XCHRX COUNTRY RICH DEVELOPMENT LIMITED v. MA CHAN FUK KIU AND OTHERS

1993, No.A5503

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H E A D N O T E

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APPLICATION FOR LEAVE TO APPEAL OUT OF TIME AS A RESULT OF THE COURT OF APPEAL DECISION IN FU MEI LING MARY V. YEUNG KONG & ANOTHER.

1993, No.A5503

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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Background

1. There are two applications before me. The first is an application by the 1st Defendant seeking leave to appeal out of time against the decision of Master Jennings who granted an order for possession against the defendants under Order 113 of the Rules of Supreme Court. The second is an appeal by the Plaintiff against the decision of Master O'Donnell who refused to vacate a lis pendens registered by the 1st Defendant against the property of the Plaintiff.

2. The property of the Plaintiff consists of various lots of land in Demarcation District Nos.21 and 22 in Tai Po, New Territories, Hong Kong. The-former registered owners of the property were Peter Mah Yun Leong, alias Ma Yun Leung ("Mr Mah") and two other persons.

3. On 10th April 1992, a sale and purchase agreement of the property between the Plaintiff and the former owners was registered in the Land Registry. On 29th April 1992, the 1st Defendant issued a writ of summons in High Court Action No.2942 of 1992 against Mr Mah and registered it against the property. On 26th June 1993, the property was assigned to the Plaintiff.

4. On 28th June 1993, the Plaintiff commenced the present action against the 1st Defendant and other defendants seeking possession of the property on the basis that the defendants had been occupying the property without the Plaintiff's permission or consent.

5. The 1st Defendant denied that the Plaintiff was entitled to its claim. According to the defence, in 1948 Mr Mah sold those part of the property in which the 1st Defendant was occupying to the 1st Defendant and her daughter who had since died. The consideration for the purchase was $11,000 and the agreement for the sale of the land was evidenced by a Chinese deed. The agreement was entered into by the 1st Defendant and Mr Mah during the Japanese occupation. As the District Land Office was not available for service, the 1st Defendant was unable to procure or cause Mr Mah to register the agreement. The parties agreed that Mr Mah would cause the property to be registered in the name of the 1st Defendant and her daughter once the District Land Office was available for service. Mr Mah, however, failed to do so after the Japanese war. The 1st Defendant contended that pursuant to the agreement she was in occupation of the property and had been collecting rent from her tenants until 1983 when they ceased to lease the property for cultivation. The 1st Defendant contended that she was the owner of the property. She further avered that she was entitled to remain in possession of the property by reason of the Plaintiff's claims being barred by s.7(2) of the Limitation Ordinance.

6. In High Court Action No.2942 of 1992, the 1st Defendant is seeking, inter alia, a declaration that the property standing in the name of Mr Mah is held by him on trust for her absolutely and an order requiring Mr Mah to execute all documents and do such things as may be necessary to re- transfer the said property to her.

7. The issue before Master Jennings in the present action was the effect of the New Territories (Renewable Crown Leases) Ordinance ("the Ordinance") on squatters who were in adverse possession of the property. The authorities at that time held that, by virtue of the Ordinance, the rights of the squatters acquired prior to the renewal of the Crown Lease as prescribed by the Ordinance was extinguished by the automatic renewal of the Crown lease on 1st July 1973. So long as the registered owner commenced proceedings within twenty years from 1st July 1993 to recover possession of the land, any possessory right acquired by the squatter prior to that date would not be taken into account. The Court of Appeal came to a different decision in Fu Mei Ling Mary v. Yeung Kong & Another (Civil Appeal No.47 of 1994), and held that the right acquired by a squatter by reason of 20 years uninterrupted possession of the property was not defeated by the renewal of the Crown Lease on 1st July

1993. The right was preserved by the Ordinance. The judgment was delivered on 19th August 1994.

8. When the matter came before Mr Justice Sears on 8th September 1994 on the Plaintiff's appeal against Master O'Donnell's decision, the learned judge adjourned the hearing on the 1st Defendant's undertaking to issue an application for leave to appeal out of time against Master Jennings's decision. On 12th September 1994, a notice of appeal was taken out. However, this notice did not ask for leave to appeal out of time. Eventually, the 1st Defendant filed the application for leave to appeal out of time on 7th October 1994.

Leave to appeal out of time

9. The principles governing the court's discretion to grant leave to appeal out of time can be found in the case of Norwich & Peter Borough Building Society v. Steed [1991]2 All ER 880. The court has to consider the length of the delay, the reasons for the delay, the chances of the appeal succeeding if the application is granted and the degree of prejudice to the respondent if the application is granted.

10. Under the rules, the 1st Defendant had five days to appeal against the decision of the learned master. The decision was given on 6th May 1994. Whether the application to appeal out of time was filed on 12th September 1994 or 7th October 1994, there was a substantial lapse of time in the filing of the appeal.

11. As for the reasons of the delay, Miss Lee, Counsel for the 1st Defendant, stated that there was no intention to appeal against the decision of Master Jennings at that time because of the state of the law. The decision to appeal was only taken after the decision of the Court of Appeal which changed the law in this regard. This reason was not spelt out in the affidavit filed on behalf of the 1st Defendant. 1 granted leave to the 1st Defendant to file a supplement affidavit on this point. This was not objected to by the Plaintiff.

12. It is not sufficient merely to showed that a later decision of a superior court showed that an earlier case might have been wrongly decided.

13. In Craig v. Phillips (1877)7 Ch.D.249; Jessel M.R. held that :-

"It would only have come to this that more than a year after the decision in Craig v. Phillips, the Court of Appeal had come to a different decision on a vexed point of law. In my opinion that is not sufficient ground, in the absence of very special circumstances, to deprive a man of a judgment which has been given in his favour."

In Esdaile v. Payne (1889)40 Ch.D.520, Lindley L.J. held that :

"In my opinion it is for the interest of the public that litigant should know as soon as possible when certainly has been reached and that if people have deliberately elected to let the time for appealing go by, the Court should not give them leave to appeal without special circumstances."

Lopes L.J. held in the same case that :

"Though a strict adherence to rules as to time may sometimes produce hardship, I think that a loyal adherence to them is best for the public and for litigants."

14. Although these two cases refer to the requirement of special circumstances, subsequent decisions show that the court has power to enlarge the time for appealing if it is just to do so.

15. In In re J. Wigfull & Sons Trade Marks [1919]1 Ch.52, Swinfen Eady M.R. held that :

"In my judgment also, it is not necessarily a ground for enlarging the time that in some subsequent case a different view is taken of the construction of an Act of Parliament. The parties in the previous litigation had their advisers at hand; the judgment was pronounced in the court of first instance; they had an opportunity of considering whether they should or should not appeal; and after considering, they determined not to appeal; and if years are allowed to go by without any appeal being presented, I am of opinion that a strong case on the facts should be made out before leave should be granted; that is to say, before the time should be enlarged...... In my opinion the Court has power to enlarge the time for appealing if it is just that under the circumstances an order enlarging the time should be made."

In In re Berkeley [1945]1 Ch.1 Lord Greene M.R. held that :

"I find no difficulty in reconciling the statement that the different decision is not necessarily a ground for enlarging the time with the statement that the court can enlarge the time if it is just in the circumstances to do so. It seems to me that the principle to be extracted is that it is not sufficient for a party to come to the Court and say that a subsequent decision of a superior court has determined that the principle of law on which his case was decided was wrong. The court will say to him : 'That bald statement is not enough. What are the facts? What is the nature of the judgment? Who are the parties affected? What, if anything, has been done under it?' and so forth. In other words, the whole of the circumstances must be looked at. If the court, in the light of those circumstances, considers it just to extend the time, then it will do so. That seems to me to be the proper principle and it is entirely in accordance with the view taken by this court in the most recent case under this rule - Gatti v. Shoosmith [1939] Ch.841."

16. In Property & Reversionary Limited v. Templar [1977]1 WLR 1223, Roskill L.J. approved of the decision of In re Berkeley, he held that :

"It is therefore plain that it is not enough for Mr Goodhart to say that the recent decision of the House of Lords clearly showed that Judge Fay's decision was wrong. He must show there are special reasons why he should be allowed to argue that the judgment should not stand."

17. I must consider all the circumstances to decide whether it is just that leave should be given or whether there are special circumstances which justified the granting of the leave. I am informed that the Plaintiff has managed to obtain judgment against all defendants in this action. Execution of the judgment against the 1st Defendant was completed on 27th October 1994. Mr Wong, solicitor for the Plaintiff, submitted that it would be unfair to the Plaintiff that the matter should be litigated again. He submitted that the defence of adverse possession was simply not sustainable on the facts of this case notwithstanding the recent decision of the Court of Appeal. He referred me to Hyde v. Pearce [1982]1 All ER 1029. In that case, the plaintiff purchased a property and entered into possession of the property before completion of the contract for sale. The conveyancing was never completed and he remained in possession for 14 years. The vendor subsequently conveyed the property to a third party and the third party dispossessed the purchaser. The purchaser was claiming title to the property by adverse possession for a period exceeding the limitation period. It was held that since the plaintiff in bringing his action against the defendant had relied on the existence of the contract of sale to support his continued occupation of the property, and since he could have set up the contract as a valid defence to any proceedings brought against him for possession, he could not thereafter assert that he had obtained a title by adverse possession, that he had been squatting unlawfully on the property or that he had a right to remain on the property other than by virtue of the contract to purchase. It followed, therefore, that notwithstanding that more than 12 years had elapsed since the plaintiff had entered into possession of the property, his possession was not adverse possession within s.10 of the 1939 Act. Ackner L.J. held at p.1038 that,

"In my judgment, the Plaintiff having in effect been able to go in and stay under the contract, cannot now repudiate the contract with hindsight. As I have said, if, at any time, he made it clear that he was no longer bound by the contract, then different considerations would apply. Equally, no doubt, if he had made that clear, then the vendors would have taken action against him. It is only the fact that he was there as a purchaser pending completion which has enable time to run in his favour, as he says, and which enables him to claim a title by adverse possession. Accordingly, in my judgment although the full period required by the 1939 Act had elapsed, the Plaintiff has not shown that he was in adverse possession."

"For my part, not only can I see no date by which the vendors, ought to have realised the changed status of the Plaintiff, but, in addition, it seems to me that, having entered the property under a claim of right, albeit on the terms of the undertaking, and having then continued in possession ostensibly and as far as he himself was for saying at that time, or implying by his conduct at the time, as a purchaser pending completion, if he was to throw off that capacity and appear in the full light as a person in adverse possession acquiring a title, it was at least necessary that he should have repudiated the contract, thus marking his change of status."

"In the event, he never did change his status and, as I have indicated, at the end of the day he is really seeking to have the best of both worlds. He was able to stay there because of the contract; now he says in effect, he was there the whole of the time inspite of the contract. I do not think he has shown that he was in adverse possession and, accordingly, I would allow the appeal."

18. In the present case, the 1st Defendant entered into possession of the land by virtue of an agreement for sale as evidenced by the Chinese deed. She has not repudiated the agreement. On the contrary, she is actively pursuing her claim against the former owners of the property in High Court Action No.2942 of 1992 for, what is in effect, specific performance of the agreement. The matter goes beyond pleading reliefs in the alternative. By her conduct in the other action, it is clearly shown that her occupation of the land was based on the contract and not on adverse possession. It is clear that any change of judicial view regarding adverse possession in Hong Kong would not assist the 1st Defendant. Taking this and other circumstances into account, namely, the 1st Defendant was represented by legal advisers throughout the history of the litigation and had taken a considered decision not to pursue the appeal and execution of the judgment has now been completed, I am satisfied that I should not exercise the discretion in favour of the 1st Defendant and as such, the 1st Defendant's application for leave to appeal out of time is dismissed with costs nisi to the Plaintiff.

Vacating lis pendens

19. I will now come to the Plaintiff's appeal against the decision of Master O'Donnell.

20. Under s.19 of the Land Registration Ordinance (Cap.128) the court may, for a good cause shown, made an order vacating the registration of the lis pendens. A lis pendens is defined in S.1A as "any action or proceeding pending in a court or tribunal that relates to land or any interest in or charge on land."

21. In High Court Action No.2942 of 1992, the 1st Defendant is seeking a declaration that the properties standing in the name of Mr Mah is held by him on trust for the 1st Defendant and is further seeking an order requiring Mr Mah to do such acts or matters as may be necessary to re-transfer the property to her. In effect, the 1st Defendant is seeking specific performance of the agreement. The action obviously related to land at the time it was commenced.

22. In terms of priority, the lis pendens ranked after the sale and purchase agreement between Mr Mah and the Plaintiff. In the case of In re An Application by Lo Ling Leung Chai & Others [1980] HKLR 910, Mr Commissioner Litton, Q.C. (as he then was) gave an example of a situation where the lis pendens was registered before the sale and purchase agreement. At p.918, he said that,

"Assume that an action is commenced for an order for specific performance of a contract relating to a sale of a specific property; the writ is registered as a lis pendens; the defendant then sells the same property to another purchaser who is taking a risk that the action for specific performance will fail. If judgment is then given to the plaintiff, the lis pendens, (under s.18) has the same force and effect as the judgment. The purchaser's rights must therefore be subordinate to those of the plaintiff. No one would contest the justice of that result."

23. In the present case, the lis pendens was registered after the sale and purchase agreement. By now the sale had been completed. There was no application by the 1st Defendant to set aside the sale to the Plaintiff. The Plaintiff has managed to obtain a judgment against the 1st Defendant for possession of the property and execution has been completed. Whatever right the 1st Defendant may have against Mr Mah, such right is only in respect of damages and no longer in relation to the land itself.

24. Miss Lee referred me to the case of Ho King Yim v. Lau King Mo, Civil Appeal No.40 of 1979. In that case, a sale and purchase agreement in respect of land was first registered in the Land Registry followed by a charging order nisi obtained by a judgment creditor against the vendor. The sale of the land was then completed, a charging order absolute was then registered. The purchaser asked for a declaration that his agreement for sale and purchase has priority over the charging order and that his title was no longer encumbered thereby. The Court of Appeal found that the purchaser was entitled to such a declaration.

25. I do not see how this case would assist Miss Lee in resisting the Plaintiff's application. If anything, this case confirmed that the purchaser's sale and purchase agreement, which was registered prior to the charging order, has priority. Huggins J.A. held at p.4 that :

"It was the agreement which in the first place transferred the substantial beneficial interest and that transfer was merely confirmed by the assignment. Such beneficial interest in the land as the vendor continued to enjoy pending completion was essentially temporary in character and could not exist in anyone after completion. The registration of the charging order could not destroy the effect of the prior, registered agreement and thus affect the purchaser's beneficial interest which the agreement had transferred."

"Where, both a contract for the sale and purchase of land and an assignment pursuant to that contract had been registered, it seems to me that no charge created after the day of the contract can rank prior to the interest of the purchaser or, a fortiori, to the interest of the purchaser's successors in title."

26. As the lis pendens is no longer related to the land, I am satisfied that its registration should be vacated and accordingly, I shall allow the appeal against the decision of Master O'Donnell with costs nisi to the Plaintiff.