CHEUNG YAT FUK v. TANG TAK HONG AND OTHERS

FACV No. 12 of 2003

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 12 OF 2003 (CIVIL)

(ON APPEAL FROM CACV NO. 203 OF 2002)

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J U D G M E N T

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Mr Justice Bokhary PJ:

THE QUESTION OF LAW

1. Can a squatter acquire a possessory title to land through his tenant's occupation of the land? This appeal turns on that question of law because the facts are as follows.

THE FACTS

2. The appellant is, and has throughout been, registered as the owner of a piece of agricultural land in the New Territories known as Lot No. 473 in Demarcation District 114 ("the Lot"). In 1960 the 1st respondent went on to the Lot as a squatter. He remained there for seven years, farming and improving the Lot. Then he let the Lot to a tenant. The tenant, who also farmed the Lot and further improved it, remained there for 30 years. Then, in 1996, the 1st respondent commenced proceedings against the appellant. Relying on those periods of seven years and 30 years respectively, the 1st respondent sought declaratory relief to the effect that the appellant's title to the Lot has been extinguished under s.17 of the Limitation Ordinance, Cap. 347, and that he i.e. the 1st respondent had acquired a possessory title to the Lot.

3. In so far as is material, s.17 provides that "at the expiration of the period prescribed by this Ordinance for any person to bring an action to recover land ..., the title of that person to the land shall be extinguished." By virtue of s.7, this prescribed period is now 12 years from the accrual of the right of action. But prior to an amendment effected by s.5 of the Limitation (Amendment) Ordinance 1991 which came into operation on 1 July 1991, it used to be 20 years from such accrual. And it is common ground that the 20-year period applies to the present case. In 1998 the 1st respondent sold and assigned the Lot to his sons, the 2nd and 3rd respondents who then joined in as plaintiffs in the proceedings against the appellant.

AGGREGATION

4. There is no difficulty in aggregating the period of possession by the 1st respondent personally and the period of possession by him through his tenant. The legal position was neatly expressed in Shelmerdine v. Ringen Pty Ltd [1993] 1 VR 315, a decision of the Supreme Court of Victoria (Appeal Division) cited by Mr Gerard McCoy SC for the respondents. There Brooking J said (at p.341) that "where the adverse possession has been continuous, it is possible to tack the possession of one intruder on to that of another although there has been no assignment of possessory rights."

HOW THE STATUTE OPERATES

5. As to the way in which a possessory title is acquired by operation of a statute of limitation like our Limitation Ordinance, it suffices to cite how Lord Macnaghten put it when delivering the Privy Council's advice in Perry v. Clissold [1907] AC 73 at p.79:

"It cannot be disputed that a person in possession of land in the assumed character of owner and exercising peaceably the ordinary rights of ownership has a perfectly good title against all the world but the rightful owner. And if the rightful owner does not come forward and assert his title by process of law within the period prescribed by the provisions of the Statute of Limitations applicable to the case, his right is for ever extinguished, and the possessory owner acquires an absolute title."

So adverse possession of land consists in the exercise of the ordinary rights of ownership over it by a person who is not the true owner and is in possession of the land in the assumed character of owner.

IN THE COURTS BELOW

6. Taking the view that a squatter cannot acquire a possessory title to land through his tenant's occupation of the land, Deputy Judge Cheung (now Cheung J) dismissed the respondents' claim. But the Court of Appeal (Mayo VP, Yuen JA and Chu J), taking the view that a squatter can acquire a possessory title to land through his tenant's occupation of the land, granted the respondents the declaratory relief which they sought. Now the appellant is before us asking us to restore the judge's decision while the respondents are before us asking us to affirm the Court of Appeal's decision.

ADVERSE POSSESSION THROUGH A TENANT'S OCCUPATION

7. It is well established that a squatter can grant a lease or even a tenancy of land of which he is a squatter. As Lord Hoffmann explained in a recent decision of the House of Lords, Bruton v. London & Quadrant Housing Trust [2000] 1 AC 406 at p.415 B-C, a tenancy "is not concerned with the question of whether the agreement creates an estate or other proprietary interest which may be binding on third parties". Adverse possession means possession inconsistent with the title of the person with the paper title to the land (commonly called "the paper owner"). So whether a squatter can acquire a possessory title to land through his tenant's occupation of the land depends on whether he is to be regarded as in adverse possession of land through his tenant's occupation of the land.

Principle

8. Mr Alan Leong SC for the appellant rightly concedes that a squatter can be in adverse possession of land through his licensee's occupation of the land. But he contends that a squatter cannot be in adverse possession of land through his tenant's occupation of the land. I see no good reason in principle for drawing such a distinction between a tenancy granted by a squatter and a licence granted by a squatter. The granting of a tenancy by a squatter is at least as much an act done in the assumed character of owner as the granting of a licence by a squatter. If anything, the former is even more obviously so than the latter.

Authorities

9. Before turning to the cases, I note that learned authors of Megarry and Wade: The Law of Real Property, 6th ed (2000) equate without distinction adverse possession through a tenant with adverse possession through a licensee. They say this (at p.1309, para. 21-017): "The adverse possessor need not himself be in physical possession of the land. If he grants a tenancy or licence, the tenant or licensee possesses on his behalf and is estopped from denying the licence or tenancy."

10. For the proposition that a squatter can be in adverse possession through a tenant, Mr McCoy drew our attention to four English decisions, an Australian decision, a Singaporean decision and a Hong Kong decision. The English decisions are that of the House of Lords in AG Securities v. Vaughan [1990] 1 AC 417, those of the Court of Appeal in England in Nesbitt v. Mablethorpe Urban District Council [1918] 2 KB 1 and Hayward v. Chaloner [1968] 1 QB 107 and that of Pennycuick J in Bligh v. Martin [1968] 1 WLR 804. The Australian decision is that of the Court of Appeal of New South Wales in Mulcahy v. Curramore Pty Ltd [1974] 2 NSWLR 464. The Singaporean decision is that of the Court of Appeal of Singapore in Soon Peng Yam v. Maimon bte Ahmad [1996] 2 SLR 609. And the Hong Kong decision is that of the Court of Appeal (Cheung and Yeung JJA and Chung J) in Tang Kwan Tai v. Tang Koon Lam [2002] 4 HKC 482.

11. In the AG Securities case Lord Templeman said (at p.455A) that: "Exclusive possession means either exclusive occupation or receipt of rents and profits." In Nesbitt's case Pickford LJ said (at p.13) that "Nesbitt acquired a possessory title [because the] receipt of rent by Nesbitt was certainly an act of ownership". And in the same case Scrutton LJ said ( at pp28-29) that: "The title to the sandhills must be rested on adverse possession based on acts of ownership, and [that] there appear to be sufficient claims of title to the sandhills by the exercise of acts of ownership such as letting part of them". In Hayward's case Lord Denning MR spoke (at p.118 D-E) of possession by the lessor through the "actual receipt by him of the rents payable out of the land". (Italics in the original). And in the same case Russell LJ spoke (at p.123 F-G) of "actual possession of this piece of land throughout the relevant period either by the rector as part of his garden or by the tenants of the glebe cottages as part of their garden." In Bligh's case Pennycuick J said (at p.813 G) that "the plaintiff having been in receipt of rent during this summer period, remained throughout the period in adverse possession of the land". In Mulcahy's case Bowen CJ in Eq. said (at p.475 F-G) that a squatter "may, as might a true owner, pay rates and taxes on the property; lease it to others; allow agistment of cattle upon it; build upon it; or visit it occasionally for his own purpose". (Italics supplied).

12. Mr Leong says that in those cases it was assumed, rather than decided after argument, that a squatter can be in adverse possession through a tenant. That so many learned counsel refrained from disputing a proposition and so many learned judges proceeded on the basis of that proposition can be seen as an indication that the proposition conforms to principle. And in any event, it was after full argument that the courts in Soon's case and Tang's case decided that a squatter can be in adverse possession through a tenant.

13. Since this is an appeal from our Court of Appeal and Tang's case was also decided by our Court of Appeal and less than three weeks later, it is desirable that I indicate that my view would be no different even if I were to leave Tang's case out of account. There is however one aspect of Tang's case on which I should say a word. At p.486 C-G Cheung JA, giving the main judgment in Tang's case, dealt with sections 12(3) and 13(3)(b) of the Limitation Ordinance. Section 12(3) reads:

" Where any person is in possession of land by virtue of a lease in writing by which a rent of not less than $20 is reserved, and the rent is received by some person wrongfully claiming to be entitled to the land in reversion immediately expectant on the determination of the lease, and no rent is subsequently received by the person rightfully so entitled, the right of action of the last-named person to recover the land shall be deemed to have accrued at the date when the rent was first received by the person wrongfully claiming as aforesaid and not at the date of the determination of the lease."

And s.13(3)(b) reads:

" For the purposes of this section...receipt of rent under a lease by a person wrongfully claiming, in accordance with section 12(3), the land in reversion shall be deemed to be adverse possession of the land."

14. Cheung JA took the view that these provisions envisage the situation where a squatter intercepts the rent in respect of a tenancy originally granted by the paper owner. He did not share Pennycuick J's view in Bligh's case that provisions like these envisage the situation where the squatter grants the tenancy. And if anything said by the Court of Appeal in England in Mellor v. Harpur-Crewe, 2 November 1992, (unreported) amounts to support for that view of Pennycuick J's, then Cheung JA would part company with the Court of Appeal in England on the point.

15. In the present case Yuen JA, giving the judgment of the Court of Appeal, refrained from expressing a concluded view on the point, but said this:

"It may be, as the judge below held, that s.12(3) and s.13(3)(b) apply only to a situation where the tenant had been put in possession by the true owner. But if the receipt of rent made the recipient the adverse possessor of the land even in that situation, then in our judgment, the situation would be stronger for the adverse possessor who had exercised even more control over the land by himself putting the tenant in physical possession."

Having regard to what s.12(3) deems to be the date on which the right of action accrues, I share Cheung JA's view that s.12(3) and s.13(3)(b) envisage the situation where a squatter intercepts rent. I also share Yuen JA's view that this strengthens the argument that a squatter is to be regarded as being in adverse possession of land through his tenant's occupation of the land.

16. I turn finally to the decision of the Court of Appeal of Singapore in Soon's case. Giving the judgment of the court in that case, Goh Joon Seng J said this (at p.615 E-F):

" It is clear to us that a possessor need not personally be in occupation of the land to be in factual possession or to have the requisite animus possidendi. As Slade J said in the extract quoted above, factual possession is constituted by a possessor 'dealing with the land in question as an occupying owner might have been expected to deal with it'. This clearly contemplates physical possession but it certainly encompasses much more. It is the exercise of acts of ownership which is crucial. Receipt of rent or grant of licence in respect of the property by the respondent would be an act of ownership which is adverse to the title of the club."

That reference to what Slade J said is to what he said in Powell v. McFarlane (1979) 38 P & CR 452 at pp 470-471.

17. We have not been shown any case, whether Hong Kong or foreign, which decides or suggests that a squatter cannot acquire a possessory title to land through his tenant's occupation of the land. The grant of a tenancy over land is just as much an act of ownership of the land as the grant of a licence over it.

18. Mr Leong advances a policy argument for not permitting squatters to acquire possessory title through their tenants' occupation of land. The essence of this argument, as I understand it, is that permitting such acquisition would amount to promulgating a squatters' charter under which would blossom a class of professional squatters, corporate perhaps, who would be able to acquire possessory title to vast tracts of land by putting tenants on them. I do not view this scenario as a realistic one. Twelve years is a long time. And where in Hong Kong, I asked Mr Leong, are these vast tracts of land on which squatters or their tenants could remain upon for long without stealth or, indeed, even by stealth? Mr Leong's answer was that his policy argument probably has more application in jurisdictions other than Hong Kong. There is no reason why we should be influenced in our development of the law of Hong Kong by a policy consideration that, if it has any substantial application at all, has such application only outside Hong Kong. Despite the skill with which it was advanced, I reject this policy argument. Even if only in passing, I should mention that Mr Leong has not been able to indicate any jurisdiction in which it has been accepted.

CONCLUSION

19. The conclusion to which I have come on principle and persuasive authority is as follows. When a squatter grants a tenancy and receives rent, he is acting inconsistently with the title of the paper owner, and that puts the squatter in adverse possession of the land through his tenant. The squatter can in that way acquire a possessory title to the land through his tenant's occupation of the land. This being the law and the facts being as outlined above, the respondents are entitled to succeed.

20. Accordingly I would dismiss this appeal with costs here as well as in the courts below (both sides having accepted at the hearing that the costs of this appeal should follow the event).

Mr Justice Chan PJ:

21. I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Ribeiro PJ:

22. I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Nazareth NPJ:

23. I agree with the judgment of Mr Justice Bokhary PJ.

Sir Anthony Mason NPJ:

24. I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Bokhary PJ:

25. The Court unanimously dismisses this appeal with costs here as well as in the courts below.