WONG CHEE SING (OR WONG CHE SING) (by his next friend WONG TAK KWAN LILIAN) v. HUNG WAH (孔华) TRADING AS TAK HING LUNG MEDICINE CO. AND ANOTHER

CACV 595/2021, [2025] HKCA 534

On Appeal From [2020] HKDC 1032

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 595 OF 2021

(ON APPEAL FROM DCMP NO. 1988 OF 2018)

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JUDGMENT

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Hon Cheung JA (giving the Judgment of the Court) :

I.  The appeal

1.  This is an appeal, pursuant to leave granted by this Court, against the judgment of H H Judge Harold Leong, by which he gave judgment for the plaintiff for possession of the Property known as the G/F Rear Shop of 50 Battery Street, Kowloon (‘the Property’) and dismissed the 1^st defendant’s counterclaim that he had acquired a possessory title to the Property by reason of adverse possession.

II.  Background

1)  The plaintiff’s case

2.  The Property is situated in a building located at 50‑52 Battery Street, Kowloon (‘the Building’) which consists of one shop for non-domestic use on the ground floor; one office for non-domestic use on the mezzanine floor; and three tenements per floor for domestic use from the first floor to the eighth floor.

3.  The plaintiff is the registered owner of the Building. He was 87 years old at the time of the trial below. He is represented by his daughter as his next friend, pursuant to the order of H H Judge Kent Yee dated 31 March 2020, by reason of his mental incapacity.

4.  The plaintiff’s case is that by a tenancy agreement dated 25 May 1966, he let the Property to one Liu Shu Ming (‘Liu’) for a term of four years from 25 May 1966 to 24 May 1970. Liu apparently remained as a tenant of the Property after the expiration of the lease on 24 May 1970. By a second tenancy agreement dated 19 March 1974, the plaintiff let the Property to Liu, then trading as Wo Sang Medicine Shop for a term of two years from 25 February 1974 to 24 February 1976 at $2,000 per month. From 24 February 1976 onwards, the plaintiff ceased to collect any rent from the Property. The plaintiff claimed that by November 1993, Liu had ceased to be a tenant or occupant of the Property. From November 1993, the 1^st defendant became an occupier of the Property without his consent. By a letter dated 25 January 2018, the plaintiff’s solicitors demanded the 1^st defendant to quit and deliver vacant possession of the Property to the plaintiff within 14 days. The 1^st defendant failed to do so and the present proceedings were commenced by way of originating summons on 20 July 2018 and by order of Registrar of District Court it was to continue as if begun by writ on 21 August 2018.

3)  The 1^st defendant’s case

5.  The 1^st defendant has been a Chinese medicine practitioner since 1992. In around March 1992, he was recommended by an introducer called Luk Sum (Sixth Auntie) to use the Property to carry on the retail business for the sale of herbal medicine, ginseng and tonic food. The 1^st defendant paid Luk Sum $135,000 to purchase the Property and all the assets in the Property that included tonic food, dried seafood and herbal medicine and he obtained the exclusive possession of the Property. Luk Sum told him that he did not have to pay rent for his occupation. The 1^st defendant has been carrying on the business under the trade name Tak Hing Lung Medicine Co. (‘THL’) at the Property. He installed a huge lit sign box with the name THL outside the Property. Since 1992, the 1^st defendant has not paid any rent to anyone including the plaintiff who has never shown up at the Property and never requested him to pay rent. The 1^st defendant has the keys to the Property. He keeps the Property locked when he closes the shop at night. He keeps his personal properties and the tools for operating the business in the Property. He had at his own costs and expenses repaired, renovated and maintained the Property from time to time. Such work included the repair of the fresh water and drainage pipes and also water leakage in the exterior wall of the Property. He also installed a security system in the Property. Since 1992, whenever he was directed by the Buildings Department to carry out work in respect of the Property, he would arrange contractors to carry out the work and pay them. He also paid for the water, electricity and telecommunication charges of the Property. Since 1992, he had not received any demand notes for rates and government rents of the Property. He believed the government had imposed a freeze for those charges after the setting up of the Independent Commission Against Corruption in 1994. He only learned after the present proceedings had commenced that the plaintiff had been paying the government rates. The 1^st defendant claimed that for over 26 years from 1992 he had been in uninterrupted and exclusive possession of the Property and by the operation of section 7 of the Limitation Ordinance (Cap. 347), he has acquired a possessory title to the Property.

III.  The Judge’s Decision

6.  The Judge first rejected the 1^st defendant’s claim that he had purchased the Property. He rejected the 1^st defendant’s claim that ‘All along...I have believed deeply without doubt that this is my property’. The Judge referred to the evidence of the 1^st defendant that Luk Sum did not tell him (and he did not know) that she was the owner or that she was a tenant of the Property. He accepted that Luk Sum had possession because she held the key of the Property. He never requested Luk Sum to give him any title deeds (because he had only been in Hong Kong for a few years so he did not know the legal procedure of transfer of ownership of a property), but Luk Sum also told him that she could not give anything ‘in writing’ to him. He handed over $135,000 and accepted this as a ‘risk in investment’ because ‘any investment has risks’. The Judge also rejected the submission of the 1^st defendant’s counsel that the 1^st defendant had a mistaken belief that he had successfully bought the Property from Luk Sum in 1992. The Judge held that he has serious doubt as to whether the 1^st defendant had made any payment in the manner he described to Luk Sum or to anyone as alleged.

7.  The Judge referred to the two requirements for adverse possession, namely, factual possession and intention to possess. The Judge found against the 1^st defendant on factual possession. The Judge asked the question ‘taking into account all the circumstances of this case, does Mr Hung’s [i.e. the 1^st defendant’s] behavior show that he “has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no one else has done so”?’ He held :

‘ 62. The answer to this must be “no”. In this situation, merely occupying the Property without paying rent to the paper owner is clearly not enough: the owner is expected to pay rates and government rents (I have already addressed above why I do not accept Mr. Hung’s “mistaken belief” argument), deal with various building orders and maintenance issues etc. The statement “when no one else has done so” also does not apply in this case: Mr. Wong has been “in the picture” all along regarding these payments and maintenance works and Mr. Hung was simply taking advantage of Mr. Wong’s rather unusual and generous attitude.’

8.  The Judge also found against the 1^st defendant on intention to possess. The Judge held :

‘ 26. I do not think that Mr. Hung has adduced sufficient evidence to support a finding that he had animus possidendi at the time he came to possess the Property. His evidence regarding the transaction with “Luk Sum” and his “belief” are self-serving. I would find that, by whatever way he came to occupy the Property in 1992, his intention at the time was simply to lie low and see how long he could get away with not paying rent and other payments and did not “intend to possess the land to the exclusion of all other persons including the paper owner”. If he did pay any sum of money to Luk Sum (or anyone else), it was more likely that it was only paid to take over the business (or a share of the business) of the shop, and not for buying the Property under a mistaken belief or otherwise.

....

63. As for the question regarding whether Mr. Hung has the requisite animus possidendi. I have already found that he could not have possess such intention at the time he alleged he paid for the business and the Property. One may argue that he may have shown some intention to possess the Property in his own name when he attempted to pay for the rates of the Property on 25 July 2018, but that was after he received a copy of the demand note from Mr. Wong’s solicitors.’

IV.  The principles

9.  The Court of Final Appeal in Wong Tak Yue v Kung Kwok Wai David and Anor [1998] 1 HKLRD 241 applied the well‑established principles in Powell v McFarlane (1979) 38 P & CR 452 that identified the twin requirements of factual possession and intention to possess in order to establish adverse possession. Li CJ at page 249 stated :

‘ The principles for the application of these provisions are well established. A person claiming to be in adverse possession must be shown to have both possession and the requisite intention to possess. See the Court of Appeal decisions in England in R v Secretary of State for the Environment ex p Davies (1990) 61 P & CR 487, Buckinghamshire County Council v Moran [1990] 1 Ch 623 which treated as authoritative and applied the principles enunciated by Slade J in Powell v McFarlane (1979) 38 P & CR 452.’

10.  Slade J in Powell at page 470 stated that factual possession signifies a sufficient degree of physical control :

‘ .....The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed.’

11.  And he at page 471 stated :

‘ .....I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no‑one else has done so.’

12.  Slade J further explained the meaning of intention to possess at page 471 :

‘ .....[it] involves the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as is reasonably practicable and so far as the processes of the law will allow.’

13.  Lord Browne‑Wilkinson in J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419 agreed with the statements of law by Slade J. Dealing with the criticism that Slade J ‘definition as being unhelpful since it used the word being defined—possession—in the definition itself’, he held :

‘ 40. ...To be pedantic the problem could be avoided by saying there are two elements necessary for legal possession: (1) a sufficient degree of physical custody and control (“factual possession”); (2) an intention to exercise such custody and control on one’s own behalf and for one’s own benefit (“intention to possess”).’

14.  On the facts of the case, he held :

‘ 41 ...The Grahams [i.e. the occupiers] were in occupation of the land which was within their exclusive physical control. The paper owner, Pye, was physically excluded from the land by the hedges and the lack of any key to the road gate. The Grahams farmed it in conjunction with Manor Farm and in exactly the same way. They were plainly in factual possession before 30 April 1986.’

15.  On the issue of intention to possess, Lord Browne‑Wilkinson at [42] clarified that the intention is not an intention to own but an intention to possess. He referred to the Moran case (1988) 86 LGR 472, 479 and held that :

‘ 42. .....the trial judge (Hoffmann J) had pointed out that what is required is “not an intention to own or even an intention to acquire ownership but an intention to possess”. The Court of Appeal in that case [1990] Ch 623, 643 adopted this proposition which in my judgment is manifestly correct. Once it is accepted that in the Limitation Acts, the word “possession” has its ordinary meaning (being the same as in the law of trespass or conversion) it is clear that, at any given moment, the only relevant question is whether the person in factual possession also has an intention to possess: if a stranger enters on to land occupied by a squatter, the entry is a trespass against the possession of the squatter whether or not the squatter has any long term intention to acquire a title.’

16.  There is no dispute that the relevant period to defeat the title of the paper title owner is 12 years : section 7(2) of the Limitation Ordinance (Cap. 347).

V.  Grounds of appeal

1)  The 1^st defendant’s grounds

17.  The grounds of appeal of the 1^st defendant as advanced by Mr Mak and Ms Pang are essentially that the Judge had erred both on his findings on factual possession and intention to possess. Three grounds of appeal are relied upon :

(1)  On factual possession, the Judge erred in treating the issue of payment of rates and government rent as a factual possession issue when such acts are relevant to the issue of intention to possess.

(2)  On intention to possess, the Judge erred in equating ownership with exclusive possession and wrongly held that the 1^st defendant did not, as an owner would be expected to do, pay rates and government rent.

(3)  The Judge erred in finding the 1^st defendant was a tenant or sub‑tenant. The Judge further erred by failing to take into account relevant matters.

2)  The plaintiff’s objection

18.  Ms Eu SC and Mr Chan for the plaintiff opposed the appeal. They argued that the Judge had correctly identified and applied the law. The burden is on the 1^st defendant to prove factual possession and intention to possess. The Judge found against the 1^st defendant on credibility. There are primary findings of fact against the 1^st defendant and none of the grounds of appeal shows that the Judge was plainly wrong.

19.  The 1^st defendant’s case was based on a ‘mistaken belief that he had successfully bought the Property’ in 1992. The Judge found : (1) the 1^st defendant was dishonest, he did not hold any mistaken belief that he was the owner of the Property; (2) the 1^st defendant’s alleged payment of $135,000 to Luk Sum was seriously doubtful. Even if he did make the alleged payment, it was to take over the business rather than to acquire the Property under some mistaken belief as he claimed; (3) the 1^st defendant had no intention to possess the Property to the exclusion of all other persons including the paper owner; (4) since the 1^st defendant was not unaware that an owner of the Property would be required to pay rates and government rates, it was nonsensical for him to hold a belief that he need not do so, and for him not to make any inquiries with the government. This was inconsistent with the 1^st defendant’s claim of his mistaken belief that he was the owner of the Property; (5) the 1^st defendant’s delay in dealing with the building orders in respect of his canopy showed that he was less interested in dealing with the Property as an occupying owner might be expected than in lying low and getting away with not paying rent or other expenses; and (6) the Judge accepted that the 1^st defendant was approached at the time of the first building order in 2006, as evidenced by a letter dated 14 April 2006 produced by the plaintiff, from Mr Yip of the Architect Authorized Person to the Buildings Department, detailing the efforts made by the plaintiff as the owner/landlord and the 1^st defendant’s/tenant’s denial of responsibility for his illegal canopy. The Judge found it unlikely that the 1^st defendant was not aware of the existence of the landlord. The plaintiff argued that these are primary findings of fact and the 1^st defendant has not shown any ground for saying that they are ‘plainly wrong’ in accordance with the law laid down in the Court of Final Appeal case of Ting Kwok Keung v Tam Dick Yuen [2002] 3 HKLRD 1.

20.  As to Ground 1, Ms Eu argued that an owner of a unit in a multi‑storey building would be expected to pay or inquire into the payment of rates and government rent. The Judge disbelieved the 1^st defendant’s explanation that such payments were frozen by the Government. The 1^st defendant knew the plaintiff is the owner and allowed the plaintiff to deal with matters that the owner was expected to do such as his failure to comply with the demand of the Building Authority on repair and his conduct relating to building orders.

21.  As to Ground 2, the 1^st defendant’s knowledge of the true owner and his conduct in knowingly allowing the plaintiff to pay for the other expenses or delay dealing with his own canopy strongly pointed to the finding that the 1^st defendant did not intend to exclude the true owner.

22.  As to Ground 3, the Judge did not make a finding on tenancy which was not a relevant issue.

VI.  Our view

1)  Conflating ownership and possession

23.  It is important to bear in mind the distinction between ownership and possession in adverse possession cases. In our view, the Judge had erred both on the issues of factual possession and intention to possess by conflating these two concepts when he rejected the 1^st defendant’s case. By so doing his findings on these two crucial issues are plainly wrong because he had taken into account irrelevant considerations and ignored relevant considerations.

2)  Factual possession

24.  In respect of factual possession, what is required is physical custody and control. The 1^st defendant’s evidence clearly showed that he has fulfilled this requirement. He has been using the Property as a shop, selling, amongst other things, medicinal and tonic products. He keeps his personal belongings and the tools of his trade there. He keeps the keys to the Property and it is locked up at the close of business. The Property is not used by anyone else and he keeps the keys. He has paid for the water, electricity and telecommunication charges. He has carried out maintenance and repair work of the Property himself. He has not paid any rent since 1992. The 1^st defendant has been in occupation of the Property which was within his exclusive physical control. The plaintiff as the paper owner was physically excluded from the Property by the lack of any key to the Property. The Judge did not make any contrary findings on the 1^st defendant’s physical control and custody of the Property.

25.  When the Judge found against the 1^st defendant on the issue of factual possession, he relied on the statement of Slade J in Powell that ‘the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it, and that no one else has done so’ and held that the 1^st defendant’s behaviour did not fulfil this requirement because the 1^st defendant ‘merely occupying the Property without paying rent to the paper owner is clearly not enough : the owner is expected to pay rates and government rents ..., deal with various building orders and maintenance issues etc [62]’. This is the clearest indication that the Judge had conflated possession with ownership. The statement of Slade J must be properly understood in the context of factual possession that is by way of physical control and custody. The 1^st defendant had fulfilled this requirement. If an occupier like the 1^st defendant has in fact paid the rates and government rents, then it will further strengthen his case for adverse possession but it is not a pre‑requisite to his claim for adverse possession because we are concerned with what a paper owner might do in respect of his physical custody and control of the Property.

26.  Further, whether the 1^st defendant had bought the Property or just the contents inside or whether he had mistakenly believed that he had bought the Property does not in any way weaken his claim if there is physical possession and control by him to the exclusion of others including the paper title owner. As this Court held in Cheung Kwong Yuen v Sun Hui Fang [2016] 1 HKLRD 464 at [12] :

‘ 12. ...there is no principle of law by which a person who mistakenly claims to be the lawful tenant or purchaser would be precluded from invoking adverse possession.’

27.  As to the payment of rates, this Court held in Poon Chi Hang v Lai Ho Sun [2019] HKCA 734 :

‘ 27. The payment of rates by the defendant [i.e. the paper title owner] is at best wholly neutral on this question. It is certainly not probative of permission having been given.’

28.  In Adverse Possession (2^nd Edn) by Jourdan & Radley‑Gardner, the authors at [13‑82] stated :

‘ 13-82 The payment of rates or other taxes could not constitute the factual element of possession. However, the payment of taxes levied on the person in possession is evidence of the animus possidendi.’

29.  In Bree v Scott (1904) 29 V.L.R. 692, Madden CJ of the Supreme Court of Victoria, Australia explained the impact of payment of rates by the occupier and the paper owner on the issue of possession :

‘ A person in adverse possession who actually pays rates is in a very different case, because a person who holds possession as a tenant of the true owner when asked for rates would naturally say “You had better ask the owner.” But when she wants the world to understand that she claims the land herself she naturally would pay the rates herself, and there would be a strong inference in her favour. But the fact that the true owner pays the rates affords a very slight inference in his favour that the person in possession is not holding for herself. If she is there as the servant or tenant of the true owner you may be perfectly sure that she would not pay the rates.’

30.  Neuberger J (as he then was) explained in Purbrick v Hackney London Borough [2004] 1 P. & C.R. 34, at [20] that whilst it is not illegitimate to consider what more may have done by the occupier, the crucial question is whether what he did may amount to physical possession.

‘ 21 However, that can be a dangerous approach because the question is not what the squatter could have done, but what he did, and whether what he did is sufficient to amount to physical possession. To my mind, it is dangerous to conclude that the squatter did not do sufficient to achieve adverse possession because he should have improved the premises. In my judgment, while I would not rule out the possibility of the court ever holding that there was insufficient activity because there was no improvement, it would require a rare case where the mere failure to carry out improvements to a dilapidated property, or property out of repair, meant that the squatter did not have sufficient physical possession. After all, as some of the various passages I have quoted emphasise, unless the squatter believes, mistakenly, that he owns the property, which at least until the Land Registration Act 2002 comes into force is an irrelevant factor, he is unlikely to carry out much in the way of improvement because he knows that, at any time, he is liable to be ejected.’

31.  As to the handling of the building orders issued by the Building Authority on the unauthorised canopy outside the Property, the Judge referred to the three building orders addressed to the plaintiff dated 29 August 2002, 4 April 2007 and 14 December 2015 respectively. The Judge dealt with this issue as follows :

‘ 47. The first order was dated 29 August 2002 (page 495 of the Trial Bundle).

48. The plaintiff has produced a letter from a Benjamin Yip (“Mr. Yip”) of N.Y. Workshop, an “Architect Authorised Person”, to the Buildings Department dated 14 April 2006 (page 508 of the Trial Bundle) explaining the efforts taken by Mr. Wong to attempt to comply with the said order. In particular, the letter documented how Mr. Yip had approached the concerned tenant, THL, on 10 April 2006 and had offered to remove the illegal structure at the owner’s expense but “the tenant has denied responsibility…as it has neither clearly specified which ground floor unit(s) it referred to, nor does it address directly to that unit(s)” and also that “the tenant claimed that a similar building order had previously been served directly to him and that the order had been fully discharged…”

49. The second order was dated 4 April 2007 (Exhibit P3) which enclosed a “Mezz Floor Part Plan” which provided a clear identification of the illegal canopy structure concerned, and which stated that this order would supersede the first order, presumably in response to the issues raised in Mr. Yip’s letter.

50. Mr. Hung claimed that he was not aware of these two orders or learned of Mr. Wong’s existence until he received the third order dated 14 December 2015. The covering letter from the Buildings Department (page 120 of the Trial Bundle) clearly stated “At the request of the agent of the landlord, this department now enclose…” and that Mr. Wong was named as the landlord.

51. Mr. Hung argued that if letters were not addressed to “Rear”, “Rear Portion”, “R/P” of the ground floor or to THL, he would not receive them, and if any neighbours received such, they would not pass the letters to him. However, Mr. Hung himself produced as his own document a building order dated 31 March 2009 concerning the “Ground Floor” of the Building without reference to “Rear” etc. in the address. This building order was not related the canopy in question, but this clearly demonstrated that Mr. Hung was able to receive letters addressed in such a manner. Further, if it was true that there was such a specific address for a premises, a reasonable occupier would have alerted the neighbours and even the postman so that he would not be missing any “misdirected” mail.

52. Further, on balance, I find that Mr. Yip must have approached THL to attempt to deal with the illegal canopy structure in the manner stated in his letter. It would be unlikely that Mr. Hung was not aware of the existence of the landlord.

53. The plaintiff’s case, as stated by Ms. Wong in her witness statement (page 70 of the Trial Bundle) was that Mr. Wong sent a registered post to THL to give notice of his intention to demolish various illegal structures in early September 2015. Soon after, Mr. Wong, various people from his contractor, Diploma Construction Engineering (Holdings) Limited (“Diploma”), and 2 representatives from the Buildings Department attended the Property and demanded Mr. Hung for access to the Property to demolish the canopy. Mr. Hung initially was reluctant but finally agreed.

54. According to Mr. Hung, he himself replaced the canopy with an aluminum-framed one. He produced a receipt to purport for such dated 16 March 2016.

55. The plaintiff did not call any witness from Diploma and Ms. Wong herself was not present at the time the canopy was demolished. As such, much of her evidence on this would be at best hearsay. In any case, whenever and in whatever way the canopy was finally demolished, it was well over 10 years since the first canopy order. This may suggest again that Mr. Hung was less interested in “dealing with the land in question as an occupying owner might have expected to deal with it” and more interested in getting away without paying for anything for as long as possible.

56. Further, these evidence show that Mr. Wong has not abandoned the Property and I did not accept Mr. Hung’s claim that he only become aware of the presence of Mr. Wong as the landlord in 2015.’

32.  It is of note that by April 2004 when Mr Yip said he had approached the tenant THL, the physical occupation by the 1^st defendant had already exceeded 12 years from March 1992. Further, even from April 2004 onwards, no rent was paid by the 1^st defendant and the plaintiff had made no attempts to collect rent. The plaintiff’s argument that the 1^st defendant’s delay in dealing with the building orders showed that he was less interested in dealing with the Property as an occupying owner again repeats the flawed conflation of ownership and possession that we have dealt with.

33.  As to the issue of tenancy, the plaintiff produced a notebook that referred to rents. The Judge held :

‘ 28. There was a handwritten entry on one page which appeared to record a meeting with someone at the ground floor entrance on 22 May 2005. This entry appeared to be made with a pencil. There were further handwritings on the same page by what appeared to be entries made by a ballpoint pen of black ink and a ballpoint pen of blue ink: “Now called Tak Hing Lung, owner surname Hung” (in black ink) … “Wah 27711310” (in blue ink) … “together with wife of [Liu] Shu Ming (¼ share), dealt with by Mr. [Liu’s] nephew (surname Lee), admit rent account” (in black ink) … “10,000 dollars, one year contract (12.7.95)” (in blue ink).

29. Mr. Wong is now an elderly gentleman. He recognised the notebook and confirmed that this was his contemporaneous handwriting. He thought that he “should have” met Mr. Hung on that occasion (12 July 1995) and interpreted the meaning of the writing as Mr. Hung and the wife of Mr. [Liu] were jointly renting the Property at the time, with the wife of Mr. Hung owing ¼ share.’

34.  The Judge found that the entries in the notebook were genuine and contemporaneous, and he held :

‘ 34. I would accept this as an accurate record of the situation of the Property at the time: some form of meeting or meetings must have taken place and even if Mr. Wong did not meet Mr. Hung at that time, on balance, I would accept the contemporaneous writings showed that at the very least, there must have been some discussions with Mr. [Liu’s] wife (who owned ¼ share of THL at the time) and that Mr. Wong must have believed that some form of rental agreement was reached.’

35.  However, the Judge did not by this find that there was a tenancy between the plaintiff and the 1^st defendant. [34] was couched with vague words, namely, some form of meeting or discussion. More importantly, the Judge merely held that the plaintiff ‘must have believed that some form of rental agreement was reached and he had not abandoned the building where the Property is situated’ :

‘ 35. As such, however disorganized and “idle” that Mr. Wong had been, he had made it clear to whoever attended those meetings (which included Mr. [Liu’s] wife who owned ¼ share of THL) that he had not abandoned the Building. ’

36.  In our view, the subjective intention of the plaintiff is irrelevant. What is relevant in an adverse possession case is whether the occupier fulfilled the twin requirements of factual possession and intention to possess. Even if there was ‘some form of rental agreement’ being reached, this is irrelevant because the 1^st defendant has never paid any rent since 1992 and the plaintiff has not sought to recover rent from him.

3)  Intention to possess

37.  Likewise, in our view, the Judge’s finding on the 1^st defendant’s lack of intention to possess is flawed by his conflation of the concepts of ownership and possession. There are two matters relevant to the 1^st defendant’s intention to possess. First, he has enclosed the Property for his own use to the exclusion of the plaintiff since 1992. Second, he has not paid any rent to the plaintiff since 1992.

38.  In Buckinghamshire County Council v Moran [1990] 1 Ch.623, Slade LJ addressed that enclosure may indicate intention to possess at page 641 :

‘ As a number of authorities indicate, enclosure by itself prima facie indicates the requisite animus possidendi. As Cockburn C.J. said in Seddon v. Smith (1877) 36 L.T. 168, 169: “Enclosure is the strongest possible evidence of adverse possession.” Russell L.J. in George Wimpey & Co. Ltd. v. Sohn [1967] Ch. 487, 511A, similarly observed: “Ordinarily, of course, enclosure is the most cogent evidence of adverse possession and of dispossession of the true owner.” ’

39.  Lord Hutton in J A Pye (Oxford) Ltd held where the occupier has established factual possession, such conduct by the occupier should be viewed as evidence of the intention to possess :

‘ 76 I consider that such use of land by a person who is occupying it will normally make it clear that he has the requisite intention to possess and that such conduct should be viewed by a court as establishing that intention, unless the claimant with the paper title can adduce other evidence which points to a contrary conclusion. Where the evidence establishes that the person claiming title under the Limitation Act 1980 has occupied the land and made full use of it in the way in which an owner would, I consider that in the normal case he will not have to adduce additional evidence to establish that he had the intention to possess. It is in cases where the acts in relation to the land of a person claiming title by adverse possession are equivocal and are open to more than one interpretation that those acts will be insufficient to establish the intention to possess. But it is different if the actions of the occupier make it clear that he is using the land in the way in which a full owner would and in such a way that the owner is excluded.’ (emphasis added)

40.  In Poon Chi Hang, this Court addressed how intention to possess may be inferred from the occupier’s non‑payment of rents and his other acts :

‘ 32. Similarly, it seems to me that the fact that there was a tenancy to start with is a key factor in ascertaining whether or not possession by Poon Yiu Chung, his family, and the plaintiff was accompanied by the requisite intention to possess adversely to the title of the defendant. Given the existence of such a tenancy, under which rent was paid for a short period, the continued exclusive occupation of the property without payment of rent was clear evidence of an intention to possess the property adversely to the rights of the true owner. In my view, this alone would be sufficient to establish the requisite intention to possess.

33. As to the other matters relied on by the plaintiff, it seems to me that the changing of the locks was also evidence of an intention to exclude the defendant from the property, particularly as the effect would be to prevent the defendant from accessing the property. As for the payments made in respect of management charges, internal redecoration and levies for building maintenance and renovation, although the first two types of payment would be equally consistent with occupation under a tenancy as occupation in one’s own right, it appears to me that the third type of payment does support the plaintiff’s claim as such payments are not such as would usually be borne by a tenant, being capital in nature and for the benefit of the owner of the property.’ (emphasis added)

41.  Ms Eu referred to Wong Tak Yue and argued that non‑payment of rent is not enough. In that case, the squatter did not pay rent but he stated that he was willing to do so if the owners had requested payment. It was on this basis that Li CJ held at page 250 that the occupier did not have the intention to possess :

‘ The fourteenth defendant’s intention to pay rent if the owners had requested payment demonstrated that he was not intending to exclude the owner with the paper title but showed that he was treating himself as enjoying possession under a lawful title from the owners. His intention to possess was not “as of wrong” but was “as of right”. Such intention is similar to the occupier’s offer to pay rent in R v Secretary of State for the Environment ex p Davies, supra, which was held to be inconsistent with the intention to claim possession for the purposes of adverse possession.’

42.  Litton PJ also held at 251 :

‘ Here, the appellant has come nowhere near establishing adverse possession. He unequivocally declared that at all times he was ready willing and able to pay rent to the owners, and did not do so only because no one came along on behalf of the landlords to collect rent. Whether his acts and declarations in the course of the 1980 court proceedings amounted to an acknowledgment of the owners’ title in terms of s.23(1), or fell short of that, the fact remains that he had no intention to exclude the owners.’

43.  The House of Lords in J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419 took a different view on the occupier’s willingness to pay rent if asked :

‘ 46 In a number of cases (such as the present case) squatters have given evidence that if they had been asked by the paper owner to pay for their occupation of the disputed land or to take a lease they would have been prepared to do so. In Ocean Estates Ltd v Pinder [1969] 2 AC 19, 24 Lord Diplock giving the advice of the Privy Council said that an admission by the squatter to that effect “which any candid squatter hoping in due course to acquire a possessory title would be almost bound to make” did not indicate an absence of an intention to possess. In my judgment in the present case the Court of Appeal did not give full weight to that decision. In my judgment the decision of the Court of Appeal in R v Secretary of State for the Environment, Ex p Davies (1990) 61 P & CR 487 (the decision in Pinder not having been cited) was wrong. The decision in Pinder is to be preferred because it is consistent with principle. Once it is accepted that the necessary intent is an intent to possess not to own and an intention to exclude the paper owner only so far as is reasonably possible, there is no inconsistency between a squatter being willing to pay the paper owner if asked and his being in the meantime in possession. An admission of title by the squatter is not inconsistent with the squatter being in possession in the meantime.’

44.  Wong Tak Yue is a decision binding on this Court but the issue of the occupier’s intention to pay rent when asked by the landlord is not an issue in this case and we do not need to discuss the divergence in views. All that we wish to say is that Ms Eu’s reliance on Wong Tak Yue is misplaced in respect of her argument that non‑payment of rent is not enough to support the intention to possess. It is clear that Wong Tak Yue does not say non-payment of rent is not relevant to the intention to possess.

45.  The Judge described the 1^st defendant’s evidence on his transaction with Luk Sum as self‑serving. But this is the 1^st defendant’s explanation as to how he has come into possession of the Property. When the Court disapproves self‑serving statements by the occupier, it is generally referring to statements made by him about his intentions in occupying the property, such as ‘I intend to occupy the land as my own to the exclusion of the true owner and others’. Instead, the Court is required to look at all the surrounding circumstances in order to draw the inference that the occupier has the requisite intention to possess. In the present case, the only reasonable inference to be drawn from the evidence is that the 1^st defendant has the necessary intention.

46.  The Judge referred to the 1^st defendant’s intention when he came to occupy the Property in 1992 as ‘simply to lie low and see how long he could get away with not paying rent and other payments and did not “intend to possess the land to the exclusion of all persons including the paper owner”.’ But we are dealing here with a lapse of 26 years between 1992 when the 1^st defendant started his occupation and 2018 when the notice to quit was served by the plaintiff. The intention of the 1^st defendant must be judged in this context and not merely confined to the time when he started his occupation. In any event, this ‘lying low’ argument or the 1^st defendant keeping a low profile does not advance the plaintiff’s case at all. Like the situation in Purbrick, the 1^st defendant was not doing anything dishonest or underhand in respect of his occupation and he did not deny to anyone that he was in occupation. More importantly, as Neuberger J explained :

‘ 25. Thirdly, there is the fact that Mr Purbrick kept a low profile during the four years in question. To some, I accept, that might appear to be unattractive. Against that, it is to some extent implicit in the present law of adverse possession, that an owner of property who makes no use of it, whatever, should be expected to keep an eye on the property to ensure that adverse possession rights are not being clocked up. A period of 12 years is a long period during which to neglect a property completely.’

47.  See also Topplan Estates Ltd v David Townley [2004] EWCA Civ 1369, at [85] applying Purbrick. This is exactly the situation here. For whatever reason, the plaintiff has chosen not to deal with the Property for a period of 26 years and allowed the adverse possession by the 1^st defendant to be clocked up.

VII.   Conclusion

48.  We find that the 1^st defendant had discharged the burden of showing that he has acquired a possessory title to the Property. Accordingly, the appeal is allowed. The judgment below is set aside and in its place we will make the following orders :

1)  A declaration that the plaintiff’s interest, rights and title in the Property have been extinguished and the plaintiff is debarred from taking action against the 1^st defendant to recover possession of the Property pursuant to section 7 of the Limitation Ordinance;

2)  A declaration that the 1^st defendant is entitled to enter, retain the use of and possess of the Property by reason of adverse possession; and

3)  A declaration that the 1^st defendant has acquired an indefeasible possessory title to the Property and is entitled to be registered as the owner of the Property by virtue of the fact that the plaintiff’s title to the Property has been extinguished.

VIII.  Costs

49.  Costs of the appeal and below be paid by the plaintiff to the 1^st defendant. There will be a certificate for one counsel for the costs below. In accordance with the practice of this Court, when there is attendance by two counsel on appeal, unless it is decided otherwise, there is no need for us to specify that certificate for two counsel is granted for the costs of the appeal.