COMMON LUCK INVESTMENT LTD. v. CHEUNG SIU MING

1994, No. MP1065

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

_______________

_______________

_______________

J U D G M E N T

_______________

1. This dispute centers around an agricultural lot in Yuen Long, New Territories, and whether the Plaintiff or the Defendant is entitled to the compensation payable by the Government upon its resumption of the Lot on 2 December 1991 ("the material date").

The Land Registry Records

2. There is no dispute that on 1 December 1962 the Lot was assigned to the Defendant as a gift by his father-in-law, and the deed of assignment was duly registered at the District Lands Office, Yuen Long on that day. It is further not disputed that shortly thereafter the Defendant and his family commenced residing on the Lot, and continued to do so, while at the same time conducting various farming activities on it, without interruption until its resumption by the Government on 2 December 1991.

3. The history of the title to the Lot thereafter is reflected in the official records of the District Lands Office as follows. On 3 May 1963, the Defendant mortgaged the Lot to the Canton Trust and Commercial Bank Limited ("the Bank") to secure a loan of $2,000 from the Bank which was repayable on 2 November 1963. This transaction was duly registered at the District Lands Office in a Memorial dated 3 May 1963 which was signed by the Defendant and by two signatories on behalf of the Bank, and by the Assistant Land Officer, New Territories ("the Assistant Land Officer").

4. There is no dispute that the Defendant duly repaid that loan to the Bank, and the mortgage was redeemed on 1 April 1964, which Redemption was registered at the District Lands Office in a Memorial of the same date which was signed on behalf of the Bank and again by the Assistant Land Officer.

5. The next development as reflected in the records of the District Lands Office was that on 19 May 1964 the Defendant again mortgaged the property to the Bank, this time to secure a loan of $5,000 from the Bank, repayable on 18 May 1965. This mortgage was apparently duly registered in a Memorial executed on the same date, signed by the Defendant and by two signatories on behalf of the Bank, and also by the Assistant Land Officer.

(The Defendant categorically denies that he ever entered into this further mortgage in 1964, as is elaborated hereinafter.)

6. The next and final development prior to the resumption of the Lot, as reflected in the records at the District Lands Office, was that on 8 July 1977 the Bank (in liquidation) acting by the Official Receiver as liquidator, in its capacity as mortgagee sold and assigned to the Plaintiff twelve lots in the New Territories, including the Lot in question, for the sum of $121,000. A Conveyance on Sale was signed by the Official Receiver and on behalf of the Plaintiff, and duly registered at the District Lands Office by a Memorial of the same date, which was signed by the parties and by the Assistant Land Officer.

7. The Defendant, in the meantime, continued to live with his family on the Lot, blissfully unaware, he says, that it had been sold over his head to the Plaintiff.

8. On 2 September 1991, the Resumption of the Lot was duly Gazetted; on 30 September 1991, the Buildings and Lands Department, District Lands Office, Yuen Long wrote to the Plaintiff to inform it that since it was the registered owner of the Lot according to the records kept at the District Land Registry, it was entitled to claim compensation upon the resumption of the Lot, and offering to pay the sum of $517,492.80 by way of such compensation. The Plaintiff duly accepted the offer and applied to be paid the compensation in that sum.

9. On 18 December 1991, the Defendant's solicitors notified the District Lands Office that the Defendant had only recently become aware of the fact that the Lot had been resumed when Government officers had visited him for the purpose of registering the occupants of the property; that a subsequent land search revealed that the Plaintiff had "purportedly" become the registered owner of the Lot under a purported exercise of a right of sale by the liquidator of the Bank in its capacity as mortgagee; that the Defendant had never in fact executed any further mortgage of the property after the 1963 mortgage which had been duly redeemed, and had never borrowed any further money from the Bank; that on being shown the Memorial of the 1964 mortgage the Defendant maintained that the signature purporting to be his was not in fact his signature, and that the Memorial thus appeared to be a forgery; and that the Defendant remained the true and rightful owner of the Lot and was therefore entitled to be paid the compensation upon its resumption.

10. On 16 January 1992 the District Lands Office notified the Plaintiff that since there were rival claims to the compensation and an allegation of fraud in relation to the 1964 mortgage, the Registrar General was not satisfied with the Plaintiff's title, and the processing of the payment of compensation would have to await the resolution of these issues. After protracted correspondence between the Plaintiff's solicitors and the Building and Lands Department, and conflicting indications from the latter as to how it intended to proceed in the light of the competing claims to the compensation, the Plaintiff finally on 10 June 1994 applied for Judicial Review of the Government's refusal to pay it the compensation in question. That hearing was adjourned and subsequently resumed on 13 December 1994, when Mayo J. (as he then was) ordered that the proceedings were to continue as if begun by Writ, which resulted in the present proceedings.

11. The Plaintiff and the Defendant each allege that they were respectively the rightful owner of the Lot at the material date, and the onus is upon each of them respectively to establish such.

12. No oral evidence was led on behalf of the Plaintiff, since its case is contained in the aforesaid records of the Lands Registry, which were put in by consent.

The System of Land Registration in Hong Kong : Deeds Registration

13. It is important to keep in mind that the system of land registration in Hong Kong is a system of deeds registration, not title. The purpose of it is to facilitate the tracing of title, not to confer title in itself, as is clearly apparent from the relevant provisions of the Land Registration Ordinance. Registration does not confer title, nor is it the test of ownership, but it provides prima facie evidence of ownership :

"It does not exclude enquiry into the underlying transaction which is the subject matter of the registration. The validity and effectiveness of such transactions depend upon the results of such enquiry independently of the fact of registration."

(See Financial and Investment Services for Asia Limited v. Baik Wha International Trading Company Limited [1985] HKLR 103 at 113, per Hunter J.) As the learned judge indicated, if a challenge is made to the validity of any of the underlying transactions, such challenge has to be investigated and the matter ruled upon, whether the challenge alleges fraud or mistake. If fraud is revealed and proved, the deed which was registered ceases to have any effect at all. The possibility of mistake also cannot be excluded : mistakes by the parties or their advisors in the Registry may lead to a completely mistaken registration, which will also be void ab initio.

14. The registered documents in the Lands Registry in the present case constituted clear prima facie evidence that the Plaintiff was the registered owner of the Lot at the material time. The onus is on the Defendant to displace such prima facie evidence of ownership.

The Defendant's Case

15. Although the Defendant initially denied his signature upon the Memorial of the 1964 mortgage, and persisted in such denial in the Judicial Review proceedings, subsequently by a Notice of Admission dated 14 June 1996 he admitted the authenticity of his signature in the Mortgage dated 19 May 1964 and the Memorial thereof. (That admission as to the authenticity of his signature in the 1964 Mortgage is not consistent with the Answers to Interrogatories which he gave on 2 December 1966, which answers accurately stated his case as it was presented in these proceedings :

"25. Not having seen the 1964 Mortgage, I cannot tell if my signature did appear thereon.

26. I do not know what signature appear on the 1964 Mortgage but I am positive that even if I did sign on the 1964 Mortgage and/or signed on the 1964 Memorial, I did not know or understand that they or any of them was/were relating to the mortgage or other disposal of Lot No.4170A in D.D.116 by me, whether by way of security or otherwise.

27. I believe that (1) I signed the 1964 Memorial; and (2) if I did sign the 1964 Mortgage (which is not admitted), I did so after having been misled into thinking that they were part of the formalities for my transactions with the Bank relating to redemption of the 1963 Mortgage but definitely not relating to any specific borrowing from or security to be furnished by me to the Bank after redemption of the 1963 Mortgage.")

16. The Defendant gave evidence. It transpires that he suffered a stroke about ten years ago which has clearly affected his faculties : he walks with some difficulty, his speech and most importantly his memory have clearly been affected. For example, he denied that he had ever applied for legal aid in connection with these proceedings, stoutly maintaining that he could well afford to pay for himself and did not need any assistance, whereas it was common ground that he had in fact applied for and been granted legal aid on 10 June 1992.

17. He was, however, able to give intelligible evidence. By consent, I ordered that his witness statements should stand as his evidence-in-chief; he confirmed that what he had told his solicitors resulting in such statements was true. He stated that he had received the Lot as a gift from his father-in-law in 1962, and that he and his wife had shortly thereafter moved onto the Lot and lived on it continuously until its resumption by the Government, for a large part of that time together with their four children (who were all brought up there) and three grandchildren. He built a two-storey house on it , and also pig sties and chicken sheds which were scattered all over the Lot.

18. His evidence and that of his son in this respect was not challenged, and I have no hesitation in accepting it as true. Indeed, he produced many documents which substantiated his evidence, including receipts from utility companies in relation to the supply of services to the Lot and addressed to him there; receipts for the payment by him of Crown Rent in respect of the Lot in December 1969 and October 1970; and receipts for the payment by him of Modification of Tenancy Permit Fees to the Government throughout the period 1972 to April 1991. I note that in terms of the Crown Lease the Defendant was given permission to erect agricultural structures only, which were not permitted to be used for human habitation.

19. He confirmed that in 1963 he had borrowed $2,000 from the Bank in order to start up a restaurant, that he had mortgaged his property to the Bank to secure such loan, and in furtherance of the mortgage had handed to the Bank the Deed of Assignment in terms of which his father-in-law had assigned the Lot to him in 1962. When he repaid the loan, the Bank gave him a receipt and returned to him such Deed of Assignment. He said that as he was ignorant of the necessary procedures, he did not ask the Bank to execute any document to discharge the mortgage. (It will be recalled that the records reflect that a Memorial of the Redemption of such mortgage, executed by the Bank, was duly registered on 1 April 1964.)

20. He categorically denied that following the redemption of the 1963 mortgage he had ever borrowed any further money from the Bank, or executed any further mortgage of his Lot in its favour. He said that at the request of the Bank he had, at the time of the negotiations concerning the 1963 loan and mortgage, signed several documents at the Bank, and that he believed that his signature on the Memorial of the 1964 mortgage must have been unlawfully obtained by a dishonest member of staff of the Bank, which person must also have dishonestly misappropriated the HK$5,000 which had purportedly been loaned by the Bank to the Defendant in terms of such 1964 mortgage deed. He had never received any notice from the Bank demanding repayment of the alleged loan of $5,000, nor any notice indicating the Bank's intention to sell the Lot in order to realize its security as mortgagee under the purported 1964 mortgage transaction.

The Defendant's Signature on the 1964 Mortgage Memorial

21. The general rule is that a person is estopped by his signature on a deed from denying his consent to be bound by the provisions contained in that deed. In exceptional circumstances, however, a plea of non est factum is available to the signatory on the basis that his mind did not accompany his signature, thus rendering his consent to the provisions in the deed a nullity. Such plea can only rarely be established by a person of full capacity; he must show that in signing the document he acted with reasonable care, and he must establish that there is a fundamental difference between what he actually signed and what he thought he was signing.

22. Mr Chong, who appears for the Defendant, has identified a number of features which support the Defendant's denial that he ever entered into the 1964 mortgage with the Bank :

(1) The original Deed of Assignment which he and his father-in-law had executed in 1962 in terms of which his father-in-law assigned the Lot to him (which Deed, it will be recalled, he had handed to the Bank to secure the 1963 mortgage, and which had been returned to him by the Bank upon the redemption of such mortgage) remained in his possession throughout thereafter. It was indeed the Defendant who produced such Deed as an exhibit in these proceedings.

If he had executed a further mortgage of the Lot in favour of the Bank in 1964 as alleged, he would have been required to hand over such Deed to the Bank at that time, and it would have remained with the Bank since it was common ground that he had failed to repay the $5,000 loan which he had allegedly obtained on that occasion;

(2) There is no evidence to show that the Bank took any steps at all between 1964 and 1977 to assert its rights as mortgagee and assignee of the Defendant's title in the Lot, most particularly its right, upon the Defendant's failure to repay the alleged loan, to quietly enter into, hold and enjoy the Lot without interruption by any person. It will be recalled that the Defendant remained in undisturbed occupation of the Lot throughout that period, and indeed right up until it was resumed in December 1991.

(In considering this aspect, it must be borne in mind that the Bank had gone into liquidation on 15 May 1965. The Plaintiff's solicitors wrote to the Official Receiver on 24 February 1995, inter alia requesting him to furnish them with full information and all the relevant documents in respect of the 1964 loan made by the Bank to the Defendant, and also the notices from the Bank demanding repayment of the loan and informing the Defendant of the intended exercise of the Bank's power of sale. The Official Receiver replied on 6 March 1995 to the effect that the Bank had been dissolved on 8 January 1988 and was therefore no longer in existence; that all the books and records of the Bank had been destroyed under s.283 of the Companies Ordinance, so that the solicitors' request for documents could not be fulfilled; and that the Official Receiver had been released as liquidator of the company by order of court on 3 December 1985 under s.205(3) of the Companies Ordinance);

(3) The signatures on the 1963 and 1964 mortgage memorials (Memorial No.150425 and Memorial No.153539) appear to be identical in form and signed in the same ink and with the same pen, which Mr Chong submitted supports the Defendant's contention that he signed both signatures on the same occasion when he was asked to sign several documents in connection with the 1963 mortgage;

(4) The address of the Defendant which is stated in the Memorial dated 19 May 1964 is the Defendant's old address at 24, Chong Hong Third Street, Yuen Long - the same address which was recorded in the 1963 mortgage Memorial whereas by April 1964 he was living on the Lot in question. Mr Chong submitted that this also supports the suggestion that the Defendant's address and all the other details in the disputed 1964 Memorial were simply typed in afterwards and copied from the documents already in possession of the Bank in relation to the 1963 mortgage.

23. This is not the usual case of non est factum, in that it is not his signature to the 1964 mortgage deed which the Defendant is trying to avoid : no such mortgage deed has been produced. (A director of the Plaintiff swore a statutory declaration on 10 December 1991, stating that he had made a diligent search among the Plaintiff's records in order to ascertain the whereabouts of such a mortgage deed, was unable to find it and verily believed that it had been lost.) It is his signature in the Memorial of the 1964 mortgage that the Defendant attempts to explain away, such memorial being no more than prima facie evidence that such a mortgage deed had indeed been entered into by the parties.

24. By reason of the Defendant's disability, I have not found it possible to make any truly informed judgment as to his credibility; what I can say is that he conducted himself with dignity, and came across as an entirely respectable gentleman, and that there was nothing in his demeanour which led me to suspect that he was not telling the truth.

25. I have given anxious consideration to the aforesaid features relied upon by Mr Chong as supporting the Defendant's case that he did not execute the 1964 mortgage in favour of the Bank, since they are not without some substance. Looking at the matter as a whole, however, the Defendant has not, to my mind, discharged the onus upon him of establishing on the probabilities that he did not duly execute the 1964 mortgage of his Lot in favour of the Bank.

26. The Memorial of the 1964 mortgage is in the standard form, headed :

"A Memorial required to be registered in the New Territories Administration, at Hong Kong according to the provisions of the Land Registration Ordinance(Cap.128) and the New Territories Ordinance (Cap.97);"

I note that it was apparently witnessed by the same person who had witnessed the Memorial of the 1963 mortgage, since the signatures appear to be identical; and furthermore, both Memorials were signed by the same Assistant Land Officer, New Territories, who in both documents certified that it was "a correct Memorial according to s.23 of the New Territories Ordinance (Cap.97) .....".

27. [I should add that it is not entirely clear to me what certification "as a correct Memorial according to s.23 of the New Territories Ordinance ....." means, since s.23 does not make provision for certification of any kind : the gist of what it provides is that "a conveyance of any land subject to the provisions of this Ordinance may be made in one of the forms set out in the Schedule subject to such variations as circumstances may require ....."; and goes on to provide that the provisions of Part II of the Ordinance which relate to conveyances shall apply only to conveyances as are made in one of the forms set out in the Schedule or in such other form as may be prescribed by the Land Officer; further that a conveyance need not necessarily be made in one of the forms set out in the Schedule; and that no conveyance shall be invalid by reason solely that it was not made in one of the forms specified in the Schedule.

28. Section 19 of the Ordinance, on the other hand, does provide for certification of Memorials, and I note that the final document produced by the District Land Office in these proceedings, namely the memorial of the 1977 Conveyance on Sale (of the Lot to the Plaintiff) was "certified as a correct memorial according to s.19 of theNew Territories Ordinance ...."

29. Counsel for both parties submitted that certification of the Memorial "according to s.23 of the Ordinance" meant that the mortgage had been executed in terms of Statutory Form B, as provided for by ss.25 and 30 of the Ordinance.]

30. In any event, in all the circumstances the Defendant's signature on the Memorial of the 1964 mortgage which was drawn up in due form, duly witnessed and signed by the Assistant Land Officer, New Territories, constitutes cogent evidence that he did execute such mortgage in favour of the Bank in a mortgage deed executed in due form, the particulars of which are set out in the Memorial. The Defendant has not discharged the onus of satisfying me on a balance of probabilities that his signature to this Memorial was irregularly obtained and that he did not execute such mortgage in favour of the Bank in 1964.

31. I find it proved that on a balance of probabilities the Defendant did execute the 1964 mortgage in favour of the Bank, and did so in statutory Form B under the New Territories Ordinance.

32. I note also the provisions of s.31 of the New Territories Ordinance, Cap.97 :

"31. When a sale is made under a power of sale conferred by this Ordinance, the title of the purchaser shall not be impeached by reason that no case had arisen to authorize the sale or that due notice was not given or that the power was otherwise improperly or irregularly exercised; but any person damnified by an unauthorized, improper or irregular exercise of the power of sale shall have his remedy in damages against the person exercising the power."

If the sale of the Lot in 1977 by the Bank (in liquidation) as Mortgagee to the Plaintiff was a sale "made under a power of sale conferred by this Ordinance", then even if no case had arisen to authorize the sale or the power of sale was improperly or irregularly exercised by the Official Receiver as liquidator of the Bank in liquidation, the Defendant would nevertheless, under the terms of s.31, be barred from impeaching the title of the Plaintiff to the Lot which it acquired under the aforesaid sale, and would be confined instead to a remedy in damages against the Bank.

33. Section 30 of the Ordinance confers the power of sale upon a mortgagee :

"30. A mortgagee and any person entitled to give a receipt for the mortgage money, where the mortgage is made in accordance with Form B in the Schedule, shall have the following powers to the like extent as if they had been conferred by the mortgage deed but not further -

(a) where the mortgage money has become due, to sell and convey the mortgaged property.....

Provided that a mortgagee shall not exercise the power of sale unless and until notice requiring payment of the mortgage money has been served on the mortgagor ...... and default has been made in payment of the mortgage money or part thereof for one month after such service......"

34. Since I have found it proved that the Defendant did execute the 1964 mortgage of the Lot in favour of the Bank, and that the mortgage was made in accordance with Form B in the Schedule of the New Territories Ordinance, Cap.97, it follows that the Bank therefore had the power to sell the mortgaged property upon the mortgage money becoming due, in terms of s.30(a) of the Ordinance. In these circumstances, it seems clear that the sale of the Lot by the Bank (in liquidation) to the Plaintiff in 1977 was a sale "made under a power of sale conferred by this Ordinance ....", to which the provisions of s.31 therefore apply. The result is that even if due notice was not given to the Defendant in terms of the proviso to s.30(a) - I note the evidence of the Defendant and his son to that effect - the Defendant would be precluded by the provisions of s.31 from impeaching the title of the Plaintiff which it acquired under the sale, whether on the ground of such lack of notice, or that no case had arisen to authorize the sale, or that the power of sale was in any way otherwise improperly or irregularly exercised, and he is confined to pursuing a remedy in damages against the Bank (which is an empty remedy on the facts of this case, since the Bank is no longer in existence).

35. I should perhaps add that Mr Chong submitted that s.31 only applies to a sale to a bona fide purchaser for value without notice of any defect in the title being conveyed; and that it did not therefore apply to the Conveyance on Sale in question, which expressly provided :

"AND it is hereby expressly AGREED AND DECLARED that the Vendor being a company in liquidation gives no covenants for title, expressed or implied or otherwise howsoever arising...."

36. In my view the presence of this term in the Conveyance did not serve to render the provisions of s.31 non-applicable; it remained a sale "made under a power of sale conferred by this Ordinance", to which the provisions of s.31 applied.

The Limitation Ordinance

37. The Defendant, however, is not yet down and out : he has another string to his bow. Mr Chong has submitted that even if the Court found against the Defendant that he did execute the 1964 mortgage of the Lot in favour of the Bank, and that the Plaintiff acquired title to the Lot under the sale by the Bank (in liquidation) to it in 1977, subsequently, but prior to the resumption of the Lot by the Government on 2 December 1991, the Plaintiff's title was extinguished and the Defendant acquired a possessory title in the Lot under the provisions of the Limitation Ordinance.

38. Ordinance No.31/65 is the version of the Ordinance which is applicable on the facts of this case, and the following provisions of it are relevant :

"7(2) No action shall be brought by any other person to recover any land after the expiration of 20 years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person ......"

"8(1) Where the person bringing an action to recover land, or some person through whom he claims, has been in possession thereof, and has while entitled thereto been dispossessed or discontinued his possession, the right of action shall be deemed to have accrued on the date of the dispossession or discontinuance."

"11. A right of action to recover land by virtue of a forfeiture or breach of condition shall be deemed to have accrued on the date on which the forfeiture was incurred or the condition broken ....."

"13(1) No right of action to recover land shall be deemed to accrue unless the land is in the possession of some person in whose favour the period of limitation can run (hereafter in this section referred to as adverse possession) and where under the foregoing provisions of this Ordinance, any such right of action is deemed to accrue on a certain date and no person is in adverse possession on that date, the right of action shall not be deemed to accrue unless and until adverse possession is taken of the land.

(2) Where a right of action to recover land has accrued and thereafter, before the right is barred, the land ceases to be in adverse possession, the right of action shall no longer be deemed to have accrued and no fresh right of action shall be deemed to accrue unless and until the land is again taken in adverse possession."

"17. Subject to the provisions of s.10, at the expiration of the period prescribed by this Ordinance for any person to bring an action to recover land (including a redemption action), the title of that person to the land shall be extinguished."

39. Mr Chong submitted that on the premise that the Defendant did execute the 1964 mortgage of the Lot in favour of the Bank to secure a loan of $5,000 - as I have found that he did - since it is common ground that he had failed to repay the loan by the due date for repayment, namely 18 May 1965, the Bank as mortgagee thereupon had the right to quietly enter into, hold and enjoy the Lot without interruption by any person, in terms of the covenant implied in the mortgage agreement by s.25(1)(c) of the New Territories Ordinance, Cap.97. It is not disputed that the Bank never did in fact exercise its rights in that respect, and that the Defendant remained continuously in possession of the Lot thereafter, and it follows that the Defendant has, since midnight on 18 May 1965, been in adverse possession of the Lot for the purposes of s.13(1) of the Limitation Ordinance; further that in terms of s.11 of the Ordinance, a right of action to recover the land by virtue of the Defendant's breach of condition of the mortgage accrued to the Bank as from midnight on 18 May 1965; and that time therefore started to run from that same day for the purposes of s.7(2) of the Ordinance. Since it is not disputed that the Defendant and his family remained in continuous possession of the Lot between 18 May 1965 and 2 December 1991, and since the 20 year period laid down by s.7 of the Ordinance expired at midnight on 17 May 1985, the Plaintiff was precluded by s.7(2) of the Ordinance from bringing any action to recover the Lot after 18 May 1985 upon which date, in terms of s.17 of the Ordinance, the Plaintiff's title to the Lot was extinguished and the Defendant had in effect acquired a possessory or squatters title to the Lot. The intervening sale of the Lot by the Bank to the Plaintiff in 1977 did not affect the running of time under the Ordinance since it is common ground that notwithstanding the sale, neither the Bank nor the Plaintiff entered into possession of the Lot or interrupted the Defendant's continued occupation of it.

40. Mr Pirie submitted that up until the sale of the Lot to the Plaintiff in 1977 the Defendant had both title and possession of it, and his possession could not therefore, as a matter of law, be "adverse" possession for the purposes of the Limitation Ordinance, since possession cannot be adverse if it is referable to lawful title. On this basis, putting the Defendant's case at its highest, time could only have started to run at the earliest with effect from 8 July 1977, when the Lot was sold to the Plaintiff, with the result that in terms of s.7 of the Ordinance, the Plaintiff had until 7 July 1997 to bring any action to recover the Lot, and its title had not therefore been extinguished at the material date (when the Lot was resumed on 2 December 1991) and it was not out of time in lodging the present proceedings on 10 June 1994.

41. He submitted that on the facts the Defendant's case cannot be put even that high, since even after the sale of the Lot to the Plaintiff in 1977 the Defendant continued to occupy the property until the resumption of it on 2 December 1991 in the continuing belief that he was the owner of it - it will be recalled that he maintained that he was completely unaware that the Lot had been sold to the Plaintiff, and he remained all along in possession of the original Deed of Assignment in terms of which the property had been assigned to him in 1962. In these circumstances, it was argued, he lacked the necessary mental intention to constitute adverse possession, which necessarily requires an intention to dispossess the true owner. Time has therefore never started to run for the purposes of the Limitation Ordinance.

42. Mr Chong submitted that it was not necessary for the Defendant to know that he was in wrongful occupation of another's land, and the fact that he mistakenly believed that he was in occupation of his own land when in fact it belonged to another did not detract from his adverse possession of the land : the only animus required of him for the purposes of the Limitation Ordinance was the animus possidendi, which he clearly had at all material times.

The Legal Bases of the Defendant's Occupation

43. Prior to the 1964 mortgage of the Lot the Defendant occupied it as owner, having obtained the assignment of it by way of a gift in December 1962. In terms of the 1964 mortgage in Form B of the New Territories Ordinance, Cap.97, he assigned the Lot to the Bank "for the residue of the term of years created by the Crown lease thereof ... for securing payment on 18 of May 1965.....". The Defendant thus conditionally assigned to the Bank the whole of his legal interest in the Lot, retaining only his equity of redemption. In terms of s.25(1)(c) of the Ordinance the Defendant as mortgagor covenanted "that the property conveyed may after default of payment of the monies intended to be secured by the mortgage be quietly entered into, held and enjoyed by the mortgagee without any interruption by any person". Subsequent to the mortgage agreement, pending any such "default in payment of the monies intended to be secured by the mortgage", the Defendant remained in occupation of the Lot, notwithstanding his assignment to the Bank of his legal interest in it.

44. It will be recalled that the factual basis on which the Limitation point arises for consideration necessarily includes the premise that the Defendant was in default of his obligation to repay the loan on 18 May 1965, since it was only in those circumstances that the Bank (in liquidation) had the right as mortgagee to sell the property to the Plaintiff in July 1977. It follows that with effect from 19 May 1965 the Bank had the right to quietly enter into, hold and enjoy the property without interruption by any person, on account of the Defendant's breach of the condition for repayment : in other words, a right of action accrued to the Bank on that day to recover the Lot, in terms of the mortgage agreement and, importantly, for the purposes of s.11 of the Limitation Ordinance.

45. The Bank never exercised such right and the Defendant remained in occupation of the Lot without interruption until the Bank as mortgagee sold it to the Plaintiff on 8 July 1977. Even then the Bank did not enter into possession of it : the Defendant remained in undisturbed possession, unaware that such sale had taken place.

46. Mr Chong submitted that with effect from 19 May 1965 the Defendant's continued occupation of the Lot in the face of the Bank's right to quietly enter into possession of it and hold it without any interruption thenceforth, constituted adverse possession for the purposes of s.13 of the Limitation Ordinance. Mr Pirie on the other hand submitted that the Defendant's continued occupation of the Lot after 19 May 1965 was by virtue of an implied licence granted to him by the Bank, and did not therefore constitute adverse possession for the purposes of s.13 of the Ordinance, since possession under licence cannot in law amount to adverse possession.

47. It is trite law that possession under a license cannot constitute adverse possession. The learned authors Clerk and Lindsell on Torts, 17th Edition, paragragphs 17-74, page 878 state as follows :

"Time cannot run ...in favour of a licensee, and therefore he has no adverse possession. Nevertheless certain recent decisions had adopted, in cases where the owner had retained title with a view to some future utilisation for a specific purpose, a quite general doctrine of implied licence from the owner to the squatter without any specific factual basis for such an implication.... But this approach is difficult to reconcile with the very purpose of the Limitation Act, for as Sir John Pennycuick said in Treloar v. Nute [1976] 1 WLR 1295 at 1300, 'if a squatter takes possession of land belonging to another and remains in possession for 12 years to the exclusion of the owner, that represents adverse possession and accordingly at the end of the 12 years the title of the owner is extinguished. That is the plain meaning of the statutory provisions....' "

48. Whether or not a licence was given is a pure question of fact. The mere failure by the Bank to exercise its right to enter into possession of the property did not per se constitute an implied licence to the Defendant to continue occupying it. On the facts of the present case, bearing in mind particularly that the Defendant's occupation was quite inconsistent with the Bank's present or future enjoyment of the land, there is no basis for finding that the Bank, either expressly or impliedly, granted a licence to the Defendant to continue occupying the property.

49. The question whether an occupier's occupation of the land constituted adverse possession for the purposes of the Limitation Ordinance is one to be determined on the peculiar facts of each individual case.

50. Mr Pirie cited various authorities in support of his submissions, including most particularly Hyde v. Pearce [1982]1 AER 1029, Court of Appeal. In that case the occupier went into occupation of the property following his purchase of it under a contract of purchase and sale which, in the event, was never completed; the Court held that he was to be regarded as a licensee of the vendor. This case does not assist the Plaintiff in my view since the basis upon which the Court found against the occupier that his possession after his license to occupy had been terminated was not adverse for the purposes of the Ordinance, was a factually complex one which has no parallel in the present case. (See in particular the judgment of Templeman, L.J. at 1036J-1038J).

51. In Wallis's Holiday Camp v. Shell-Mex and B.P. Ltd. (Court of Appeal) [1975]1 QB 94 the Court held that the plaintiff occupier's acts of possession constituted but a trivial trespass upon the defendants' land to which the defendants would have readily agreed, had they been asked, and that this did not amount to adverse possession against the defendants. The plaintiff's acts were not inconsistent with the enjoyment of the land by the defendants (at 116G - 117). This is in stark contrast with the facts of the present case, where the Defendant's occupation and use of the land was extensive if not complete, and at all times inconsistent with the enjoyment of the land by the Bank and latterly the Plaintiff.

52. In Ho Hang-wan v. Ma Ting-cheung, personal representative of Ma Sz-tsang, deceased [1990]1 HKLR 649, the occupier of the land had entered into possession as a licensee, which licence had subsequently terminated upon the death of the licensor, whereafter the occupier remained in possession for a period in excess of 20 years, and the question was whether her possession thereafter was "adverse" for the purposes of the Limitation Ordinance. It was argued on behalf of the Defendant, who claimed to be the true owner of the land, that since the occupier was unaware of the death of the licensor she would notionally have had to concede, if challenged, the right of the licensor to terminate the licence and demand possession at some future date and that such state of mind, whether actual or as on the facts of that case attributed, did not reflect the necessary animus to constitute adverse possession, which necessitates an animus to dispossess the licensor (at page 652G). The Court of Appeal rejected that argument, holding that it did not reflect the true significance of animus possidendi, and that :

"(1) the test of intention is objective ...;

(2) "what is required ... is not an intention to own or even an intention to acquire ownership, but an intention to possess" (per Hoffman, J. in Buckinghamshire County Council v. Moran (1988)86 LGR 473 and [1989]3 WLR 152, Court of Appeal, approved by Slade, L.J. at p.168);

(3) the intent need not be hostile or aimed at the owner ..."

The animus possidendi "is necessarily established by unequivocal evidence of exclusive physical possession" (at 654D). On the facts of that case the plaintiff occupier had covered the site with structures and used it as a store and a residence, and "could not more plainly have demonstrated exclusive physical possession to the world" (at 652F).

Conclusion

53. On the facts of the present case there is no doubt that the Defendant had taken exclusive physical possession of the Lot : he built a two-storey residence upon it large enough to accommodate his wife and four children and, at times, various grandchildren; and he had in addition erected pig sties and chicken sheds which were scattered all over the Lot. He also "could not more plainly have demonstrated exclusive physical possession to the world", which effectively and unequivocally dispossessed the Bank and subsequently the Plaintiff, as well as all other persons.

54. In my view the Defendant was in adverse possession of the Lot with effect from 19 May 1965, on which day a right of action to recover it accrued to the Bank for the purposes of s.11 of the Ordinance. From that day onwards the Defendant had no enforceable right to occupy the Lot. Time therefore started to run in terms of s.7(2) of the Ordinance with effect from 19 May 1965, at that stage as against the Bank until it sold the Lot to the Plaintiff on 7 July 1977; and since the Defendant remained continuously in adverse possession of it thereafter until the Government resumed it on 2 December 1991, time continued to run under s.7(2) of the Ordinance until the date of resumption. The sale of the Lot to the Plaintiff did not affect the running of time since it is clear that neither the Bank nor the Plaintiff at any time entered into possession of the Lot or interrupted the Defendant's continued adverse possession of it.

55. In these circumstances, in terms of s.17 of the Ordinance, the Plaintiff's title to the Lot was extinguished as at 18 May 1985, since 20 years had by then expired since the date upon which the right of action to recover the land had accrued to the Plaintiff's predecessor-in-title, the Bank. The Defendant had, in other words, acquired a possessory title to the Lot with effect from 18 May 1965.

56. It follows that the Defendant was the owner of the Lot when it was resumed by the Government on 2 December 1991, and is therefore entitled to the compensation payable by the Government consequent upon such resumption. He is accordingly entitled to the declarations which he seeks, which I grant in the following terms :

1) the Defendant had acquired a good possessory title to Lot 4170A in D.D.116 Yuen Long, New Territories prior to and at the time of its resumption by the Government under the Roads (Works, Use and Compensation) Ordinance, Cap.370, on 2 December 1991;

2) the Defendant is entitled to the compensation payable by the Government consequent upon such resumption.

57. The Plaintiff's claims are dismissed, and I make an order nisi that the Plaintiff is to pay the Defendant's costs of these proceedings.