SUN HOI TAT v. PROFECTUS INVESTMENT GROUP LTD

HCA 1366/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1366 OF 2013

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DECISION ON BASIS OF TAXATION

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1.  In a judgment handed down in August 2016, the plaintiff’s claim was dismissed with costs to the defendant.  The outcome resulted, in short, from the rejection of the plaintiff’s claim that he has been in adverse possession of the suit property for such time period that the defendant’s title thereto was extinguished.

2.  The parties disagree regarding the basis of taxation.  The defendant contends that the above costs should be taxed on more generous basis (either indemnity or common fund) whereas the plaintiff argues that they should be taxed on the usual party-and-party basis.

3.  The only ground put forth by the defendant for seeking a departure from the norm is that the plaintiff and his witness were persons with extremely low moral standard, and he has commenced a “try on” or bogus claim.

4.  The evidential basis relied upon in support of the above ground is the court’s rejection of the testimony given by the plaintiff’s witnesses.

5.  The footnotes in Hong Kong Civil Procedure 2016 Vol 1 (para 62/App/12) set out the relevant general principles:

“The Court of Appeal in Choy Yee Chun (The Representative of the estate of Chan Pui Yiu) v. Bond Star Development Ltd (1997) H.K.L.R.D. 1327, CA reviewed the cases and summarized the law as follows. A taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner.”

6.  The Choy Yee Chun decision is heavily relied upon by the defendant in this application.  However, there are important differences between that decision and this action.  In Choy Yee Chun (a case where adverse possession was the defence):

(a)   before the legal proceedings, the paying party (the defendant therein) demanded money in exchange for handing over the property concerned;

(b)   in the course of the legal proceedings, the paying party was found to own a much smarter residential unit near the property concerned, and his alleged continued occupation of the property concerned was rejected;

(c)   the courts (both first instance and on appeal) concluded that the paying party put forth a bogus claim, which was contradicted by obvious evidence (such as the paying party’s own earlier assertions) and abused the process by dragging on to put financial pressure on the receiving party.

7.  No such (or similar) features can be found in this action.  This action does not differ much from other hostile litigations involving credibility; in order to determine the outcome of those litigations, the courts would have to (and did) deciding on which factual version should be accepted (and the related question of which version should be rejected).  See also Overseas Trust Bank Ltd v Coopers & Lybrand (a firm) and Others [1991] 1 HKLR 177 (referred to in the Choy Yee Chun decision).

8.  Such being the case, there is insufficient reason to justify awarding the higher scale(s) of costs sought by the defendant. Accordingly, the costs should be taxed on the usual party-and-party basis.

HCA 1366/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1366 OF 2013

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J U D G M E N T

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Introduction

1.  The plaintiff commenced this action in July 2013 claiming in gist that he has obtained possessory title to the lots of land in Tai Mong Tsai, Sai Kung (“the suit property”) by uninterrupted adverse possession since 1994 (relying on the Limitation Ordinance (Cap 347)).

2.  The above claim is denied by the defendant, the “paper owner” of the suit property.

Background

3.  The suit property is located next to a village most indigenous residents of which are surnamed Lau.

4.  Next to the suit property, but physically forming one flat piece of land, are other lots of land belonging to another of the said villagers (“the adjoining land”).

5.  A Mr Luk (“Luk”), who has been a long acquaintance of the plaintiff, entered into possession of the suit property and the adjoining land (collectively “the nursery ground”) sometime in 1989. Luk did so for the purpose of operating in effect a horticulture business (“Luk’s operation”); the plants grown there would be supplied to retailers as well as supermarkets.

6.  At least for the period from 1989 to about 1991 or 1992, it is undisputed Luk paid for the use of the nursery ground.  Luk mentioned two sums:

(a) $120,000 as “transfer fee” (頂手費);

(b) annual rents.

7.  The plaintiff has, since some time (even) before 1994, begun to work (at least irregularly) at Luk’s operation.

8.  The suit property (but not the adjoining land) is still occupied by the plaintiff.

The Main Issues

9.  While the plaintiff’s period of occupation of the suit property may not be disputed, the precise nature (and period) of his occupation is one of the main issues in this action: the plaintiff asserts that he has been in adverse possession while the defendant asserts that he did so as some kind of licensee (or even a tenant) at least until about end of 2007 (the reason for this date will become apparent below).

10.  The parties’ respective case regarding the above two matters is factually different.  A proper determination of this action therefore necessitates a determination of those matters, and in turn will involve resolving the factual differences in the witnesses’ testimony.

Witnesses’ Testimony and Findings of Fact

11.  The approach I adopted in earlier decisions when assessing the credibility is repeated:

“The assessment of a witness’s credibility and/or reliability is a task frequently undertaken by the court in litigation (in fact, very often an essential task). I consider the following to be the appropriate test to adopt:-

‘There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-

(a) whether that part of his testimony is inherently plausible or implausible;

(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest’.

(See, for example, the decisions in Chiu Chi Tong v. Lau Chong Sai & Another, HCA 765/2002 (para. 28) and Yu Ming Investment Ltd. v. Peng Ru Chuan, Richard, HCA 814/2002 (para. 13)).”

(Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd and Others, HCA 3523/2002 (13 August 2005), para 12) (See also林傳龍對謝巧玩 HCA 1443/2011 (19 December 2014), para 15).  The same approach will be adopted in this action.

12.  I have also borne in mind the approach disapproved by the decision in The PopiM [1985] 1 WLR 948 (see also Ide v ATB Sales Ltd [2008] EWCA Civ 424 (28 April 2008), para 1 to 6; Datec Electronic Holdings Ltd and Others v UPS Ltd [2007] 1 WLR 1325, para 46 to 50).  The impermissible approach was described in the ATB Sales judgment as follows:

“ ... a trial judge was not compelled to choose between two theories, where the evidence was unsatisfactory ... it was not possible to proceed on the basis of eliminating the impossible and deciding that the remaining explanation, however improbable, must be the cause ... the concept of proof on a balance of probabilities had to be applied with common sense ... ” (para 3 thereof).

13.  This judgment contains headings and sub-headings below only because of the need for easy comprehension.  That the witnesses’ overall credibility has to be assessed from a wider perspective has not been overlooked.

14.  The following factual witnesses testified at trial:

(1) the plaintiff;

(2) Luk;

(3) Wong, a contractor who is familiar with many of the indigenous villagers and the locality;

(4) Lau, one of the previous “paper owners” (the predecessors-in-title of the defendant).

15.  As a general observation, I find the defence witnesses to be more credible and reliable than the plaintiff’s witnesses, especially as regards the important matters of whether:

(a) Luk and/or the plaintiff have occupied the suit property with the permission of the “paper owners” (whether the permission be by way of a tenancy or a licence);

(b) Luk and/or the plaintiff have paid rents/fees for the occupation up to about end of 2007.

16.  Wong is an important witness in relation to the matters mentioned in para 15 (in particular para 15(b)) above.  There is no obvious reason why he would benefit from this action.  Also, his credibility and reliability has not been damaged by cross-examination (as the plaintiff fairly accepted during closing submissions).  Wong’s testimony is far from being inherently implausible, and therefore is not to be rejected adopting the ATB Sales approach.

17.  Wong’s contacts with Luk and the plaintiff arose out of the following circumstances:

(1) he has been operating a construction sub-contract business, mainly building village-type houses in the Sai Kung area;

(2) he became acquainted with the indigenous villagers (including those living near the suit property) as a result;

(3) in fact, in 1992, one of his construction sites was located next to the suit property;

(4) consequently, he also knew of the plaintiff and Luk;

(5) one of the owners of the adjoining land complained to Wong that Luk had failed to pay rents and asked Wong to help collect rents from Luk.

18.  Several matters important to both the credibility of the plaintiff and Luk, and to the determination of this action have been testified to by Wong:

(a) because of the owner’s request, Wong met with Luk in November 1999 and, at Wong’s insistence, Luk executed a tenancy agreement regarding the adjoining land, and paid the rents in advance;

(b) the plaintiff was present on that occasion;

(c) when the owner again complained to Wong about Luk’s failure to pay rents, Wong helped the owner to engage a law firm to commence an action to recover the adjoining land from Luk;

(d) a sign belonging to Luk’s horticulture was all along hung outside the nursery ground;

(e) Wong seldom saw Luk at the nursery ground after 2011, but Wong often saw the plaintiff working there all the time;

(f) a private car and a truck belonging to Luk (or Luk’s company) were always parked at or near the nursery ground;

(g) from 2009 to 2010, Wong and his workers have to enter the suit property in order to construct a retention wall.  Wong sought Lau’s consent to do so (and Lau consented) in 2009.  Wong never asked for consent for doing so from the plaintiff or Luk, and the said act (and work) of Wong and his workers were never interrupted by the plaintiff or Luk.

19.  Further, important facts have been accepted by the plaintiff when he testified:

(1) he was unaware that the nursery ground consisted of the suit property together with the adjoining land until the adjoining land was recovered by the owner of the adjoining land (in 2008);

(2) he was unaware of the boundaries of the adjoining land and the suit property until the adjoining land was recovered by the owner of the adjoining land (in 2008);

(3) he “took over” the nursery ground (including the suit property) from Luk;

(4) although the tenancy agreement executed in December 1999 was in Luk’s name, it was he who wanted to stay on the nursery ground;

(5) many items found on the suit property (especially the large pots and plants) were left behind by Luk;

(6) further, Luk would store plants on the suit property from time to time;

(7) he performed paid work for Luk’s operation from time to time.

20.  It should also be noted the defence filed by Luk in March 2008 (when he defended the recovery action commenced by the adjoining land’s owner) stated that Luk had always paid rents, and that Luk had an office at the nursery ground.

21.  In light of the foregoing, the assertions of the plaintiff and Luk to the effect that:

(a) none of them had paid rents to the “paper owners” of the suit property and the adjoining land after 1992;

(b) the plaintiff has been occupying the suit property (and the adjoining land up to 2008) in his own right since about 1994;

(c) the occupation of the suit property (and the adjoining land) by Luk up to about 1994, and by the plaintiff since then, was without the consent of the “paper owners” (at least prior to 2008),

are not accepted as truthful testimony.

22.  The plaintiff’s testimony has also been materially shaken by cross-examination.  Examples of this are:

(1) his testimony concerning the time when the staircase and brick wall on the suit property were constructed was about a decade different from what was stated in the pleadings and his witness statement;

(2) his testimony as to Luk handing over possession of the nursery ground to him for free, when Luk had earlier paid substantial sums for it, is inherently implausible;

(3) the apparent free access to, and use of, the vehicles belonging to Luk (or Luk’s company), allegedly purely for his personal use (rather than for Luk’s operation) for a sustained time period, is inherently implausible;

(4) his admission that his affirmation filed in the recovery action of the adjoining land had no substance, and was principally used to delay the execution of the order for possession, weights against him;

(5) that Luk was willing to execute a tenancy agreement in 1999 when, on the plaintiff’s case, Luk had already left the nursery ground for several years; and that Luk, rather than the plaintiff, did so is inherently implausible.  In any event, in the light of such background, and that it was the plaintiff who wanted to stay on the nursery ground, Luk was in effect acting as an agent (for an undisclosed principal) when he executed the tenancy.

23.  Luk’s credibility suffers from similar deficiencies (similar to those mentioned in para 22(2), (3) and (5) above).

24.  Lau was a witness who lacks sophistication, and the power to articulate clearly.  He was unable to explain clearly (when cross-examined) details relating to dates and names, and relating to the precise nature of earlier transactions concerning the suit property.  Despite these, the important parts of Lau’s testimony are supported by Wong’s testimony and contemporaneous documents.

Was the Possession of the Suit Property Adverse ?

25.  The relevant legal principles are undisputed, and can be summarized as follows:

(a) to establish adverse possession, the party in possession has to show both exclusive, continuous and open possession, as well as an intention to exclude the world at large, including the true owner: Wu Yee Pak v Un Fong Leung & Others (2004) 7 HKCFAR 498, para 5;

(b) the burden of proof which rests with the party in possession is a heavy one and requires clear evidence: Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd CACV 79/2008 (18 February 2009), para 88 to 89 citing Powell v McFarlane (1979) 38 P & CR 452, 472.

26.  In view of the above findings regarding the witnesses’ credibility, the plaintiff has failed to satisfy the above burden of proof.

27.  I am therefore not satisfied that the plaintiff has established adverse possession of the suit property.

Conclusion

28.  The plaintiff’s claim is dismissed.  It is accepted that the counterclaim is but the reverse of the plaintiff’s claim. For this reason, the relief sought by para (1) to (4) of the counterclaim will be granted.

Other Matters

29.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the judgment and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Costs Order

30.  The parties agree that the costs of this action should follow the event.  There will accordingly be a costs order that the costs of this action (including any reserved costs) be paid by the plaintiff to the defendant to be taxed if not agreed.  The plaintiff’s own costs are to be taxed in accordance with the Legal Aid Regulations (Cap 91A).

31.  The parties differ, however, as to the basis of taxation.  For this purpose:

(1) the defendant be at liberty to lodge with court and serve written submissions within 7 days from today;

(2) the plaintiff be at liberty to lodge with court and serve written submissions within 7 days thereafter.

Any application for a more generous basis of taxation will be determined after sight of the written submissions without further hearing.