LAI MOON HUNG v. LAM ISLAND DEVELOPMENT CO. LTD.

H E A D N O T E

Where a new Crown lease was deemed, by section 4(1) of the New Territories (Renewable Crown Leases) Ordinance (Cap. 152) ("the Ordinance"), to have been granted to the lessee on 1st July 1973, the lessee's cause of action against squatters on the land demised by the lease for possession of the land was a new cause of action which accrued to the lessee on 1st July 1973. That was so however long squatters had been in adverse possession of the land for prior to 1st July 1973. Accordingly, subject to section 4(4)(c) of the Ordinance, proceedings commenced by the lessee after 1st July 1973, and more than 20 years after squatters had first taken adverse possession of the land, were not statute-barred by section 7(2) of the Limitation Ordinance (Cap. 347).

Adverse possession of land prior to 1st July 1973 for a period which was insufficient for the acquisition of a possessory title by 1st July 1973 did not amount to a right or encumbrance within the meaning of section 4(4)(c) of the Ordinance, to which the original Crown lease, and the land demised by it, had been subject immediately before 1st July 1973.

IN THE COURT OF APPEAL

1994, No. 66
(Civil)

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J U D G M E N T

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Penlington, J.A.:

1. Before asking Keith J. to deliver the first judgment, I should say a few words as to the history of these appeals and as to my reasons for concurring with that judgment and that of Liu J.

2. We heard this consolidated appeal from the 20th to 22nd July, three days being the estimate of time agreed between the parties. That proved to be inadequate and because of other fixtures and commitments it was agreed by counsel that further submissions should be put in writing. That was duly done but after those submissions were received another division of this Court delivered its decision in Fu Mei Ling, Mary v. Yeung Kong, C.A. 47/94 in which Godfrey J.A. decided that his previous decisions as a judge of the High Court in Kam Lee On v. Lam Hing, H.C.A. 5458 andLam Island Development Co. Ltd. v. Lai Moon Hing and Others, M.P. 1566 to 68, 70 to 71/1993 were wrong. The appeal by the persons in occupation of the land was allowed. We therefore asked if counsel wished to make further written submissions in the light of Fu Mei Ling, Mary and they did so. We may say that all submissions received, which we have studied with the care which this difficult and very important appeal merits, were very helpful indeed. However owing to the circumstances which I have outlined above this judgment has not been forthcoming as promptly as we would have wished.

3. I have read in draft the judgments of Keith and Liu JJ and I agree with them that these appeals must be dismissed. Sympathetic as we must feel towards the appellants who, when these proceedings commenced had been in occupation of land for a total period of well over 20 years and for almost that period since a new lease was granted by statute in 1973, I am however satisfied, for the reasons given by Keith and Liu JJ that despite the criticism of it and the dissenting judgment of Lord Morris, this Court is bound by the decision in Fairweather.

4. The essential question in Fairweather was whether the lessee of a lease due to expire in 1992 could surrender his lease to the leasor free-holder if a squatter had been in adverse possession for a sufficient period to bar a claim for possession by the leasee. Did the leasee have anything to surrender? The majority said yes he did, Lord Morris said he did not, but there was in any event no dispute that if the lease had continued to run until its expiry in 1992 the squatter could not then rely on his adverse possession as against the free-holder. Here the lease was not surrendered. It expired on 1st July 1973 but, because the terms of the lease so provided, it was renewed.

5. For the appellants to succeed on this limb of the argument, it seems to me, they would have to show that the renewal of the original 1898 lease simply meant that the original lease continued for another 24 years less 3 days. That is contrary to Rider v. Ford [1923] 1 Ch. 541 and to the wording of the New Territories (Renewable Crown Leases) Ordinance - "shall be granted to such person a new Crown Lease".

6. As regards the question of whether the appellants could rely on Section 4(4)(c) of that Ordinance they had to show that adverse occupation for a period less than 20 years gave rise to a "right" in respect of the land or was a "burden" on it. For the reasons given by Keith and Liu JJ, I do not consider they have done so and I also do not agree with Godfrey JA in Fu Mei Ling, Mary that a right includes one which the possessors of land are in the course of acquiring. Such a right does not exist until the 20-year period has passed nor is adverse possession a burden on the land if there is no right to remain which can be enforced.

Keith, J.:

INTRODUCTION

7. Crown leases for lots of land in the New Territories were usually granted for a fixed term of years. However, it was common for a lessee to be given a right to renew the lease for a further term. In 1969, the Government decided to make the renewal of these leases automatic. The statutory device which was used to achieve that was to deem the right of renewal as having been exercised, and to deem a new Crown lease as having been granted. The issue which these consolidated appeals raise is the extent to which the legal rights of squatters on the land were thereby affected.

THE FACTS

8. The land to which these appeals relate is in Sheung Shui in the New Territories. The lots in which the land is included were among a number of lots comprised in a Block Crown lease dated 27th March 1905. The lease provided that the lots were to be held from the Crown for an original term of 75 years from 1st July 1898. The lease also provided that the lessees would be entitled, on the expiration of the original term, to a renewed lease of the lots for a further term of 24 years less 3 days.

9. On 19th March 1973, the legal estate in that original term (so far as the lots to which these appeals relate were concerned) was assigned to Lam Island Development Co. Ltd. ("the Company"). It was the Company, therefore, which reaped the benefit of section 4(1) of the New Territories (Renewable Crown Leases) Ordinance (Cap. 152) ("the Ordinance"), which provided:

"In the case of an existing Crown lease of a lot which has not 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 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."

10. The lots had not been divided into sections before 1st July 1973. Accordingly, the effect of section 4(1) of the Ordinance was that:

(a) the Company was deemed to have exercised the right of renewal contained in the original Crown lease, and

(b) a new Crown lease was deemed to have been granted to the Company on 1st July 1973.

11. However, parts of the land to which the lots related had been occupied for many years by people who had made their homes there. No finding has been made as to when the various Appellants began to occupy the land, but both the hearing below and the appeal have proceeded on the assumptions that (a) the Appellants began to occupy the land at some time between 1st July 1953 and 10th June 1973, (b) they have occupied the land continuously, and (c) their occupation of the land has been adverse to the Company and to the Company's predecessors-in-title.

THE PROCEEDINGS

12. On 10th June 1993, the Company commenced proceedings for possession of the land under Ord. 113 of the Rules of the Supreme Court. The originating summonses eventually came before Godfrey J.A. (sitting as an additional Judge of the High Court). He made an order for possession of the land occupied by the Appellants in favour of the Company. However, he stayed execution of his order pending any appeal by the Appellants. The Appellants now appeal against the order for possession made against them.

THE TIME-BAR

13. Those of the Appellants who were represented at the hearing before Godfrey J.A. contended that the proceedings were statute-barred. They relied on section 7(2) of the Limitation Ordinance (Cap. 347) which provides:

"No action shall be brought by any other person to recover any land after the expiration of 12 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 ..."

The period had been reduced from 20 years in 1991, but the effect of section 38A of the Limitation Ordinance is that the reduction does not apply to causes of action, such as the present, which accrued prior to 1st July 1991. For the proceedings to have become statute-barred, therefore, the right of action on which the Company sued had to have accrued on or before 10th June 1973.

14. Godfrey J.A. held that the right of action on which the Company sued only accrued to it on 1st July 1973 when it was granted a new Crown lease of the land. The fact that the Company had had a right of action before that date was irrelevant, since that right of action no longer existed because it had been based on the original Crown lease which had expired. This reasoning involves three propositions:

(i) the Company's right of action under the original Crown lease came to an end when the original Crown lease expired on 30th June 1973,

(ii) the deemed grant of the new Crown lease on 1st July 1973 gave the Company a new right of action, and

(iii) it was that latter right of action on which the Company sued.

In my view, these propositions are too plain for argument. If authority is needed for them, it is necessary to look no further than Rider v. Ford [1923] 1 Ch. 541, which Godfrey J.A. referred to in his judgment. Russell J. (as he then was) was dealing with an option to call for a new lease, rather than a statutory grant of a new lease by way of renewal of an existing lease, but he added at p. 547 that "[e]ven if all the provisions in the fresh lease were the same as in the old lease it would none the less be a fresh demise, and a fresh term with fresh covenants."

15. Mr. Kenneth Chow for the Appellants in CA 66/94 developed an interesting argument based on the fact that the right of the Company's predecessors-in-title to a renewal of the original Crown lease was contained in the original Crown lease. A right of action under any new Crown lease which was granted pursuant to the exercise by the Company of its right of renewal was, he argued, a right of action under the original Crown lease because:

(a) the original Crown lease was the source of the right of renewal which the Company was deemed to have exercised, and

(b) applying the rule in Walsh v. Lonsdale (1882) 21 Ch. D. 9, the right of renewal meant that a new Crown lease was to be treated as having been granted.

16. I reject this ingenious argument. Renewal of the original Crown lease had not always been automatic. The Company or its predecessors-in-title had been required to exercise the right of renewal (though the Ordinance used a statutory mechanism subsequently to deem the right as having been exercised). The rule in Walsh v. Lonsdale simply meant that if the Company or its predecessors-in-title had exercised the right of renewal, and had continued to occupy the land, an instrument giving effect to the renewed lease would have been treated as having been executed. As it was, the enactment of the Ordinance in 1969 made the application of the rule in Walsh v. Lonsdale unnecessary: a new Crown lease was deemed to have been granted to the Company.

17. To the extent that Mr. Chow argued that Baker v. Merckel [1960]1 Q.B. 657 is authority for the proposition that the exercise of the right of renewal is an irrelevant consideration, I disagree. Baker v. Merckel dealt with an option to extend the length of an existing lease, not a right to renew an existing lease in circumstances in which the exercise of that right would result in the grant of what section 4(1) of the Ordinance called "a new Crown lease". And the fact that the Company acquired a new Crown lease is the answer to another point taken by Mr. Chow. It is true that

(a) the relationship of landlord and tenant continued between the Crown and the Company from 1st July 1973 as it had continued before, and

(b) the Company's right to a renewal of the Crown lease derived from the terms of the original Crown lease,

but the form which the Ordinance provided that renewal was to take was the grant of a new Crown lease. Harsh though the result may be, there is, in my view, no getting away from the statutory language - though in defence of the statutory language, it should be noted that the original Crown lease talked of "the renewed Lease" as being "a new lease".

18. Once the right of action on which the Company sued is shown not to have been the right of action which ceased on 30th June 1973, how can it be said that the right of action on which the Company sued accrued prior to 10th June 1973? The beguiling argument developed by Mr. Daniel Fung QC for the Appellant in CA 67/94 went like this:

(i) The Company or its predecessors-in-title had been dispossessed of the land for at least 20 years prior to 10th June 1993.

(ii) Section 8(1) of the Limitation Ordinance provides:"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".

(iii) Accordingly, the right of action of the Company or its predecessors-in-title for possession accrued at least 20 years prior to 10th June 1993.

(iv) Moreover, section 13(2) of the Limitation Ordinance provides: "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."

(v) Accordingly, so long as the land in question did not cease to be in adverse possession, the period of adverse possession required to bar a claim for possession was not broken.

19. In my view, these sections do not help the Appellants' case. The words "the right of action" in section 8(1) can only refer to the right of action on which the Company sued. That is because section 8(1) merely deems when the right of action referred to in section 7(2) accrued. In this case, the Company or its predecessors-in-title had not been dispossessed of the land for at least 20 years since the right of action on which the Company sued accrued to it. That right of action did not accrue to it until 1st July 1973. Moreover, I do not think that it is implicit in section 13(2) that uninterrupted adverse possession for the requisite period necessarily gives rise to the time-bar. Section 13(2) merely deems the right of action as not continuing in the one situation to which section 13(2) relates. I see, of course, the force of the Appellants' assertion that they enjoyed at least 20 years' uninterrupted adverse possession before 10th June 1993. There was, to use the principle which Mr. Fung sought to derive from Mount Carmel Investments Ltd. v. Peter Thurlow Ltd. [1988] 1 W.L.R .1078, no change in the quality of the Appellants' occupation of the land. However, the fact remains that up to 1st July 1973 the Appellants' possession of the land was adverse to the Company's and their predecessors-in-title's rights under the original Crown lease, whereas since then their possession was adverse to the Company's right under the new Crown lease - and it was the Company's right to possession under the new Crown lease which was the right of action upon which the Company sued.

20. I also see the force of the Appellant's argument that what the legislature really intended in section 4(1) of the Ordinance was "to do no more than create a later date for the expiration of the term created by the original [Crown] lease than that for which that lease originally provided". However, I have already referred to the language of the Ordinance, and I agree with Godfrey J.A. that "if that was the object of the legislature, ... it failed to achieve it. The words it chose to use in Section 4(1) are ... clear and unambiguous and operated to create a new Crown lease commencing on 1st July 1973".

21. The controversial majority decision of the House of Lords in Fairweather v. St. Marylebone Property Co. Ltd. [1963] A.C. 510 was discussed at considerable length in the course of argument. Fairweather was concerned with the true legal effect of section 16 of the Limitation Act 1939 (reproduced as section 17 in the Limitation Ordinance). Section 16 provided that the title of a person to land was "extinguished" on the expiration of the limitation period for any person to bring an action to recover the land. A majority of the House of Lords held that it was only the lessee's title to the land which was extinguished as against the squatter: the expiration of the limitation period did not destroy the lessee's estate as between himself and the lessor. Accordingly, once the lessee's lease was determined as against the lessor, whether by surrender, by forfeiture and re-entry or by effluxion of time, the lessor was entitled to claim possession of the land against the squatter - even if the squatter had been in adverse possession of the land for a sufficient number of years to have acquired a possessory title. That was not because the determination of the lessee's lease meant that there was no estate to which the squatter's possessory title could attach. The squatter's possessory title was an independent title subject only to a superior claim to possession. It was because the lessor's superior right to possession only accrued when the encumbrance on the lessor's right to possession, namely, the lease, ceased to exist.

22. Of course, in the present case, by the time the original Crown lease was determined by effluxion of time, the Appellants had not been in adverse possession of the land for a sufficient number of years to have acquired a possessory title. Accordingly, the Company's title to the land as against the Appellants had not been extinguished by 1st July 1973 (as was the case in the recent decision of the Court of Appeal in Fu Mei Ling Mary v. Yeung Kong (CA 47/94)). But to the extent that the Appellants rely on uninterrupted adverse possession of the land for at least 20 years prior to 10th June 1993, Fairweather prevents the Appellants (subject to any statutory provision to the contrary) from aggregating adverse possession prior to 1st July 1973 and adverse possession after that date. Indeed, Lord Denning recognised at p. 547 that the lessor and lessee could conspire together to defeat the squatter :

" ... they can by a surrender - or by a surrender and regrant destroy the squatter's [possessory] title and get rid of him. So be it. There is no way of preventing it."

There is no logical reason why the same should not apply to the determination of a lease by effluxion of time and the deemed statutory renewal of the lease on identical terms. And if the lessor and lessee can conspire together to defeat the possessory title which the squatter has already acquired, all the more reason for saying that they can conspire to defeat a possessory title which the squatter is in the process of acquiring.

23. A valiant attempt was made to persuade us not to follow Fairweather. We were referred to Lord Morris's powerful dissenting speech, to the refusal of the Supreme Court of Ireland to followFairweather in Perry v. Woodfarm Homes Ltd. [1975] I.R. 104, and to the trenchant criticisms of Fairweather by academic writers of the calibre of Prof. Wade and Megarry V.- C. (as he eventually became) in (1962) 78 L.Q.R. 33 and 541. However, I agree with Leonard J. in Fu Mei Ling Mary:

"There being no material distinction between the relevant parts of the Limitation Ordinance on the one hand and the relevant parts of the Limitation Acts on the other, this court is bound by the majority decision in Fairweather as to the true meaning and effect of the legislation - De Lasala v. De Lasala [1979] H.K.L.R. 214."

I therefore decline the invitation to consider whether Fairweather should be followed. Fairweather is binding on the courts of Hong Kong.

24. Finally, an attempt was made to distinguish Fairweather from the present case on the basis that the policy considerations which particularly influenced the majority were that it would be unreasonable and unjust to deprive a lessor of his title when he has no knowledge of what is happening to his reversionary interest until the determination of the lease: see the speeches of Lord Radcliffe and Lord Denning at pp. 538 and 544 respectively. It is said that these policy considerations do not apply to the present case since no question of want of knowledge of the Appellants' adverse possession can be claimed by the Company who Mr. Fung described as "the party with immediate possessory title ... at all material times". Even if that were the case, I do not read Fairweather as in any way limiting the application of the important questions it decides to those cases in which either the lessor or "the party with immediate possessory title" is unaware of the presence of squatters on the land.

25. For these reasons, I conclude that the right of action on which the Company sued accrued on 1st July 1973, and since 20 years had not elapsed before it commenced these proceedings, these proceedings are not statute- barred.

RIGHT OR ENCUMBRANCE UNDER SECTION 4(4)(c)

26. Section 4(4)(c) of the Ordinance provided that the new Crown lease, and the land which it deemed to demise, were deemed to be subject to such "rights, easements, tenancies or other burdens or encumbrances of whatsoever kind or nature" as the original Crown lease, and the land which it demised, had been "subject to immediately before the 1st day of July 1973". Those of the Appellants who were represented before Godfrey J.A. argued that the possessory title which they were in the process of acquiring before 1st July 1973 were rights or encumbrances of the kind contemplated by section 4(4)(c), and to which the new Crown lease, and the land which it deemed to demise, were subject. Godfrey J.A. rejected this argument. He held that the rights to which section 4(4)(c) applied were "rights which qualified existing titles, not rights which, if established, would operate to defeat those titles altogether".

27. In Fu Mei Ling Mary, Godfrey J.A. accepted that this was too restrictive a construction of section 4(4)(c). Along with the other members of the Court, he held that where the squatter had acquired a possessory title by more than 20 years' adverse possession prior to 1st July 1973, section 4(4)(c) was wide enough to include rights which had been acquired under the Limitation Ordinance. On that issue, the three members of the Court were unanimous. As Leonard J. rhetorically asked: "Why should it be assumed that the legislature did not intend by section 4(4) to preserve rights which it had itself by statute created?" Indeed, for the compelling reasons given by Leonard J., I agree that the acquisition of a possessory title prior to 1st July 1973 was both an encumbrance on, and a right in respect of, the land which the original Crown lease demised of the kind contemplated by section 4(4)(c), and to which the new Crown lease, and the land which it deemed to demise, were therefore subject.

28. However, in the present case, the Appellants had not acquired a possessory title by 1st July 1973. The length of their adverse possession of the land prior to 1st July 1973 meant that they were only in the course of acquiring it. The question which this appeal raises, therefore, is whether a possessory title which was in the course of being acquired was an encumbrance on, or a right in respect of, the land which the original Crown lease demised of a kind contemplated by section 4(4)(c). In Fu Mei Ling Mary, Mortimer J.A. expressly left this issue open, and Leonard J. did not expressly deal with the issue at all. Godfrey J.A., however, thought that a possessory title which was in the course of being acquired was a right in respect of the land demised by the original Crown lease of a kind contemplated by section 4(4)(c) (and he expressed the opinion that that view was supported by section 70(1)(f) of the Land Registration Act 1925).

29. On this issue, I find myself in respectful disagreement with what Godfrey J.A. said in Fu Mei Ling Mary. I accept that it would be an unexpected consequence of the Ordinance if, by the mechanism of automatic renewal provided for by section 4(1), the Ordinance indirectly and fortuitously deprived a considerable number of people who had acquired a possessory title of the interest in the land which their possessory title gave them. I accept that it would also be an unintended consequence of the Ordinance if it similarly deprived a considerable number of people who were in the process of acquiring a possessory title of the interest in the land which adverse possession in the future (when added to the adverse possession in the past) would, but for Fairweather, have given them. It is therefore necessary to construe section 4(4)(c) in such a way as to avoid that unintended consequence, and in such a way as to achieve what it was plainly designed to achieve - namely, to preserve the status quo and not to destroy rights already acquired - provided that such a construction does not do violence to the language which the legislature chose to use.

30. In my view, the language of section 4(4)(c) does not permit the construction for which the Appellants contend. It is true that the right or encumbrance to which the land demised by the original Crown lease had to be subject before the new Crown lease, and the land deemed to be demised by it, were deemed to be subject to them were a right or encumbrance "of whatsoever kind or nature". The legislature clearly intended section 4(4) to cover every kind or right or encumbrance. But adverse possession for less than the number of years necessary for the acquisition of a possessory title cannot be regarded as a right or encumbrance to which the land was subject immediately prior to 1st July 1973. Such adverse possession gave the squatter no enforceable rights of any kind against the dispossessed lessee, nor did it constitute an encumbrance on the dispossessed lessee's lease or on the land which the lease demised. The most that can be said is that the adverse possession constituted a prospective right or encumbrance as against the dispossessed lessee, which was contingent upon adverse possession continuing for the number of years necessary for the acquisition of a possessory title. Since the only rights or encumbrances which section 4(4)(c) comprised were those to which the original Crown lease, and the land demised by it, were subject immediately before 1st July 1973, the right or encumbrance had to have existed by then. It would be doing wholly unjustifiable violence to the statutory language to hold that the right or encumbrance was in existence then.

31. That, in my view, is the answer to the reliance placed by both Mr. Chow and Mr. Fung on the principle that a person in possession of land has a good title to the land against anyone except someone having a better legal right to possession. The leading decision on the principle in modern times is Asher v. Whitlock (1865) L.R.1 Q.B.1 (expressly approved and applied by the Privy Council in Perry v. Clissold [1907]A.C .73), in which it was held that a person in possession of land without any other title has a devisable interest in the land. It may well be, therefore, that the Appellants' adverse possession of the land prior to 1st July 1973 amounted to an interest in the land, but it is quite another thing to argue that that interest amounted to an encumbrance or right to which the land demised by the original Crown lease was subject immediately before 1st July 1973. The existing Crown lease had given the Company the immediate right to possession immediately prior to 1st July 1973, and that immediate right to possession was superior to the Appellants' limited interest in the land at that stage.

32. Finally, with respect to Godfrey J.A., I do not think that section 70(1)(f) of the Land Registration Act 1925 is of assistance. That provides that "rights acquired or in the course of being acquired under the Limitation Acts" amount to overriding interests to which registered land is deemed to be subject. The plain fact of the matter is that when section 4(4) of the Ordinance was enacted, the legislature attempted to specify those "encumbrances and interests as the land and existing Crown lease were subject to", but "rights acquired or in the course of being acquired under the Limitation Ordinance" were not expressed to be among them. The legislature therefore left it to the Courts to decide whether rights (a) acquired or (b) in the course of being acquired under the Limitation Ordinance were rights comprised in section 4(4)(c). For the reasons I have given, I think that (a) were, but (b) were not.

CONCLUSION

33. For these reasons, I would dismiss the appeal, though not without expressing my sympathy for the Appellants who have been denied a possessory title despite at least 20 years' uninterrupted adverse possession of the land. Godfrey J.A. himself encouraged the Appellants to appeal, and he expressed the hope that legal aid would be granted to enable them to do so. In the special circumstances of this case, the order nisi I would make as to the costs of the appeal would be that there should be no order as to costs.

Liu, J.:

34. The respondent company is the registered owner of divers plots of land in Sheung Shui, New Territories. Five actions were instituted by Originating Summons under O.113, R.S.C. against different defendants as trespassers. All five actions came to be heard by Godfrey, J.A. who granted orders for possession against all the defendants with a stay of execution until the determination of their respective appeals. Only one defendant in one action and two defendants in another caused to be filed their Notices of Appeal. The two appeals come before us, in which two points are taken. They may be shortly stated as follows:

(1) The respondent's right to recover land against these appellants are statute-barred after 20 years' adverse possession under the then s.7(2) of the Limitation Ordinance; and

(2) Periods of the appellants' respective adverse possession of the land prior to 1 July 1973 constituted "encumbrances", "burdens" or "interests" within the meaning of those words in s.4(4)(c) of the New Territories (Renewable Crown Leases) Ordinance, hence the respondent's land and its new Crown lease are deemed to have been, since 1 July 1973, subject to these alleged "encumbrances", "burdens" or "interests".

35. The 20 years' period under the then s.7(2) of the Limitation Ordinance was amended to 12 years by s.5 of the Limitation (Amendment) Ordinance 1991 which came into operation on 1 July 1991. By s.38A(1)(a) of the Limitation Ordinance, "the time for bringing proceedings in respect of a cause of action to recover land; ... which accrued before 1 July 1991 shall, if it has not then already expired, expire at the time when it would have expired apart from the provisions of the Limitation (Amendment) Ordinance 1991". Therefore, for the purposes of these appeals, the limitation period is 20 years.

36. Twenty years' adverse possession as against the respondent would extinguish its title to the plots under s.17 of the Limitation Ordinance. As "the operation of the Statutes of Limitation is merely negative, (it would) destroy the leaseholder's title to the land but (would) not vest it in the squatter". See St. Marylebone Property Co. Ltd. v. Fairweather, [1963] A.C.510 H.L. at p.544, per Lord Denning. Moreover, the leaseholder's "estate as between himself and the lessor (would) not (be) destroyed". At p.538, Lord Radcliffe took the same view in the leading judgment: "The right or title extinguished is coterminous with the right of action the barring of which is the occasion of extinguishment. This would mean that, when a squatter dispossesses a lessee for the statutory period, it is the lessee's right and title as against the squatter that is finally destroyed but not his right or title as against persons who are not or do not take through the adverse possessor", such as the freeholder.

37. I set out below s.2(2), the then s.7(2), s.8(1), s.13(2) and s.17 of the Limitation Ordinance and the relevant parts of s.4(4) of the New Territories (Renewable Crown Leases) Ordinance:

38. Limitation Ordinance:

"2(2) A person shall be deemed to claim through another person if he became entitled by, through, under, or by the act of that other person to the right claimed;

7. Limitation of actions to recover land

(i) .......

(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:

Provided that, if the right of action first accrued to the Crown through whom the person bringing the action claims, the action may be brought at any time before the expiration of the period during which the action could have been brought by the Crown, or of 20 years from the date on which the right of action accrued to some person other than the Crown, whichever period first expires.

8. Accrual of right of action in case of present interests in land

(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.

13. Right of action not to accrue or continue unless there is adverse possession

(1) ..........

(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. Extinction of title after expiration of period

Subject to the provisions of section 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."

New Territories (Renewable Crown Leases) Ordinance

"4. New Crown leases deemed to be granted on 1st July 1973

(1) In the case of an existing Crown lease of a lot which has not 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 person entitled to that right and on that date there shall be deemed to be granted to such a person a new Crown lease of the land held by him immediately before that date under the existing Crown lease.

(2) ........

(3) ..........

(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 relating 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 Registry 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."

39. The respondent has throughout been a paper owner, never in actual possession. These plots were held under a 1905 Crown lease expiring on 30 June 1973 with a right to renew for a further term of 24 years less the last 3 days in "a new lease". On 19 March 1973, the respondent became owner of these plots under an assignment. Came 30 June 1973, the respondent reaped the benefit of the statutory renewal under s.4(2) of the New Territories (Renewable Crown Leases) Ordinance on the expiration of the 1905 Crown lease. The contractual option to renew under that lease was not exercised.

40. For the purposes of the submissions made to Godfrey J.A. in the O.113 proceedings, it was assumed that by the time the respondent commenced these five ejectment actions against the appellants and other occupiers on 10 June 1993, they had all been in adverse possession for over 20 years but that none of them had yet accumulated his/her respective full 20 years' adverse possession as at the expiry date of the 1905 Crown lease on 30 June 1973. From the date the respondent became owner by the said assignment on 19 March 1973 to 10 June 1993 when these actions were instituted, the period was more than 20 years. But from the date of the deemed renewal of the 1905 Crown lease on 1 July 1973 to the date of the O.113 Originating Summonses issued on 10 June 1993, almost but not quite 20 years had elapsed. That period was some 20 days short of the prescribed 20 years for adverse possession. Therefore from the date of the regrant on 1 July 1973, the applicable statutory period of adverse possession had not run its full course against the respondent as holder of the new Crown lease. Also, as the respondent's right to recover land was to accrue afresh from the date of its new Crown lease so deemed to have been regranted, the respondent has not been time-barred. Thus, both before and since 1 July 1973 no possessory title had been acquired as against the respondent. That would seem to be the position, but counsel for the appellants seek to persuade us otherwise.

41. It is the contention of these appellants that up to the date of the O.113 Originating Summonses each of them had been in continuous adverse possession of the land for over 20 years without any interruption or interference. The first point taken by Mr Fung, leading counsel for an appellant in Civil Appeal No.67/1994, bifurcates into two limbs : first, the respondent's right to recover land was not disrupted by the regrant, and the appellants' unbroken full periods of adverse possession had wholly destroyed the respondent's singular right and title to land "for all purposes and in all relations, so that as between (itself) and the (Crown) (the respondent) had thereafter no estate or interest in the land demised". Consequently, Mr Fung submits that insofar as Fairweather could be understood to have held that "the squatter's title ..... (was) defeated ..... by a (statutory) regrant", made at whatever stage of the pre- 1973 periods of adverse possession, Fairweather was wrongly decided by a majority. Secondly, Fairweather has no application to these appeals in which the respondent has been the same Crown lessee seized with the same leasehold interest before and after the 1973 regrant. Counsel further submits that for the legislative intent gleaned compendiously from the then s.7(2), s.8(1) and s.13(2) of the Limitation Ordinance, the case of these appellants falls to be decided on the view this court takes of two questions, namely whether the respondent's right of action to recover land after first accrual to it or to the person through whom it claimed under the 1905 Crown lease had been interrupted and whether each of the appellants had accumulated an effective full period of adverse possession before action. Mr Fung and Mr Chow both focus on such contended uninterrupted right of action of the respondent and the contended unbroken periods of adverse possession of the appellants. Further, counsel seek to take advantage of the appellants' incomplete periods of adverse possession prior to 1 July 1973 as alleged "encumbrances", "burdens" or "interests" on or in the new Crown lease.

42. Mr Fung acknowledges the ground principle reaffirmed in Walter v. Yalden [1902]2 KB 304, that time would not begin to run against a reversioner until the lease expires. I would observe in anticipation that the same principle was applied to the English Land Registration Act, 1925. No one maintains any likely time bar separately against the Crown as under s.7(1) of the Limitation Ordinance, the Crown would not risk defeat by any adverse possessory claim in less than 60 years. It is argued on behalf of the appellants that expiry of the 1905 Crown lease did not stop or did not have the effect of stopping the running of its otherwise contemplated full term viz. the original term and the renewal. Mr Chow, counsel in Civil Appeal No.66/1994, is emphatic that despite the regrant statutorily deemed to have been made, the court should examine what is, in substance, the same term involving the same parties, in the same relationship and having same rights under the 1905 Crown lease. It is, in effect, so counsel argue, the same leasehold interest. Mr Fung submits that the Crown as grantor is therefore affected by the statute-bar for the duration of the respondent's alleged extinguished lease which links the initial term with the renewed term. In supporting Mr Fung, Mr Chow also directs our attention to the continuity said to have been derived from the original demise and, in effect, a further term (though by way of a regrant), both emanating from the 1905 Crown lease as if the initial term had been enlarged. That is clearly not the case. The right of renewal had not even been exercised. The New Territories (Renewable Crown Leases) Ordinance created in law a new Crown lease of the same land hitherto held by the respondent under the 1905 Crown lease.

43. In St. Marylebone Property Company Limited v. Fairweather supra., on the settled principle that after a squatter had time-barred a leaseholder, the reversioner's title would not be eroded, the Board held by a majority that if the dispossessed leaseholder surrendered the remainder of his lease to the reversioner after full time had run against him under the Limitation Act, in effect merging the estate of the statute-barred leaseholder in the freehold, the reversioner would thereupon be entitled to an immediate right of action to eject the squatter. Fairweather was and has been sought to be supported by settled principle, the logical operation of "extinction of title" under the Statutes of Limitation, sound approach in convenyancing practice and fair play. The dissenting Law Lord and others following him have strongly condemned the decision as illogical, tortuous, lope-sided, unjust, over-conventional, being open to abuse and jeopardising the policy of protecting possessory title. See also Professor Wade's criticism in "Landlord, Tenant, Squatters - And Peter Pan's Shadow?" [1962]78 LQR 33 at p.35. The opinions in the Law Reform Committee encapsulated in its 21st Report were evenly divided. Indeed, it was commented that "no general rule is likely to produce absolute justice in every case". The Law Reform Committee took the view that since "a carefully drawn covenant would anyhow circumvent a statutory reversal of the St. Marylebone decision, there (was) no sufficient justification for a change in the law." The Law Reform Committee made no recommendation for any change in its 1977 Report. However, the Fairweather case was not followed in Ireland. See Perry v. Woodfarm Homes Limited [1975] IR 104. Mr Fung is highly critical of the majority decision of the Board. Counsel invites us to disregard it as an erroneous majority approach. Mr Fung is certainly not without company. He cites local decisions some of which share his disappointment. The majority view in Fairweather has weathered well hostile reception for a great many years. In 1977, the English Law Reform Committee, after a concerned debate, were equally divided on it. No sufficient justification was found for making any recommendation and none was attempted. It would not be productive for me to allow myself to be drawn into the same unfruitful academic exercise. I am content with the majority decision in Fairweather which was not at least sought to be moderated by the English Law Reform Committee in 1977.

44. Lord Morris, as did Willmer L.J. who dissented in the Court of Appeal, reasoned that a good possessory title would extinguish the lessee's right and title to land "for all purposes and in all relations, so that between himself and the lessor, for instance, he has thereafter no estate or interest in the land demised". In his speech, Lord Morris elaborated thus: a full period of adverse possession would destroy "the nexus between (the lessee) and his lessor" in the sense that "once adverse possession has been completed, he ceases to hold the term of years and estate in it granted to him by his lessor". See Fairweather, supra. pp.538, 539 & 540. How could there be, so tested Lord Morris, anything left to be surrendered to the lessor? Lord Morris affirmed Walter v. Yalden, [1902]2 K.B. 301. In the Court of Appeal in Fairweather, Willmer L.J. could not see "how the lessee, by surrendering the lease, (could) improve the position of the freeholder by conferring a right which he himself (had) not got". See St. Marylebone Property Co.Ltd. v. Fairweather, [1961]3 W.L.R. 1083, CA at p.1102. Lord Morris was prepared to accept that the lessor would be entitled to eject the squatter at the end of the lease but not immediately upon accepting the surrender, and the Law Lord explained the decision in Taylor v. Twinberrow, [1930]2 K.B. 16 on the footing that the joinder of the leasehold interest and the reversioner's interest had obviated "any necessity for the giving of a notice to quit" to terminate the leasehold so as to immediately allow the reversioner to sue. Fairweather supra. p.556. The majority in their Lordships' House in Fairweather reminded us of two settled principles: first, a squatter "is in possession by his own right, so far as it is a right," but he does not derive title from the lessee. That is what was labelled by Lord Denning as the "negative operation of the Statutes of Limitation". See Fairweather, supra. p.536 per Lord Radcliffe and p.544 per Lord Denning. The other principle is : only the lessee's right and title is extinguished and the estate between the lessee and the lessor is not destroyed. The debate in Fairweather was narrowly confined to squatters on leasehold land, converging on the question as to whether a good possessory title as against a lessee could be defeated by a voluntary relinquishment of the "extinguished" leasehold interest by a surrender such as in Walter or by a joinder or merger of the yearly tenancy with the reversion such as in Taylor. But the Law Lords were all of one voice that so long as the leasehold interest was terminated as in the case of a periodic tenancy or was forfeited or expired as in the case of a fixed term, the reversioner's own right to eject the squatter would accrue at once. See Fairweather pp.540-541 (per Law Radcliffe), 547 (per Lord Denning) and 555, 556 & 559 (per Lord Morris).

45. In the absence of divergent development of the law, the decisions of the House of Lords, the Appellate Committee of which shares with the Judicial Committee of the Privy Council a common membership, "will have the same practical effect as if they were strictly binding, and courts of Hong Kong would be well advised to treat them as being so." De Lasala v. de Lasala, [1979] HKLR 214 at pp.220 & 221. Moreover, even "the Judicial Committee is not the final judicial authority for the determination of English law. That is the responsibility of the House of Lords in its judicial capacity ....... It is, of course, open to the Judicial Committee to depart from a House of Lords decision in a case where, by reason of custom or statute or for other reasons peculiar to the jurisdiction where the matter in dispute arose, the Judicial Committee is required to determine whether English law should or should not apply." Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd., [1987] HKLR 1041 at p.1053 D/E, E-F.

46. The answer to the first limb of Mr Fung's first submission is that the initial term and the term in the regrant did not both stem from the same 1905 Crown lease. These two terms cannot be regarded as in effect one term under the 1905 lease. If s.4(2) Cap 152 had effectively enlarged the original term under the 1905 Crown lease, the appellants' adverse possession completing all 20 years after the statutory regrant might arguably have defeated the respondent's claims. But the statutory regrant clearly gave "a new Crown lease".

47. Both counsel lean heavily on the unceasing adverse possession of the appellants and, but for the alleged possessory title said to have been completed against the respondent, the respondent's continual entitlement to eject squatters. Much is sought to be made of the respondent's mere right to immediate possession to found an action in ejectment. But the concept of immediate possession has no direct bearing on the right of action to recover land accrued under the Limitation Ordinance. The right to immediate possession is essential for a claim in trespass, but what is under consideration in these appeals is the gaining of a possessory title after first accrual of the right of action to recover land. An immediate right to possession in ejectment is dissimilar to a good possessory title derived from adverse possession, the essence of which is exclusive physical control with the intention to dispossess. In broad terms, the former deals with an immediate right to possession for wrongful occupation and the latter extinction of title through adverse possession. Has the respondent had only one title? If the respondent has had more than one title, would the appellants' time in adverse possession continue to run or would the running of the limitation period have to start afresh? These are the core questions in these appeals.

48. It would seem that no real distinction may be drawn between a new grant and a new Crown lease deemed to have been granted on a right of renewal deemed to have been exercised under s.4(1) of the New Territories (Renewable Crown Leases) Ordinance. In Rider v. Ford [1923]1 Ch.541 at p.547 Russell J. observed:

"The right to renew is a right to call for a fresh lease. The new lease is a result of a fresh demise. Even if all the provisions in the fresh lease were the same as in the old lease, it would nonetheless be a fresh demise, and a fresh term with fresh covenants."

It would be difficult to appreciate why a former leaseholder, whether or not statute-barred, who takes a new lease from the reversioner should not enjoy the same interest. After all, the reversioner is not affected. The new lessee who derives title from the reversioner must inherit no less right and interest. As Russell J. observed in Rider v. Ford, supra., the leaseholder has a completely fresh demise for a fresh term with fresh covenants. Further, s.4(1) expressly refers to a "new Crown lease". These were not cases of extension of the 1905 Crown lease. The option of renewal was not even exercised. A re-grant was given by law. In 1973, the law regarded the respondent as having a new lease which came with a new title. In my view, the respondent in this case enjoys no less right than the Crown had at the time when the new Crown lease was deemed to have been granted under s.4(1) of the New Territories (Renewable Crown Leases) Ordinance. As at 1 July 1973 when the new Crown lease was deemed to be granted, the appellants had not accumulated their full 20 years' adverse possession. There were no rights, burdens or encumbrances binding on the respondent as the 1905 Crown lessee. The title and interest of a reversioner could not be defeated by even a good possessory title. See Fairweather. A reversioner must be less vulnerable to an inchoate right of a squatter, so far as it may be called a right, before he completes the full period for acquiring his possessory title. The attributes of the lessee in a fresh Crown grant are akin to those of a reversioner.

49. This court, differently constituted, in Fu Mei Ling Mary v. Yeung Kong, Civil Appeal No.47 of 1994 judgments of which were delivered on 19 August 1994, dealt with extinction of title to land before the statutory re-grant under the New Territories (Renewable Crown Leases) Ordinance. Section 70(1)(f) of the Land Registration Act, 1925 to which Godfrey J.A. referred in his judgment does not seem to be material. Moreover, the 1925 Act has no application to Hong Kong. For our present purposes, an inchoate right has never been regarded in Hong Kong as a right or interest, overriding or otherwise. Further, the words "right in the course of being acquired" in s.70(1)(f) of the Land Registration Act, 1925 were evidently designed for the situation, under the same lease, where with the right of action first accrued to some one through whom the plaintiff claims, the period runs from the date of accrual to that other person or where with "a transmissible interest" acquired by an earlier adverse possessor who is "succeeded in possession by one claiming through him", holding until the expiration of the statutory period, the successor shall then hold "as good a right to the possession as if he himself had occupied the whole period". See s.7(2) & s.2(2) Limitation Ordinance and 28 Halsbury's Laws of England, 4th edn. p.348, para.777. In that scenario under the same lease, a "right in the course of being acquired" would arise under the Limitation Act, 1939 but such an overriding interest would also not affect the reversioner or the new Crown lessee. See generally, if need be, note to s.75(1) of the 1925 Act at p.583, 37 Halsbury's Statutes, 4th edn. Such an overriding interest would only bind a purchaser of the affected term as a person claiming through his predecessor to whom the right of action to recover land first accrued or the leaseholder who succeeds to a "transmissible interest". In these appeals, a fresh term with a new title was granted on 1 July 1973. The words "right in the course of being acquired" in s.70(1)(f) of the Land Registration Act, 1925 could not, in any way, prevail over a reversioner's right or the new title here in the 1973 statutory regrant. In Mary Fu Mei Ling, Godfrey J.A. was not concerned with an inchoate right but a good possessory title in an existing pre-1973 Crown lease. Rightly or wrongly, Godfrey J.A. sought merely to fortify his conclusion by these words. Godfrey J.A. could not have applied these words in s.70(1)(f) of the Land Registration Act, 1925 to a reversioner or a new Crown grantee. He did not express any view on the effect of these words "right in the course of being acquired" on a fresh grant. Godfrey J.A. conceded his reasoning in these actions as being fallacious. It clearly is, but were they correctly decided?

50. A regrant is a regrant, whether or not it be between the former lessor and the former lessee. A new title was granted and accepted in each of these cases. The law explicitly provided a new Crown lease. Taylor v. Twinberrow [1930]2 KB 16, approved by majority in Fairweather, is an example where the court applied the principle discussed above to a former time-barred tenant who later acquired the reversion. Extinction of title under s.17 of the Limitation Ordinance is referable to each title and not different titles in succession. Section 17 does not envisage the limitation period to continue to run, for the benefit of an adverse possessor, into a new title. I note that in Fairweather, Lord Denning dreaded the possibility of defeating a squatter's possessory title by, inter alia, a regrant in collusion. Fairweather, supra. pp.547-548. But as the law now stands, the appellants' respective periods of adverse possession would have to run afresh against the new title as from the date of the new Crown lease on 1 July 1973. Up to the date of the Originating Summonses, none of the appellants had completed 20 years' adverse possession. On the assumed facts, they were all some 20 days short. The appellants' apparently undisturbed adverse possession under the 1905 Crown lease could not effectively run over to the 1973 regrant. For the purpose of the Limitation Ordinance, a new title came into being, which the appellants must overcome. The land and the legal interests pertaining thereto reverted to the Crown on 30 June 1973 before the regrant and no good possessory title has been acquired after 1 July 1973. Upon the expiration of the 1905 Crown lease, there was unquestionably a break in the respondent's title and estate and with it its then right of action to recover land came to an end. As a fresh demise, the 1973 new Crown lease conferred a new title in a fresh term. The period of possession adverse to the claim of the 1905 Crown lessee lapsed, and land was again taken in adverse possession against the new Crown lessee as from 1 July 1973. Mr Fung's argument fails.

51. Finally, I turn to consider the remaining point in these appeals. Mr Fung and Mr Chow argue that in the course of gaining a good possessory title as against the respondent before the expiration of the said 1905 Crown lease, those periods of adverse possession accumulating for less than 20 years had become "encumbrances", "burdens" or "interests" within the meaning of those words in s.4(4)(c) of the New Territories (Renewable Crown Leases) Ordinance. Under the then s.7(2), s.8(1), s.13(2) and s.17 of the Limitation Ordinance, such less than 20 years' adverse possession could not impinge upon the right and title of the respondent under the 1905 Crown lease. Further, if incomplete adverse possessory periods had been intended by the legislature to fall within the meaning of the terms "encumbrances", "burdens" or "interests" in s.4(4)(c), one would have expected these incomplete periods to be given such overriding force against a lessee of a new grant in the Limitation Ordinance. As Godfrey J.A. said of s.4(4)(c), it is a deeming subsection dealing with designated encumbrances and burdens to which "the land and the existing Crown lease .... were subject .... before the 1st day of July 1973". When a statutory limitation period is completed, an adverse possessor's right would extinguish the title of the one who has been dispossessed. But before the period is complete, "so far as it is a right" adverse possession might give rise only to an inchoate right, and such an inchoate right had not been perfected by 1 July 1973. The land and the then existing 1905 Crown lease were not subject to these so-called inchoate rights. The 1905 Crown lease was thus free from any encumbrance, burden or interest. There was none to be preserved by s.4(4)(c) of the New Territories (Renewable Crown Leases) Ordinance. Suffice it to say that the cases cited by both counsel for the appellants are more pertinent to a different aspect of the law of ejectment and trespass. For all these reasons, the periods of adverse possession prior to 1 July 1973 of these appellants are not the encumbrances, burdens or interests for s.4(4)(c).

52. Counsel make expansive submissions on the nature of an option to renewal and the equities it is said to have given rise to. Much is also sought to be made of the absence of any provision in the 1905 Crown lease "to require any formal exercise" of the option, but it would have been otiose to specify the manner in which it should be exercised. Principles for the exercise of an option to renew are well settled. When the option under the 1905 Crown lease was deemed statutorily to have been exercised in terms of s.4(4) of the New Territories (Renewable Crown Leases) Ordinance, "a new Crown lease" was put in place. Whatever interests, equitable or otherwise, the option had under the 1905 Crown lease fell away at its expiration by effluxion of time. Section 4(4) did not operate as "only a matter of procedure and administration" but subject to its sub-paragraph (c) it granted a full and clean leasehold interest. For the reasons I have given, sub-paragraph (c) could take the case of the appellants no further. I concur with the conclusions reached by Godfrey J.A.

53. In my view, the appeals fail. I would affirm the decision of Godfrey J.A. in these actions. I would dismiss these appeals.

Penlington, J.A.:

54. The appeals are accordingly dismissed. In the light of the background evidence, the difficult legal concepts involved and that many other residents of the New Territories will be greatly affected by this decision, there will be an order nisi that there be no order for costs of the appeal.