HARVEST GOOD DEVELOPMENT LTD v. SECRETARY FOR JUSTICE AND OTHERS

HCAL 32/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 32 OF 2006

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J U D G M E N T

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Introduction

1. Historically, all land in Hong Kong has been vested in the Government.  The Government has not granted freehold title.  The system of land tenure, therefore, has been a leasehold system.  While the Basic Law has provided extensive guarantees of property rights, it has not changed that system of land tenure.  Article 7 of the Basic Law vests all land in the state.  However, in terms of the article, the Hong Kong Government is responsible for its management and this includes the lease or grant of land to individuals for “use and development”.  As an underlying principle, therefore, the Basic Law looks to land being put to use for the benefit of Hong Kong people.

2. Hong Kong does not have a system of land registration under which the fact of registration is proof absolute of title.  The Land Registration Ordinance, Cap.128, which has been in force over 150 years, does facilitate the tracing of title but it does not itself give title : see, for example, the judgment of Hunter J (as he then was) in Financial and Investment Services for Asia v. Baik Wha International Trading Co. Ltd [1985] HKLR 103, at 112I.

3. It is therefore fundamental that in Hong Kong land law possession is at the root of title.  An individual who possesses land is presumed to have leasehold ownership unless a better title can be demonstrated.  This is because title to unregistered land is relative and depends ultimately upon possession.  The person best entitled to the land is the person with the best right to possession of it.

4. If a person comes onto land and occupies it for a long enough period in defiance of the rights of the registered leaseholder, it does not matter that he came onto the land wrongfully as a squatter, that period of adverse possession will entitle him, as against the leaseholder, to possessory estate in the land.

5. It is important to note that, whatever the position may have been, or is, in the United Kingdom, in Hong Kong physical possession alone is not sufficient to constitute adverse possession.  It must be accompanied by the intent to do so as an adverse possessor.  In Wong Tak Yue v. Kung Kwok Wai David (1997-8) 1 HKCFAR 55, the Court of Final Appeal held that a declaration by a person claiming adverse possession of a willingness to pay rent to the registered leaseholder was inconsistent with the necessary intent.

6. The Limitation Ordinance, Cap.347, was enacted in 1965, being modelled on the Limitations Act of 1939.  The Ordinance contains a scheme in terms of which a person who has been in adverse possession of a piece of land for a specified period of time acquires possessory title in that land, not as against the freeholder; that is, the state, but as against the individual who has been granted the leasehold rights in that land.  Not only does the adverse possessor acquire the possessory estate – the right to occupy and use the land – but he does so without any need to pay compensation to the leaseholder.  Originally, the Ordinance specified that 20 years adverse possession was required before possessory title was lost by the leaseholder and gained by the adverse possessor.  In 1991, however, that period was reduced to 12 years.

7. This application for judicial review seeks to determine whether, in light of the property rights guaranteed by the Basic Law, the scheme contained in the Limitation Ordinance is consistent with those guaranteed rights. 

8. The statutory scheme is contained in two sections.  Section 7(2) of the Limitation Ordinance provides that adverse possession for a period of what is now 12 years bars the right of the registered leaseholder to bring an action to recover possession of the land.  The section provides what I perceive to be a procedural safeguard for the adverse possessor; namely, that :

“	No action shall be brought by any … 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…”

9. The consequence of the registered owner being barred from taking action to recover possession is that, as against the adverse possessor, his title in the land (his possessory estate) is extinguished.  In this regard, section 17 of the Ordinance provides for the loss of a substantive right by leaseholder and a corresponding acquisition of a substantive right by the adverse possessor :

“	… at the expiration of the period prescribed by this Ordinance for any person to bring an action to recover land … the title of that person to the land shall be extinguished.”

10. Sections 7(2) and 17 do not therefore simply bar claims to recover but give practical effect to that bar by transferring possessory title.  What is left to the leaseholder is a mere ‘paper title’.

11. To expand on what I have said earlier, the land law of England and Wales – and Hong Kong – is at root only a law of possession and not a law of ownership.  As Lord Hoffmann expressed it in Hunter v. Canary Wharf Ltd [1997] AC 655, at 703 :

“	Exclusive possession de jure or de facto, now or in the future, is the bedrock of English land law.  As it is said in Cheshire and Burn’s Modern Law of Real Property, 15th ed. (1994), p. 26 :
	‘	All titles to land are ultimately based upon possession in the sense that the title of the man seised prevails against all who can show no better right to seisin.  Seisin is a root of title, and it may be said without undue exaggeration that so far as land is concerned there is in England no law of ownership, but only a law of possession.’”

12. Possession suggests use and implementation, if only at the most basic level of occupation.  Adverse possession is a form of exclusive possession, de facto as opposed to de jure.  The concept of adverse possession, and the recognition of its consequences, are long-standing, fundamental features of Hong Kong’s land law.

13. In a system of land tenure based primarily on exclusive possession, it has been said that adverse possession, while superficially appearing to be solely negative, even parasitic, does have a constructive role to play.  That being said, however, it has been recognised that adverse possession, in its present stark and unequivocal form, can give rise to unfairness as between the registered leaseholder and the adverse possessor. 

14. In a judgment of the Court of Final Appeal, which preceded this application for judicial review but, for reasons which I shall explain, is integrally related to it, Lord Hoffmann NPJ recognised that there is much that is troubling in the proposition that a squatter can, simply by wrongful occupation for a specified period, in effect, if not in legal theory, acquire a valuable property, leaving the registered leasehold owner with the sole privilege of paying the annual rent to the freeholder; that is, to Government : see Chan Yuk Yin and Another v. Harvest Good Development, unreported FACV No.13 of 2005.  In the same judgment, Litton NPJ observed :

“

… a squatter, confirmed in his possessory title by a court declaration, can greatly enhance the value of the property by improvements on the land, increasing its rateable value.  But the burden of paying the annual rent of 3% of the rateable value falls on the dispossessed registered owner, not on the squatter.”

15. It should be said that the consequence, in practice, is not always so harsh as may, at first blush, appear.  The Rating Ordinance, Cap.515, provides that both the leaseholder and the occupier of a tenement are liable to pay rates and, in the absence of agreement, the rates are to be paid by the occupier.  As for both rates and Government rent, the leaseholder would be entitled to obtain reimbursement from the occupier.  But, of course, in seeking reimbursement, the leaseholder is forced to take the occupier as he finds him; in many cases, no doubt, he will find him to be a man of straw.

16. In England and Wales, Parliament has acted to alleviate the harshness of adverse possession, seeking to bring it more in line with contemporary concepts of fairness.

17. As I have indicated earlier, at the heart of this application is the assertion that – as it stands – the scheme contained in the Limitation Ordinance is inconsistent with the rights of private ownership guaranteed by the Basic Law, more especially the right to be compensated for lawful deprivation of property.

18. The articles of the Basic Law which are relied upon to found this assertion are articles 6 and 105.  Article 6, in stating a general principle, states that the Hong Kong Special Administrative Region ‘shall protect the right of private ownership of property in accordance with law’.  Article 105, in more substantive terms, provides that :

“	The Hong Kong Special Administrative Region shall, in accordance with law, protect the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property.
	Such compensation shall correspond to the real value of the property concerned at the time and shall be freely convertible and paid without undue delay.”

19. For the Secretary for Justice, it is contended that sections 7(2) and 17 of the Limitation Ordinance are not engaged by articles 6 and 105 of the Basic Law.  This contention is founded on the assertion that article 105, in protecting the right to compensation for lawful deprivation of property, is not concerned with regulating property rights between individuals but is concerned instead with the right of an individual to be paid compensation when the state or a state agency deprives him of his property for some public purpose; essentially therefore when there is a resumption in order to build roads or railways or to advance some other public interest.

20. Accordingly, the first substantive issue to be determined is whether the statutory scheme which creates and regulates the acquisition and loss of possessory title by way of adverse possession is even engaged by the Basic Law.

21. If the Basic Law is engaged, the second substantive issue to be determined is whether the statutory scheme – as it stands – is inconsistent with the Basic Law.

22. The importance of the substantive issues which this application seeks to determine is not disputed.  If not determined in this application, they will undoubtedly have to be determined in another case in the not too distant future.  Indeed, as I understand it, challenges of essentially the same nature have already come before our courts.  But, while the first respondent, the Secretary for Justice, acknowledges the importance of the substantive issues, it is his case that this particular application for judicial review is not a suitable vehicle for their determination.  He has based this preliminary opposition on two grounds :

(i)	That, in the factual circumstances of this case, the Basic Law in any event can have no application, the rights in adverse possession having accrued some 15 years before the Basic Law came into effect.
(ii)	That, having regard to the history of this matter, more especially to the existence of earlier private litigation in which the issue of adverse possession could have been raised but was not, this application constitutes an abuse of the court’s process.

23. In light of these preliminary grounds of opposition, it is necessary, as a first step, to visit the history of the dispute which has given rise to this application.

Background

24. The land which is the subject of this application is situated in the New Territories in the hills near Tai Po.  It is made up of five lots of land which together constitute a farm.  There is no dispute as to its boundaries.

25. In or about February 1951, Madam Wong Yam Tai, the third respondent, and her husband leased the land from the then registered leasehold owner for a period of ten years.  When that lease ended in or about February 1961, the couple continued to live on the land and to work it, growing fruit and raising livestock.  However, they did so as squatters, paying no rent.

26. Shortly thereafter, in or about May 1961, Mr Lee Shau Kee and two friends became the registered leasehold owners of the land.  But no formal agreement of lease with Madam Wong and her husband was entered into.  

27. Madam Wong’s husband died and she remarried.  In 1964, a daughter was born of this second marriage who was raised on the land.  She is Madam Chan Suk Yin, the second respondent.

28. It was only in 1993, some 32 years after paper title had been obtained and after his two friends had died, that Mr Lee Shau Kee took legal action to have Madam Wong and her family removed from the land.  The action was instituted on the strength of a High Court judgment which, by its interpretation of certain relevant legislation, seemed to enable Mr Lee to successfully avoid the defence that he was barred by way of adverse possession from instituting action to recover the land.  That judgment, however, although uphold by the Court of Appeal, was reversed by the Privy Council in 1996.  In the result, Mr Lee’s action, which was defended on the basis that title had been lost to him by adverse possession, did not go to trial.  It was discontinued.

29. In 1997, Mr Lee transferred leasehold ownership of the land to one of his companies, Harvest Good Development Limited, the applicant in this matter.

30. The earlier action having been discontinued, in 2000, Madam Wong and her daughter, Madam Chan, instituted action themselves in respect of the land.  In their action they claimed that they had been in adverse possession of the land for over 20 years, that being the time then required by the Limitation Ordinance.  They sought a declaration pursuant to section 7(2) of the Ordinance that the applicant, the new registered leaseholder, was therefore barred from bringing any action at law to recover the land and a further declaration pursuant to section 17 that, as a matter of substantive law, the company’s title to the land had been extinguished.

31. The action was defended on the basis that in 1961, both before and after Lee Shau Kee and his two friends had purchased the land, Madam Wong and her first husband had been visited and given permission to continue to occupy the land as licensees.

32. In a judgment handed down in February 2004, the Court of First Instance held that Madam Wong and her first husband had not been given a licence to remain on the land and that it had been held in adverse possession since at least 1962.  Accordingly, by 1982, the land had been held for the then required period of 20 years and by that time the registered leaseholder’s title has been extinguished in terms of section 17 of the Limitation Ordinance.  Madam Wong and her daughter were therefore granted their declarations.

33. That judgment was appealed.  The Court of Appeal did not upset the factual finding that the land had been held in adverse possession for at least 20 years.  However, it found for Harvest Good Development on a new ground.  By a majority, the court held that a provision in the 1988 New Territories Leases (Extension) Ordinance, Cap.150, which extended by 50 years leases that would otherwise expire before 30 June 1997, created new leases and those leases gave a new right of possession to the registered leaseholder not affected by the Limitation Ordinance.

34. The Court of Final Appeal, however, did not find that to be a true construction of the provision.  In its judgment of January 2006, it held that new leases were not created but that existing leases were merely extended.  As to whether the land had been held in adverse possession or under licence, the Court of Final Appeal was not prepared to upset the findings of fact made by the judge at first instance.  In the result, the declarations made at first instance were restored.

35. Although the litigation instituted by Madam Wong and her daughter had commenced after the Basic Law had come into effect, at no time was the defence raised in that litigation that sections 7(2) and 17 of the Limitation Ordinance were inconsistent with the Basic Law.

36. In February 2006, however, shortly after the Court of Final Appeal had given its judgment, solicitors for the applicant wrote to the Secretary for Justice, the first respondent, asserting that sections 7(2) and 17 were inconsistent with the Basic Law and should be amended or struck down.

37. It appears that the letter was motivated by a judgment of the European Court of Human Rights in J.A. Pye (Oxford) Ltd v. United Kingdom (2005) 19 BHRL 705.  In that judgment, the court had found that provisions in the Westminster statutes, similar to sections 7(2) and 17 of the Limitation Ordinance, in depriving the applicant companies of their title to certain registered land by way of adverse possession, had —

“	… imposed on them an individual and excessive burden and upset the fair balance between the demands of the public interest on the one hand and the applicants’ right to the peaceful enjoyment of their possessions on the other.”

38. In light of this, in their letter to the Secretary for Justice, the solicitors for the applicant made the following demand :

“

We are instructed by our client, which we hereby do, to demand your goodself to take steps to repeal sections 7(2) and 17 of the Limitation Ordinance or otherwise to bring them in line with Articles 6 and 105 of the Basic Law and to reinstate the property right of our client to the said [land], or to provide our client with adequate compensation for the deprivation of its property right to the said [land].  The amount of compensation, which shall correspond to the real value of the said [land], could be assessed in due course.”

39. The solicitors for the applicant also wrote to the legal representatives of Madam Wong and her daughter.  The letter was to the same effect but concluded with a different demand :

“

We are instructed by our Client, which we hereby do, to demand your Clients to restore the property right of our Client to the said [land], or to provide our Client with adequate compensation for the deprivation of its property right to the said [land].  The amount of compensation, which shall correspond to the real value of the said [land], could be assessed in due course.”

40. The Secretary for Justice did not make a direct response, dealing with the merits.  It appears that Madam Wong and her daughter made no response at all.  In a further letter addressed to the Secretary for Justice, the solicitors for the applicant said that they would take the lack of direct response to mean that the Secretary was not prepared to undertake the requested measures.  The present judicial review proceedings were then instituted.

An overview of the applicant’s case

41. It is, of course, the gist of the applicant’s case that, as result of the scheme contained in the Limitation Ordinance, it has been deprived of its land without compensation, contrary to articles 6 and 105 of the Basic Law.

42. It is the applicant’s case, first, that there is no legitimate reason to deprive a lawful owner of his right to private property by reason only of a specified effluxion of time and, second, even if there is a legitimate reason to do so, deprivation of private property without any compensation fails to achieve a fair balance between the legitimate objectives to be achieved and the protection of property rights under the Basic Law.  As it was argued on behalf of the applicant, under the present statutory regime the squatter enjoys a windfall benefit at the expense of the lawful and rightful leasehold owner.  It requires the owner to make a ‘compulsory gift’ to the squatter.

The ‘decision’ challenged and remedies sought

43. One decision only has been challenged, that decision forming the basis of the application.  It is the decision of the Secretary for Justice, by omission or otherwise, to refuse the demand made to bring sections 7(2) and 17 of the Limitation Ordinance in line with the Basic Law and, in so doing, either to reinstate the effective property rights of Harvest Good Development or alternatively to provide adequate compensation for the loss of those rights.

44. The relief that has been sought is to the following effect :

(i)	A declaration that sections 7(2) and 17 of the Limitation Ordinance are inconsistent with articles 6 and 105 of the Basic Law.
(ii)	An order that the Secretary for Justice reinstate the property rights of the applicant in the land.
(iii)	Alternative to (i) and (ii), a declaration that the Secretary for Justice must compensate the applicant for the loss of its property rights in relation to the land, the amount of compensation corresponding to the value of the land at the time of its deprivation.
(iv)	Alternative to (iii), a declaration that the mother and daughter, the second and third respondents, must compensate the applicant for the loss of its property rights in relation to the land, the amount of compensation corresponding to the value of the land at the time of its deprivation.

The disjoinder of Madam Wong and her daughter

45. Prior to the substantive hearing of the application for judicial review, Madam Wong and her daughter made an interlocutory application to have all claims against them struck out and to be disjoined as parties to the proceedings.

46. In a judgment handed down on 19 December 2006 (‘my December judgment’), I ruled that the ‘Basic Law point’; that is, the issue of whether sections 7(2) and 17 of the Limitation Ordinance were inconsistent with articles 6 and 105 of the Basic Law, could – and should – have been raised in the earlier litigation and that it would now constitute an abuse of process to allow the judicial review proceedings to be continued against them.  I therefore ordered that the claims against them be struck out and they be disjoined as respondents.

47. My December judgment was appealed but there was insufficient time for the appeal to be heard before the commencement of the substantive judicial review hearing.  In the circumstances, Mr David Pannick QC, leading counsel for the applicant, took the view that the mother and daughter remained parties to the proceedings and could, if they wished, be heard.  However, the mother and daughter, understandably, no longer being represented in court, and having been given no warning that they should attend, Mr Pannick addressed his advocacy only to the issues arising between the applicant, Harvest Good Development, and the Secretary for Justice.

The first preliminary issue : does the Basic Law have any application in this case?

48. On behalf of the Secretary for Justice, it was submitted that irrespective of whether the applicant is correct in its contention that sections 7(2) and 17 of the Limitation Ordinance contravene articles 6 and 105 of the Basic Law, the Basic Law itself has no relevance to this case.  Mr Benjamin Yu SC, leading counsel for the Secretary, advanced this submission on two grounds :

(i)

That the declarations made by the Court of First Instance, and restored by the Court of Final Appeal, were based on a finding of fact that the applicant’s land had been held in adverse possession for a period of at least 20 years from 1962 to 1982 and remained in adverse possession.  The declarations were binding declarations of rights which had been secured pursuant to sections 7(2) and 17 of the Limitation Ordinance by Madam Wong and her daughter in 1982.  In short, they were declarations that, in law, both procedural and substantive rights of adverse possession had been vested in at least Madam Wong for some 15 years before the coming into effect of the Basic Law.

(ii)

That the Basic Law does not reach back to a time before it came into effect either to extinguish rights which had already accrued or revive rights which had already been extinguished.  Accordingly, the Basic Law has no application in this case.

a. When was the applicant deprived of its land?

49. It was submitted by Mr Yu that the declarations made by the Court of First Instance, and restored by the Court of Final Appeal, were binding declarations that it was in 1982 that possessory estate in the land had been lost by the then registered leaseholder and had accrued to the adverse possessors.  From that date therefore a right of adverse possession had become vested in Madam Wong and her daughter, that right at that time requiring no quid pro quo by way of monetary compensation.

50. While the legal proceedings which resulted in Madam Wong and her daughter securing declarations pursuant to sections 7(2) and 17 of the Limitation Ordinance had only been commenced after the Basic Law had come into effect, it was Mr Yu’s contention that the date of the proceedings was immaterial.  What mattered was the finding of fact that the land had been held in adverse possession from 1962 to 1982 and that accordingly, in 1982, the possessory title then held by the registered leaseholder had been extinguished.  There should be no confusion, he said, between the date when a right is extinguished and the date when a court determines that it has been extinguished.

51. In the result, said Mr Yu, as at 30 June 1997, the day before the Basic Law came into effect, Madam Wong and her daughter, by operation of law, already held possessory title in the land, that being a substantive right.

52. As for the applicant, said Mr Yu, it only purported to acquire a possessory title in the land in October 1997.  By that date, however, by operation of law, the title of the previous owner had been extinguished.  As Mr Yu put it, the applicant could not have acquired any title and accordingly could not have been deprived of anything by the operation of the Limitation Ordinance.  All it acquired in 1997 was paper title.  Insofar it has lost the value of the bargain it made in acquiring any interest in the land, its cause of action, if any, said Mr Yu, was against the vendor of the land for breach of the covenant of good title.

53. That Madam Ho and her daughter enjoyed accrued rights in the land before the coming into effect of the Basic Law was a matter of importance, said Mr Yu.  The law was clear and of long-standing.  In In re Athlumney; Ex parte Wilson [1898] 2 Q.B. 547, 551-552, Wright J said :

“

Perhaps no rule of construction is more firmly established than this – that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matters of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment.”

54. In this regard, see also Yew Bon Tew and Another v. Kenderan Bas Mara [1983] AC 553, a judgment of the Privy Council in which Lord Brightman said, at 558 :

“	There is at common law a prima facie rule of construction that a statute should not be interpreted retrospectively so as to impair an existing right or obligation unless that result is unavoidable on the language used.”

55. It was Mr Yu’s contention that, in the litigation instituted by Madam Wong and her daughter, the cause of action, and all events related to it, had taken place before the coming into effect of the Basic Law.  The Basic Law therefore had no relevance to the issues that fell for determination.  In this regard, Mr Yu made reference to Malhous v. Czech Republic (2000) App. No. 33071/96, in which the Grand Chamber of the European Court of Human Rights rejected any submission that the Convention operated retrospectively in respect of private property rights and rejected also the assertion that deprivation of ownership was a continuing situation :

“

In this respect, the Court first recalls that it can examine applications only to the extent that they relate to events which occurred after the Convention entered into force with respect to the relevant Contracting Party.  In the present case, the property of the applicant’s father was expropriated in June 1949 and assigned to other natural persons in 1957, that is long before 18 March 1992, the date of the entry into force of the Convention with regard to the Czech Republic.  Therefore, the Court is not competent ratione temporis to examine the circumstances of the expropriation or the continuing effects produced by it up to the present date.  In this regard, the Court refers to and confirms the Commission’s established case-law according to which deprivation of ownership or of another right in rem is in principle an instantaneous act and does not produce a continuing situation of ‘deprivation of a right’.”

56. On behalf of the applicant, however, it was submitted that the date of commencement of legal proceedings was of central importance.  The issue of adverse possession, it was said, was not finally determined until the judgment of the Court of Final Appeal was handed down in January 2006.  It was only after it had been determined that there was a lawful deprivation of property, said Mr Pannick, that any right to compensation under article 105 of the Basic Law became engaged.  That cause of action; namely the right to compensation, did not arise therefore until it was finally determined in January 2006 that there had been a lawful deprivation.  In the circumstances, retrospectivity plays no part.

57. Mr Pannick argued that the litigation instituted by Madam Wong and her daughter was only instituted well after the Basic Law had come into effect and there was nothing in the Basic Law to suggest that proceedings would not be determined according to that Law.  The action, said Mr Pannick, was defended on two bases, one factual and one legal.  Neither of these issues was resolved until the Court of Final Appeal handed down its judgment until 2006.  The factual issue was whether Madam Wong and her family had occupied the land as licensees, the legal issue was whether the New Territories Leases (Extension) Ordinance created a new possessory estate in the land.  Those issues, therefore, remained live issues until the conclusion of the litigation.  Indeed, in respect of the legal issue, it was the law for a period of time after the Court of Appeal had given its judgment that the New Territories Leases (Extension) Ordinance did create a new possessory estate.

58. While I accept that, in certain circumstances, the date of legal proceedings may be important – mainly, I would think, in matters going to the fairness of those proceedings – I do not accept that they are determinative in the present case.  I say that because it is clear, in my view, that the declarations obtained by Madam Wong and her daughter, no matter when, by an accident of history, they were made, stated that, in law, they had acquired possessory title in the land some 18 years before the Basic Law came into effect.

59. Likewise, the defences raised went to historical issues; namely, whether, at some time before the coming into effect of the Basic Law, title to the land had been extinguished and, if so, whether the introduction of legislation in 1988 had created a fresh title.  In determining both those issues, the declarations restored by the Court of Final Appeal were to the effect that in 1982 Madam Wong and her daughter had acquired a substantive right in the land and that right had not in any way been compromised by the later legislation.

60. As for the issue of compensation, whether it was or was not an independent consequential action, it still fell for determination in the context of history.  If it properly should have been paid, when should that have been?

61. Underlying the submissions made on behalf of the applicant was the contention that there is nothing in the Basic Law to suggest that it does not apply to all court proceedings instituted and determined after it came into effect.  But that, it seems to me, essentially begs the question.  The question is whether the Basic Law may apply so as to determine the substantive issues in civil suits which concern matters arising before the Basic Law came into effect.

62. As I have said, the litigation commenced by Madam Wong and her daughter resulted in declarations that, at the time when the Basic Law came into effect, they were already vested with right of possessory title.  I appreciate the difficulties that are faced in attempting to define what is or is not a vested right.  In the present case, it is sufficient, I think, to note that possessory title was acquired at a particular moment in time as the result of an extended period of conduct; that is, of exclusive possession and use.  It was at that time that certain rights in the land were extinguished and others acquired.

63. In the result, the applicant having had its title extinguished in 1982, it seems to me that the question to be asked is whether the Basic Law is able – in these circumstances – to operate retrospectively so as to reach back and revive that loss of title.

b. Does the Basic Law operate retrospectively so as to protect rights of private property?

64. As I have indicated earlier, there is a presumption in our law that legislative instruments shall not be construed as having retrospective effect unless that is clearly intended.  In his judgment in L’Office Cherifien v. Yamashita Ltd[1993] 3 WLR 266, at 273, Sir Thomas Bingham confirmed that the presumption may correctly be expressed in the following terms :

“

Upon the presumption that the legislature does not intend what is unjust rests the leaning against giving certain statutes a retrospective operation.  They are construed as operating only in cases or on facts which come into existence after the statutes were passed unless a retrospective effect is clearly intended.  It is a fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication: Maxwell on Interpretation of Statutes, 12th ed. (1969), p.215”

65. This presumption finds concrete expression in section 23 of the Interpretation and General Clauses Ordinance, Cap.1, which provides inter alia that, when a statute repeals, in whole or in part, any other statute, that repeal shall not affect any right or privilege which has accrued or been acquired under the repealed statute.

66. As to retrospectivity, I start by saying that, reading the Basic Law in the context of its purpose, I can find no provision to the effect that, concerning rights of private property, the Law shall operate retrospectively.  There is certainly no clear language that it shall have such effect.  Nor, in my view, on a reading of the Law or relevant extraneous materials, does such a construction arise by necessary implication.

67. The Basic Law, it appears to me, while it recognises history, seeks to set up a new order, one to take effect on the resumption of sovereignty on 1 July 1997.  It is therefore a forward-looking document, not one that seeks to reach back in order to influence or alter what came before.  In this regard, the third paragraph to the preamble to the Basic Law reads :

“

In accordance with the Constitution of the People’s Republic of China, the National People’s Congress hereby enacts the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China, prescribing the systems to be practised in the Hong Kong Special Administrative Region, in order to ensure the implementation of the basic policies of the People’s Republic of China regarding Hong Kong.”  [my emphasis]

68. As to the operation of law, article 4 directs that the Hong Kong Special Administrative Region shall safeguard rights and freedoms in accordance with law while article 84 requires the courts to adjudicate cases in accordance with the applicable laws, the power being given to refer to precedents of other common law jurisdictions.  As to what are the applicable laws, article 8 directs that :

“	The laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and customary law shall be maintained, except for any that contravene this Law, and subject to any amendment by the legislature of the Hong Kong Special Administrative Region.”

69. While couched in broad language, it seems to me that article 8 leans more towards acknowledging the common law presumption against retrospective operation of legislative instruments rather than implying that its provisions may be employed retrospectively.  The article speaks of maintaining Hong Kong’s previous laws unimpaired.  Put another way, it speaks of preserving them.  Article 8, therefore, as with the Basic Law itself, looks to continuity and stability.  It looks to preserving all previous laws except those which – with the coming into effect of the Basic Law, and at no earlier date – are found to contravene that law.

70. In matters concerning private property, during the course of submissions Mr Yu made reference to article 86 of the Joint Declaration which emphasised that rights concerning the acquisition, use and disposal of land would ‘continue’ to be protected.  Here again, the emphasis is on preservation of what came before not on reaching back to change it.  The article reads :

“

Rights concerning the ownership of property, including those relating to acquisition, use, disposal, inheritance and compensation for lawful deprivation (corresponding to the real value of the property concerned, freely convertible and paid without delay) shall continue to be protected by law.”  [my emphasis]

71. But that does not end the matter.  I say that because the presumption against retrospective operation of legislative instruments – and it is only a presumption – is based on the principle of fairness and what fairness demands covers a broad range of circumstances.

72. In what has become a seminal statement, Staughton LJ, in Secretary of State for Social Security v. Tunnicliffe [1991] 2 All ER 712, at 724, defined the presumption in the following manner :

“

In my judgment the true principle is that Parliament is presumed not to have intended to alter the law applicable to past events and transactions in a manner which is unfair to those concerned in them, unless a contrary intention appears.  It is not simply a question of classifying an enactment as retrospective or not retrospective.  Rather it may well be a matter of degree – the greater the unfairness, the more it is to be expected that Parliament will make it clear if that is intended.”

73. As I understand it, therefore, if, on a weighing of all relevant factors, it appears that the makers of the legislative instrument – in this case, the Basic Law – must have intended it to have some retrospective operation then the presumption against retrospectivity cannot act to stifle that intent.

74. In his speech in L’Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd [1994] 1 AC 486, at 525, Lord Mustill spoke of this more nuanced approach in the following terms :

“

… it would be impossible now to doubt that the court is required to approach questions of statutory interpretation with a disposition, and in some cases a very strong disposition, to assume that a statute is not intended to have retrospective effect.  Nor indeed would I wish to cast any doubt on the validity of this approach for it ensures that the courts are constantly on the alert for the kind of unfairness which is found in, for example, the characterisation as criminal of past conduct which was lawful when it took place, or in alterations to the antecedent national, civil or familial status of individuals.  Nevertheless, I must own up to reservations about the reliability of generalised presumptions and maxims when engaged in the task of finding out what Parliament intended by a particular form of words, for they too readily confine the court to a perspective which treats all statutes, and all situations to which they apply, as if they were the same.  This is misleading, for the basis of the rule is no more than simple fairness, which ought to be the basis of every legal rule.”

75. A little further in his speech, Lord Mustill said :

“

Precisely how the single question of fairness will be answered in respect of a particular statute will depend on the interaction of several factors, each of them capable of varying from case to case.  Thus, the degree to which the statute has retrospective effect is not a constant.  Nor is the value of the rights which the statute affects, or the extent to which that value is diminished or extinguished by the retrospective effect of the statute.  Again, the unfairness of adversely affecting the rights, and hence the degree of unlikelihood that this is what Parliament intended, will vary from case to case.  So also will the clarity of the language used by Parliament, and the light shed on it by consideration of the circumstances in which the legislation was enacted.  All these factors must be weighed together to provide a direct answer to the question whether the consequences of reading the statute with the suggested degree of retrospectivity are so unfair that the words used by Parliament cannot have been intended to mean what they might appear to say.”

76. In his speech in the more recent judgment of the House of Lords in Wilson v. First County Trust Ltd (No.2) [2004] 1 AC 816, at 868, Lord Scott spoke of the presumption as follows :

“

It is, of course, open to Parliament, if it chooses to do so, to enact legislation which alters the mutual rights and obligations of citizens arising out of events which predate the enactment.  But in general Parliament does not choose to do so for the reason that to legislate so as to alter the legal consequences of events that have already taken place is likely to produce unfair or unjust results.  Unfairness or injustice may produced if persons who have acquired rights in consequence of past events are deprived of those rights by subsequent legislation; or it may be produced if persons are subjected on account of those past events to liabilities that they were not previously subject to.  There is, therefore, a common law presumption that a statute is not intended to have a retrospective effect.  This presumption is part of a broader presumption that Parliament does not intend a statute to have an unfair or unjust effect.  The presumption can be rebutted if it sufficiently clearly appears that it was indeed the intention of Parliament to produce the result in question.  The presumption is no more than a starting point.”

77. Can it be said, therefore, that it is clear that the drafters of the Basic Law intended articles 6 and 105 to have retrospective effect?  In answering this question, I take a number of matters into account.

78. First, as a constitutional document, the Basic Law must be construed purposively, avoiding what has been called ‘the austerity of tabulated legalism’.  As it was said in Ng Ka Ling & Others v. Director of Immigration (1999) 2 HKCFAR 4, a purposive approach is necessary because a constitution states general principles and expresses purposes without condescending to particularity and definition of terms.  In construing the provisions of the Basic Law, the language is to be considered in the light of its context and purpose.  Extrinsic materials which throw light on that context and purpose may generally be used.

79. Second, fundamental rights set out in Chapter III of the Basic Law must be given a generous interpretation.  As Li CJ said in Ng Ka Ling & Others v. Director of Immigration (1999) 2 HKCFAR 4 :

“	The courts should give a generous interpretation to the provisions in Chapter III that contain these constitutional guarantees in order to give to Hong Kong residents the full measure of fundamental rights and freedoms so constitutionally guaranteed.”

80. The protective guarantees concerning private property rights are not contained in Chapter III.  Article 6 appears in Chapter I, headed ‘general principles’, while article 105 appears in Chapter V, headed ‘economy’.  But, in the Basic Law, private property rights are rights of real importance just as they are deeply rooted rights in the common law.  While therefore they may not be seen through the prism of universality, such as the right of equality before the law or freedom of conscience, nevertheless, bearing in mind that the Basic Law entrenches Hong Kong’s capitalist system, they are rights, in my view, which warrant a generous interpretation.

81. Third, that being said, however, it must be recognised that the give and take of civil society frequently requires that the exercise of private rights in land should be restricted in the public interest; for example, that land should be utilised and not left fallow.  The Basic Law does not prohibit the lawful requisitioning or resumption of land.  It requires only that there should be compensation in return.  As Lord Hoffmann expressed it in R. (Alconbury Ltd) v. Environment Secretary [2003] 2 AC 295, at 325, all democratic societies recognize that, while there are certain basic rights which attach to the ownership of property, they are heavily qualified by considerations of public interest.

82. Fourth, by way of broad observation, I would add that, as to the occupation and use of land, what the public interest may demand is a matter best judged in a democratic society such as Hong Kong by its representative bodies.  Equally, it is important to recognise that, in respect of the occupation and use of land, Hong Kong has its own unique history of land tenure and its own continuing demands as to how land is best employed for the greater benefit of Hong Kong people.

83. If articles 6 and 105 had retrospective effect, it would mean that they would operate to reach back over an indefinite period of time to any given date to be weighed in the balance with all relevant factors which at that date went to the efficacy of the prevailing policies of land occupation and use.  To illustrate the point, albeit hypothetically, in the present case, it would mean reaching back and considering all relevant conditions as early as the 1960s.  Perhaps at that time land in parts of the New Territories had such little value (in comparative terms) that there was little incentive on the part of leaseholders to occupy and use it.  Perhaps at that time there was correctly perceived to be a real advantage in the public interest in giving possessory title without the need for compensation to those who had been prepared to occupy the land and work it over an extended period of time.

84. In looking to articles 6 and 105, we are not talking of rights classified by the Basic Law as fundamental rights which must prevail in favour of the individual over the interests of society.  We are talking about rights which, as society evolves, are quite properly qualified by considerations of public policy.

85. These rights, it seems to me, ought to be established by reference to the law as it was at the time.  At that time those who occupied and utilised land in adverse possession knew the risks they faced and the possible rewards.  Equally, leaseholders knew the risk they faced if they themselves did not ensure possession and utilisation of their land.

86. For these reasons, I do not see how it can be said that, on the principle of fairness, the drafters of the Basic Law must have intended that articles 6 and 105 would operate retrospectively.  To find otherwise, in my view, would be more a formula for unfairness.  I say that because, in my view, the consequence of events under the civil law should, in the circumstances related to the possession and use of land, be established by reference to the law prevailing at the relevant time.  In that way all parties are able to ascertain the extent of their rights and obligations.  That cannot be so if subsequent enactments can operate to reach back and diminish or compromise those rights and obligations.

87. In my judgment, therefore, the presumption that the drafters of the Basic Law did not intend that Law to operate retrospectively in respect of property rights is a correct presumption.  It is not rebutted, certainly not so as to alter accrued rights or to impose obligations where none previously existed.

88. By way of a postscript, I record that during the course of submissions, the authorities of R. v. Lambert [2002] 2 AC 545 and R. v. Kansal (No.2) [2002] 2 AC 69 were analysed and debated, both of these authorities going to the issue of retrospectivity under the Human Rights Act 1998.  However, I did not find these authorities to be of assistance in the present case.

89. First, they fell very much to be decided on the particular construction of the Human Rights Act itself.  By way of illustration, Lord Lloyd began his speech in Kansal by saying :

“	My Lords, to what extent can a person rely on a breach of his Convention rights in respect of an act which took place before the relevant provisions of the Human Rights Act 1998 came into force?  The answer depends on the interrelation of sections 6(1), 6(2), 7(1), 7(6) and 22(4) of the Act.”

90. Second, the fundamental rights under consideration went to the fairness of criminal proceedings.  In Lambert, for example, the issue concerned the presumption of innocence.  In this application, however, the issue concerns substantive rights in property lost or acquired before the Basic Law came into force.

91. In the circumstances, I am satisfied that, in the present case – where all relevant events as to the acquisition and loss of possessory title took place before the coming into force of the Basic Law – that Law has no application.

92. On this basis, this application for judicial review must be dismissed.  However, in the event that I am wrong, I move on to consider the second preliminary ground of opposition raised on behalf of the Secretary for Justice.

The second preliminary issue : does this application constitute an abuse of process?

93. As I have said earlier, after the judgment of the Court of Final Appeal had been handed down in January 2006, the solicitors for the applicant wrote to the Secretary for Justice.  In their letter the solicitors demanded that the Secretary take steps to repeal or amend the Limitation Ordinance so as to make it consistent with the constitutional protections contained in articles 6 and 105 of the Basic Law.  The letter has to be read as a demand that necessary legislative measures must be placed before the Legislative Council for its consideration.  However, in addition to seeking a change of the law, a demand was made for the reinstatement of the applicant’s possessory title in the land or, failing that, for payment of compensation out of the public purse.

94. Put simply, having failed to raise the constitutional issue in the litigation, the applicant now looked, not to the party from whom the defective title had been acquired, but to the Government, demanding that the Government either reinstate its possessory title or pay compensation.

95. The demand for reinstatement or compensation remains.  In this regard, paragraph 36 of this judgment sets out the relevant relief sought.  Before they were disjoined, the same demand was, of course, made of Madam Wong and her daughter.

96. On behalf of the Secretary for Justice, it was contended that if, as the applicant contends, sections 7(2) and 17 of the Limitation Ordinance are inconsistent with articles 6 and 105 of the Basic Law, it could – and should – have raised the issue in the litigation instituted by Madam Wong and her daughter in 2000, litigation which endured for some five years.  As Mr Yu put it, it is a principle that, save in exceptional circumstances, jurisdiction to grant judicial review will not be exercised when other remedies have been available and have not been employed.

97. The exercise of judicial review is, of course, discretionary.  Even if a case is made out, the court may refuse a remedy.  As Sir John Donaldson MR put it in R. v. Epping and Harlow General Commissioners [1983] 3 All ER 257, at 262 :

“

That only leaves the residual jurisdiction of the Divisional Court, which of course is that which we are being asked to allow to be exercised.  But it is a cardinal principle that, save in the most exceptional circumstances, that jurisdiction will not be exercised where other remedies were available and have not been used.”

98. It was Mr Yu’s submission that the litigation instituted by Madam Wong and daughter in 2000 was the ideal forum for resolving the constitutional question.  The constitutional issue, if raised in that litigation, would not have been peripheral, it would have been integral to it and would have been capable of being fully determined in that litigation.  If it had been raised in that litigation, the issue by now would have been determined conclusively by the Court of Final Appeal.  The applicant, however, did not to raise the issue in the litigation.  Instead, it waited until the litigation was exhausted and then, still seeking what had been sought in the litigation; namely, possessory title in the land, turned to Government and proceeded against it.  In the circumstances, said Mr Yu, the failure to raise the constitutional issue in the earlier litigation but instead to institute fresh proceedings against the state seeking effectively the same relief that it had sought in the litigation, not only permitted this court to refuse to grant a remedy but went further and constituted an abuse of process.

99. The applicable rule, I think, is now well settled.  When material issues of a substantive nature could, and should, have been raised in earlier proceedings, the creation of fresh proceedings for the purpose of having those issues resolved may constitute an abuse of the process of the court.  The rule is an extension of the doctrine of res judicata.  There need not be a specific finding as to cause of action estoppel or issue estoppel.  It will suffice if there is a finding that, in all the circumstances, the attempt to raise issues which could, and should, have been raised earlier goes against the public interest; that is, the general interest in ensuring finality in litigation as well as the interests of the parties themselves.  In Barrow v. Bankside Agency Ltd [1996] 1 WLR 257, at 260, the Court of Appeal described the rule in the following terms :

“

The rule is not based on the doctrine of res judicata in the narrow sense, nor even on any strict doctrine of issue or cause of action estoppel.  It is a rule of public policy based on the desirability, in the general interest as well as that of the parties themselves, that litigation should not drag on for ever and that a defendant should not be oppressed by successive suits when one would do.  That is the abuse at which the rule is directed.”

100. More recently, Lord Bingham, in his speech in Johnson v. Gore Wood & Co. [2002] 2 AC 1, at 31, defined the rule as follows :

“

The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter.  This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole.  The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.  I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party.”

101. The rule, of course, is to be applied with caution.  In Bradford and Bingley Building Society v. Seddon [1999] 1 WLR 1482, Auld LJ, in the Court of Appeal, put it in the following terms :

“

In my judgment mere ‘re’-litigation, in circumstances not giving rise to cause of action or issue estoppel, does not necessarily give rise to abuse of process.  Equally, the maintenance of a second claim which could have been part of an earlier one, or which conflicts with an earlier one, should not, per se, be regarded as an abuse of process.  Rules of such rigidity would be to deny its very concept and purpose.”

102. There are circumstances in which a party may justifiably refrain from litigating an issue in one set of proceedings and yet raise it in another.  Mr Pannick, for the applicant, made reference to the judgment of the High Court of Australia in Port of Melbourne Authority v. Anshun Pty Ltd (1981) 147 CLR 589, in which it was held that estoppel did not arise unless the matter relied on in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to raise it earlier.  In that case (per Gibbs CJ, Mason and Aickin JJ), the observation was made that the issue raised in the second action was so closely connected with the subject matter of the first action that it was to be expected that it would be relied upon in that first action.  If successful in that first action it would have determined substantive issues.  As it was, by being reserved for the second action, it had increased costs and given rise to a conflicting judgment.

103. Each case, therefore, is to be judged according to its own circumstances.  As to the approach, I can do no better than look to the dictum of Lord Bingham in Johnson v. Gore Wood, at 31, when he said that what was is required is —

“

… a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.  As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard or fast rule to determine whether, on given facts, abuse is to be found or not.”

104. I remind myself that the burden of demonstrating abuse rests on the party alleging it, in this case the Secretary for Justice.  It is a burden of some weight.

105. The first and fundamental question, of course, is whether the constitutional issue had any relevance to the litigation instituted by Madam Wong and her daughter and, if so, whether it could properly have been raised in that action.

106. In my judgment, it is unarguable that the constitutional issue was directly relevant to that action, indeed of central and fundamental relevance.  If raised successfully, it would have determined all issues.  The court would have been bound to declare sections 7(2) and 17 of the Limitation Ordinance inconsistent with articles 6 and/or 105 of the Basic Law and thereby to remove from the statute books any provision for acquisition of possessory title in land by way of adverse possession.  In short, the applicant would have been left with possessory estate.

107. As to the difficulties of retrospectivity, in my December judgment (in which I disjoined Madam Wong and her daughter) I said :

“	As I see it, difficulties concerning retrospective application of the Basic Law would have applied equally in the first action as they do in the present proceedings and that issue, of course, has not deterred the applicant from instituting the present proceedings.”

108. The question to be asked is whether it was to be expected that the constitutional issue would be raised in the earlier litigation?  In my judgment, if its potential value was then appreciated, it would most certainly have been raised.  I can see no reason why it would not have been raised.  Itmay be the case, and I put it no higher than that – for simple oversight was not admitted – that the potential value of the constitutional point was only appreciated late in the earlier litigation.  If that was the case, it is, in my opinion, relevant to the issue of abuse of process.  But in my December judgment I determined this matter in the following terms :

“

It is true that JA Pye (Oxford) Ltd v. United Kingdom was only determined by the European Court very late in the litigation of the first action.  But the national litigation had earlier raised the issue of the effective seizure of land without compensation offending individual rights.  In any event, the issue of seizure of land without compensation was, for those learned in Hong Kong public law, one standing to be determined.  To put it another way, I do not see how it can be argued that in the early stages of the first action it was such an oblique point that only intervening jurisprudence has revealed its true substance.  The relevant terms of the Basic Law are not ambiguous and indeed, during the course of the first action, the general issue of the unfairness of squatters being able to obtain possessory title without compensation was raised in the Court of Appeal and the Court of Final Appeal.  What must also be remembered is that the applicant has at all times been enable to employ solicitors and counsel of high reputation.  In short, the Basic Law point was available at all times and not so far beyond the compass of the applicant’s counsel that the applicant can be excused for not identifying it earlier.”

109. On behalf of the applicant, it was argued that the issues that fell for determination in the litigation instituted by Madam Wong and her daughter were, first, whether the land had been occupied by way of adverse possession or licence and, second, whether the New Territories Leases (Extension) Ordinance created a new possessory estate in the land.  These issues, it was said, were not being pursued further.  By contrast, the issues arising in the present judicial review proceedings looked only to the consequences of the finding made that the applicant’s possessory title in the land had been extinguished.

110. In my judgment, however, that is a distinction without substance.  The litigation instituted by Madam Wong and her daughter was founded on a single premise; namely, that the land had been held in adverse possession for the period of time (then) required by the Limitation Ordinance and that, as a result, possessory title had been lost to the registered leaseholder and acquired by the adverse possessors.  The defences raised were the defences which at the time were thought best to meet that claim.  There has been no suggestion that the value of the constitutional issue was understood at an early stage of the proceedings but deliberately held over.  For the defence, the real issue in the earlier litigation was how best to resist the claim for adverse possession.  The constitutional issue, raised for the first time in these judicial review proceedings, would, if successfully raised in the litigation, have done away with any need to prove the asserted fact of occupation by way of licence or to prove that the New Territories Leases (Extension) Ordinance, on a true construction, created a new possessory estate in the land.

111. As I understood Mr Pannick’s argument, it was, however, to the effect that, whether the constitutional point should or should not have been raised in the earlier litigation, this application for judicial review raises independent issues.  As he put it, the issues in this judicial review look to what remedies, if any, are available under the Basic Law for a deprivation of private property by way of adverse possession without compensation.

112. Again, I confess that the distinction is too fine for me.  Of course, in this judicial review, the issues are going to be couched in a manner different from how they would have been couched in the earlier litigation.  But once that varnish is removed and we are back to plain wood, what do we see?  We see that the applicant seeks possessory estate in the land or, if that is no longer possible – because the applicant failed to raise the constitutional issue in the earlier proceedings – we see that he seeks at least a form of monetary compensation.  In short, we see that an attempt is being made to pursue the earlier litigation by other means.  To that extent, because what is sought effectively is a reversal or compromise of the awards flowing from the declarations made in the earlier litigation, it may be said that the action now pursued constitutes a collateral attack on that earlier litigation.

113. Insofar as it was contended that it would have been premature to raise the constitutional issue in the earlier litigation, in my December judgment, I said :

“

Mr Neoh submitted that, if the issue of adverse possession itself had been determined in favour of the applicant before the Court of First Instance or the Court of Final Appeal, there would have been no basis for pursuing the constitutional claim which would therefore have been premature as well as a waste of legal costs.  I do not agree.  As I have said earlier, if brought forward in the first action, the Basic Law point would, or could, have determined all issues.  In any event, it is not open to a defendant to defend a matter on the basis that it will in the one action put forward one defence and, if that fails, it will, by whatever means available, open a new action putting forward a further defence.  Absent special circumstances, a defendant is not able to ‘drip feed’ his defences in this way.  It is an abuse of the system.”

114. It is fundamental, in my view, that, if the constitutional issue had been agitated in the earlier litigation, there would have been no need at all for this judicial review application.

115. I accept, of course, that, as matters now stand, Madam Wong and her daughter are no longer parties to these judicial review proceedings.  The proceedings now are between the applicant and an entirely new party, the Secretary for Justice.  There is no longer that additional element of unjust harassment of a party.  But for abuse of process to be demonstrated in the manner advocated by Mr Yu it is not necessary that the parties remain the same.  That was confirmed by Auld LJ in Bradford and Bingley Building Society v. Seddon, page 226F, who commenced his examination of relevant authorities by saying :

“	In my view, it is now well established that the rule in Henderson v. Henderson, as a species of the modern doctrine of abuse of process, is capable of application where the parties to the proceedings in which the issue is raised are different from those in earlier proceedings.”

116. Abuse of process goes to abuse of the court’s process and that may take on many forms.  In the present case, it seems to me that the applicant, having had the ideal forum open to it in the earlier litigation and having failed to make use of that forum, has been forced to create an essentially artificial forum to determine what should have been determined earlier.

117. Even though Madam Wong and her daughter have been disjoined, the applicant still seeks restoration of its possessory title in the land, this time through the agency of Government.  Madam Wong and her daughter, on this basis, remain at risk even though the judgment of the Court of Final Appeal conclusively determined that they had rights to the land which had accrued to them as far back as 1982.  This application for judicial review, if it is successful, will deprive Madam Wong and her daughter of those rights, albeit on a new basis in law.  Nevertheless, the consequence will be in direct conflict with the judgment of the Court of Final Appeal.  Such a result does not sit happily with how I believe the common law should work.

118. Even if reinstatement of title is not obtained and only some form of monetary compensation is payable, it means that Madam Wong and her daughter will remain at risk, except now they will stand to be visited with an obligation that may be the equivalent of their loss of title.  Either that or the public purse is to be made liable for the compensation.  But why should the public purse pay compensation when, if the Basic Law point had been raised in the earlier litigation, as it should have been, there would be no need for any such payment?

119. If the remedies of reinstatement of possessory estate or compensation are to be denied the applicant, what then is left?  The applicant then is reduced to asking for what in effect is an advisory judgment as to the constitutionality of sections 7(2) and 17 of the Limitation Ordinance.  Its only standing in that case is that it was the losing party in earlier private litigation in which it could have raised the same point with the benefit of practical consequences but failed to do so.

120. In the circumstances, I am satisfied that the Secretary for Justice has demonstrated that this application for judicial review is not simply an artificial construct, it constitutes, as against, the Secretary, an abuse of this court’s process.

121. Even if I am wrong in this regard, for the reasons given, this seems to me to be a case in which, whatever the merits of the constitutional issue, the applicant should be denied a remedy by way of reinstatement of title or monetary compensation.

Deprivation, delimitation or simply defect in title?

122. In his speech in Wilson v. First County Trust Ltd (No.2), para.106, Lord Hope said :

“	One must, of course, distinguish carefully between cases where the effect of the relevant law is to deprive a person of something he already owns and those where its effect is to subject his right from the outset to the reservation or qualification which is now being enforced against him.”

123. As I understood his submission, Mr Yu did not go so far as to say that, as all Hong Kong land is subject to the limitations imposed by sections 7(2) and 17 of the Limitation Ordinance, there can be no deprivation of property if possessory title in land is extinguished by way of adverse possession.  If that was the basis of his argument I would reject it.

124. The test, as I understand it, is to consider whether the restrictions qualifications or limitations ‘bit’ at the moment the land was acquired, and were therefore at all times an incident of the acquired rights or whether they only ‘bit’ at a later stage.  All leasehold owners in Hong Kong acquire land subject to the risk that possessory title may be lost to an adverse possessor but, as I see it, the effect of adverse possession in terms of the statutory scheme will only ‘bite’ at a later stage if and when a specified period of adverse possession has been achieved.

125. On behalf of the applicant, it was contended, by way of analogy, that it would be impossible to sustain an argument that a leasehold owner of land in Hong Kong only acquires a defeasible title because there is always the risk that at some future time a resumption order may be made against the land under the Lands Resumption Ordinance, Cap.124.  Likewise, it should not be a defeasible title simply because at some future date there may be a squatter who is able to remain in occupation of the land for the number of years specified in the Limitation Ordinance.

126. Accordingly I am satisfied that the operation of sections 7(2) and 17 of the Limitation Ordinance is not to be regarded as an incident of, or limitation on, the title of all leasehold owners of land in Hong Kong.

127. But as I have said, Mr Yu’s submission, as I understood it, was not founded on such a broad assertion.  It was founded instead on the contention that, when the applicant acquired the land, that land was already subject to adverse possession for the period of 20 years then required by the statutory scheme.  Accordingly, there was, in law, no risk that at some future time the legislation would ‘bite’ to deprive it of possessory title, the legislation had already ‘bitten’.  As Mr Yu put it, when the applicant acquired the land the interest of its predecessor-in-title had already been extinguished in accordance with sections 7(2) and 17 of the Ordinance.  In short, the risk to which all Hong Kong land is subject had, in respect of this land, already crystallised.  Loss of possessory estate was therefore, from the moment of acquisition, a delimitation of the applicant’s rights.

128. This seems to me, however, to be not so much an issue of delimination of title as defect in title.  Put simply, as I see it, the applicant acquired paper title and no more.  In terms of the declarations restored by the Court of Final Appeal, possessory title had been extinguished in 1982.  To this extent, it may be said that the applicant’s predecessor-in-title was deprived of possessory estate but not the applicant.  The applicant was not deprived of such title because it never acquired it.

Do sections 7(2) and 17 of the Limitation Ordinance engage the Basic Law?

129. It is a fact that, as a result of the operation of sections 7(2) and 17 of the Limitation Ordinance, the applicant was deprived of possessory title in the land – to all rights to occupy and utilise it – without payment of compensation in return.  It was asserted on behalf of the applicant that this deprivation without compensation is contrary to the guarantees contained in articles 6 and 105 of the Basic Law.  The guarantees are to the effect that, in protecting the rights of private ownership of property, the Hong Kong Special Administrative Region shall, in accordance with law, protect the right of all persons ‘to compensation for lawful deprivation of their property’.

130. On behalf of the Secretary for Justice, Mr Yu contended that, in terms of articles 6 and 105, the right to compensation for lawful deprivation of property arises only when it is the state or an agency of the state which, in accordance with law and for some public purpose, deprives an individual of his property.  Sections 7(2) and 17 of the Limitation Ordinance, however, are concerned with the regulation of property rights as between individuals not as between individuals and the state.  Accordingly, said Mr Yu, the constitutional guarantees contained in articles 6 and 105 are simply not engaged.

131. Mr Yu’s contention was not based on the English text of article 105 which specifically guarantees the right to compensation for lawful deprivation of property.  ‘Deprivation’ in the English language is not a term of art.  As I understand it, it refers simply to the fact of being deprived; that is, of being disposed or divested of something.  There is no intrinsic or implied meaning that it must be the state which disposes or divests.  Indeed, it would seem to me that, in giving to the word a generous interpretation, as I am required to do, it would include the circumstances of the present case; that is, where, as a result of legislative action, one individual has the right in law to seriously interfere with the property rights of another.

132. But, as I have said, Mr Yu’s contention was not based on the English text.  It was based instead on a reading of the Chinese text, specifically to the term “徵用” which, I am told, may be romanised as zhengyong.  In Chinese characters, article 105 reads :

“第一百零五條 香港特別行政區依法保護私人和法人財產的取得 、使用 、處置 和繼承的權利 ， 以及依法徵用私人和法人財產時被徵用財產的所有人得到補償的權利 。 徵用財產的補償應相當於該財產當時的實際價值 ，可自由兌換， 不得無故遲延支付 。 企業所有權和外來投資均受法律保護 。”

133. In a recent judgment of the Court of Appeal, Tang VP said that the word ‘deprivation’, as it is used in article 105, is to be read as ‘expropriation’, that being the expression used in the Chinese text : Weeson Investment Ltd v. Commissioner of Inland Revenue [2007] 2 HKLRD 567, at 585.

134. As to the definition of the term ‘expropriation’, in his text, Constitutional Property Clauses (1999, Juta & Co. Ltd) Professor AJ van der Walt, at p.18, wrote :

“

The term expropriation … does not apply to or adequately explain the position in all jurisdictions.  When referring to the acquisition of property in terms of the power of eminent domain, most constitutions in the Anglo tradition refer to compulsory acquisitions, whereas most jurisdictions in the Germanic tradition refer to expropriations, with the two terms having roughly the same meaning.  The fairly widely accepted interpretation is that these terms require the state to actually acquire property or derive a benefit from the expropriation or acquisition in some way, thereby excluding state actions that destroy or take away property without any benefit for the state.”  [my emphasis]

135. In his article, The Basic Law and the Protection of Property Rights (1993) HKLJ 31, at p.60, Albert Chen, with reference to a number of dictionary entries, wrote the following :

“	… zhengyong seems to be confined to situations where title, possession, control or use of the property has been acquired by the government.  Dictionary definitions of zhengyong refer to the state acquiring or using the property of others.”

136. Mr Yu drew my attention to the fact that the term zhengyong has been used in accordance with its dictionary meaning in the 1954, 1975 and 1978 Constitutions of the People’s Republic of China.  Mr Yu further drew my attention to the 1982 Constitution which, under article 10, recognised that not all land was owned solely by the state.  This being so, article 10(3) provides that : ‘The state may, in the public interest, requisition land for its use in accordance with law’.  The term used in article 10(3) is zhengyong.  As Mr Yu put it, by the time of the enactment of the Basic Law in 1990, the term zhengyong had a well-established usage in the constitutional documents of the People’s Republic consonant with its understood meaning of compulsory acquisition by the state or a state agency.

137. The result, of course, is that there is a clear difference in meaning between the English and Chinese texts, the Chinese text requiring a more specific, and thereby limited, interpretation.  In the event of such a discrepancy, the position is clear : the Chinese text must prevail.  In this regard, the Standing Committee of National People’s Congress adopted the following decision on 28 June 1990; namely, that —

“

… the English translation of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China which has been finalized upon examination under the auspices of the Law Committee of the National People’s Congress shall be the official English text and shall be used in parallel with the Chinese text.  In case of discrepancy between the two texts in the implication of any words used, the Chinese text shall prevail.”  [my emphasis]

138. Accordingly, in my view, I am bound to read the English text of article 105 to mean that the Hong Kong Special Administrative Region shall in accordance with law, protect the right of individuals to compensation for the expropriation of their property by the Government or a Government agency.

139. This narrower interpretation of article 105 does not, in the eyes of the common law, lead to a surprising consequence.  To the contrary, the consequence is well recognised.  In his judgment in Grape Bay Ltd v. Attorney General of Bermuda [2003] 1 WLR 574, at 583, Lord Hoffmann observed that —

“

It is well settled that restrictions on the use of property imposed in the public interest by general regulatory laws do not constitute a deprivation of that property for which compensation should be paid.  The best example is planning control (Westminster Bank Ltd. v. Beverley Borough Council [1971] A.C. 508) or, in American terminology, zoning laws (Village of Euclid v. Ambler Realty Co. (1926) 272 U.S. 365).  The give and take of civil society frequently requires that the exercise of private rights should be restricted in the general public interest.”

As to when compensation is payable, Lord Hoffmann went on to say :

“

The principles which underlie the right of the individual not to be deprived of his property without compensation are, first, that some public interest is necessary to justify the taking of private property for the benefit of the state and, secondly, that when the public interest does so require, the loss should not fall upon the individual whose property has been taken but should be borne by the public as a whole.”

Lord Hoffmann continued by emphasising that :

“

… these principles do not require the payment of compensation to anyone whose private rights are restricted by legislation of general application which is enacted for the public benefit.  This is so even if, as will inevitably be the case, the legislation in general terms affects some people more than others.  For example, rent control legislation restricts only the rights of those who happen to be landlords but nevertheless falls within the general principle that compensation will not be payable.  Likewise in Penn Central Transportation Co. v. New York City (1978) 438 U.S. 104, the New York City’s landmarks Preservation Law restricted only the rights of those people whose buildings happened to have been designated historic landmarks.  Nevertheless the Supreme Court of the United States held that it was a general law passed in the public interest which did not violate the Fifth Amendment prohibition on taking private property without compensation.”

140. While, on behalf of the applicant, it was accepted that there is an apparent difference in meaning between the word ‘deprivation’ used in the English text of article 105 and the term zhengyong used in the Chinese text, it was said that in substance there is no difference.  It was submitted that the compulsory acquisition of property by the state may be accomplished by legislation which has the effect of transferring property from one individual to another.  An example is to be found in the judgment of the European Court of Human Rights in James v. United Kingdom (1986) 8 EHRR 123.  As legislation is a use of sovereign power vested in the Hong Kong Special Administrative Region through the Basic Law, the transfer of property from one person to another is no more than acquisition by the state from one person and the transfer by the state to another through the instrumentality of legislation.  That being the case, in respect of the loss of title by one individual to another by way of adverse possession, the transfer having been accomplished by way of legislation, the term zhengyong should not bear a different meaning from the word ‘deprivation’. 

141. In support of this contention, it was submitted that the rights guaranteed by articles 6 and 105 of the Basic Law should be given a generous and purposive interpretation, construed in such a way as to give maximum protection.  On this basis, it was argued that there is no sound policy reason why protection should be given when property is acquired by the state but not when it is acquired by other individuals under legislation enacted by the state.  In both cases there has been a loss of a substantive right.

142. In considering this submission, I start with what must be the self-evident observation that articles 6 and 105 are not to be read as requiring that all forms of deprivation of property authorised by legislation require payment of compensation.  The confiscation of property found to have been used in the commission of a crime is after all a form of deprivation of property but nobody would suggest that it must be met with compensation.  The High Court of Australia, in Mutual Pools & Staff Pty Ltd v. The Commonwealth [1993-1994] 179 CLR 155, at 189, in looking to s.51(xxxi) of the Australian constitution, per Deane and Gaudron JJ, expressed the principle as follows :

“

Obviously, many general laws which regulate the rights and conduct of individuals may, for any number of legitimate legislative purposes, effect or authorize an ‘acquisition of property’ within the wide meaning of those words as used in s.51(xxxi).  If every such law which incidentally altered, modified or extinguished proprietary rights or interests in a way which constituted such an ‘acquisition of property’ were invalid unless it provided a quid pro quo of just terms, the legislative powers of the Commonwealth would be reduced to an extent which could not have been intended by those who framed and adopted the Australian Constitution.”

143. How is it then to be determined when compensation is or is not payable for deprivation of property?  It seems to me that one method of approach must be to look to the character of the legislation authorising the deprivation.  To repeat Lord Hoffmann’s dictum in Grape Bay Ltd v. Attorney General of Bermuda : “It is well settled that restrictions on the use of property imposed in the public interest by general regulatory laws do not constitute a deprivation of property for which compensation should be paid.”

144. If therefore the legislation is of a general regulatory nature, authorising deprivation in the public interest so as to regulate the rights and duties of society then a deprivation of property under that legislation may not constitute a deprivation for which compensation must be made.

145. Moving on from this general observation, the first difficulty I have with the submission that the term zhengyong should not bear a different meaning from the word ‘deprivation’ is that, even on a generous and purposive interpretation, the meaning of the Chinese text of article 105, read in context, must prevail.  That meaning is clear.  It is to the effect that the right to compensation is guaranteed only when there is expropriation of property by the state for some public purpose.  The statutory scheme governing adverse possession, while it provides for a transfer of rights between individuals, is not confiscatory in nature.  There is no confiscation of land by the state for public purposes.

146. While I accept that expropriation may take on different forms, direct and indirect, in my judgment, the statutory scheme is not to be read as a scheme of de facto expropriation.  It is to be distinguished from James v. United Kingdom where the legislation under scrutiny was the Leasehold Reform Act 1967 which conferred on tenants holding long leases the right to purchase compulsorily the freehold subject to prescribed conditions.

147. The Limitation Ordinance, while it does provide for the effective transfer of a possessory right, seeks to do no more than avoid protracted uncertainty as to where the title to land lies; in short, to bring certainty into a system which is so open to uncertainties.  It ensures that the reality of unopposed occupation of land and its legal ownership coincide.  The scheme therefore provides for the general regulation of rights and obligations pertaining to the possession of land.  It does so in the public interest and its operation is applicable to all land and all persons. 

148. In advocating the submission that, in the context of article 105 of the Basic Law, the term zhengyong should bear the same broad meaning as the word ‘deprivation’.  Mr Pannick went on to adopt certain observations made by Albert Chen in his article to which I have referred in paragraph 135 of this judgment.  As to why a word with a narrower meaning than ‘deprivation’ was not used in the English text of article 105, Mr Chen wrote :

“

… the Joint Declaration expressly guarantees the continued legal protection of property rights, including the right to ‘compensation for lawful deprivation’.  In the Chinese version of the Joint Declaration, zhengyong is the word corresponding to ‘deprivation’.  Thus if there is a discrepancy between the meanings of zhengyong and ‘deprivation’ in the Basic Law, the discrepancy may be traced back to the Joint Declaration itself.  As far as the Joint Declaration is concerned, the English and Chinese versions are equally authentic.  It might therefore be argued that in interpreting the meanings of zhengyong and ‘deprivation’ in the Basic Law, the courts should, instead of confining its attention to or simply relying on the NPC Standing Committee’s decision regarding the superiority of the Chinese version, attempt to adopt an interpretation which, as far as possible, reconciles the English and the Chinese terms concerned so as to give effect to the Joint Declaration.”

149. On the basis of these observations Mr Pannick submitted that, in order to reconcile the difference in the English and Chinese terms, bearing in mind the central importance of the protection of property rights in the Basic Law, the term zhengyong should be given a wider meaning, one that equates with ‘deprivation’.  This would accord with the use of the two terms, each being equally authentic, in the Joint Declaration.

150. But equally, of course, reconciliation can be achieved by giving ‘deprivation’ a narrower meaning.  Although property rights are to be given an ample interpretation, that cannot be at the expense of the integrity of the language of the Basic Law itself and, if the Chinese text of the Basic Law itself is to take precedence, that would seem to be the route a court is obliged to take.  In any event, as I have said earlier, this would not, in the eyes of the common law, lead to a surprising consequence.  Indeed, on one view, it may be said to be entirely in accord with common law concepts which have long recognised that rights in property are heavily qualified by considerations of public interest.

151. What is to be remembered is that the Joint Declaration did not herald an increased protection for property rights.  Nor has the Basic Law, as I read it, achieved one.  What has been achieved is a continuation of the recognition of property rights so that Hong Kong’s stability as a capitalist society may be assured.  With Hong Kong’s system of land tenure being based primarily on possession, it would seem to me that any such continuation of property rights would include recognition of possessory rights and that, in turn, would include recognition of rights of adverse possession.

152. Accordingly, I am satisfied that, on a true construction, article 105 of the Basic Law, even as buttressed by article 6, seeks only to guarantee the right to compensation for lawful deprivation of property when that deprivation constitutes expropriation of property by the state or a state agency.  I am further satisfied that a loss of possessory title pursuant to the operation of sections 7(2) and 17 of the Limitation Ordinance does not constitute an expropriation, de facto or otherwise.

153. That being the case, I am satisfied that articles 6 and 105 are not engaged by the operation of sections 7(2) and 17 of the Ordinance.

154. However, if I am wrong in this regard, or it is the case that the general protection of private property rights contained in articles 6 and 105 has sufficient reach, I turn to the final issue; namely, the assertion that sections 7(2) and 17 of the Ordinance, which provide for the loss of substantive rights in property without compensation, are inconsistent with the Basic Law.

Is the statutory scheme governing adverse possession constitutional?

155. The scheme of adverse possession contained in sections 7(2) and 17 of the Limitation Ordinance visits draconian consequences on the leaseholder whose possessory rights are extinguished.  That, I think, is self-evident.

156. The scheme requires that no notice be given of impending loss of title.  As Lord Hope expressed it in his speech when Pye was before the House of Lords (paragraph 73) :

“

The unfairness in the old regime which this case has demonstrated lies not in the absence of compensation, although that is an important factor, but in the lack of safeguards against oversight or inadvertence on the part of the registered proprietor’.”  [JA Pye (Oxford) Ltd v. Graham [2002] 3 All ER 865]

157. When Pye had earlier been determined at first instance, Neuberger J said the following as to the consequences that may be visited upon an inadvertent landowner :

“

A frequent justification for limitation periods generally is that people should not be able to sit on their rights indefinitely, and that is a proposition to which at least in general nobody could take exception.  However, if as in the present case the owner of land has no immediate use for it and is content to let another person trespass on the land for the time being, it is hard to see what principle of justice entitles the trespasser to acquire the land for nothing from the owner simply because he has been permitted to remain there for 12 years.  To say that in such circumstances the owner who has sat on his rights should therefore be deprived of his land appears to me to be illogical and disproportionate.  Illogical because the only reason that the owner can be said to have sat on his rights is because of the existence of the 12-year limitation period in the first place; if no limitation period existed he would be entitled to claim possession whenever he actually wanted the land.  Of course one can well see the justification for saying that the owner should not be entitled to recover damages for trespass going back more than six years; that involves rather different considerations.  I believe that the result is disproportionate because, particularly in a climate of increasing awareness of human rights including the right to enjoy one’s own property, it does seem draconian to the owner and a windfall for the squatter that, just because the owner has taken no steps to evict a squatter for 12 years, the owner should lose 25 hectares of land to the squatter with no compensation whatsoever.”  [JA Pye (Oxford) Ltd v. Graham [2000] Ch 676, 710]

158. Pye, of course, was a case concerning registered land when the registered owner may be forgiven for thinking that registration itself was a sufficient protection of his rights.  It may be said that, when title is ultimately founded in possession, a duty is imposed to possess.  Nevertheless there must be occasions – as in Pye – when the culpability of the leaseholder is minimal while the trespasser, in exploiting an opportunity, has come away with a prize of disproportionate value.  The scheme, in its starkness, leaves itself open to such inequities.

159. Under the scheme, the leaseholder not only loses possessory title but does so while retaining obligations in respect of the land : rates, rent and other covenant responsibilities may have to be met.  As I said at the beginning of this judgment – paragraph 15 – the disadvantages may not be as severe as, at first blush, they may appear.  But the fact is that the equities, even after loss of title, continue to be unbalanced.

160. Finally, of course, there is no provision for any form of compensation.

161. When Pye came before the European Court of Human Rights, the Court, as I have said earlier in this judgment, found that the applicants’ deprivation of title by way of adverse possession was inconsistent with the rights of property contained in Article I of the first protocol to the Convention.  Article I is to the following effect :

“	Every natural or legal person is entitled to the peaceful enjoyment of his possessions.  No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
	The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

162. While recognising that a wide margin of appreciation must be given to the national authorities to decide when the deprivation of property is in ‘the public interest’, the Court went on to say (paragraph 46) :

“

An interference with the peaceful enjoyment of possessions must nevertheless strike a ‘fair balance’ between the demands of the public or general interest of the community and the requirements of the protection of the individual’s fundamental rights.  The concern to achieve this balance is reflected in the structure of art 1 as a whole, which is to be read in the light of the general principle enunciated in the first sentence.  In particular, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised by any measure depriving a person of his possessions or controlling their use.  Compensation terms under the relevant legislation are material to the assessment of whether the contested measure respects the requisite fair balance, and notably, whether it does not impose a disproportionate burden on the applicant.”

163. In looking to the issue of proportionality, the court accepted that the operation of the relevant legislation pursued a legitimate aim.  In this regard, in part, the following was said (paragraphs 68-71) :

“	The government, like Mummery LJ in the Court of Appeal, place reliance on two factors in particular for contending that the system as it operated in the applicants’ case was proportionate and struck a fair balance – the reasonableness of the period of 12 years for bringing proceedings and the fact that it was neither impossible nor difficult for a landowner to prevent a squatter acquiring title by adverse possession: a mere grant to the Grahams of authority to use the land, subject to an acknowledgement of the applicants ownership would have been sufficient to stop time running.
	The court accepts that the limitation period of 12 years was relatively long and that the law of adverse possession was well-established and had not altered during the period of the applicants’ ownership of the land.  It is further accepted that it is a relevant consideration that, in order to avoid losing their title, the applicants had to do no more than regularise the Grahams’ occupation of the land or issue proceedings for to recover its possession within the 12-year period.
	The question nevertheless remains whether, even having regard to the lack of care and inadvertence on the part of the applicants and their advisers, the deprivation of their title to the registered land and the transfer of beneficial ownership to those in unauthorised possession struck a fair balance with any legitimate public interest served.
	The court notes in the first place that, not only were the applicants deprived of their property but they received no compensation for the loss.  The result for the applicants was thus one of exceptional severity …”

164. The court, as I have said earlier, went on to conclude that the relevant English legislation upset the fair balance between the demands of the public interest on the one hand and the applicants’ rights to the peaceful enjoyment of their land on the other.  The legislation was therefore inconsistent with article 1.

165. In his 2006 judgment in The Hong Kong Buddhist Association v. The Occupiers, HCMP 4108 of 2003, Deputy Judge Saunders, as he then was, was persuaded by the judgment of the European Court. 

166. However, in my judgment, while Pye is, in a number of respects, highly persuasive, I do not believe too much weight can be placed upon it.  It is distinguishable on a number of grounds.  Most importantly, however, Pye was concerned with registered land.  Proof of title, therefore, rested solely on the fact of registration.  Hong Kong land, as I have said many times in this judgment, is unregistered land, proof of title depending ultimately upon possession.

167. In Pye, the distinction was always well understood.  In his speech in the House of Lords, Lord Bingham said :

“	where land is registered it is difficult to see any justification for a legal rule which compels such an apparently unjust result, and even harder to see why the party gaining title should not be required to pay some compensation at least to the party losing it.”  [my emphasis]

168. The European Court itself, in considering the legitimate aim of the English legislation, made the following observations (paragraphs 64 and 65) :

“

The government [of the United Kingdom] argue that the contested provisions governing the adverse possession of land serve two public interests – firstly, as in Stubbings v UK (1996) 1 BHRC 316, they prevent uncertainty and injustice arising from stale claims; secondly, they ensure that the reality of unopposed occupation of land and its legal ownership coincide.  These aims echo two of the public interests identified by the Law Commission in its consultative document.  While the court accepts the undoubted relevance and importance of these aims in the case of unregistered land, their importance in the case of registered land is more questionable.  As Neuberger J explained in his judgment in the present case, with one or two limited exceptions, the uncertainties which sometimes arise in relation to the ownership of land are very unlikely to arise in the context of a system of land ownership involving compulsory registration, where the owner of the land is readily identifiable by inspecting the proprietorship register of the relevant title at the Land Register.  Similar statements appear in the report of the Law Commission on registered land and in the judgment of Lord Bingham in the House of Lords, who observed that, while in the days before registration became the norm a result whereby an adverse possessor of land was rewarded by obtaining title could be justified as avoiding protracted uncertainty as to where the title to land lay, where land was registered it was difficult to see any justification for a legal rule which impelled such an unjust result.”  [my emphasis]

169. The qualification by the European Court is direct and forceful.  It must be borne in mind that in any event there were three judges who dissented, holding that, even in respect of registered land, loss of title by way of adverse possession was not inconsistent with Article I.  It may, therefore, be argued, I think, that – if unregistered land had been in issue – the judgment of the Court would have been different.  Certainly, the Court recognised that the social, economic and regulatory dynamics which govern unregistered land in England and Wales are different from those which govern registered land.

170. Those social, economic and regulatory dynamics also, to a greater or lesser degree, govern land in Hong Kong, said Mr Yu, all Hong Kong land being unregistered.  In this regard, Mr Yu made the following submissions.

171. First, it has long been a matter of policy that there is the need to ensure that land – a scarce resource in Hong Kong – is utilised and not left abandoned for an extended number of years.  Arising from this, there is the requirement to encourage a leaseholder not to sleep on his rights. 

172. In Hong Kong, since the mid-1800s, all leaseholders have known that their title ultimately depends on possession and that they are under an obligation to assert that possession.  If there is a failure to do so, as a matter of public policy formulated in the general interest, they are at risk of losing the land they hold under leasehold.  There may be occasions when a leaseholder’s culpability is minimal but in all instances, if title is extinguished by way of adverse possession, there must at least have been a culpable omission on the part of the leaseholder extending over a period of many years.  This is to be considered in the light that in Hong Kong, said Mr Yu, the rights of the adverse possessor have always been recognised.

173. Second, in the absence of a system of registration of title, it has always been, and still remains, a material aid to conveyancing.  In a 1998 consultative document entitled ‘Land Registration for the twenty-first century’ the Law Commission of England expanded on this by saying :

“

The fact that adverse possession can extinguish earlier rights to possess facilitates and cheapens the investigation of title to unregistered land.  The length of title that a vendor is required to deduce is and always has been closely linked to the limitation period.  Indeed, the principal reason for having limitation statutes in relation to real property appears to have been to facilitate conveyancing.”

174. Third, adverse possession helps protect against stale claims.  In respect of registered land, the claim is established or refuted by registration.  But that is not the case in Hong Kong.  A stale claim in Hong Kong may be refuted by proof of subsequent adverse possession.

175. Fourth, the scheme of adverse possession promotes certainty as to title.  It thereby avoids hardship in cases where land boundaries on the paper title are uncertain or open to dispute.  As Mr Yu said, title defect can arise because of lost deeds, concerns as to validity of execution or doubts as to the identity of a predecessor-in-title.  A vendor who is able to prove a continuous period of undisturbed possession may be able to cure such defects.  In this regard, see Chan Chu Hang & Others v. Man Yun Sau [1997] 2 HKC 144, at 150, where Le Pichon J, as she then was, noted that —

“	… good title may be part documentary and part possessory.  If good title could be traced down to the date of the defect, possession as from that date would cure the defect and the title could be forced on the purchaser.”  [my emphasis]

176. The Law Commission to which I have just referred, expanded on this by saying :

“	… if land ownership and the reality of possession are completely out of kilter, the land in question is rendered unmarketable if there is no mechanism by which the squatter can acquire title.  This situation can easily happen, as for example where—
	(1)	the true owner has disappeared and the squatter has assumed the rights of ownership for a substantial period; or
	(2)	there have been dealings with registered land ‘off the register’, so that the register no longer reflects the ‘true’ ownership of the land.”

177. The Law Commission continued :

“

… in cases of mistake, the law of adverse possession can prevent hardship.  For example, a squatter may have innocently entered land, mistakenly believing that he or she owned it, perhaps due to uncertainty as to the boundaries.  He or she may have incurred expenditure under the mistaken belief of ownership.  Although in some cases the squatter may have a claim based upon principles of proprietary estoppel, because the true owner knew of and acquiesced in the squatter’s mistake, that will not always be true.”

178. On behalf of the applicant, it was accepted that in England and Wales there may be good reason why a scheme of adverse possession should regulate possession of unregistered land.  But it would be fundamentally wrong, said Mr Pannick, to assume that the imperatives which determine the regulation of unregistered land in England and Wales are the same in Hong Kong.  They are not.

179. Whereas there are many types of tenures in England and Wales dating back centuries and perusal of extracts of title may have to go back a very long time in conveyancing, adding considerable cost to the process, there is only one type of tenure in Hong Kong.  Conveyancing in Hong Kong is therefore simpler and less costly.  All leaseholders hold their land from a grant from the Government, upon the terms of a lease, which is the root title of all leaseholders and this is always traceable to the Government.  Perusal of extracts of title at the time of conveyancing in Hong Kong is therefore relatively simple and only requires the vendor to produce the Government (Crown) lease and the documents which prove the devolution of the vendor’s title from the Government (Crown) lease.  In addition, there are important statutory presumptions going to the due execution of documents and the truth of recitals in documents of over 15 years vintage.  In this regard, section 13 of the Conveyancing and Property Ordinance, Cap.219 applies.

180. During the course of submissions, emphasis was placed by Mr Yu, for the Secretary for Justice, on the rudimentary survey of land in the New Territories between 1900 and 1905, that survey still being the basis for boundaries.  This, he said, has given rise to many problems.  If a system of adverse possession barring stale claims by extinguishing title was not present, it could render a significant amount of land in the New Territories difficult to market. 

181. In response, it was argued on behalf of the applicant that, while Hong Kong may not have a system of registration of title, its system of registration of title deeds has acted to give very considerable certainty to matters of land tenure.  In practice, therefore, on a day-to-day basis it may be said to act effectively as a system of registration of title.  In respect specifically of land in the New Territories, while the original survey may have been rudimentary, the Land Registration Ordinance and the New Territories Ordinance, Cap.97, together with regulations made under them, have brought in a system of conveyancing and probate practice which is not only relatively simple to operate but provides reasonable certainty as to land title.  As to disputes over boundaries, the Land Titles Ordinance, Cap.585, provides a system of determination.

182. Mr Pannick said that real estate developers in the New Territories have long found ways of living with the problems inherited from the original survey of the New Territories.  They have done so by commissioning their own land surveys when necessary and executing surrender and re-grants with the Government.  The fact that the New Territories are so well developed attest to the fact that titles are freely marketable. 

183. I accept the validity of many of the submissions put forward on behalf of the applicant.  But, as I understood Mr Yu’s submissions, they were not to the effect that, without adverse possession, our law of land tenure would be entirely unworkable.  As I understood Mr Yu, his submissions went instead to the contention that, since the mid-1800s, the mechanism of adverse possession has been integral to Hong Kong land low.  While there has been an improvement in the sophistication of our system of land law, making it more workable, the mechanism of adverse possession nevertheless remains integral.  It not only encourages the utilisation of land in Hong Kong by encouraging leaseholders to assert possession but also, because title to all land still ultimately rests on possession, ensures that, when problems do arise, there is a system of resolution.

184. Bearing in mind that Hong Kong does not have a system of registration of title, I think it must be accepted that the scheme of adverse possession contained in sections 7(2) and 17 of the Limitation Ordinance clearly pursues a legitimate aim.  In this regard, I note that Deputy Judge Saunders, in his judgment in The Hong Kong Buddhist Association v. The Occupiers was of the same view.

185. The real issue, it seems to me, is whether a fair balance has been struck between the aims of the statutory scheme and the hardship visited upon those whose possessory title is extinguished.

186. In my judgment, the mechanism of adverse possession is clumsy.  In the result, there can be occasions when it works inequitably.  Parliament in England has devised a more equitable system and perhaps in due course the same will be done in Hong Kong.  But the question is not whether a better system may be created.  It is whether the present statutory scheme is inconsistent with the protection of property rights in the Basic Law. 

187. In the course of his submissions, Mr Yu said that, in a system of law which is possession-based, it is a matter of policy for the legislature, and not for the courts, to decide whether the law should favour the one who has continuously been in possession of the land or the one who has a paper title but has slept on his rights for an extended period of years.  In my judgment, he makes a telling point. 

188. It cannot be disputed that land – a scarce resource in Hong Kong – should be utilised.  Article 7 of the Basic Law provides for ‘use development’ of land.  Being granted leasehold rights over land brings with it duties as well as rights.  As I said earlier, if title is ultimately based on possession then it would seem that there is a duty to possess, not to leave land effectively abandoned for an extended period of years.  Certainly, as I see it, the legislature and the administration is entitled to conclude that there are good reasons, social and economic, why land should at least be occupied rather than left abandoned and to put all leasehold owners on notice of this.

189. The Hong Kong legislature and the Government have considered it to be contrary to the public interest to allow land to lie effectively abandoned for an extended period of years.  The required period of adverse possession has not been extended; it has been decreased.  While the Basic Law may provide protection for property rights, such rights have always been heavily qualified by regulation in the public interest.  As to how land, a fundamental resource is to be best regulated is pre-eminently a matter for democratic decision : see, for example, Grape Bay Ltd v. Attorney General of Bermuda, page 585.

190. As Mr Yu emphasised, the law as to limitation and adverse possession has been part of Hong Kong’s system of land law since 1843.  The law has operated on numerous occasions in the past to serve the social needs of protecting individuals from stale claims, avoiding hardship in cases where boundaries or paper titles are uncertain, preventing land from falling into disuse and facilitating conveyancing.  Today, the need to employ the mechanism of adverse possession may have been reduced by legislative enactments and regulations.  But, in my judgment, it cannot be denied that it is still integral to our system of land law and, as such, can, and does, play a constructive role, not simply a destructive one.

191. In all the circumstances, it has not been an easy decision to reach.  In my view, the mechanism of adverse possession can bear harshly.  But, being obliged to give a wide margin of appreciation on the basis that the policy of adverse possession is founded on economic and social imperatives, I am satisfied that, if articles 6 and 105 are engaged, the statutory scheme of adverse possession is nevertheless consistent with the protections contained in those articles.

Conclusion

192. For the reasons given in the body of this judgment, this application for judicial review must be dismissed.

193. As to costs, I am satisfied that costs should follow the event and I awarded to the 1^st respondent, the Secretary for Justice.