Posts Tagged ‘Adverse possession’

Common intention constructive trust: context

April 26, 2017

Cheung Lai Mui v Cheung Wai Shing ([2017] HKEC 740) concerned property that had been owned by three brothers (W, F and K) as tenants in common in equal shares.

W died and D1 and D2 inherited W’s share. When F and K died, P (K’s adopted daughter) applied to be administratrix and executrix of their respective estates.

D3 was D1’s son. He claimed to be solely beneficially entitled as a result of a common intention constructive trust. This succeeded.

This was a traditional Chinese family residing in the New Territories ([78]). D3 was the only male descendant of the family. This was a significant fact that lent credence to the allegation of the common intention.

There was evidence of express discussions concerning the common intention and other surrounding circumstances that made it likely that the common intention had come into existence.

The lack of any formal written evidence of the common intention was understandable in the family context ([94] – [95]).

A defence of estoppel by standing by also succeeded ([103]).

So did D3’s adverse possession claim. He had erected a gate. This was an unambiguous assertion of control even though the gate had not been locked ([108]).

Michael Lower

Adverse possession by co-owner in breach of DMC

April 10, 2017

In Foremost Hill Ltd v Li Hon ([2017] HKEC 708) P and D owned adjoining shops in a building covered by a Deed of Mutual Covenant (‘DMC’). P had been in possession of part of D’s shop (‘the disputed area’) since 1981 (possibly earlier) due to a wrongly positioned partition wall. P claimed to have acquired title to the disputed area by adverse possession. The court agreed.

There was a clear ouster; P’s actions were incompatible with D’s right to exclusive occupation of the disputed area.

D also relied on the DMC covenant provisions conferring on each owner a right to the exclusive use of its own unit. Andrew Chung J commented that this effectively raised the question as to whether adverse possession can ever operate as between co-owners of units covered by a DMC ([25]).

The matter seemed not be covered by authority and should be approached from first principles.

An action to enforce the DMC term as a contractual term was time-barred after six years (section 4(1) of the Limitation Ordinance).

There was no limitation period for an action to enforce a restrictive covenant in equity but the doctrine of laches applies. The adverse possession began so long ago that it would be inequitable to allow D to enforce the covenant against P.

Andrew Chung J. also agreed with the proposition that since the action was, in substance, an action to recover land the limitation period in section 7(2) is engaged ([37]).

Michael Lower

Joint adverse possession?

December 17, 2016

U Po Chu v Tsang Pui Ling [2016] HKEC 2673, CA, concerned a two storey stone house in Tsuen Wan. P brought possession proceedings against D1, a former tenant of part of the ground floor, amongst others. D1 relied on adverse possession; she stopped paying rent in 1985 but remained in possession. Other people occupied other parts of the building. D1 claimed to have been in adverse possession of the whole building jointly with the occupiers of the other parts.This claim was rejected at first instance and in the current proceedings the Court of Appeal (Cheung JA giving the judgment) refused leave to appeal. The judge at first instance had been quite right to hold that there was no evidence that the squatters were in joint possession of the whole building; on the facts of this case, each was in possession of its own part. While a successful claim by D1 to the part of the house that she had occupied was a possibility, it had not been pleaded and it was too late to introduce such a claim.

Michael Lower

Adverse possession: where part of the limitation period is taken up by squatter’s declaration proceedings

August 4, 2016

In Tang Wai Tung v Tang Wai Lun ([2016] 3 HKLRD 96, CA) TWL claimed to have acquired title to Tso lands through adverse possession, having continued a period of adverse possession begin by his father, TPK. This may have been possible because there was a period of time during which there were no new members whose claim would not be defeated by a successful adverse possession claim. The claim failed because TWL could not establish factual possession. The Court of Appeal (Yuen JA giving the judgment) also considered an interesting issue concerning the effect of litigation commenced during the limitation period. Here, TPK began proceedings against the Tso in 1998 and these were taken over by TWL after TPK’s death. Amongst other things, TPK sought a declaration that the Tsos title to the land had been defeated by adverse possession. In its defence, the Tso denied this but it did not counterclaim for possession. The Court of Appeal considered that the 1998 proceedings (eventually struck out in 2011) stopped the limitation period running despite the absence of an express claim to possession by the Tso.  The court had to look at the substance of the issue and the claim to possession was at the heart of the 1999 proceedings ([49]). Further, TPK’s conduct in bringing the proceedings could be taken into account. Bringing the action, and then failing to progress it, may well have been motivated by a desire to prevent the Tso from bringing its own action to recover possession ([50]).

TWL also claimed that the disputed land had been conveyed to his grandfather. The court had serious concerns about the documents produced in support of this claim. In any event, there was no evidence that consent to a sale had been obtained  pursuant to section 15 of the New Territories Ordinance. This omission would invalidate the transaction in any event (Light Ocean Investments Ltd v Emway Development Ltd [1994] 3 HKC 31).

Michael Lower

Mistaken belief that one is the owner or tenant is not fatal to an adverse possession claim

February 17, 2016

In Cheung Kwong Yuen v Sun Hui Fang ([2016] 1 HKLRD 464, CA) C was the registered owner of one floor of a property and of the roof above it. S lived in a room on the roof. C had applied for an order for vacant possession of the room despite S’s claim to have extinguished C’s title by adverse possession. S claimed that her brother had bought the flat in 1992. She relied on an informal and unregistered document purporting to transfer title to him. The Lands Tribunal ordered S to leave the property: it held that adverse possession was not available to one who claimed to be a tenant or purchaser of the property. The Court of Appeal (Kwan JA giving the Court’s reasons) pointed out that this was a mistake as to the law and ordered the case to be retried in the District Court. ‘There is no rule of law that [factual possession and intention to possess] cannot be established for a person who mistakenly believes that he has good title or that he is a lawful tenant and does not realise he is trespassing on another’s land.’ ([11]).

Michael Lower

Adverse possession: the effect of being added as a party after expiry of the limitation period to proceedings begun within the limitation period

September 2, 2015

In Yu Fung Co Ltd v Olympic City Properties Ltd ([2015] HKEC 1523, CFI) L was party to a ‘Redevelopment Agreement’ with Full Country Development Limited (‘Full Country’). Under the terms of the agreement, and subsequent sale and purchase agreements, L assigned his flat to Full Country in return for a new flat once a redevelopment scheme had been completed. L moved into the new flat in June 1997 but title to the flat was never assigned to him. Around the same time, June 1997, Full Country assigned the title to a third party. Title ultimately came into the hands of Olympic. Olympic borrowed from Yu Fung and Yu Fung had a charge over the flat. Olympic defaulted and Yu Fung brought possession proceedings. L argued that the sale and purchase agreement gave him an equitable title to the property and he was joined as a party to the proceedings.

The claim to an equitable interest in the flat as a result of the sale and purchase agreement failed: the agreement did not specify the flat (or quantify L’s undivided share in the development) ([33] – [34] per Deputy Judge Simon Leung).

L also relied on adverse possession. Possession had originally been with Full Country’s consent and so not adverse. This changed, however, when Full Country assigned the title to the flat. There was no evidence to show that the new owners had consented to L’s possession: the limitation period, therefore, began to run around June 1997. The fact that L believed that he was entitled to be in possession under the terms of the agreement did not stop the limitation period from running if possession and intention to possess were present ([71]). Time begins to run once a purchaser goes into possession pursuant to a sale with the intention of excluding the whole world including the vendor ([72]).

The question was whether the limitation period had expired. Proceedings against Olympic were brought in June 2008. Lai was joined as a party a month later, in July 2008. The claim against Lai was first made in a Notice and affidavit in October 2011. If the relevant proceedings were brought against Lai in June / July 2008, the limitation period would not have expired. If October 2011 was the relevant date then the limitation period had expired by then (twelve years from June 1997). Deputy Judge Simon Leung pointed to section 35(1)(b) of the Limitation Ordinance: new claims (other than third party proceedings) are deemed to have been commenced on the same date as the original action. The addition of a new party is a ‘new claim’ (Limitation Ordinance, s. 35(2)(a)). Thus, the limitation defence failed and Yu Fung was entitled to possession. L should have applied to strike out the 2011 Notice and affidavit on the grounds that they were an abuse of process ([84]). This application would, it seems, rely on section 35(3) of the Limitation Ordinance which prohibits new claims after the expiry of the time limit which would affect a new action to enforce that claim.

Michael Lower

Adverse possession: Paving land as evidence of possession

May 13, 2015

In Tsoi Ping Hung v Cheung Chow Lan ([2015] HKEC 701, CA) the defendants owned land on which they had built a house. The plaintiffs owned land adjoining that of the defendants. It was covered in vegetation. In February 2000 the defendants cleared wild vegetation on the plaintiffs’ land, levelled and paved it. They sowed grass and built a small ‘golf course’ on it. The result was that the land was a metre higher than the rest of the plaintiffs’ neighbouring land. The defendants also built a shed on the land. The defendants used the land for golf practice and walking the dog. They cut the grass from time to time. In early 2001, the defendants built a fence along one boundary. The possession proceedings were issued on 3 August 2012 so the question was whether there had been factual possession and an intention to possess since August 2000. The plaintiffs contended that they were only present from 2001 when the fence was erected.

Overturning the first instance decision, the Court of Appeal found that the events that took place in 2000 were sufficient to allow the defendant’s adverse possession claim to succeed. Paving or cultivating land is a clear act of possession ([4.8] – [4.11]). In this case, even before the fence, the presence of a pre-existing ditch combined with the work of raising the ground level of the land meant that there was a 6 feet drop from the disputed land to the rest of the plaintiff’s land. This barrier was an effective way of staking an interest in the land ([4.13]).

On the intention to possess, it was true, as explained in Powell v McFarlane, that the defendants as trespassers needed to provide ‘clear and affirmative evidence that the trespasser … not only had the requisite intention to possess, but made such evidence clear to the world.’ If the use to which the land was put was equivocal, there needed to be compelling evidence of an intention to possess. The actions of 2000 were sufficient evidence of an intention to possess. The plaintiffs’ possession proceedings failed and their title was extinguished.

Michael Lower

The Limitation Ordinance and tenancies ‘without a lease in writing’

March 18, 2015

In Mitchell v Watkinson ([2014] EWCA Civ 1472, CA (Eng)) the English Court of Appeal had to look at the application of the English equivalent of section 12(2) of the Limitation Ordinance. Section 12(2) provides that:

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

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

In this case, a father, having given land to his son, purported to grant a written periodic tenancy of it to trustees who held the tenancy on trust for an unincorporated association (a cricket club). Shortly afterwards, on 2nd October 1947, the father’ solicitors wrote to one of the trustees telling him that the land had been conveyed to the son but inaccurately stating that this had happened after the date of the tenancy. The club’s last payment of rent was made on 8th October 1974. The club, relying on the equivalent of section 12(2), argued that time began to run on that date and that they had acquired title by adverse possession twelve years later.

This analysis relied on the proposition that the trustees did not hold under the terms of the original written agreement but under a later implied periodic tenancy. The club’s argument was that it did not hold the property under the terms of the written agreement with the father but by virtue of an implied periodic tenancy based on the payment and acceptance of rent to the son’s agents once it had been pointed out that he was the owner of the land. Thus, it was argued, the periodic tenancy was ‘without a lease in writing’ and section 12(2) applied. This succeeded.

The owner (the son’s widow) argued, among other things, that the original written lease created a tenancy by estoppel which was to be treated as having been assigned to the son. This argument failed. The correct view was that the tenancy by estoppel had been impliedly surrendered on the grant of the new implied tenancy by the son([37]).

The owner also contended that the result of the letter of 2nd October 1947 and the subsequent conduct was to give rise to an estoppel by convention so that the tenants were estopped from denying that they held under the terms of the written agreement granted by the father. This failed because the letter of 2nd October 1947 could not be the basis for a common assumption that the tenants held under the terms of the written agreement; the parties might equally plausibly have understood that a new implied tenancy came into being (and almost certainly gave no thought to the distinction) ([55]).

Michael Lower

 

Legal joint tenancy: determining beneficial ownership under a common intention constructive trust

March 11, 2015

In Lo Kau Kun v Cheung Yuk Yun ([2015] HKEC 316, CFI) a married couple bought a flat as joint tenants. P claimed that the property was held on common intention constructive trust in equal shares. D claimed that she was the sole beneficial owner. Deputy Judge Sakhrani referred to the statements in Stack v Dowden ([68] in Stack) and Jones v Kernott ( [51] in Jones) to the effect that where the legal title is in joint names and there is a question as to beneficial ownership equity follows the law (so that a legal joint tenancy gives rise to equal shares) but that it may be possible to show a contrary intention (the burden of proof being on the party seeking to establish this). P had paid the down payment. P and D were jointly liable under the terms of the mortgage and each had contributed to the mortgage payments. Crucially, there was a finding that the parties had discussed their intentions concerning the ownership of the property ([63]). The couple had agreed that the property was to be a family asset (to be held equally as a family asset according to P) ([64]). This (not the record of financial contributions) was determinative. The property was held on common intention constructive trust in equal shares ([66]).

D also argued that she had extinguished P’s title by adverse possession. P had left the property in 1993 after a violent argument and never returned ([77]). This argument failed since D was entitled to be in possession as co-owner. There was no evidence of the ouster that would be necessary for this claim to succeed ([81]).

Michael Lower

Purchasers from squatters take subject to equitable interests of which they have notice

January 20, 2015

Re Nisbet and Potts’ Contract ([1906] 1 Ch. 386, CA (Eng)) concerned N’s contract to sell land to P. N’s title was possessory. The formal title had been defeated and there had been several conveyances of the possessory title before its conveyance to N. The contract beween N and P required P to accept this title. At the time of his purchase, N had not investigated title for the full forty years then demanded by conveyancing practice. Had he done so, investigating the paper title that had been defeated, he would have discovered that the paper title was subject to a restrictive covenant controlling what could be built on the land. P was a builder and he acquired the land with a view to building shops and other buildings on it. Before the contract was completed, the neighbour with the benefit of the restrictive covenant informed him of it and that proceedings would be brought in the event of breach. P refused to complete on the basis of this undisclosed encumbrance. The question was whether the covenant was binding on N; if so, P was justified in refusing to complete.

The English Court of Appeal held that a restrictive covenant is an equitable proprietary interest binding on all but a good faith purchaser for value without notice of it (Collins M.R. at 403; Romer LJ at 405 and 406). It was not defeated merely because the paper title had been extinguished. Time would only begin to run against the covenantee when there had been a breach so that the covenantee had a right to bring proceedings (Collins M.R. at 401 and 402).

The squatter himself is always subject to the covenant whether or not he had notice of it (Cozens Hardy L.J. at 410). A purchaser of the squatter’s title is subject to the restrictive covenant unless he is a good faith purchaser for value without notice (Cozens Hardy L.J. at 410). N was not such a purchaser. He had not investigated the title for the full forty year period  and so had constructive notice of any interests that he would have discovered had he done so. N’s title was subject to the restrictive covenant and P was entitled to resile from the contract.

Michael Lower