CHUI SHUI ON v. TANG KOON YUNG AND ANOTHER

1992, No. A5993

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. As matters of public interest arise out of these applications Counsel for both parties agreed that I should deliver judgment in Open Court.

2. Two summonses lie before me for determination. The Plaintiff's summons is for me to grant an injunction restraining the Defendants from asserting rights as owners of the suit property. The Defendants' summons taken out under order 14A is for determining a question of law, namely whether the action is well founded on the Plaintiff's claim in the Endorsement of claim that the Defendants are time barred from disputing the Plaintiff's adverse possession of this land.

3. Counsel were able to agree that the most logical course to adopt was to hear the Order 14A summons first.

4. Mr. Ng for the Plaintiff produced a draft of the Statement of Claim and Mr. Chain for the Defendants waived any objections on the ground that it was out of time. It was accordingly agreed, that the Statement of Claim was in the form as produced to me.

5. There do not appear to be any important issues of fact in contention between the parties. Put in very simple terms the Plaintiff and another party bought a wooden but which had been erected on the land in question in 1968. Since then he had lived in the hut and had occupied the land immediately adjoining it. He had undertaken various improvements and had run a pig farm and cultivated vegetables with his family since first occupying the property. He had also paid a small fee to the Crown for a licence in respect of the modification of the Crown lease. This modification related to the erection of the wooden hut.

6. There was also no substantive issue that there had been various assignments of the land in question and that shortly before the commencement of this litigation the Defendants had taken an assignment of the land from the previous registered owner.

7. The Plaintiff claimed that by virtue of section 7 of The Limitation Ordinance Cap. 347 no action could be brought against him for the recovery of the land. Both Counsel agreed by virtue of the transitional provisions contained in section 38A of the Ordinance that the relevant period was still 20 years.

8. Put in simple terms Mr. Chain submitted time only started to run for the adverse possession from 1973 which was the year when the Block Crown Lease of Land in the New Territories was extended from that year to 1997 by virtue of the provisions contained in the New Territories (Renewable Crown Leases) Ordinance Cap. 152.

9. He argued that the effect of this ordinance was to grant to the Holders of Crown Leases in the New Territories a fresh right which was not subject to any claim to adverse possession.

10. Mr. Chain placed some reliance upon the speeches of Lord Radcliffe and Lord Denning in Fairweather v. St. Marylebone property Co. Ltd. [1963] A.C. 510. One of the questions which had to be determined in that case was the extent to which a Landlord was affected when a squatter obtained a possessory title against a Lessee under a long lease. It was held by the majority of the Court that a Landlord was not precluded from taking action against the squatter when the term of the tease expired.

11. Lord Radcliffe had this to say on p.540.

" I conclude, therefore, that the effect of the "extinguishment" sections of the Limitation Acts is not to destroy the lessee's estate as between himself and the lessor; and that it would be incorrect to say that if he offers a surrender to the lessor he has nothing to surrender to him in respect of the land in the possession of the squatter. Nemo dat quod non habet, and I daresay that he does not, but, as Pearson L.J. indicated in the Court of Appeal [1962] 1 Q.B. 498, 530, the question here is not whether there are any exceptions from that general principle but whether, as a principle, it is relevant to the situation that we have here. In my opinion it is not.

What the lessee surrendered in this case was the incumbrance on the fee simple in possession which was represented by the term of years. It was that incumbrance and nothing else, I think, which until then prevented the fee simple owner from asserting a claim to possession against the squatter. This is clear, if one assumes claims made at three successive points of time and asks what the defence to them would be. If the fee simple owner claimed possession against the squatter before his adverse possession against the lessee had been completed, I do not see what defence would be open to the squatter except that the outstanding term of years prevented the landlord from having a present title to possession. He would defend himself by alleging the grant to the lessee. Secondly, if the landlord came against him after he had enjoyed his 12 years' adverse possession against the lessee, his defence would have to be the same, for otherwise the landlord would have a present and unbarred right to possession. Yet this would be after the limitation statute had extinguished the lessee's title. Now, thirdly, if the landlord then goes to the lessee and gets him to surrender the outstanding term, which incumbers his fee simple in possession, then the squatter's defence against the landlord disappears and, since he has not completed adverse possession against the landlord, he must give way to the rightful owner's claim to the land. That is the situation that we have here."

12. This line of reasoning was followed by Mantell J. in Cheuk Chau Co. Ltd. v. Chau Kwan Nam and Others unreported being MP 274 of 1982. This case was similar to the present case save for the fact that reliance was placed upon the fact that there had been a Renewal of the Crown Lease specifically granted by the Crown to the Lessor rather than reference being made to Cap. 152.

13. At p.6 of his judgment Mantell J. Said:

" So, notwithstanding the difficulty I have felt with regard to that case, not least because it seems to me that the effect of it is very largely to stultify the effect of possession acquired under section 7 of the Limitation Ordinance since in Hong Kong all land is held from the Crown, I am bound to apply it. It seems to me that applying the principle in Fairweather, if adverse possession having been achieved against Mr. Mui, Mr. Mui had surrendered the land in question and taken a re-grant of it, the effect would have been to extinguish the title acquired by each of the defendants under the Limitation Ordinance. Does it make any difference that subsequent to Mr. Mui's title being, so to speak, extinguished, except for that residuum of the lease described and defined in Fairweather's case, a reiteration of which I will not attempt, that subsequently Mr. Mui purported to assign his interest in the land to the plaintiff. It might, if it were possible to read into the assignment some words which would suggest that Mr. Mui had retained his residual interest in the strip of land now occupied by the defendants. I cannot construe either the assignment or the conveyance on sale in that way. If follows that his status, that is Mr. Mui's status as lessee in relation to the crown and in relation to the strip of land beyond the fence was transferred by assignment to the plaintiff, putting the plaintiff precisely in the same position as Mr. Mui would have been and consequently, it follows that upon the surrender of the lease by the plaintiff to the Crown and on the subsequent re-grant of part of the land including that in question to the plaintiff, the rights of the defendants to remain in occupation of their dwellings came to an end. Consequently, there will be a judgment in this case for the plaintiff and I shall make orders for possession in relation to the land on which the defendants' huts stand in favour of the plaintiff."

14. Godfrey J. did, however, consider the issue in relation to the New Territories (Renewable Crown Leases) Ordinance Cap. 152 in HCA 5458 of 1991 which again is unreported.

15. He was satisfied that where there had been an extension of the Crown Lease by the Ordinance, time only started to run against the owner of the land from 1973.

" But for the statutory exercise of the option to renew contained in the original lease, and the statutory grant of a new lease for a term commencing immediately after the expiration of the term created by the original lease, the plaintiff would not, on 23rd July 1991, have had any cause of action against the defendant, not because of any limitation point, but because the plaintiff's own title to and interest in the disputed land would have come to an end on 30th June 1973, when the term created by the original lease came to an end by effluxion of time. No question arises of the extinguishment by virtue of the Limitation Ordinance of the plaintiff's title under the original lease. That title, and so the plaintiff's interest, terminated on 30th June 1973 anyway. The only question which now arises is whether the plaintiff's claim to recover possession of the disputed land, a new lease of which was granted to him for a term of 24 years (less 3 days) from 1st July 1973 by virtue of the operation of the New Territories (Renewable Crown Leases) Ordinance, is barred by virtue of s.7(2) of the Limitation Ordinance. The answer is that it is not; because the new lease did not commence until 1st July 1973 and the plaintiff issued his writ on 23rd July 1991, which is within, the period of the 20 years commencing on 1st July 1973, and thus less than 20 years before action brought.

The plaintiff's present right to possession under the new lease first accrued with the commencement of the term created by that new lease, with the defendant then in possession, and in possession adverse to the plaintiff, of the disputed land. The position of the defendant is exactly the same, no better and no worse, than it would have been if the Crown on 1st July 1973 had granted a new lease of the disputed land, not to the plaintiff, but to somebody else altogether.

If this is the correct analysis of the matter, as I hold that it is, the limitation point is, in the end, a bad one. Since the parties were agreed that I should decide the point as if it had come before me as a preliminary issue, I propose to treat that issue as before me and decide it in favour of the plaintiff."

16. Keith J. Came to a similar conclusion in First Base Development Ltd. v. Or Hau Chun & Another unreported being HCA 2669 of 1990. However, his remarks were obiter dicta.

17. Mr. Ng for the Plaintiff contended that the Hong Kong cases which had been referred to by Mr. Chain had been wrongly decided. They had all had as their starting point the Fairweather case. What had not been fully appreciated was the limited scope of that case. Fairweather had been limited to a situation where there had been both a surrender and a determination of the lease in question. This was quite different to the situation which had been created by Cap. 152 section 4 of the Ordinance provided :

" 4.(1) In the case of an existing Crown lease of a lot which has not been divided into sections before the lst day of July 1973, the right of renewal contained in the lease shall be deemed to have been exercised by the person entitled to that right and on that date there shall be deemed to be granted to such person a new Crown lease of the land held by him immediately before that date under the existing Crown lease.

(2) In the case of an existing Crown lease of a lot which has been divided into sections before the 1st day of July 1973, the right of renewal contained in the lease shall be deemed to have been exercised by the persons entitled to that right and on that date there shall be deemed to be granted to such persons separate new Crown leases of the land respectively held by them immediately before that date under the existing Crown lease.

(3) Every new Crown lease shall be deemed to be for a term of twenty-four years less three days from the 1st day of July 1973, and shall be deemed to contain -

(a) where the new Crown lease is deemed to"be granted under subsection (1), a reservation of the same annual Crown rent as was payable for the year ending on the 30th day of June 1973 in respect of the land to which the new Crown lease relates;

(b) where the new Crown lease is deemed to be granted under subsection (2), a reservation of the same annual Crown rent as may appear from the Crown Rent Roll in the appropriate District Office to have been payable for the year ending on the 30th day of June 1973 in respect of the land to which the new Crown lease relates;

(c) a covenant by the lessee to pay in the same manner and on the same days as are specified in the exisiting Crown lease whichever of the annual Crown rents referred to in paragraphs (a) and (b) is applicable;

(d) the same covenants, exceptions, reservations, stipulations, provisos and declarations (including the right of re-entry) mutatis mutandis as are contained in the existing Crown lease of the land to which the new Crown lease relates other than -

(i) the covenant to pay the Crown rent; and -

(ii) the provision (if any) for fixing a new crown rent at the expiration of the first ten years of the term; and

(iii) the right of renewal on the expiration of the term;

(e) a covenant by the lessee to perform, observe and comply with the covenants, exceptions, reservations, stipulations, provisos and declarations deemed to be contained in the new crown lease by virtue of paragraph (d).

(4) Every new Crown lease and the land thereby deemed to be demised shall be deemed to be subject to such of the following encumbrances and interests as the land and the existing Crown lease relation thereto were subject to immediately before the 1st day of July 1973 -

(a) any mortgage, whether legal or equitable, and whether registered in a District Land Office or not;

(b) any public rights; and

(c) any other rights, easements, tenancies or other burdens or encumbrances of whatsoever kind or nature, except such as were created by an instrument and were not thereby expressed to continue after the 30th day of June 1973."

18. It was evident from the way in which the section was framed that what was intended was that there should be a continuation of Crown Leases in the New Territories and not the granting of a fresh term. This was particularly evident from the provisions contained in section 4(4) which referred to all the interests and incumbrances which the extended term would be subject to. There was no reason whatever why the Plaintiff's possessory right should not be included in the general exceptions referred to in the sub section.

19. I must say immediately that this submission appears to me to be untenable. In 1973 the Plaintiff had only been in adverse possession for 5 years. Such possession could not by any stretch of the imagination come within the compass of the burdens or incumbrances contemplated in section 4(4).

20. Mr. Ng also argued that it was evident from the judgments in Baker v. Merckel [1960] 1QB 657 that where a term had been extended by virtue of the exercise of an option to renew the agreement of the parties relating to the extended term retrospectively related back to the original granting of the lease.

21. Pearce L.J. said at p. 667:

"But I agree with the judge when he said that, if it be necessary that the variation of the existing term could only operate as a surrender of the original lease and the grant of a new lease, he should feel no difficulty in saying that the effect of the supplemental deed was to work a surrender of the original lease and the grant of a new lease for seven years or, on the happening of a specified event, for 11 years. So to hold would, in my view, carry out the intention of the parties as it appears from the document. By a consensual variation embodied in the supplemental deed endorsed on the lease there was built into the original lease of seven years an option that changed the demise from one of seven years to one which might extend to 11 years on the exercise of the option. It was at that stage that the variation was made. Owing to the clause which was so built into the lease, the happening of an event (namely, the exercise of the option), was to have a retrospective effect and to cause the deed to be read and construed as though it had originally been a lease for 11 years, and to affect the repairing covenant not only thereafter but retrospectively. From the wording of that document, I do not find it possible to regard it as a mere collateral option which did not affect the demise until it was exercised. It is plain that when the supplemental deed was endorsed on the lease the parties regarded the transaction as one demise which might be for seven years or might, on a certain event, continue for 11 years."

22. It is necessary, however, to bear in mind that the terms of the option referred to in that case were entirely different to the provisions contained in section 4 of Cap. 152.

23. I have no doubt when considering the matter as a whole that Godfrey J. was correct in his analysis of the position and that time for the adverse possession only started to run from 1973. This is being the case the Plaintiff has not at this point of time been able to make out a case that he has a possessory title.

24. There is a further matter that I have to deal with. In the Statement of Claim the Plaintiff also makes a claim based on proprietary estoppel.

25. Reliance is placed upon the expenditure of money in fencing in the property and generally improving it over the period when it was occupied by the Plaintiff.

26. For a claim of this nature to succeed it is necessary at the very least for the Plaintiff to make out a case that the Defendants have either themselves or one of their predecessors in title stood by while the Plaintiff incurred the expenditure referred to and permitted the Plaintiff to continue with the improvements. There is no evidence whatever on the papers before me to this effect.

27. I think that Mr. Chain is correct in his submission that it would only be in rare cases that a claim based on adverse possession of land could be run at the same time as one based upon proprietary estoppel. The contentions usually advanced for these types of cases are mutually incompatible.

28. I do not think that on the material which was before me that the Plaintiff has been able to demonstrate that a case based on proprietary estoppel would have any prospect of success.

29. For the reasons I have given I would find in favour of the Defendant on its order 14A summons. This means that the injunction summons must fail as the action upon which it is based no longer exists. I will hear the parties on costs.