in external dealings, the Koon gave an impression that it was not operated by the Plaintiff. I do not find these documents to be particularly helpful in deciding the crucial question identified above. As mentioned, these documents had to be considered against the background that the Koon was not run as a business and all circumstances had to be taken into account. If one examined the subject matters of these invoices, some of those were in respect of equipment and materials relating to the gardening of the Koon. Those gardening expenses were reflected in the audited financial statements of the Plaintiff. Mr CH Chan postulated that the Plaintiff could have been used as a mere conduit or agent for the Association in holding bank accounts for administrative convenience. Whilst one can understand that some professional people might have reasons to set up service companies, I think it is unlikely that a religious institution like the Koon would have any reason to do so. Having regard to all the circumstances in the present case, I must reject Mr CH Chan’s postulation. I think it is more likely that the Plaintiff was formed to take over the management and operation of the Koon altogether.

14.  As regards the 1974 tenancy agreement, that has to be considered together with the viva voce evidence of the Plaintiff’s witnesses who dealt with Cheung Kung Wing. The evidence of Wong Tung Wing was that the negotiation was conducted by Wong Lung on behalf of the Koon. It is also his evidence that the Plaintiff had taken over the operation of the Koon since its incorporation. Despite the forensic points made by counsel concerning the inconsistencies between the evidence filed in the judicial review proceedings in 1997 (which I shall deal with below), I accept his evidence before me on this issue.

15.  Chan King Tak also gave evidence to this effect. He said that the incorporation was suggested by Messrs.Lau Chan & Ko and the purpose was to have the company to handle the affairs of the Koon to avoid future disputes. The advice was that as from incorporation, the Plaintiff would operate the Koon. I find such evidence accords with common sense and inherent probabilities and I accept the same.

16.  The evidence concerning the organization structure of the Koon shows that there was a board of managers (理事會) and an executive committee (值事會). The day to day management of the Koon was undertaken by the executive committee and some minutes of meetings of this committee were included in the trial bundles. The business discussed at those meetings were consistent with the activities of the Plaintiff reflected in its financial statements and directors’ reports. For example, the management of the garden was discussed at several meetings and the expenses thereof were reflected in the audited accounts. Donations were alluded to in the minutes and such donations were again booked into the Plaintiff’s accounts. The minutes also referred to the free Chinese medicinal services provided by the Koon. Again the expenses on such services were set out in the Plaintiff’s accounts.

17.  Mok Chun Hing had been appointed by the Plaintiff to provide such medical services since 1976.  His appointment evidenced by a letter from the Plaintiff dated 10 August 1980. He gave evidence before me. He became an ordinary member in 1984 and later joined the executive committee in 1987. Between 1988 and 1991, he was the vice chairman of the Koon. He is still a member. He testified that at all time since he came to the Koon, the Koon was run by the Plaintiff and there was no separate organization operating the Koon in parallel with the Plaintiff. Mok said he did not realize he is alleged by the Defendant to be a member of the Association and as such potentially liable as one of the persons being represented by the 2^nd Defendant by Counterclaim. I see no reason to doubt his evidence.

18.  Even though an executive committee had been in existence prior to 1972, it does not mean that the Plaintiff could not have adopt the same organizational structure after it took over the management of the Koon upon its incorporation. It is within the power of the board of directors of the Plaintiff to delegate the management of the Koon to a similar executive committee and to form a board of managers to supervise the same. Having regard to all the matters mentioned above, the correct inference is that the Plaintiff had adopted the same organization structure in running the Koon. As from 1972, the committee should be regarded as part of the Plaintiff and the minutes of the committee were evidence of the activities of the Plaintiff as opposed to activities of the Koon.

19.  Mr CH Chan asked this court to consider the evidence filed in the 1997 judicial review. Those proceedings challenged the decision of the Director of Lands’ refusal to renew the Government Lease for Lot No.1943 in DD 121 upon its expiration in 1997. The Plaintiff was the 2^nd Applicant whilst the 1^st Applicant was “Kam Lan Koon, an unincorporated association of persons by its chairman Kwan Yau Hang”. The 3^rd Applicant was Wong Tung Wing. Details regarding those proceedings can be found in the judgment of Yeung J (as he then was) reported at [1998] 2 HKLRD 875 and the Court of Appeal at [1999] 3 HKC 591. The proceedings were a complete failure as far as the Applicants were concerned. They failed at the first instance, at the Court of Appeal and they failed to persuade the Appeal Committee to grant them leave to appeal to the Court of Final Appeal.

20.  Insofar as the Defendant relied on these proceedings to establish the Association continued to “exist” and played an active role in that piece of litigation, it is in fact a red herring. As pointed out at the beginning of this judgment, the crucial issue in the present action is whether the Association took any part in the infringing activities, not whether the Association existed at the time of the 1997 judicial review. Secondly, it is somewhat unreal to talk about the existence of an unincorporated association in the abstract. By definition, an unincorporated association is not a legal entity. In the eyes of the law, an unincorporated association is the sum total of its members. Even if one were to conclude that a group of people could be regarded as an association in pursuing one purpose, it does not mean that the same group of people could be so regarded for another purpose. I have referred to the dicta of Lord Parker in London Association v Greenlands Ltd [1916] 2 AC 16 at p.38-9 in Paragraph 14 of my Ruling of 30 March 2005. In order to test the liability of an individual as a member of an unincorporated association to a third party, one must examine the specific activity in question to see whether agency could be made out. In the present context, the mere fact that some members of the Association had used the name of the Association in the judicial review to seek renewal of the Government Lease sheds no light on the actual occupation and use of the land and the identity of the entity that operated the Koon since 1972 or more pertinently, since 1999. Even if the Koon were operated by the Plaintiff after 1972, some members of the Association or those advising them might take the view, rightly or wrongly, that there might be some forensic justification for joining the Association as a co-applicant in the judicial review.

21.  Equally immaterial is the question of the transfer of beneficial ownership of the interest in Lot No.1943. Mr CH Chan contended that because of the Statute of Frauds 1677 and Sections 3 and 5 of the Conveyancing and Property Ordinance, there could not be any transfer of beneficial ownership of Lot No.1943 from the Association to the Plaintiff without any writing. I shall explain later why it is legally incorrect to suggest that beneficial ownership had ever been vested in the Association. For the sake of argument, assuming for the moment one can validly assert that the Association held the beneficial ownership in land, at the most this means the Association had not effectively disposed of its interest in Lot No.1943. It does not thereby prove that the Association must have been running the Koon. It is perfectly possible for one entity to hold the title (or in this case, retain the equitable interest) either consciously or unwittingly (through the failure to go through all legal formalities regarding the disposal of interest in land) but to allow another entity to have actual use thereof in the operation of the Koon.   

22.  However, Mr CH Chan is on firmer ground when he referred to specific paragraphs in the affirmations of Wong Tung Wing and Kwan Yau Hang filed in the judicial review. Counsel referred to certain statements in Paragraphs 1, 10 and 51(a) of the affirmation of Kwan Yau Hang filed on 19 June 1997 in the judicial review and contended that those statements showed the Association continued to exist after incorporation of the Plaintiff and use the land at Lot 1943 right up to the time of the judicial review. Admittedly, if one were to read these paragraphs in isolation, it is possible to come to these conclusions. However, one must read the affirmation as a whole. In Paragraphs 28 to 31 of that Affirmation, Mr Kwan made it clear his evidence was that upon incorporation of the Plaintiff, the management and control of the Koon had been passed to the Plaintiff. As far as the actual occupation of the land and the identity of the operator of the Koon since June 1972 is concerned, I do not think any mileage could be gained by the Defendant on this score.

23.  As regards the affirmation of Wong Tung Wing filed in the judicial review, Mr CH Chan sought to place reliance on Paragraphs 85 and 90 to assert Wong’s evidence was that the Association was still operating on the land after the incorporation of the Plaintiff. In my judgment, with respect, that is again selective reading of the affirmation. In Paragraphs 70 and 71 of the same affirmation, Mr Wong clearly deposed that after the incorporation of the Plaintiff, the Koon’s affairs and management were taken over by the Plaintiff. Mr Wong also gave evidence as to the purpose of the formation of the Plaintiff consistent with the evidence given by Chan King Tak in this trial. 

24.  Mr CH Chan also made some points regarding the wordings of the affirmation of Kwan Yau Hang filed in the present action and the explanation of Mr Wong and Mr Kwan in their viva voce evidence at the trial about these earlier affirmations. I have read the relevant parts of the transcripts and the relevant paragraphs in the affirmations. I do not think their evidence cast any doubt over the main drift of their testimony, viz. upon the incorporation of the Plaintiff, the management and control of the Koon had passed to the Plaintiff. It is quite obvious to me when they made their affirmations in 1997 in the judicial review, they and those advising them did not pay as much care and attention to the wordings deployed in the affirmations as they should have. But I do not find such inaccuracies to be a sufficient reason to disbelieve their evidence as to the identity of the operator of the Koon after 1972, particularly in the light of the other evidence alluded to in the other parts of this judgment.

25.  Lastly, Mr CH Chan prayed in aid of the evidence of Hui Ka Cheung regarding the honorary chairmanship of Cheung Kung Wing whilst the latter has never been a member of the Plaintiff. To my mind, it is a matter of little moment. The honorary chairmanship is clearly an honorary title. It does not have any significance in terms of the actual management and operation of the Koon. In the wake of the overwhelming evidence to the contrary, I do not think this piece of evidence could be relied upon to point to the management of the Koon by the Association.

26.  On the whole, I find as a fact that ever since the incorporation of the Plaintiff, the Koon has been operated by the Plaintiff and as from June 1972, the Association ceased to carry out any activities on the land in dispute. That being so, there is no basis to assert that the Association was involved in the infringing acts pleaded in Paragraph 5 of the Re-re-re-re-amended Defence and Counterclaim. It follows that the Counterclaim by the Defendant against the 2^nd Defendant by Counterclaim must be dismissed.

Dissolution of the Association

27.  Since it is essentially a question of fact, my above findings are sufficient to dispose of the Counterclaim. In deference to the very thorough submissions by counsel, I will refer to some other points taken. In his final submissions, Mr F Chan advanced the proposition that the Association had been dissolved informally after the incorporation of the Plaintiff. A good starting point to guide the examination of this issue is the dicta of Megarry VC in GKN Bolts & Nuts Sports & Social Club [1982] 1 WLR 774 at p.779,

“As a matter of principle I would hold that it is perfectly possible for a club to be dissolved spontaneously. I do not think that mere inactivity is enough: a club may do little or nothing for a long period, and yet continue in existence. A cataleptic trance may look like death without being death. But inactivity may be so prolonged or so circumstanced that the only reasonable inference is that the club has become dissolved. In such cases, there may be difficulty in determining the punctum temporis of dissolution: the less activity there is, the greater the difficulty of fastening upon one date rather than another as the moment of dissolution. In such cases the court must do the best it can by picking a reasonable date somewhere between the time when the club could still be said to exist, and the time when its existence had clearly come to an end.”

And then at p.780F to G,

“Mere inactivity is equivocal: suspended animation may be continued life, not death; and the mere cessation of function that was mentioned in the Abbatt case would not, I think, suffice per se. But inactivity coupled with other circumstances may demonstrate that all concerned regard the society as having ceased to have any purpose or function, and so as no longer existing. I think that short inactivity coupled with strong circumstances, or long inactivity coupled with weaker circumstances may equally suffice. The question is whether, put together, the facts carry sufficient conviction that the society is at an end and not merely dormant.”

28.  Another dicta which provides some guidance in principle can be found in the judgment of Brightman J in Re William Denby & Sons Ltd Sick and Benevolent Fund [1971] 1 WLR 973 at 978-9,

“In my judgment there are at least four categories of cases in which an unregistered friendly society or benevolent fund … is to be regarded as dissolved or terminated so as to render the unspent assets distributable in some direction. The most obvious case is the occurrence of an event upon the happening of which the rules prescribe dissolution or termination The Printers and Transferrers case [1899] 2 Ch. 184 is an example, the debate there being confined to the destination of the distributable funds. A second type of case is where all interested parties agree. A third case is where the court orders dissolution in the exercise of its inherent jurisdiction. It is unquestionable that this jurisdiction exists: see Blake v. Smither (1906) 22 T.L.R. 698. The jurisdiction had previously been exercised in the Lead Co.'s case [1904] 2 Ch. 196. …  A fourth category of case, in my view, is where the substratum upon which the society or fund was founded has gone. In such a case the society or fund is treated as dissolved or terminated, without any order of the court, when it has no effective purpose, with the result that the surplus assets (if not bona vacantia) are divisible among the then members.” 

29.  On the evidence before me, there had not been any steps taken by the Association to pass any resolution for the formal dissolution of the unincorporated association. However, as pointed out by Megarry VC, formal dissolution might not be necessary. A good illustration which bears some similarities with the present case can be found in Master Grocers’ Association of Victoria v Northern District Grocers Co-operative Ltd [1983] VR 195. In that case, some retail grocers in Croxton grouped together to form a Croxton Groucer’s Association. It was amalgamated with a similar association in 1958. The amalgamated association was called the Northern Association. The Northern Association was subsequently incorporated into the Northern District Grocers Co-operative Limited. The court found that the resolution of the Croxton Association for amalgamation was invalid. Despite that, due to the fact that no member took step to object to the cessation of operation by the association or to challenge the amalgamation, the court found that all the members acquiesced in the dissolution of the Croxton Association (see p.205).

30.  That case also highlighted the distinction between the dissolution of an unincorporated association and the disposal of all its assets after its dissolution. Usually, property for the use of an association is held by trustees. Sometimes it is loosely described as property held on trust for the association. Legally, that is not quite correct. An association, being an unincorporated body, cannot be a beneficiary. The vesting of the beneficial interest depends on proper construction of the trust instrument or in the absence of which, the contract between the members of the association inter se. The legal analysis is succinctly set out by Le Pichon J (as she then was) in Chap Yick Clansman’s Association Ltd v Mok Fai [1997] HKLRD 580 at p.584-5 with reference to Neville Estates Ltd v Madden [1962] Ch 832 at 849 and Re Recher’s Will Trust [1972] Ch 526 at p.539. This is why the Association could not have held the beneficial ownership of Lot No.1943. 

31.  Hence, the dissolution of an association is a separate question from the disposal of its asset. Having concluded that the association in question (viz. the Croxton Association) had been dissolved by acquiescence in Master Grocers’ Association of Victoria v Northern District Grocers Co-operative Ltd [1983] VR 195, Brooking J went on to consider what happened to the beneficial interest in the property by reference to the possible claims of the members and resolved the same on the basis of laches at p.207 to 209. At p.207, His Honour said,  

“Where the defence is that of laches in the sense of unreasonable delay on the part of the claimant coupled with resulting changes in the position of others such as would make it practically unjust to give a remedy …the claimant’s knowledge or means of knowledge becomes rather a matter to be taken into account in the general evaluation of the position and determination of how the balance of justice inclines. Even if it is not right in the present case to infer an intention on the part of the unpaid members to abandon or release their rights, still they have so acted as to induce other persons to alter their position in the reasonable belief that the rights of the unpaid members have been abandoned or released.”

32.  A not dissimilar approach was adopted by Le Pichon J in Chap Yick Clansman’s Association Ltd v Mok Fai [1997] HKLRD 580 at p.587 although Her Ladyship applied the concept of novation as opposed to laches. That was also a case of incorporation of a previously unincorporated association. At p.587B, the learned judge said,

“… the falling of the Association into desuetude did not bring about the termination of the relationship between the members of the Association who continued to function as members of the company. Rather, by approving and adopting the articles of association, the members effected a ‘novation’ of the terms of their relationship inter se.”

33.  I also incline to adopt the same approach with regard to what happened to the beneficial ownership regarding Lot No.1943 after the incorporation of the Plaintiff. However, I do not need to decide the point. What is important in the present context is that the outstanding title problem regarding Lot No.1943 cannot be a hurdle in the dissolution of the Association.

34.  Coming back to the question of spontaneous dissolution, Brooking J had to consider a similar point in the context of the dissolution of the Northern Association upon the incorporation of the Northern District Grocers Co-operative Limited at p.205-6. I would just quote a few passages from the judgment,

“The evidence bearing on the dissolution of the Northern Association is scanty in the extreme. No minutes of that Association exist and whether its members ever met to consider the proposed formation of the Co-operative does not appear.  … [Reference was then made to the statutory statement for incorporation which spelt out that the incorporated body will take over the businesses of the Association and the identities of the subscribers.] … There is evidence that the Co-operative took control of the assets and assumed the liabilities of the Northern Association and such scanty material as is available suggests that the Northern Association ceased to function in any way after October 1959 and that no member of the Northern Association ever complained of the Association’s ceasing to function. … I find that in about October 1959 the Northern Association was dissolved by the unanimous agreement of its members.” 

35.  A similar factual matrix was before Le Pichon J in Chap Yick Clansman’s Association Ltd v Mok Fai [1997] HKLRD 580. However, since the proceedings before Her Ladyship focused on the devolution of the property, there was no need to examine the issue whether the association was dissolved in depth. The learned judge observed at p.586I that even though there was no formal dissolution, the association became defunct for all practical purposes.

36.  Some other authorities were also cited by counsel. However, those cases were not dealing with a situation where the members incorporated themselves with a view to take over the operation of the unincorporated body. Since it is basically an application of the principles set out in the cases mentioned in Paragraphs 27 to 33 above, I do not think it is profitable to refer to them at length.

37.  To recap my findings based on the evidence set out in the earlier part of this judgment, 

(a)	in the wake of the disputes with Cheung Kung-leung, members of the Association were advised by solicitors to form a corporation to run the Koon to avoid disputes in the future;
(b)	the members accepted such advice and formed the Plaintiff accordingly;
(c)	the incorporation of the Plaintiff was well publicized and no member opposed the same;
(d)	the Plaintiff took over the operation and management of the Koon upon incorporation of the Plaintiff;
(e)	membership of the Association were transferred to the Plaintiff and the Association ceased to admit any new member;
(f)	all the activities the Koon were organized by the Plaintiff and the Association did not carry out further activities;
(g)	the monies of the Association were transferred to the Plaintiff shortly after its incorporation.

38.  In my judgment, the irresistible conclusion from these primary facts is that the Association had become defunct shortly after the incorporation of the Plaintiff. As regards the part allegedly played by the Association in the judicial review, I am of the view that that was simply a misguided joinder on the basis of the misconceived notion as to the vesting of beneficial ownership of Lot No.1943 after the cessation of operation of the Association. For reasons already given, I think the factual evidence placed before the court in the judicial review is consistent with my finding that the Association was defunct after the incorporation of the Plaintiff. It is also quite plain that all the then members of the Association had agreed to the demise of the Association. Since the only purpose of the Association was to operate the Koon, after that operation had been passed to the Plaintiff, the members had no reason to maintain the existence of the Association. If I may respectfully borrow from the analysis of Megarry VC, the present case is a case of long inactivity coupled with strong circumstances. I find as a fact that the Association was dissolved by unanimous consent of all its then members shortly after June 1972. Once the Association had been dissolved, it could not have been revived by whoever acting purportedly and misguidedly on its behalf in the 1997 judicial review.      

39.  I therefore accept the submission of Mr F Chan that by 1999, the Association had long become history and the claim against the 2^nd Defendant is misconceived.

40.  Having reached this conclusion, I do not propose to discuss the other limb of Mr F Chan’s submissions relating to the propriety of a representative claim in the present circumstances. I still have misgivings in that respect and counsel have referred this court to a number of authorities. The question may have to be re-visited on another occasion.  

41.  The Counterclaim against the 2^nd Defendant by Counterclaim is dismissed. I also make a cost order nisi that the Defendant shall pay the costs of the 2^nd Defendant by Counterclaim and such costs to be taxed if not agreed.

Mr K M Chong, instructed by Messrs Peter Mo & Co., for the Plaintiff

Mr Chan Hing Fai, Frederick, instructed by Messrs Peter Mo & Co., for the 2^nd Defendant (by counterclaim)

Mr Chan Chi Hung SC, instructed by Messrs Kao, Lee & Yip, for the Defendant (by original action) and the Plaintiff (by counterclaim)

HCA 15824/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 15824 OF 1999

____________

____________

_____________

R U L I N G

_____________

1.  This ruling dealt with four applications made in the course of trial. Due to the under-estimate by the parties as to the length of trial, it had to be adjourned part heard on 29 October 2004. The trial is scheduled to be resumed on 13 June 2005. During the adjourned period, the Court of Appeal handed down its decision in Chan Tin Shi v Li Tin Sung [2005] 1 HKC 1. That decision has an obvious and substantial impact on the viability of the Plaintiff’s claim.

2.  The first application was an application made on 29 October 2004, after the close of the Plaintiff’s factual evidence. The Defendant applied for leave to further amend its Defence and Counterclaim. The application was opposed by the Plaintiff and the 2^nd Defendant by Counterclaim. The second application was an application by the 2^nd Defendant by Counterclaim seeking to discharge the representation order, or alternatively for striking out certain paragraphs in the Defence and Counterclaim. The third application was made by the Defendant for Order 14A judgment against the Plaintiff as a result of the Court of Appeal’s decision. The fourth application is an application by the Plaintiff for the trial to be adjourned pending the Court of Final Appeal’s determination of the appeal in Chan Tin Shi. I have disposed of the first two applications on 21 March 2005 and the reasons for my decisions are given below. I shall also give my decisions on the other two applications in this Ruling.

3.  The most controversial parts of the proposed amendments by the Defendant are,

(a)	a new Paragraph 5(f) in the following terms,
	“since October 1999, the Plaintiff and/or the Association has been in wrongful occupation of the Disputed area, except the footpath. At or since the date of the writ, the Plaintiff and/or the Association has been in wrongful occupation of the footpath.”
(b)	amendments to Paragraph 6, the effect of which is to assert that since the Infringing Acts pleaded in Paragraph 5, the Defendant was dispossessed although there was no dispossession prior to such acts. Before the proposed amendment, the plea in Paragraph 6 was that the Infringing Acts did not and do not, in fact and as a matter of law, constitute dispossession.
(c)	a new prayer (2A) seeking a declaration that the title of the Defendant has never been extinguished.

4.  There are other amendments of minor nature. They are not opposed by Mr F Chan. Although Mr Chong also objected to those in his written and oral submissions, I think the proposed amendments in Paragraph 3A(e) and the main body of Paragraph 5 and paragraph (a) in the Particulars of Paragraph 5 are basically fine tuning the pleadings to tie in the same with evidence already there and they do not cause any prejudice to the other parties that could not be compensated by costs. In accordance with well settled principle, I grant leave to amend as far as those are concerned.

5.  In a way, the amendments to Paragraph 6 tie in with the proposed addition of Paragraph 5(f). As I understand from Mr C H Chan, the purpose of these amendments was to clarify that the Defendant’s case is that after the works in 1999, the Plaintiff and/or the Association occupied the Disputed area in a manner adverse to the Defendant. The occupation continued and the Defendant has been excluded. Hence, the need on the part of the Defendant to seek an order for possession. This case appears to be inconsistent with at least part of the pleas in Paragraph 3(a) and (b) of the draft Re-re-re-re-Amended Defence and Counterclaim and the last sentence of Paragraph 6. At the hearing of 21 March 2005, Mr C H Chan orally applied to revise the draft to remove the apparent conflicts in his pleadings.

6.  To appreciate the implications of these amendments in the context of this action, it is necessary to examine the existing stance of the other parties on the question of occupation of the Disputed area. The Plaintiff’s case is that it took over the occupation and the affairs of Kam Lan Koon since 1972 upon its incorporation. The evidence of its witnesses is to the effect that since the grand opening of the Koon, there had been encroachment of the land in its vicinity progressively. Substantial works were carried out at various stages in the 1970’s starting from 1972. At the latest by mid 1970’s, the Plaintiff has been occupying and using the Disputed areas up to today. This is the very foundation of the Plaintiff’s claim for declarations regarding its possessory title based on adverse possession.

7.  The position of the 2^nd Defendant by Counterclaim is different. As I mentioned in my Reasons for Ruling dated 25 October 2004, as the pleadings stand, it is unclear who comes within the description of the 2^nd Defendant by Counterclaim. To address that concern, Mr CH Chan submitted in writing on 29 October 2004 that the following persons were meant to be sued as such,

“	1.	The members of the Association sued are those who has or had ever been, who are presently, and who becomes, a member of the Association for any period at anytime from October 1999 to date of Judgment on the Counterclaim.
	2.	The aforesaid members of the Association sued include, but are not limited to, all who has and had ever been, who are presently, and who becomes, a member of the Plaintiff for any period at anytime from October 1999 to the date of Judgment on the Counterclaim, as all members of the Plaintiff from time to time were and are members of the Association at the same time.
	3.	The aforesaid members of the Association sued include, but are not limited to, all those persons listed as members of the Plaintiff as on 31 December 2003, being Annexure 1 to the 2nd Supplemental Witness Statement of Kwan Yau Hang filed herein on 14 June 2004, except Low Sai Hong, deceased, as those persons listed as aforesaid were and are members of the Plaintiff from October 1999 (or earlier), up to present.”

8.  Mr CH Chan recognized that within this group of people, some might have separate defence from the others in respect of some causes of action in the Counterclaim. However, he submitted that as regards the claim for possession by the Defendant and the proposed declaratory relief, their position should be identical.

9.  As far as the existing pleadings of the 2^nd Defendant by Counterclaim and the position of Mr F Chan are concerned, the 2^nd Defendant by Counterclaim is not contending that they have a right to occupy the Disputed areas. Nor do they assert that they have occupation and use of the same. Their case is that the Association had ceased to exist since the incorporation of the Plaintiff and the occupation of the Disputed areas, at least as from 1972, was by the Plaintiff.

10.  From the manner in which Mr F Chan conducted the case on behalf of the 2^nd Defendant by Counterclaim so far, he had been confining himself to establish the cessation of activities and occupation by the Association since 1972. He also assured this court it is not his intention to establish positively adverse possession by the Plaintiff although theoretically speaking, it is relevant to the defence to counterclaim (see Paragraphs 22 to 24 and Paragraphs 42 to 54 of the Defence and Counterclaim of the 2^nd Defendant by Counterclaim). He was quite happy to leave that to Mr Chong.

11.  If the Counterclaim against the 2^nd Defendant by Counterclaim were confined to the claim for possession, the real contestants seem to be the Plaintiff and the Defendant. Mr F Chan indicated that the 2^nd Defendant by Counterclaim was quite happy to give an undertaking to this court that in the event the court shall hold against the Plaintiff on adverse possession and made an order for possession in favour of the Defendant, the 2^nd Defendant by Counterclaim would be abided by the same order although on his case, such order vis-à-vis the 2^nd Defendant by Counterclaim would not be necessary as they are not occupying the land.

12.  But the Defendant is also suing for damages. This put a different complexion into the case. Not only does the Defendant sue for damages for trespass, it claims that the trespasses were committed with a calculation to make profit for the wrongdoers that were likely to exceed the compensation payable to the Defendant and asks for aggravated and/or exemplary damages against both the Plaintiff and the 2^nd Defendant by Counterclaim. This means each and every one of those persons who come within the description of the 2^nd Defendant by Counterclaim is potentially at risk of being held personally liable to pay substantially damages to the Defendant in the event the Defendant succeeds.

13.  At the hearing on 2 February 2005, Mr CH Chan indicated on behalf of the  Defendant that the Defendant could undertake to this court that apart from Mr Kwan himself, the Defendant would not seek aggravated or exemplary damages against other members of the association. That addressed some of the concerns raised by this court. However, the Defendant is still reserving the right to seek leave to enforce judgment for ordinary damages against those members. That claim could still be a substantial one.

14.  Legally speaking, to hold a member of an unincorporated association personally liable for the tort physically committed by others in the association is by no means straightforward. Lord Parker had these observations in London Association v Greenlands Ltd [1916] 2 AC 16 at p.38-9,

“Had Sir Samuel Scott applied to the court for leave to defend on behalf of himself and all other members of the association, the court would have had to inquire whether the case was within O.XVI r.9 of the Rules of the Supreme Court; in other words, whether the members of the association have a common interest within the meaning of that rule. Upon such an inquiry the nature and constitution of the association would have been of great materiality. For example, did it carry on business for gain? If so, it would be illegal, and no order recognising its existence could be properly made. On the other hand, if it did not carry on business for gain, the question would at once arise as to the applicability of what may be referred to as the club cases. To use the words of the 8th edition of Lindley on Partnership, p.14, ‘If liabilities are to be fastened on’ any members of such an association ‘it must be by reason of the acts of those members themselves, or by reason of the acts of their agents; and the agency must be made out by the person who relies on it, for none is implied by the mere fact of association’.”

15.  In my judgment, there are two questions that may arise from a claim against the members of an unincorporated association. First, there is a question of substantive law as to how a member would be held liable for the acts or conducts of his fellow member(s) even if he did not take part in such acts or conducts personally. This is the question addressed by the passage in Lindley. Second, there is a question of procedure as to whether a representative action under Order 15 Rule 12 is the appropriate course to adopt to have that matter litigated. To an extent, the second question may depend on answer to the first question. This is because Rule 12(1) is only applicable when there are persons having the same interest in the proceedings.    

16.  But there are cases where the question on substantive law could not be finally resolved at the interlocutory stage. Obviously, the court cannot adjudicate on disputes of facts going to the merits when it is asked to consider an application under Order 15 Rule 12. At the interlocutory stage, all that the court could do is to assess by reference to the materials and the submissions before it whether there is sufficient identity of interest amongst those members so that it would be fair and just to have the action proceeded by way of representative action.

17.  Three consequences follow from this analysis. First, since Order 15 Rule 12 is only concerned with the procedural aspect of an action, it cannot override or pre-empt the conclusion of a trial judge regarding the liability of individual members in the application of the substantive law to his finding of facts. Second, as a matter of procedure, the main concern of the court in deciding whether representative action is appropriate is to ensure that the interests of the individual members who may potentially be affected by the outcome have been fairly and sufficiently safeguarded. Rule 12(5) provides a safety valve to protect members who may have a distinct defence that has not been adequately canvassed at the trial. Third, such assessment must be capable of being varied as the preparation or the conduct of the case developed in such a way that leads to material changes to the positions of the parties. A review mechanism is built into Rule 12(1) where it is provided that the court can order otherwise. In this connection, Mr F Chan cited a number of cases in his very comprehensive written submissions of 5 January 2005 in support of this construction of Rule 12(1): R J Flowers v Burns [1987] 1 NZLR 260 at 273; Taspac Oysters Ltd v James Hardie & Co [1990] 1 NZLR 442 at 447; The Irish Rowan [1989] 2 Ll Rep 144 at 154, 156 and 162; Carnie v Esanda  (1995) 127 ALR 76 at p.81 and 94.          

18.  I therefore reject Mr C H Chan’s submission that as a matter of jurisdiction, this court is barred by the order of Deputy Judge Saunders (see [2004] 2 HKC 673) from reviewing the appropriateness of representation order. I think the more pertinent question on the summons taken out by the 2^nd Defendant by Counterclaim seeking a discharge of the representation order is whether the court should do so in the exercise of its discretion.

19.  Bearing in mind that the 2^nd Defendant by Counterclaim would take part in the action in his personal capacity in any event, I considered that at this stage the most important question is to ensure procedural fairness to the other alleged members of the Association. The question as to liability of such members on substantive law and enforcement of judgment against such members could be ventilated in closing submissions or at a hearing under Order 15 Rule 12(5).  Hence, it is important to ascertain the stance of the other members. For that purpose, I gave directions on 2 February 2005 for notices to be given to them by the Defendant. The notices were duly served and none of them appear at the hearing on 21 March 2005. I can therefore safely assume that they are quite content to leave the matter as it is.

20.  In the light of that, it may not be too meaningful to entertain an application for the discharge of the representation order at this stage. Mr F Chan wisely agreed on 21 March 2005 not to proceed with the summons.  I therefore made no order on the summons of the 2^nd Defendant by Counterclaim with costs reserved to be decided after trial.

21.  Having said so, it should be apparent from what I said that the substantive question as to the personal liabilities of the alleged members is still very much a live issue and parties are at liberty to address me further on that topic in their final submissions.

22.  Coming back to the amendments, Mr F Chan’s main complaint is that it is not clear from the pleadings the basis on which it is alleged that the alleged members of the Association were personally liable for the alleged acts of trespass. He contended that it was not clear from the Defendant’ pleas who did what in the allegations of trespass when considered in the context of the claims against the 2^nd Defendant by Counterclaim.

23.  I have some sympathy with Mr F Chan. However, Mr C H Chan clarified at the hearing on 2 February 2005 that vis-à-vis the 2^nd Defendant by Counterclaim, the Defendant’s allegation of trespass was based on the use and occupation of the Disputed Area by the Association which, according to the case of the Defendant, still retained the character of an unincorporated association. As I understand it, Mr CH Chan’s contention can be summed up as follows,

(a)	the Defendant is relying on the “corporate” occupation of the land by the association instead of any specific act of trespass committed by an individual member;
(b)	the members of the Plaintiff were also members of the unincorporated association that continued to exist despite the incorporation in 1972;
(c)	the occupation of the Disputed areas by the Association constituted “corporate” acts on the part of the association;
(d)	since the occupation was for the furtherance of the purpose of the Association, each and every member is personally liable even though he or she did not commit any act of trespass personally.

Hence, Mr C H Chan submitted that the Defendant needed not pinpoint any specific act by any person.

24.  Whether that contention can be sustained is a matter that I do not wish to express any conclusion at this stage. At this stage, what I am concerned with is whether the 2^nd Defendant by Counterclaim would be embarrassed by such a plea.  So long as the Defendant confines itself to the contention set out above (as Mr C H Chan did), I think there is no risk of the 2^nd Defendant by Counterclaim being disadvantaged by the lack of averment of specific acts of trespass. As regards the Plaintiff, given the position taken by it on occupation, there cannot be any prejudice. I therefore granted leave to amend on 21 March 2005.

25.  Turning to the Defendant’s application for disposal of the case against the Plaintiff on a point of law under Order 14A, Mr C H Chan relied on the recent decision by the Court of Appeal in Chan Tin Shi v Li Tin Sung [2005] 1 HKC 1. The Court of Appeal held in that case that time started to run afresh in respect of land in the New Territories by reason of the effect of the New Territories Leases (Extension) Ordinance Cap.150.

26.  The Court of Appeal has granted leave in Chan Tin Shi for appeal to the Court of Final Appeal. I was told that the appeal is scheduled to be heard in October 2005.

27.  The present case has been adjourned part heard and the scheduled date for resumption of the trial is 13 June 2005 with 15 days reserved.

28.  On the other hand, Mr Chong applied for an adjournment pending the decision of the Court of Final Appeal in Chan Tin Shi. He cited Kingcastle v Owen-Owen, 19 February 1999, an unreported judgment of the English Court of Appeal.  He contended that it is entirely a matter of discretion of this court in deciding whether to wait for the outcome of the decision of the Court of Final Appeal before resuming the trial. In his written submissions of 2 December 2004 and 30 January 2005, Mr Chong advanced arguments as to why the matter should not be determined by way of Order 14A. He submitted that given the stage at which we had arrived in the trial, it would be a waste of judicial resource to determine the case under Order 14A without any finding of facts. He also pointed out that there would still be outstanding matters even if the point of law is decided in favour of the Defendant. Mr F Chan supported that course. He also referred this court to Derby v Weldon (No 5) [1989] 1 WLR 1244 and urged that in any event, discretion should be exercised against proceeding by way of Order 14A in the present circumstances.

29.  Mr C H Chan submitted that the mere fact that the Court of Appeal’s decision is being challenged in the pending appeal to the Court of Final Appeal is not a good reason for delaying justice being administered according to the law laid down by the Court of Appeal. He cited Kung Wong Sau Hin v Sze To Chun Keung [1996] 2 HKC 616 and Hong Kong Ferry (Holdings) v Chan Kwan Fat [1995] 1 HKC 542 in support of this proposition.

30.  In my judgment, it all boils down to how this court should exercise its case management discretion in the disposal of the remaining part of the trial in the light of the decision of Chan Tin Shi and its pending appeal. In the exercise of such discretion, each case must depend on its own facts and the authorities cited by counsel could only serve as illustrations of how the discretion had been exercised in the past in similar, but not precisely the same, circumstances.

31.  The starting point is that this court does have the power under Order 14A to determine a case on a point of law at any stage of the proceedings provided that the criteria in Order 14A Rule 1 are satisfied.  I am satisfied that Mr C H Chan’s summons does raise a question of law suitable for determination without a full trial although the issue had not been as precisely framed as that formulated by Rogers VP in Para.4 of the judgment of 27 January 2005 in Chan Tin Shi.

32.  I am also satisfied that a determination of the point of law will finally determine the claim of the Plaintiff in this action. It will also determine the liability of the Plaintiff in respect of the counterclaim. In fact, Mr Chong conceded in Paragraph 6 of his skeleton submissions of 2 December 2004 that this court is bound by Chan Tin Shi and the Plaintiff’s claim must fail in view of that. However, the question of damages vis-à-vis the Plaintiff, including exemplary or aggravated damages, would not be determined. Likewise, the question of liability of the 2^nd Defendant by Counterclaim would not be determined. In the premises, I am of the view that Rule 1(b) is satisfied.

33.  The question is whether I should exercise my discretion to entertain the application at this stage. I do not accept Mr Chong’s argument that the trial has proceeded to such an advanced stage that the application should not be entertained. Based on the estimates of the parties, the trial on liability will take another 15 days if it is not otherwise disposed of. Whilst it is correct that there are still some other issues to be dealt with, they should take up less than 5 days. A disposal under Order 14A may therefore save at least 10 days’ costs.

34.  Order 14A itself provides that the power can be exercised at any stage of the action. Whilst it is unusual for such power to be evoked during the course of trial, there are exceptional circumstances in the present case. First, the Court of Appeal’s decision was not handed down until the trial had been adjourned part heard. Second, it is properly conceded by Mr Chong that the Plaintiff’s claim must fail unless the Court of Appeal’s decision is overturned.

35.  The only disadvantage of deciding the case under Order 14A is that this court will not make any finding of facts on any controversial matters since the Defendant has yet to adduce its evidence. In the event that the Court of Final Appeal overturns the decision of the Court of Appeal, the case will have to be remitted back to this court to continue with the trial. However, there is no need to hear the evidence that had already been heard by this court in October 2004.  There is no question of waste of judicial resource.

36.  It could mean that if the Court of Final Appeal reverses the decision of the Court of Appeal, there would be a long lapse of time before evidence is resumed. Yet, the same disadvantage would arise if the trial were adjourned pending the decision of the Court of Final Appeal.

37.  It seems to me the material difference between deciding the matter under Order 14A and adjourning the trial is that in the former, the Plaintiff would need to launch an appeal to preserve its position pending the outcome of Chan Tin Shi in the Court of Final Appeal and to apply for a stay of execution in the meantime. If parties do not want to incur too much cost, the appeal could be stayed pending the outcome of Chan Tin Shi. The costs involved should be much less than 10 days’ costs in the trial.

38.  Mr C H Chan submitted that the Defendant is entitled to judgment according to the law as laid down by the Court of Appeal and it would not be correct to delay the same by an adjournment of the trial. Having regard to the circumstances in the present case and the principles in R v Kingston-upon-Thames Justices, ex parte Martin [1994] Imm AR 172, I agree it is not appropriate to impose an adjournment on the Defendant merely because there is a pending appeal in Chan Tin Shi. Balancing the potential prejudice that may cause to the parties by the different options, I think the Defendant is justified in having a determination from this court even though the appeal in Chan Tin Shi could affect the outcome. In my view,  the prejudice of delay caused by an adjournment of the trial to the Defendant outweighs the prejudice to the Plaintiff occasioned by the costs of the appeal preserving the position of the Plaintiff pending the outcome of Chan Tin Shi. The application for the trial to be adjourned is therefore dismissed.

39.  Hence, the choice is between deciding the matter under Order 14A or continuing with the trial in June. I do not think it follows from the decision of Vinelott J in Derby v Weldon (No 5) [1989] 1 WLR 1244 that I should continue with the trial instead of dealing with the matter under Order 14A. The underlying factual matrix in that case is quite different. First, the appeal to the House of Lords in that case is likely to be heard before the action was ready for trial. Second, the claims for conspiracy (which the defendant sought to strike out) in that case called for the investigation of substantially the same facts as other claims which are not demurrable and the striking out of the former would not significantly alter the course of the trial. In those circumstances, I can readily understand why Vinelott J declined to entertain the striking out application pending the decision by the House of Lords.

40.  We are in a rather different situation. The appeal to the Court of Final Appeal is scheduled to be heard several months after the resumption of this trial. This means that even if the trial is to proceed without any Order 14A disposal, this court will still be bound by the Court of Appeal’s decision in Chan Tin Shi and determine the claims of the parties accordingly. Further, as mentioned above, the course of the remaining part of the trial would be quite different and the time taken could be substantially reduced if there were an Order 14A determination.

41.  I recognize that if I proceed under Order 14A, there is a risk that if the Court of Final Appeal shall subsequently overturn the decision of the Court of Appeal in Chan Tin Shi, the case will have to be remitted back to the Court of First Instance for hearing the rest of the evidence and making the relevant finding of facts. On the other hand, there is also a possibility that the Court of Final Appeal may agree with the Court of Appeal. In that event, if we proceed with a full-blown trial, the additional costs of a trial with at least 10 additional days and the enormous judicial time spent on fact finding will be wasted. It has to be remembered that the latter is not confined to the 10 additional days of court sittings. I do not have the benefit of hearing the viva voce evidence of Cheung Kung Wing and the Defendant is relying on his deposition that spanned over 12 days. Even with assistance from counsel, this court must therefore spend substantial time on the reading of the transcripts of the deposition in order to deal with the factual issues properly and satisfactorily.

42.  Mr Chong contended that the Plaintiff would suffer hardship if it has to incur the costs of the appeal. I am not impressed by that argument. The Plaintiff has not filed any evidence as to its financial position. In any event, Mr C H Chan indicated that the Defendant is agreeable to have the appeal stayed pending the outcome of the Court of Final Appeal’s decision in Chan Tin Shi. I do not think the additional costs of such an appeal should be so substantial that the Plaintiff could not afford. To the contrary, I believe it would probably be well within the limit of the costs saved by the reduction in the remaining part of the trial.

43.  Neither would there be substantial additional costs incurred for the purpose of the Order 14A application. In fact, all the costs pertaining thereto should have been incurred. The point is a straightforward one. Mr Chong conceded that at the moment, I am bound by Chan Tin Shi and the only possible result is the dismissal of the Plaintiff’s claim and to enter judgment in favour of the Defendant against the Plaintiff on possession and liability for damages in respect of the Counterclaim.

44.  On balance, I think I should accede to the Defendant’s Order 14A application and determine the Plaintiff’s claim and the Defendant’s counterclaim by following the decision of the Court of Appeal in Chan Tin Shi.  There is no dispute that the land involved is New Territories land and the Government Lease under which the Defendant holds the title is subject to the operation of the New Territories Leases (Extension) Ordinance. According to Chan Tin Shi, the Defendant obtained a new estate by the extension. Two possible dates had been specified in Paragraph 4 of the judgment of Rogers VP of 27 January 2005 in granting leave to appeal as the commencement dates of the fresh limitation period: 25 April 1988 or 30 June 1997. It is plain that on either dates, the limitation period for commencement of action had not expired when the Defendant first filed its Counterclaim on 21 June 2003. For a cause of action to recover land accrued on 25 April 1988, the limitation period is 20 years, see Section 38A of the Limitation Ordinance. For a cause of action accrued on 30 June 1997, the limitation period is 12 years.

45.  In the circumstances, the Plaintiff’s claim, which is based on extinguishment of title of the Defendant by adverse possession, must fail and I shall dismiss it. As regards the counterclaim by the Defendant, there shall be final judgment against the Plaintiff in terms of Prayers (1), (2), (2A). When the trial resumes in June, the court will deal with the following outstanding matters,

(a)	the liability of the 2nd Defendant by Counterclaim;
(b)	the proper order to be made against the Plaintiff regarding Prayers (3), (4) and (5) in the Counterclaim;
(c)	the question of costs.

46.  I was told that the parties would not call further evidence on issue (a). I therefore give the following directions as to the future conduct of the case,

(a)	the Defendant shall file and serve skeleton submissions on the outstanding issues by 1 June 2005;
(b)	the Plaintiff and the 2nd Defendant by Counterclaim shall file and serve skeleton submissions by 7 June 2005.

Mr K M Chong, instructed by Messrs Peter Mo & Co., for the Plaintiff

(by original action and the 1^st Defendant (by counterclaim)

Mr Chan Hing Fai, Frederick, instructed by Messrs Peter Mo & Co., for the 2^nd Defendant (by counterclaim)

Mr Chan Chi hung, instructed by Messrs Kao, Lee & Yip, for the Defendant(by original action) and the Plaintiff (by counterclaim)

HCA 15824/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 15824 OF 1999

____________

____________

_______________________________

REASONS  FOR  RULINGS

_______________________________

1.  On 9 April 2003, the Defendant in this action took out a summons under Order 39 Rule 1 seeking an order that a witness Mr Cheung Kung Wing be examined viva voce before a judge, the Registrar or an examiner.  The application was heard by Chu J and an order in the following terms was made on 17 April 2003,

“1. Cheung Kung Wing, a witness on behalf of the Defendant be forthwith examined viva voce on oath or affirmation before a Master on an early date to be fixed in consultation with Counsel’s diary but not earlier than 26 May 2003 with 5 days reserved;

2. …

3. Depositions taken at the examination be filed in the Registry of the High Court, and that office copies thereof may be read and given in evidence on the trial of this cause, saving all just exceptions, without any further proof of the absence of the said witness than the affidavit of the solicitor of the party using the same, as to his belief …”

2.  That order was in the same form as form No. 32 in Appendix A to the Rules of the High Court.  Order 1 Rule 9 provides that the forms in the Appendices shall be used where applicable with such variations as the circumstances of the particular case require.

3.  Pursuant to that order, Cheung Kung Wing was examined before the Registrar.  It was a lengthy process.  Altogether it took 12 days (although on some occasions, either no evidence was taken or proceedings were adjourned early due to health condition of Mr Cheung), starting on 26 May 2003 and ending on 15 December 2003.

4.  At the time when the order of Chu J was made, the 2^nd Defendant by Counterclaim had not yet been joined as a party to this action.  The summons for amendment of the Defence and Counterclaim joining the 2^nd Defendant was taken out on 9 May 2003 and leave for amendment was granted on 19 June 2003.  The matter is further complicated by the fact that the 2^nd Defendant is named in a representative capacity and the representation order was not made until 21 October 2003.  Mr Kwan appealed against that order.  The appeal was dismissed by Deputy Judge Saunders on 23 March 2004.  It is not very clear on the face of the pleadings as to what is the appropriate point in time to determine whether a person comes within the description “member of Kam Lan Koon, an unincorporated association”.  As canvassed during the course of arguments, there could be a number of possibilities,

(a)     the date when the alleged causes of action accrued : in this respect, there could be different dates for different causes of action;

(b)    the date when the 2^nd Defendant was joined as a party to the action;

(c)     the date when judgment is pronounced by the court.

Membership of Kam Lan Koon, assuming it still exists as an unincorporated association, may very well be different on these three dates.  The defence available to members at different point in time to the Counterclaim may also be different (see Roche v Sherrington [1982] 1 WLR 599).

5.  Notice to act was filed by Messrs Christine Koo & Ip on behalf of Mr Kwan on 3 July 2003.  Mr Kwan had already been involved in the depositions taking before the joinder as a representative of the Plaintiff.  Messrs Christine Koo & Ip were also acting on behalf of the Plaintiff.  However, it seems that no notice of the joinder has been given to any other members of the alleged unincorporated Kam Lan Koon.  No notice was given to them in respect of the application for representation order.  They were not even served with the amended Counterclaim.

6.  It can be noted that the taking of deposition straddled a long period and the joinder and representation order took place some time in between.

7.  At the trial of the action, Mr C H Chan intimated to the court that the Defendant intends to adduce the deposition as evidence.  Mr Chong indicated that the Plaintiff would not consent and the court had to be satisfied that the witness is unfit to attend trial.  Mr F Chan submitted that the 2^nd Defendant by Counterclaim was not a party to the deposition and the requirements under Order 38 Rule 9 were not satisfied.  In any event, he submitted that it would be unfair to admit the deposition as evidence against the 2^nd Defendant because the 2^nd Defendant had not had any opportunity to cross-examine Mr Cheung.  He also contended that the deposition could not be admitted as hearsay evidence against the 2^nd Defendant because the definition of hearsay evidence under Section 46 of the Evidence Ordinance excludes such evidence.

8.  The Defendant issued a summons on 4 October 2004 seeking to have the deposition admitted as evidence pursuant to Order 38 Rule 9 or alternatively as hearsay evidence.  Mr C H Chan indicated that the summons was taken out ex abundante cautela.  His primary contention was that the deposition had already been admitted as evidence by reason of the order of Chu J and there was no need on the part of the Defendant to seek another order under Order 38 Rule 9.

9.  After hearing very wide ranging submissions from the parties, I ruled on 14 October 2004 that the deposition shall be admitted as evidence against the Plaintiff pursuant to Order 38 Rule 9.  I also ruled that the deposition cannot be admitted under that rule against the 2^nd Defendant.  However, the same could be admitted as hearsay evidence against the 2^nd Defendant.  Upon further submissions, I also granted leave to the 2^nd Defendant to call Mr Cheung for cross-examination in certain limited areas through video-link facilities.  I now give reasons for these rulings.

10.  I shall first deal with Mr C H Chan’s primary contention, viz. whether the deposition has already been admitted as evidence at this trial by reason of the order of Chu J and the filing of the Affirmation of To Ka Man Karen, solicitor acting for the Defendant, on 20 July 2004.  He relied specifically on the last part of Paragraph 3 of that order, viz. “without any further proof of the absence of the said witness than the affidavit of the solicitor of the party using the same, as to his belief”.  It was submitted that the effect of this part of the order was that the court had directed that once such an affidavit was filed, the deposition would be admitted as evidence without any further order.

11.  The difficulty with that contention is that if one examines Order 39 Rule 1 and Order 38 Rule 9, a two-stage process is envisaged.  First, the party wishing to have a deposition should get an order for deposition to be taken.  If the court considers it appropriate, such an order would be made under Order 39 Rule 1.  Then deposition could be taken.  That is stage one.  Second, when the case comes on for trial, if a party so wishes, he could ask for the deposition to be admitted as evidence by reference to Order 38 Rule 9.  If there is disagreement between the parties, the court will have to apply the criteria set out in Rule 9 by reference to the material before it at the time of trial to decide on the admissibility of deposition.  That is stage two.

12.  It should be noted that a party who applied for deposition to be taken is not bound to put the deposition in as evidence at the trial.  It is up to him.  However, if he does not put it in, the other parties might apply to have the deposition put in as evidence.  But irrespective of the identity of the party making the application, the criteria in Order 38 Rule 9 must be satisfied before the deposition can be admitted as evidence.  Further, as mentioned, the court has to be satisfied by reference to the material currently before it in determining an application under Order 38 Rule 9.  A person who was unfit due to sickness at the time of an application under Order 39 Rule 1 may not be unfit by the time of a later application under Order 38 Rule 9.

13.  Mr C H Chan did not quarrel with this analysis.  However, he submitted that the court could make an order directing in advance that upon a solicitor filing an affidavit, the court will deem that the requirement under Order 38 Rule 9 satisfied and thus the deposition will then be admitted as evidence at the trial.  He further submitted that this is the effect of the last part of Paragraph 3 of the order of Chu J.

14.  Conceptually, if Mr C H Chan were correct in his contention, it means that the court had decided in advance that the requirement of Order 38 Rule 9 would be satisfied without even knowing whether a party and which party would seek to admit the deposition as evidence at the trial, what would be set out in the solicitor’s affirmation and most importantly what the opposite party would say about that application.  That seems to me to be contrary to one of the fundamental precepts in our legal system: the court should not decide a matter without first offering parties affected a fair opportunity to be heard.

15.  I am not suggesting that the court can never give directions as to the pre-conditions for the admission of a certain piece of evidence in advance of the evidence being tendered.  In fact, directions of such nature are generally given in requiring witness statements to be filed, reports of expert witness to be exchanged, documents to be disclosed.  I also imposed condition for admission of hearsay evidence well in advance of such hearsay evidence being actually tendered in High Fashion Garments v Ng Siu Tong [2003] 2 HKC 562.  But there is a difference between imposing pre-conditions for admission and the actual decision to admit the evidence.  In all those situations, the fulfillment of the conditions would not bar the opposite party from raising objection to the admissibility on other grounds which they have no prior chance to canvass.

16.  If one refers back to Paragraph 3 of the order of Chu J, it does not purport to rule that the requirement of Order 38 Rule 9 were satisfied once an affidavit from the solicitor is filed.  It only said that office copy of the deposition “may be read and given in evidence” “saving all just exceptions”.

17.  My view is supported by Fisher v CHT Ltd [1965] 1 WLR 1093.  Edmund Davies J held in that case that the reference to the reading of an office copy of the deposition at the trial in an order for examination is a wholly permissive provision and does no more than providing that office copy may be read.  In other words, it dispensed with the need of proving what had happened during the deposition by having evidence from the examiner.  But Mr C H Chan distinguished that case on the basis that the order for deposition in that case apparently did not contain wordings similar to the last part of paragraph 3 in Chu J’s order and nothing was done subsequent to the deposition by way of affidavit from a solicitor.  In the course of his submissions, Mr C H Chan asked rhetorically if that part of paragraph 3 was not intended to cater for proof of matters under Order 38 Rule 9 what purpose could it serve.

18.  Despite the diligence of counsel, they could not trace the origin of Form 32.  It was similar to Form 35 which was already there in Annual Practice 1932, that being the earliest edition of the White Book that counsel had access to.  Mr F Chan however referred this court to Seton, Forms of judgments and orders 7^th Edn (1912) at p. 112 which said,

“It is not proper to insert in the order for examination any words giving leave to give the depositions in evidence at the trial.”

Barton v North Staffordshire Railway (1887) 35 WR 536 was cited as authority for this proposition.  In that case Kay J gave a ruling to that effect.  His Lordship said before leave is given to use the evidence at the trial, it would be necessary to show that the witness was not capable of being examined.

19.  There is in fact some support for Mr C H Chan’s contention that the last part of Paragraph 3 is intended to deal with proof under Order 38 Rule 9.  Atkin’s Court Forms, Vol. 18 (1992 Issue) p. 466 n. 8 commented on this part of the standard form order.  It said “proof” in the form means “proof that the witness is dead, beyond the seas or unable from sickness or other infirmity to attend the trial”.  It further explained,

“The order may occasionally be made on other conditions as to the proof of the absence of the witness.  Thus, if there is a dispute as to that witness’s ability to attend, the court may make the order de bene esse (i.e. reserving this question for future consideration) and require the matter to be investigated thoroughly either at the trial or at some other stage.”

The footnote then set out an alternative form of order that can be used to achieve that.  Mr C H Chan therefore suggested that if the court used the standard form instead of the de bene esse form, the court chose to dispose of the issues under Order 38 Rule 9 instead of reserving the same.  I do not think it necessarily follows.  I note that the commentary at p. 385-6 of Atkin (in particular, footnote 15) suggested that this part of the prescribed form only “makes such an affidavit admissible to prove the condition precedent” under Order 38 Rule 9.  I think Barton v North Staffordshire Railway (1887) 35 WR 536 is still good law notwithstanding the wordings in Form 32.

20.  To address the concern outlined in Paragraph 14 above, Mr C H Chan submitted that the order being an interlocutory one, the court could still review the matter if there has been material change of circumstances in the meantime.  But he said the initiative lies with the party against whom the deposition is admitted to apply to court to set aside the order already made.  In the present circumstances, he informed this court that given that the issue had been raised, the Defendant would not take issue as to the absence of summons to set aside the last part of the order of Chu J and could deal with the merits of the matter under Order 38 Rule 9.

21.  Since I have heard full arguments on the point and it is a point of general application, I shall deal with it instead of leaving it to be resolved in the future.  As a matter of principle as well as authorities, I am of the view that the court could not prejudge whether an affidavit by a solicitor could satisfy the requirement under Order 38 Rule 9.  Much depends on the stance taken by the parties and the material circumstances disclosed by the evidence before the court when the issue has to be resolved, viz. at the time of trial.  At the most, at the time of making the order for examination, the court can say an affidavit of solicitor would be accepted as sufficient prima facie evidence if there is no evidence to the contrary.  Further, even if the opposing party does not file evidence, the court does not have the power to prevent him from making submissions if he wishes to contest the matter.  Hence, the order for examination cannot pre-empt the Order 38 Rule 9 issues and the parties against whom the deposition is admitted could challenge the same notwithstanding an order containing the last part of Paragraph 3 in Chu J’s order.

22.  I do not think it is correct to regard Chu J’s order as an advanced ruling on the Order 38 Rule 9 issues.  Having regard to the wordings of Paragraph 3 as a whole, it is only a permissive provision allowing an affidavit to be filed by a solicitor to be the prima facie evidence when the matter is not contentious.  I agree with Mr F Chan that the last part of Paragraph 3 probably derived from the decision of Beaufort v Crawshay (1866) LR 1 CP 699.  As such, it only dealt with the admissibility of a solicitor’s affidavit as proof.  If there is any dispute, the order could not be taken as having ruled on the same since Chu J could not tell whether there would be any dispute under Order 38 Rule 9 when the order was made.

23.  Once it is appreciated that the order of Chu J did not rule on any of the Order 38 Rule 9 issues, it follows that the burden is on the party who seeks to have the deposition admitted as evidence at the trial to show to this court that it is admissible under that rule.  The Defendant could satisfy that requirement by showing that the other parties consent.  Of course, in deciding whether to consent, the other parties should take into account the contents of the affidavit of the solicitor.  But if such consent is not forthcoming, the Defendant should seek a ruling from the trial judge.

24.  Although Mr C H Chan had mentioned about using the deposition during one of the pre-trial reviews, I do not recall the other parties having indicated categorically that they would consent.  Counsel have checked the official digital recordings as to what transpired at the pre-trial reviews and I was not referred to any clear intimation of consent by counsel for the other parties.

25.  Hence, I rule against Mr C H Chan on his primary contention.  The summons of 4 October 2004 is not otiose and in fact it is necessary.

26.  As regards the 2^nd Defendant by Counterclaim, there is an additional reason why Mr C H Chan’s primary stance is erroneous.  It is clear from the history of the case that the 2^nd Defendant by Counterclaim had not been a party to the summons of 9 April 2003 and he had not been heard before Chu J made the order of 17 April 2003.  After the 2^nd Defendant had been joined as a party to the action, the Defendant should have taken out a similar application against the 2^nd Defendant by Counterclaim.  But the Defendant did not do so.

27.  I do not accept Mr C H Chan’s submission that the order of Chu J automatically binds the 2^nd Defendant by Counterclaim after he was joined as a party.  He cited no authority for this proposition.  Taking evidence by deposition is an exception to the general rule under Order 38 Rule 1.  I see no reason why the 2^nd Defendant by Counterclaim should be deprived of any opportunity to be heard as to whether evidence should be taken by deposition and the manner in which the deposition is to be taken.  It is to be noted that in the present case, the deposition was taken before the Registrar instead of the trial judge.  That would certainly have a bearing on the trial judge’s assessment of the weight that could be placed on such deposition evidence.  The 2^nd Defendant by Counterclaim should have the opportunity to address the court as to the appropriateness of such a course if deposition were to be taken.  Hence, it is imperative that a summons under Order 39 Rule 1 should be taken out against the 2^nd Defendant if there is a possibility that deposition was to be used against him as deposition.

28.  I therefore conclude that the order of Chu J does not bind the 2^nd Defendant by Counterclaim.  It follows that Mr C H Chan’s primary stance cannot be sustained in any event as far as the 2^nd Defendant by Counterclaim is concerned.

29.  Mr C H Chan argued that because the 2^nd Defendant by Counterclaim was represented by the same firm of solicitors as the Plaintiff, notice given to that solicitor about the deposition should also constitute notice given to the 2^nd Defendant by Counterclaim, at least as regards notices after the joinder.  He referred this court to the 2^nd Affirmation of To Ka Man Karen to support this contention.  He submitted that the 2^nd Defendant by Counterclaim therefore had the opportunity to take part in the deposition and he did not do so at his own choice.  He also highlighted that counsel for the Plaintiff, Mr Chong, also acted for the 2^nd Defendant by Counterclaim in settling the Defence to Counterclaim on his behalf.  In such circumstances, he invited the court to exercise its discretion by reference to Order 2 Rule 1 to treat the failure to issue a summons under Order 39 Rule 1 against the 2^nd Defendant by Counterclaim as a mere irregularity.

30.  In an affirmation dated 5 October 2004, the solicitor acted for the Plaintiff and 2^nd Defendant by Counterclaim in 2003 explained that after the joinder, due to absence of invitation by the Defendant to the 2^nd Defendant by Counterclaim to take part in the deposition, he did not think the 2^nd Defendant by Counterclaim should be involved in the deposition and Mr Chong was not instructed to attend the deposition on behalf of the 2^nd Defendant by Counterclaim.

31.  Although it might be more helpful if the solicitor had been more vigilant and proactive in sorting out the position of the 2^nd Defendant by Counterclaim with the solicitor for the Defendant, I do not think it is fair to suggest that he was at fault in not bringing up the matter.  After all, the Defendant had the carriage of the deposition proceedings and it should bear the responsibility in ensuring all necessary procedural steps had been complied with.  It was the Defendant who chose to join the 2^nd Defendant by Counterclaim after the deposition had started and it should therefore bear the prime responsibility in taking up the matter with the 2^nd Defendant by Counterclaim and the court.  The correspondence between the parties does not show that the solicitor for the 2^nd Defendant by Counterclaim had ever misrepresented to the Defendant’s solicitor that Mr Chong also acted for the 2^nd Defendant by Counterclaim in the deposition or that the 2^nd Defendant by Counterclaim waived the need to have an order under Order 39 Rule 1 against him.  In the correspondence, the solicitor for the Defendant did not specifically referred to the position of the 2^nd Defendant by Counterclaim.  In the absence of any binding order under Order 39 Rule 1 against the 2^nd Defendant by Counterclaim, I do not think one can regard those notices given to the solicitor for the Plaintiff regarding the resumption of the deposition and the supply of transcripts as notices of the same effect to the 2^nd Defendant by Counterclaim.

32.  It seems more likely that those involved in the deposition did not address their minds to the position of the 2^nd Defendant by Counterclaim.  The Registrar did not appear to regard the 2^nd Defendant by Counterclaim as party to the deposition.  This is reflected by the fact that after cross-examination of the witness by Mr Chong (who on record only appeared for the Plaintiff in the deposition), the Registrar did not invite any person to cross-examine the witness on behalf of the 2^nd Defendant by Counterclaim.  This is quite understandable in view of the fact that the order of Chu J was only an order between the Plaintiff and the Defendant.   

33.  In her second affidavit, Ms To placed emphasis on the fact that the 2^nd Defendant by Counterclaim was aware of the deposition and he was present at part of the deposition.  But the same cannot be said with regard to the other members of Kam Lan Koon.  Although Mr Kwan was named as their representative, Mr Kwan was contesting the propriety of such representative capacity at the time of the deposition.  Those other members are potentially affected by reason of Order 15 Rule 12(3) and they stands in a rather different position in this aspect of the case.  At one stage, I was minded to invite such members to nominate another representative to address this court on the admissibility of the deposition since their position is potentially different from that of Mr Kwan.  However, I did not take such a course because I concluded that even in the case of Mr Kwan, without an order under Order 39 Rule 1 that is binding on him, he was quite entitled to assume that the Defendant chose not to involve him in the deposition.

34.  This is not a case where the positions of the Plaintiff and the 2^nd Defendant by Counterclaim are entirely the same in resisting the Counterclaim.  As demonstrated by Mr F Chan, there are questions relevant to the specific defence raised by the 2^nd Defendant by Counterclaim (but not relevant to the defence of the Plaintiff) that could be put to Mr Cheung.  Those questions have not been raised in the deposition due to the absence of the 2^nd Defendant by Counterclaim.

35.  I therefore reject Mr C H Chan’s submissions.  I find that given the lack of an order under Order 39 Rule 1 against him, the 2^nd Defendant by Counterclaim was not a party to the deposition and hence he had no opportunity to cross-examine the witness even though he personally was aware of the deposition both before and after the joinder.  I do not think the Defendant can pray in aid of Order 1 Rule 2 to seek to have the deposition admitted as deposition against the 2^nd Defendant by Counterclaim.  As far as the 2^nd Defendant by Counterclaim is concerned, the deposition was taken without his participation.  The essential characteristics of a deposition were that all parties involved must have a fair opportunity to argue whether it is appropriate to take evidence by deposition and if deposition were to be taken, they have a fair opportunity to cross-examine the witness.  Vis-à-vis the 2^nd Defendant by Counterclaim, these characteristics are absent.  At the most, the transcript of the deposition can only be regarded as hearsay statements regarding the 2^nd Defendant by Counterclaim.

36.  Coming back to the position of the Plaintiff.  Apart from the affidavits of Ms To, the Defendant called Dr Gary Chu to establish a case of Cheung being unfit to attend trial.  The doctor gave evidence on 11 October 2004 and he was cross-examined by Mr F Chan.  Mr Chong did not cross-examine the doctor.

37.  The doctor testified that the conditions of Mr Cheung are worse than that in 2003 when the deposition was taken.  Dr Chu has known Mr Cheung for a long time and he was a friend of Mr Cheung’s son since primary school.  He has been attending to Mr Cheung’s medical conditions since 1997.  He specializes in emergency medicine.  He gained fellowship in the Hong Kong Academy of Medicine in 2002.  During the past year, he saw Mr Cheung about two times per month and the last time he saw Mr Cheung before he gave evidence was 3 October 2004.  He made a medical report dated 9 October 2004 concerning Mr Cheung.  In his oral testimony, Dr Chu identified three main areas of concern regarding the health of Mr Cheung,

(a)     cancer of the prostate with multiple skeletal secondaries that caused Mr Cheung to suffer from severe headache and back pain and analgesic and morphine that would make Mr Cheung drowsy.  He said the prescribed dosage is about four times per day, and it is expected this might increase in the future;

(b)    the heart condition was said to be within type 3 of the New York classification.  Dr Chu explained that it means Mr Cheung could encounter difficulty in breathing even when he engaged in ordinary daily activities of simple exertion like brushing his teeth;

(c)     mentally speaking, Mr Cheung has symptoms of depression with insomnia and anxiety experienced.

Dr Chu was particularly concerned about the effect of the stress occasioned by giving evidence on the heart of Mr Cheung.  He worried that such stress might precipitate a heart attack.  He testified that that was what happened on 30 May 2003 when the deposition taking was interrupted.  

38.  Although Dr Chu is not the cardiologist treating Mr Cheung (he is treated by Dr Teresa Wong and another doctor at Graham Hospital in that respect), I am satisfied on the evidence before me that Mr Cheung would be unfit to attend the trial for the purpose of Order 38 Rule 9(1).  I therefore held that the deposition is admissible against the Plaintiff.

39.  As regards the position of the 2^nd Defendant by Counterclaim, for reasons already given, it could not be regarded as deposition.  Can it be admitted as hearsay evidence? Mr F Chan contended that it cannot for two reasons,

(a)     the definition of “hearsay” under the new Section 46 of the Evidence Ordinance excludes oral evidence given in the course of proceedings and the deposition falls within the exception;

(b)    the proper channel of getting the deposition admissible is to follow the regime under Order 39 Rule 1 and Order 38 Rule 9.  Short of that, the evidence is inadmissible.  He cited my decision in High Fashion Garments v Ng Siu Tong [2003] 2 HKC 562 to support this contention.   

40.  One has to read the new definition of “hearsay” carefully.  It said “hearsay” means a statement made otherwise than by a person while giving oral evidence in the proceedings which is tendered as evidence of the matters stated.  Hence, it is tested by reference to the particular proceedings at which the statement is tendered.  In the present context, the relevant proceedings is the trial.  The deposition is not oral evidence given at the trial.  Fisher v CHT Ltd [1965] 1 WLR 1093 is authority for the proposition that deposition taking is not part of the trial.  Therefore, Mr F Chan’s contention based on Section 46 must be rejected. 

41.  As regards the second point, I said the following in Paragraph 15 in High Fashion Garments v Ng Siu Tong [2003] 2 HKC 562,

“Section 47(1) only removes one obstacle as to admission of evidence, viz. exclusion of evidence on the ground of hearsay.  It does not deal with other restrictions, including procedural restrictions laid down by other rules embodied in the Rules of the High Court and directions given by court for conduct of the case.  Section 55B(1) of the Evidence Ordinance reinforces this conclusion.”

42.  I stand by what I said.  However, I am of the view that in the present circumstances, such principle could not be relied upon to exclude the admission of the deposition as hearsay statement against the 2^nd Defendant by Counterclaim.  For reasons already canvassed, the deposition has never been a deposition as far as the 2^nd Defendant by Counterclaim is concerned.  It is more akin to evidence taken in another proceedings in which the 2^nd Defendant by Counterclaim is not a party.  There is no doubt that such evidence could be admissible as hearsay statement.

43.  That being so, the question of admissibility vis-à-vis the 2^nd Defendant by Counterclaim should properly be governed by the hearsay regime.

44.  Having made my rulings accordingly on 14 October 2004, Mr F Chan applied for leave to call Mr Cheung for cross-examination pursuant to Order 38 Rule 21.  Mr F Chan indicated that the area of cross-examination would be limited to those spelt out in paragraph 18 of his skeleton submissions.

45.  Although I ruled that Mr Cheung is unfit to attend trial to give evidence on a full scale, there is an obvious difference if he were only required for cross-examination within that limited scope.  Mr F Chan told me that his cross-examination would not take more than half an hour and he was happy with cross-examination through video-link with Mr Cheung remaining at his residence throughout the process and the doctor could be present there.  With these precautions, bearing in mind the circumstances of this case and the materiality of the evidence of Mr Cheung, I am of the view that on balance the application should be granted.  Of course, Mr Cheung could apply to set aside the subpoena if he deems necessary and I will hear submissions on his behalf in that event.

Mr K M Chong, instructed by Messrs Peter Mo & Co., for the Plaintiff (by original action) and the 1^st Defendant (by counterclaim)

Mr Chan Hing Fai, Frederick, instructed by Messrs Peter Mo & Co., for the 2^nd Defendant (by counterclaim)

Mr Chan Chi Hung, instructed by Messrs Kao, Lee & Yip, for the Defendant (by original action) and the Plaintiff (by counterclaim)