TANG KWAN TAI v. TANG KOON LAM AND ANOTHER

CACV 214/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 214 OF 2002

(ON APPEAL FROM DCCJ 14951 OF 2000)

__________________________

J U D G M E N T

__________________________

Hon Cheung JA:

The history

1. Mr. Tang Tsun Yiu was the registered owner of a piece of land in Tai Hong Wai, Kam Tin, New Territories, known as Lot No. 561 in Demarcation District No. 109 ("the Lot"). In 1953, he leased the Lot to Sir Ellis Kadoorie & Son Co. ("Kadoorie") for 10 years. Kadoorie operated a charitable programme by leasing land in the New Territories and then subleased them free of charge to farmers to raise pigs. The farmers would be provided by Kadoorie with a covered pigsty, sows and piglets so that they could raise pigs to earn a living.

2. Kadoorie subdivided the Lot into two parts, one of which is the Remaining Portion of Lot No. 561 in D.D. No. 109 ("the disputed land"). From 1953, the plaintiff with the consent of Kadoorie entered into the disputed land. He operated a pig rearing farm there. On 25 February 1963 the lease granted to Kadoorie expired. The plaintiff continued to be in occupation of the disputed land as a pig farmer until 1977 or 1978. He then stopped the pig farming and erected a small cottage there. The cottage covered the whole of the disputed land. He leased the cottage for profit.

3. The 1st defendant is the son and successor of Mr. Tang Tsun Yiu who died in 1964. He became the registered owner of the Lot in 1990. In 1993, he conveyed the Lot to Tang Kui Chung, an elder brother of the 2nd defendant. In 1998, Tang Kui Chung conveyed the disputed land to the 2nd defendant.

The action

4. The plaintiff claimed he had been in adverse possession of the disputed land since 1963 after the lease granted to Kadoorie expired, and acquired a possessory title in 1983. He commenced an action in the District Court seeking a declaration that the 1st defendant's title to the disputed land had been extinguished under the Limitation Ordinance and consequently the 2nd defendant never acquired any title to the disputed land. The defendants counterclaimed for vacant possession of the disputed land.

The appeal

5. Deputy District Judge Anthony Chow found in favour of the plaintiff and dismissed the counterclaim of the defendants. The defendants now appeal against the judgment.

The ground of appeal

6. It is common ground between the parties that the plaintiff was first in adverse possession of the disputed land in 1963 and he would require 20 years in order to gain possessory title. It is also conceded by the defendants that there is only one ground of appeal, namely, the plaintiff did not acquire a possessory title because since 1977 or 1978, he had leased the disputed land to tenants and hence he had not been in continuous possession in order to acquire a possessory title. This is not a point that had been raised in the District Court.

The requirement

7. It is well established that a squatter must be in possession and has the intention to possess in order to be in adverse possession.

8. Mr. Li, counsel for the defendants, argued that in order to be in possession of the disputed land, the squatter must be in exclusive possession. He relies on the judgment of Deputy High Court Judge Andrew Cheung in Tang Tak Hong and others v. Cheung Yat Fuk (HCMP 3265 of 1996) which held a squatter who let out the land to a tenant cannot be in possession.

9. The judgment was reversed on appeal by another division of this Court (Mayo V.P., Yuen J.A. Chu J.) (see Civil Appeal No. 203 of 2002, Judgment delivered on 30 October 2002). This Court held in that case the squatter was in possession although the land was let by him to a tenant. I agree with the decision and the reasoning. It is obvious from the judgment that there were some common points raised in these two appeals. I will try not to cover the same points that had been decided earlier.

Bligh v. Martin

10. At the outset it is necessary to deal with a point raised by the case of Bligh v. Martin [1968] 1 WLR 804. This case involves, among other things, a construction of the equivalent of section 12(3) and section 13(3)(b) of the Limitation Ordinance.

“ Section 12(3) Where any person is in possession of land by virtue of a lease in writing by which a rent of not less than $20 is reserved, and the rent is received by some person wrongfully claiming to be entitled to the land in reversion immediately expectant on the determination of the lease, and no rent is subsequently received by the person rightfully so entitled, the right of action of the last-named person to recover the land shall be deemed to have accrued at the date when the rent was first received by the person wrongfully claiming as aforesaid and not at the date of the determination of the lease."

“ Section 13(3)(b) For the purposes of this section-receipt of rent under a lease by a person wrongfully claiming, in accordance with section 12(3), the land in reversion shall be deemed to be adverse possession of the land."

Pennycuick J. held that section 13(3)(b) applies to a situation where the squatter himself grants the lease to a tenant. I am unable to accede to this view. The two sections clearly envisage the squatter wrongly receiving rent from a tenant who was granted a lease by the owner of the land and not by the squatter. In so far as the English Court of Appeal in Mellor v. Harpur-Crewe (transcript of judgment of 2 November 1992) approved of Bligh v. Martin on this particular point, I am also unable to agree to this view.

Who is in possession

11. Mr. Chan, counsel for the plaintiff, expressly disavowed reliance on these two sections. In my view he was right. However, this two sections highlight a significant factor. If someone who wrongly received rent from a tenant can be deemed to be in adverse possession, then clearly the receipt of rent lends credence to the argument that the person in possession of the land for the purposes of the Limitation Ordinance is the squatter who lets out the land.

12. In Sze To Chun Keung v. Kung Kwok Wai David [1997] WLR 1232, a squatter entered into occupation of a piece of land in 1955. Between 1961 and 1988, the Crown without realizing the land was private land, granted a permit to the squatter to occupy the land. The permit expressly stated that it was not to be construed as creating the relationship of landlord and tenant. The Privy Council held that for the purposes of limitation, possession from 1961 to 1988 must be regarded as having been in the Crown, which possessed through its licensee i.e. the squatter. The possession was adverse to the true owner of the land. This is the authority relied by Megarry and Wade on The Law of Real Property 6th Ed. page 1309 in support of the statement that "The adverse possessor need not himself be in physical possession of the land. If he grants a tenancy or licence, the tenant or licensee possesses on his behalf....".

13. Sze To Chun Keung is a licence case. If a squatter licensor could be in adverse possession through a licensee would it make any difference if the squatter granted a lease instead of a licensee? Mr. Li argued it does, because unlike a licence, where a lease is granted, the tenant has the right of exclusive possession of the land which enables the tenant to exclude all persons, including the landlord, from possession : Woodfall Landlord & Tenant Paras. 1.003 and 1.023.

14. I accept the principle in Woodfall. However, I do not find this to be fatal to the plaintiff's case. While in the context of a tenancy, the squatter "tenant" may have exclusive possession, it does not mean the squatter "landlord" does not have possession for the purposes of the Limitation Ordinance. This is because the squatter "landlord"′s possession can be by way of his receipt of rent. In A. G. Securities v. Vaughan and Others [1990] 1 A.C. 417, Lord Templeman expressed the view that exclusive possession means either exclusive occupation or receipt of rents and profits. In my view, while the plaintiff's tenant during the validity of the tenancy has exclusive occupation of the land, none the less, the plaintiff still exercises dominion over the land by the receipt of rent. The possession of the plaintiff is through his tenant. In fact in Hayward v. Chaloner [1968] 1 Q.B. 107, Lord Denning MR (expressing a dissenting opinion on the facts that the squatters had not acquired a possessory title) had alluded to this when he said :

“ In my opinion "possession" there means actual possession of the land itself by the person, or his servants or agents. If a man lets the land, he ceases to be in possession, and his tenant takes possession. In such case "possession" by the lessor means actual receipt by him of the rents payable out of the land: see section 31(1) and (5) of the Act of 1939. If he does not receive the rents, he is not in possession."

15. The relevant part of section 31(1) of the Limitation Act 1939 is the definition of 'Land' which is to include :

“ corporeal hereditaments, tithes (except tithes belonging to a spiritual or eleemosynary corporation sole) and rentcharges, and any legal or equitable estate or interest therein, including an interest in the proceeds of the sale of land held upon trust for sale, but save as aforesaid does not include any incorporeal hereditament."

16. Section 31(5) is as follows :

“ References in this Act to a right of action to recover land shall include references to a right to enter into possession of the land or, in the case of rentcharges and tithes, to distrain for arrears of rent or tithe, and references to the bringing of such an action shall include references to the making of such an entry or distress."

17. A similar although not identical definition of land is found in section 2(1) of the Limitation Ordinance. Section 31(5) is also similar to our section 2(3).

18. Rentcharge is "any annuity or periodical sum of money charged upon or payable out of land...." (section 2(1)). Rent includes a rent charge. If land includes rent, and if the plaintiff is entitled to the rent, then his "possession" of the disputed land is by reason of the receipt of the rent. In the present case it means the plaintiff has been in continuous possession by the receipt of rent despite letting out the disputed land. This is the answer to the defendants' contentions.

Trespass

19. As to the argument of Mr. Li that if a trespass is committed, it is usually the tenant who has a cause of action in trespass because trespass is an interference with possession of land and it is the tenant who is in possession, I would adopt the argument of this Court in the earlier case that it does not mean the person who cannot sue for trespass does not have possession for the purpose of adverse possession. After the commencement of action, the landlord would be joined.

Successive squatters

20. Mr. Chan relied on a passage in Halsbury's Laws of England, 4th Ed. Reissue Vol. 28 para. 990 on possession by series of trespassers, which states that :

“ If a series of trespassers, adverse to one another and to the rightful owner, take and keep possession of land continuously in succession for various periods, each less than, but exceeding in the whole, 12 years, the rightful owners is barred. The earliest possessor within the 12 years may have the best title, provided any subsequent possession is contrary to the will of the earliest possessor."

See also Asher and Wife v. Whitlock [1965] L.R.1 Q.B. 1 and Perry v. Clissold and others [1907] A.C. 73. I do not consider this passage to be helpful because as it indicates, the trespassers who took possession must be adverse to one another and to the rightful owner. The relationship of the plaintiff and his own tenant is not adverse to one other.

Encroachment by tenant

21. Mr. Chan also relied on the principle that a landlord, upon the determination of the lease, is entitled to possession of land belonging to a third party encroached by the tenant together with the demised land : see Halsbury Vol. 27(1) para. 165, Gray and Gray : Elements of Land Law (3rd Ed. page 253 and 254) and Smirk v. Lyndale Developments Ltd. [1975] 1 Ch. 317.

22. I do not need to go into a detailed discussion of the principle. This is a principle which is aimed at avoiding questions of dispute which the tenant may raise when he had encroached on other's land. It does not specifically analyse who is in possession for the purposes of adverse possession.

Conclusion

23. I accordingly rule against the defendants. The appeal is dismissed with costs to the plaintiff.

Hon Yeung JA:

24. I agree with the reasoning contained in the draft judgments of both Cheung JA and Chung J and I would also dismiss the appeal with costs.

Hon Chung J:

25. I agree with the reasoning and conclusion reached in this appeal as well as that reached by this court in the appeal in Tang Tak Hong and others v. Cheung Yat Fuk (CACV 203 of 2002, 30 October 2002).

26. I consider that the same conclusion can be reached by approaching the matter on another basis, namely, by examining the objective behind the Limitation Ordinance (Cap. 347).

27. As has been pointed out in Megarry & Wade: The Law of Real Property (2000) 6th Ed., a textbook cited by counsel for the defendants:-

“ 'Limitation' means the extinction of stale claims and obsolete titles. Rights of action are limited in point of time, and are lost if not pursued within due time. Some such principle is necessary to every system of law; but in English law it depends wholly on statute, since limitation was unknown to the common law ... In relation to land ... it is in the public interest that a person who has long been in undisputed possession should be able to deal with the land as owner. It is more important that an established and peaceable possession should be protected than that the law should assist the agitation of old claims. ... Long dormant claims have often more cruelty than of justice in them" (emphasis supplied) (para. 21-001).

28. Claims can only be "stale", "old" or "long dormant" if and when there is/are someone against whom they can be made or lodged but the claims were in fact not made or lodged timeously. This is the reason why s. 13(1), Cap. 347 provides that right of action to recover land shall not be deemed to accrue unless:-

" ... the land is in the possession of some person in whose favour the period of limitation can run ... ".

29. The above provision in s. 13(1), Cap. 347 was intended to bring out the legislature's intention regarding the need for "stale", "old" and "long dormant" claims before a claim based on adverse possession can succeed. Claims can only be "pursued" if there is/are someone against whom they can be "pursued". Hence, merely because the land has been left vacant or unattended does not per se make any claims for it "stale", "old" or "long dormant".

30. Once the objective of the legislation, and therefore the intention of s. 13, Cap. 347 regarding

" ... the land [should be] in the possession of some person in whose favour the period of limitation can run ... "

is realised, the fallacy of the approach adopted by counsel for the defendants herein and by the first instance court in Tang Tak Hong can be seen. With respect to them, they have examined the above phrase in s. 13(1) from the point of view of a squatter, and asked the wrong question of whether the squatter (one of the parties to the respective litigation in question) has been in possession of the suit property for the whole of the requisite period of time. The proper question to ask is rather, whether the true owner has been dispossessed for the whole of that period of time. As long as the requisite period of dispossession has been established, the true owner's title is extinguished. Generally there is no need to be concerned with the legal niceties (if any) among the squatters themselves.

31. It is true that the court has to consider if there is sufficient evidence of an act of dispossession as well as an intention to dispossess on the part of the squatter(s). But that does not mean the court needs to go into subtle legal differences such as whether a licence (instead of a tenancy) agreement was entered into between the squatters. In relation to a "tenancy" entered into between two squatters, once the court has found as a fact that they have both dispossessed the true owner, the fact that the squatter "tenant" has exclusive possession of the land as against the squatter "landlord" does (and should) not make the true owner's claim any less "stale", "old" or "long dormant" than if the squatter "tenant" does not have such exclusive possession.

32. The above approach is consistent with the lines of authorities (relied upon by counsel for the plaintiff herein) which support the following legal propositions, namely:

（a） if a series of trespassers, adverse to one another and to the rightful owner, take and keep possession of land continuously in succession for various periods, each less than, but exceeding in the whole, 12 years, the rightful owner is barred. The earliest possessor within the 12 years may have the best title, provided any subsequent possession is contrary to the will of the earliest possessor: 28 Halsbury's Laws of England 990;

（b） where, during the currency of his tenancy, a tenant encroaches upon, or without title to do so takes possession of, other land, there is a presumption that the land so taken becomes annexed to the demised premises ... on the determination of the tenancy the land must be given up to the landlord together with the demised premises ... Where the land belongs to a third person, the third person's title is distinguished after the requisite period of adverse possession under the limitation statute: Megarry & Wade, para. 21-027; 27(1) Halsbury 165; Gray & Gray: Elements of Land Law (2001) 3rd Ed., p. 254.

33. In relation to point (a) above, the approach advocated for by the defendants herein would effectively mean that their title would have been barred if the prescribed period of dispossession had been the consequence of the combined dispossession by more than one squatter who are all strangers to each other, but not so if one squatter should have granted a "tenancy" to another squatter. There is no reason, whether based on the wordings of s. 13(1) (properly understood) or policy, to justify such a remarkable result.

34. Counsel for the defendants has argued that if adverse possession can be established by some way other than actual occupation, it can potentially give rise to an "unjust" result in that a squatter needs not be "in possession" of the land except through renting it out for the whole prescribed period. It is for present purposes unnecessary to determine the merits of this so-called potential injustice save to say this. The potential "windfall" postulated by counsel above does not appear to be any greater than the cases covered by point (b) above. In those cases, the landlord in whose favour the additional land would enure is in every sense of the word given a "windfall" to which he most probably would have no knowledge until after the event.

Hon Cheung JA:

35. Accordingly the appeal is dismissed with costs to the plaintiff.