LEE BING CHUENG v. SECRETARY FOR JUSTICE

HCA 1092/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1092 OF 2010

-------------------------

BETWEEN

-------------------------

-----------------------

J U D G M E N T

-----------------------

I. INTRODUCTION

1.  This case concerns a piece of unleased Government land (“Government Land”) adjoining Ah Kung Ngam Lot No 28 in Shaukeiwan, Hong Kong (“Leased Lot” or “AKNL28”).  The plaintiff claims against the defendant for declaratory reliefs and damages in respect of the Government Land on the grounds of (a) adverse possession, (b) encroachment for the benefit of the Government qua landlord, and/or (c) proprietary estoppel.  The defendant denies such claims, and counterclaims for damages for wrongful trespass.  The plaintiff abandons his cause of action based on encroachment upon the Government Land for his own benefit.

II. IDENTIFICATION OF THE SUIT LOTS

2.  By the Block Crown Lease of Ah Kung Ngam dated 1 January 1894 (“BCL”), AKNL28 was demised and leased to Cheung Yung Fat (張 容 發) together with the messuages, erections and buildings thereon for 999 years.  House No 29 on AKNL28 was recorded in the BCL.

3.  An archive of “Lease of Re‑grant of AKNL 24 (Counterpart)” dated 4 September 1918 in the Public Records Office shows a building on AKNL28 and a house unit on the Government Land adjoining each other.  The survey report of July 1993 (Survey Folder 3718A) from the Survey and Mapping Office (“SMO”) of the Lands Department (“LD”) contains further information about AKNL28:

“…The lot number 28 was annotated on the house which had a partition wall near its centre. The house appeared on the plan 1845, plan 1914 and plan 1927. Its dimensions scaled off from the plan 1927 agreed with that written on the Block Crown Lease schedule. …”

The 1927 Plan in Survey Folder HK3718A also shows the house units on AKNL28 and the house unit on the Government Land with division walls in between.  So in early last century there was already a building structure comprising 3 house units on AKNL28 and the Government Land.

4.  After Cheung Yung Fat (張容發) passed away, by a Partition Deed dated 18 June 1937, AKNL28 was granted and assigned unto Cheung Wan Po (張韻波).  It is agreed that the plaintiff at some time entered into possession of the Leased Lot and the Government Land.  By an Assignment dated 1 April 1952, Cheung Wan Po (張韻波) assigned AKNL28 together with all messuages, erections and buildings thereon (if any) to the plaintiff for the price of $7,000.00.  In May 1952, the plaintiff engaged a contractor to pull down the pre‑existing building and erect a 2‑storey concrete building (“New Building”), which stood and presently still stands over the Leased Lot and the Government Land.

5.  The construction of the New Building was completed in September 1952. It was built with cross walls dividing the building into 3 self‑contained house units with an extended balcony running on the first floor for the full length of the building frontage.  Over the years, these 3 house units have been referred to variously as (a) Nos 3, 3A and 3B Main Street, (b) No 29, 29A and 29B Main Street, and (c) No 29, 29A and 29B A Kung Ngam Village Road.  In this Judgment, they are referred to either as “New Houses Nos 3, 3A and 3B” or “New Houses Nos 29, 29A and 29B”, and collectively as the “New Houses”.  New House No 29B at the eastern end of the New Building with a set back at its rear occupies about ⅓ of the building site and stands over the Government Land.  New Houses Nos 29 and 29A occupy the other ⅔ of the building site and stand over the Leased Lot.

6.  There is no dispute that the location, orientation, setting and dimensions of the 3 house units of the pre‑existing building that was pulled down for the erection of the New Building appear to be about the same as those of the New Houses existing today.  In this Judgment, references to “Houses Nos 3, 3A and 3B” or “Houses Nos 29, 29A and 29B” are references to the pre‑existing house units.  House No 3B or House No 29B that stood over the Government Land is also referred to as the “Disputed House” in this Judgment.

7.  A major controversy between the parties is whether the plaintiff entered into possession of the Government Land on a day not later than 1 March 1949.  The plaintiff says that in/about February 1949 he rented and moved into “亞公岩地段28號大街門牌第三號石牆木屋” that comprised Houses Nos 29, 28A and 29B.  Such leased property has been referred to as “第三號屋” in the course of the trial, and is referred to as the “Rented House” in this Judgment.

III.  BACKGROUND

(a)  1990‑1991

8.  On 6 November 1990, the Building and Lands Department (“BLD”) inspected the New Houses.  Building defects were identified in respect of each of the New Houses includingNew House No 29B.  Upon enquiries by the BLD, the LD’s District Land Office / Hong Kong East (“DLO/HKE”) on 18 December 1990 replied that New Houses Nos 29 and 29A were within AKNL28, but New House No 29B was on unleased and unallocated Government land.

9.  On 25 February 1991, the BLD told the DLO/HKE that since New House No 29B fell within unleased and unallocated Government land (and hence not under the control of the Building Ordinance Cap 123), they would not take action on House No 29B but would refer to the DLO/HKE for necessary follow up action.  On 22 March 1991, the DLO/HKE referred New House No 29B to the Squatter Control Unit (“SCU”) of the Housing Department for appropriate action. The SCU’s reply on 27 May 1991 stated that the occupants of the structures had been informed to carry out routine repair/maintenance works to their own structures, and no action would be taken at this stage “unless these structures are condemned”.

10.  On 3 June 1991, the Building Authority (“BA”) issued Order No D232/HK/91P (“BA Order”) declaring New Houses Nos 29 and 29A were liable to become dangerous and requiring the plaintiff to carry out repairs before 3 July 1991.  The BA did not issue any building order against New House No 29B.  The plaintiff engaged contractors to repair New Houses Nos 29, 29A and 29B for the sum of $79,660.84, which works were completed in November 1991.  On 11 December 1991, the BA issued a letter of compliance in respect of New Houses Nos 29 and 29A confirming compliance with the BA Order.

(b)   1993

11.  The SMO’s survey report of July 1993 (Survey Folder 3718A) states as follows in respect of AKNL28:

“… The current owner said that he purchased the land with ruins on after the war (air photo 1949). He said the new house was rebuilt based on the ruins left on the ground. He had no idea that the area of the lot should be about two third of his house now standing on the site.”

(c)   1995

12.  A thorough investigation of Ah Kung Ngam Village was conducted in 1995 with a view to re‑establish the lot boundaries of the Ah Kung Ngam lots and to clarify the land status of such lots in the village.  Mr Cheng Muk‑yuen (“Mr Cheng”) was the assistant land surveyor with the District Survey Office / Hong Kong (“DSO/HK”) assigned to conduct the field survey for this project.  The field survey revealed the existence of the New Building on the Leased Lot and the Government Land.  Mr Cheng is also the defendant’s expert on land status, state and location in this action.

(d)   2008-2010

13.  By a Chinese tenancy agreement dated 1 September 2008, the plaintiff as landlord let the ground floor of New House No 29B to Mr Chung Hon‑ping (“Mr Chung”) as tenant for a term of 3 years from 1 September 2008 to 31 August 2011 at a monthly rent of $4,500.00 for the first two years and $4,950.00 for the third year (“Chung TA”).

14.  On 23 February 2009, a Ms Chan Shuk Ching (“Ms Chan”) submitted a planning application (signed by Mr Chung as her authorised agent) for operating an eating place at the ground floor of New House No 29B (“Planning Application”).

15.  On 26 March 2009, the DLO/HKE informed the District Planning Office / Hong Kong (“DPO/HK”) of the Planning Department that the Planning Application was not acceptable from a land administration point of view because the subject property fell within Government land without their consent or approval.

16.  On 13 August 2009, Mr Chung’s solicitors wrote to the plaintiff alleging that Mr Chung had informed the plaintiff at the time of entering into the Chung TA he would use the subject property as a local café (荼餐廳), and he threatened to take legal action for losses due to the refusal of the Planning Application.

17.  On 29 October 2009, the LD posted Government Notice Serial No DLO/HKE 2407 (“Government Notice”) on New House No 29B and issued notification letters to the plaintiff and the occupier(s) of the Government Land requiring them to cease occupation before 29 January 2010.

18.  On 21 January 2010, Ms Lee Wai Oy Vivien (李惠愛) (“Wai Oy”), the plaintiff’s second daughter, advised the DLO/HKE that their appointed surveyor would complete a survey report on New House No 29B in 3 working weeks, and requested them to extend the Government Notice to 15 March 2010.

19.  On 28 January 2010, the plaintiff’s former solicitors wrote to the DLO/HKE claiming that by adverse possession and/or proprietary estoppel the plaintiff was entitled to the Government Land and the house erected thereon, and the Government was estopped from denying his right to the use and enjoyment of the Government L and.

20.  On 29 January 2010, the Government through the LD as its land agent and the staff of the DLO/HKE evicted Mr Chung from the ground floor of New House No 29B, took possession of Government Land, and forfeited House No 29B erected thereon (“Clearance Action”).

IV.  ISSUES

(a)  First issue

21.  The plaintiff claims he has acquired possessory title to the Government Land not later than 28 February 2009 by tacking the following periods of adverse possession:

(a)  before 1 March 1949, by Cheung Wan Po (張韻波);

(b)  from a day not later than 1 March 1949 until 1 April 1952, by Cheung Wan Po (張韻波) through his tenant (ie the plaintiff);

(c)  since 1 April 1952, by the plaintiff whether by himself, his family members and/or his tenants.

22.  The defendant denies that the plaintiff has been in adverse possession of the Government Land for the requisite 60‑year period, and claims that the Government was entitled to recover possession of the Government Land over which New House No 29B now stands by the Clearance Action on 29 January 2010.

23.  Mr Man, counsel for the defendant, accepts that (subject to the third broad issue discussed below) possession of the Government Land (if any) by Cheung Wan Po (張韻波) through the plaintiff before 1 April 1952 would be adverse to (and can be counted against) the Government.  He further accepts that from 1 April 1952 until 29 January 2010 the plaintiff (whether by himself, his family members and/or his tenants) had been in continuous and exclusive possession of the Government Land.  So it is sufficient for the plaintiff to prove that he entered into possession of the Government Land before 29 January 1950 (being 60 years before the Clearance Action) as the tenant of Cheung Wan Po (張韻波).  But since the plaintiff avers that he entered into possession of the Government Land in/ about February 1949 without pleading any alternative date, the formulation of the first broad issue should be whether the plaintiff entered into possession of the Government Land on a day not later than 1 March 1949.

(b)   Second issue

24.  If the plaintiff is able to establish 60 years of exclusive and continuous possession of the Government Land, both parties agree that the presumption of encroachment upon the Government Land (being immediately adjacent to the Leased Lot) for the benefit of the Government qua landlord will prevail, and the plaintiff is only entitled to possess, use and occupy the Government Land coterminous with the Government grant in respect of Leased Lot which will expire on 31 December 2892.  There is, therefore, no need to consider the second broad issue of whether the encroachment presumption has been rebutted.

(c)   Third issue

25.  The third broad issue is whether the periods of possession of the Government Land by the plaintiff before, on and after 1 July 1997 should be cumulatively or separately counted for the purpose of the Limitation Ordinance Cap 347 (“LO”).  This is relevant to the causes of action on adverse possession and encroachment but not proprietary estoppel.  For this third broad issue, it is necessary to distinguish between the British Hong Kong Government (“BHKG”) and the HKSAR Government (“SARG”), but otherwise references to the Government in this Judgment means the BHKG, the SARG or both, whichever is applicable.

(d)   Fourth issue

26.  The plaintiff claims he has expended money and labour in erecting the New Building on inter alia the Government Land in 1952 and in maintaining and upkeeping the New Building (including New House No 29B) for a period of not less than 50 years thereafter (eg hiring contractors to repair the New Houses in 1991 upon being served with the BA Order) in the mistaken belief that the Government Land forms part of the Leased Lot and that he is legally entitled to exclusive possession of such land.  Since these acts were done openly and the BA’s staff had inspected New Houses Nos 29 and 29A to verify compliance with the BA Order, the plaintiff says the Government through its servants or agents has actual or presumed knowledge of (but has stood by and not taken any issue over) his use and occupation of the Government Land and/or New House No 29B.  Thus, the plaintiff argues that the Government cannot recover possession of such land from him as a result of proprietary estoppel.  

27.  The defendant denies such claim, but accepts that by 18 December 1990 the Government had actual knowledge of the plaintiff’s use and occupation of the Government Land being unleased and unallocated Government land.  Therefore, the fourth broad issue is whether it will be unconscionable for the Government to assert its rights over the Government Land so as to give rise to proprietary estoppel.

(e)   Fifth issue

28.  If proprietary estoppel is established, the fifth broad issue is what relief should be granted to do justice.  The plaintiff seeks the return of possession of the Government Land and New House No 29B standing thereon and a declaration that (a) he has acquired proprietary interest of and in the Government Land and (b) the Government is estopped from recovering possession of the Government Land “until after midnight of 31.12.2892”.  The defendant contends that such reliefs if granted will be wholly disproportionate to the plaintiff’s detriment as any equity in his favour must have been spent by now.

(f)    Sixth issue

29.  There is no dispute that if the plaintiff is able to establish any of his causes of action the Clearance Action on 29 January 2010 constitutes wrongful trespass, and the defendant will be liable pay damages to the plaintiff for such wrongful trespass.  The parties have agreed on the quantum of such damages as follows: (a) loss of rental income and/or mesne profits in respect of New House No 29B on the Government Land for the period from 29 January 2010 to 15 January 2013 in the total sum of $231,685.00, and (b) mesne profits for the ground and first floors of New House No 29B on the Government Land for the period from 16 January 2013 to the date of repossession by the plaintiff or 31 December 2013, whichever is earlier, in the respective monthly sum of $5,360 and $4,150.  There is no agreement over the quantum of monthly mesne profits in the event that repossession by the plaintiff is not achieved by 31 December 2013, and this falls to be assessed by the court.

(g)   Seventh issue

30.  The seventh broad issue is whether the plaintiff is liable to pay damages and/or mesne profits under the defendant’s counterclaim.  Such counterclaim must fail if the plaintiff is able to establish his case on adverse possession or encroachment, but Mr Man says that depending on the equitable relief to be granted if the plaintiff succeeds in establishing proprietary estoppel the counterclaim may be still viable.  On the other hand, Mr Chong (and with him Mr Tam), counsel for the plaintiff, argues that the counterclaim must fail if the plaintiff is able to establish any of his causes of action.  Nevertheless, subject to the issue of liability, the quantum of damages claimed under the defendant’s counterclaim being mesne profits in respect of the Government Land for the period from 19 July 2004 to 29 January 2010 is agreed at $499,000.00.

V.   LEGAL PRINCIPLES: ADVERSE POSSESSION

31.  The starting point is sections 7 and 17 of the LO:

“ Section 7(1)

No action shall be brought by the Crown to recover any land after the expiration of 60 years from the date on which the right of action accrued to the Crown or, if it first accrued to some person though whom the Crown claims, to that person.

Section 17

Subject to the provisions of section 10, at the expiration of the period prescribed by this Ordinance for any person to bring an action to recover land (including a redemption action), the title of that person to the land shall be extinguished.”

32.  To establish possessory title based on adverse possession in respect of Government land, the squatter must be shown to have both factual possession of the suit lot and the requisite intention to possess (animus possidendi) for the whole of the 60‑year limitation period.[1]

(a)   Factual possession

33.  In Powell v McFarlane & Anor (1979) 38 P & CR 452, 470‑471, Slade J said this:[2]

“(3) Factual possession signifies an appropriate degree of physical control. It must be a single and conclusive possession, though there can be a single possession exercised by or on behalf of several persons jointly. … The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed. ... Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no‑one else has done so.”

(b)   Intention to possess

34.  As to the requisite intention to possess, the principles can be found in Wong Tak Yue v Kung Kwok Wai & Another (No 2) (1997‑1998) 1 HKCFAR 55, 68:

“The requisite intention to possess has been referred in various authorities under its Latin tag “animus possidendi”.  I shall refer to it simply as the intention to possess.  As Slade J observed in Powell v McFarlane (1979) 38 P & CR 452 at pp 471‑472, the intention to possess requisite for adverse possession:

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

35.  This has several consequences.  First, although the squatter must intend to exercise exclusive control for his own benefit, he need not have a conscious intention to exclude the true owner.  It is enough that the squatter intends to exclude the owner “as best as he can” or “so far as reasonably practicable and so far as the process of the law allows”.[3]  Secondly, an intention to own the land or even an intention to acquire ownership is not required for establishing the animus possendi.[4]  Thirdly, the animus possendi can be established even if the squatter mistakenly believes himself to be the owner of the land.[5]

(c)   Evidence

36.  Both the fact of possession and the intention to possess are questions of fact, and in determining these matters the court has to assess all the circumstances. The burden of proof is on the party claiming adverse possession, and the evidence he has to adduce must be compelling.[6]  However, this does not alter the standard of proof, which remains the balance of probabilities.  All it means is that the evidence adduced must be of such a quality and nature that, if accepted on the balance of probabilities, it is sufficient to establish both factual possession as well as an intention to possess.[7]

37.  For completeness, I repeat Li CJ’s observations in Wong Tak Yue at p 69 in relation to self‑serving statements made by an occupier during his occupation or when challenged in legal proceedings, which serves to emphasise the nature of the burden that an occupier carries:

“Where the occupier has made self‑serving statements as to what was his intention, whether during the period of occupation or when challenged in legal proceedings, the courts should approach them with some skepticism. The courts would scrutinise the circumstances in which they were made and would given them such weight if any as they may deserve. Conversely, where the occupier has made statements as to what was his intention and such statements are against his interest, the courts would usually accord to them considerable weight.”

VI.   LEGAL PRINCIPLES: ENCROACHMENT

38.  The applicable legal principles have been definitively stated by the Court of Final Appeal in Secretary for Justice v Chau Ka Chik Tso FACV5/2011 (unreported, 8 December 2011). Lord Scott of Foscote NPJ explained the encroachment presumption as follows:

“108. … if a tenant goes into, and remains in, occupation of land belonging to his landlord, it is to be presumed, particularly if the encroached‑upon land is adjoining the demised land, that the tenant’s encroachment is intended by him to annex the encroached-upon land to his demised land so as to enable him to occupy and use the encroached-upon land as if it were part and parcel of the demised land (see Kingsmill v. Millard (1855) 11 Exch 313 at 318). The presumption, although imposed by judge-made law, is a rebuttable one and can be rebutted by evidence that the tenant intended to occupy the encroached-upon land not simply as tenant but as owner.”

39.  At paragraph 121, he further explained that where the encroachment presumption cannot be or has not been rebutted, the consequences will depend upon what, if any, action is taken by the owner of the encroached-upon land in response to the encroachment:

“(1) If the owner of the encroached‑upon land has adopted the presumption, or has through conduct or knowing acquiescence become barred from denying it, both parties, tenant and landlord, will be bound to treat the encroached-upon land as annexed to the demised land and held by the tenant on the terms of the demise.

(2) If the owner of the encroached‑upon land has done nothing and the relevant limitation period barring an action to recover possession of the encroached-upon land has expired, the owner will be unable to recover possession of that land until the termination of the demise. But the tenant, still bound by the unrebutted presumption, will be bound on the termination of the demise to deliver up possession both of the demised land and of the encroached-upon land to his landlord, the owner of both.

(3) But if the owner of the encroached‑upon land, having done nothing to adopt the presumption, remains not bound by it, then, if the relevant limitation period has not yet expired, the owner can, by action, pursue the remedies available against trespassers and, accordingly, recover possession of the land.”

VII.   LEGAL PRINCIPLES: PROPRIETARY ESTOPPEL

40.  There are, broadly speaking, two species of proprietary estoppel which Mr Recorder H Wong SC in Best Star Holdings Limited v Lam Chun Hing & Others HCA409/2008 (unreported, 22 February 2012) at paragraphs 134‑136 referred to as “proprietary estoppel by representation” and “proprietary estoppel by standing by”.

41.  In the present case, the plaintiff relies on the principle of “proprietary estoppel by standing by” as formulated by Lord Cranswoth LC in Ramsden v Dyson and Thornton (1866) LR 1 HL 129:

“If a stranger begins to build on my land, supposing it to be his own, and I, perceiving his mistake abstain from setting him right, and leave him to persevere in his error, a Court of Equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own. It considers that, when I saw the mistake into which he had fallen, it was my duty to be active and to state my adverse title; and that it would be dishonest in me to remain willfully passive on such an occasion, in order afterwards to profit by the mistake which I might have prevented.”

42.  Fry J in Willmott v Barber (1880) 15 Ch D 96, 105 formulated the 5 “probandas” or usual elements for considering a proprietary estoppel of this kind:

(a)  the plaintiff must have a mistaken belief as to his legal rights;

(b)  the plaintiff must have expended money or done some act on the faith of his mistaken belief (ie detrimental reliance);

(c)  the defendant must know of the existence of his own legal right which is inconsistent with the right claimed by the plaintiff;

(d)  the defendant must know of the plaintiff’s mistaken belief of his legal rights;

(e)  the defendant must have encouraged the plaintiff in his expenditure of money or in the acts which he has done, either directly or by abstaining from asserting his legal rights.

43.  But such is the nature of the equity under the doctrine of proprietary estoppel that the true test is whether it will be unconscionable for the defendant to deny that which he has allowed or encouraged the plaintiff to assume to his detriment rather than “whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour”.[8]  Nevertheless, Rogers JA in Tong Tim Nui & Ors v Hong Kong Housing Authority [1994] 4 HKC 466, 495 accepts that “the more formalised test of Fry J … remains a good starting point”.

44.  In Best Star Holdings Limited, the learned judge was not sure whether the 3^rd probanda was satisfied, but he still held that it would be unconscionable for the 1^st and 2^nd defendants to take advantage of the expenditure incurred by the plaintiff on property development, they having stood by and raised no objection to the construction of the small houses.  The learned judge also referred to Barker J’s observations in Andrews v Colonial Mutual Life Assurance Society Ltd [1982] 2 NZLR 566, 570as follows:

“The first, second and fifth probanda are clearly established; the other two less clearly. However, the recent cases show that strict adherence to the probanda is not necessary; it would be unconscionable for a party to be permitted to deny that which knowingly or unknowingly he has allowed another to assume to his detriment rather than inquiring whether the circumstances can be fitted into some preconceived formula. …”

45.  As to the nature of the relief if a claim on proprietary estoppel is made out, it is necessary to bear in mind the equity that arises is an equitable proprietary right to go to the court to seek relief.  The court will look at the circumstances in each case to determine how the equity can best be satisfied, and it has a wide discretion as to the manner in which it may satisfy the equity.  The court is not bound to give effect to the plaintiff’s expectations if the circumstances have changed so as to make it inappropriate or if a more appropriate form of relief would remedy the unconscionability.[9] The essence of the relief is to avoid an unconscionable result.[10]

VIII.   EVIDENCE

(a)   Factual witnesses

46.  The plaintiff, who gave evidence, is an elderly gentleman just a few months short of 100 years.  He was not much younger when he made his affirmations and witness statements, and when he gave evidence by deposition in 2011 and 2012.  His recollection and testimony relate to events more than 60 years ago.  The plaintiff has also called his eldest daughter Ms Lee Kwan Oy (李群愛) (“Kwan Oy”) and his second daughter Wai Oy to give evidence on his behalf.

47.  The defendant has called Ms Chiu Lee Lee (senior estate surveyor) (“Ms Chiu”) to give evidence.  The witness statements of Ms Lam Wai Ling Stella of the Water Supplies Department and Mr Wong Wai Leung of the Rating and Valuation Department respectively dated 30 and 31 August 2011 were adduced without oral evidence, but nothing really turns on their evidence.

(b)   Plaintiff’s depositions

48.  The plaintiff has made 3 witness statements dated 23 June 2011, 21 October 2011 and 9 January 2012 respectively and 2 affirmations both filed on 2 December 2010. He has given evidence twice before the trial by way of deposition on 16 March 2011 and 17 January 2012 (“1^st and 2^nd Depositions”), and both Mr Man and Mr Chong agree that the corresponding transcripts are to be adduced as hearsay evidence.

(c)    Credibility of the factual witnesses

49.  The first and fourth broad issues turn very much on the facts, so I remind myself of the warning by Litton NPJ in Tradepower (Holdings) Ltd v Tradepower (Hong Kong) Ltd [2010] 1 HKLRD 674, 725‑726 against trial judges placing undue reliance upon demeanour and resolving factual issues by using witnesses’ demeanour isolated from the inherent probabilities of the case.[11]  In the circumstances, I have to weigh the intrinsic value of the witnesses’ evidence against the documentary evidence, the experts’ evidence, the inferences based on inherent probabilities and/or undisputed facts, the history of events and the pleadings.[12]  I also bear in mind the observations in paragraphs 36‑37 above.

50.  Despite Mr Chong’s submissions to the contrary, I find Ms Chiu, whose evidence is uncontroversial, to be an honest witness.  As for Kwan Oy, Mr Man fairly accepts that she was only 5‑6 years old in 1949 and she cannot remember clearly.  Mr Man has not made any submission as to the reliability of Wai Oy’s evidence, and I find her honest and credible.

51.  Although Mr Man criticises the plaintiff for giving inconsistent and hence unreliable evidence and for tailoring his case after realising that the defendant had a useful aerial photograph which his own expert had not sighted for the purpose of such expert’s initial report, bearing in mind the plaintiff’s advanced age, his limitations in hearing and eyesight, his slowness at times in understanding the questions that were put to him, and his need to read and speak slowly, I find him forthcoming and reasonably articulate on his personal experiences, and he was unshaken on these matters even under cross‑examination. But he does not remember extraneous matters (eg the Joint Meeting as referred to in paragraph 53 below) well, and I do not believe he changed and/or tailored his evidence as Mr Man suggested.  On balance, I find the plaintiff to be truthful and reliable on the core issues, and in particular I accept his evidence in relation to his use and occupation of the Government Land, House No 3B and New House No 29B.

(d)   Disputed rent receipt

52.  The defendant does not admit the authenticity of the photocopy of a rent receipt dated 1 March 1949 (“Rent Receipt”) disclosed by the plaintiff.  But for reasons set out below, I find this document to be authentic and admissible as evidence for the purpose of the trial.

(e)    Expert witnesses on land status, state and location

53.  Both parties adduce opinion evidence from expert witnesses as to land status, state and location of the Leased Lot and the Government Land in/about 1949.  The plaintiff’s expert is Mr Ng Jor-chiu (“Mr Ng”) and the defendant’s expert is Mr Cheng, and they adopt their respective expert reports (namely, Mr Ng’s expert report dated 25 June 2010 (“Ng Report”), Mr Cheng’s expert report dated 31 August 2011 (“Cheng Report”), and their joint statement dated 31 January 2012 (“Joint Statement”) made pursuant to their joint meeting on 6 October 2011 (“Joint Meeting”)) as their evidence‑in‑chief.

54.  I will deal with their evidence in greater detail below, but suffice to state here that I agree with Mr Ng that on balance one cannot confidently visualise the ground feature(s) at the Disputed House from the aerial photographs, and I do not accept Mr Cheng’s opinion that they were shrubs and young trees.

IX.  FIRST ISSUE – ENTRY INTO POSSESSION

(a)  Background

55.  The plaintiff came from a well‑to‑do landowning family in Mainland China.  He was married in 1941.  His eldest daughter Kwan Oy, second daughter Wai Oy and eldest son were born in 1943, 1946 and 1947 respectively.  In 1949 he and his family fled to Hong Kong as refugees from the civil war in Mainland China.  But their family of five could not stay with their fellow villager黃洪 at Stewart Road, Wanchai or afford to rent accommodation in that area, so 黃 洪 suggested that they go and live in Ah Kung Ngam (then a fishing village populated by fishermen surnamed Cheung) as he knew a landowner there and the rent and lease premium (頂手費) would be cheaper.

(b)  Plaintiff’s case

56.  The plaintiff says that in/about February 1949 a Madam Cheung (“Madam Cheung”) told him the owner of AKNL28 agreed to lease the Rented House being “亞公岩地段28號大街門牌第三號石牆木屋” to him, so with her consent he and his family moved into the Rented House (which he thought was situated on AKNL28) as their home in/about February 1949.  He was given the Rent Receipt which Madam Cheung signed with a “十” sign to acknowledge receipt of the March 1949 rent ($8.00) and the lease premium (頂手費) ($500.00):

“憑單收到亞公岩地段28號大街門牌第三號石牆木屋樓全間李子文寶號/先生租銀由三月一日起至三月尾日止該租銀0 仟 0 佰 0 拾 捌 員 0 毫差餉在

言明每月上期交租取香港通用銀紙如或不賃必須預早壹個月報知倘不先聲明要補回壹個月租銀屋內裝修入牆之杉板不得拆回或鋪客如有另圖別業即將此鋪交回鋪主不得擅自頂與別人亦不得在屋內窩娼聚賭亦不得貯犯禁等物倘違例禀官究治但收租必須收租人簽字單內方為實如各伴賒借經手是問不得在租項扣除特此佈聞

水電費住客理

上蓋木屋頂手費伍佰元已收妥

經手收銀人張十

一九四九年三月一日發

天字第五拾號” (italics in manuscript)

(c)  Plaintiff’s recollection of his abode in 1949

57.  The defendant says there is clear evidence from Mr Ng that the plaintiff has no recollection of the location and state of his abode in 1949.  Mr Ng gave evidence that it was the plaintiff who first approached him via a surveyor firm with instructions to prepare a preliminary report (see paragraph 18 above), but the plaintiff was unsure what to look for other than “你幫我睇吓嗰到有無間屋喺到”.  Mr Man says this shows that prior to 25 June 2010 (the date of the Ng Report) the plaintiff had no recollection of the location and state of his abode in 1949, which means his present detailed evidence about the Rented House must have been assisted by Mr Ng’s opinion and/or wholly unreliable.

58.  I do not accept Mr Man’s submissions.  The plaintiff’s former solicitors wrote to the DLO/HKE on 28 January 2010 (ie a day before the Clearance Action and long before the Ng Report) (see paragraph 19 above), and in such letter they referred to counsel’s advice given upon preliminary consideration of inter alia oral instructions from the plaintiff, and they also set out the factual basis for the plaintiff’s claims based on adverse possession and/or proprietary estoppel:

“ We are instructed by our client that, latest by the spring of 1949, the piece of Government Land (now covered by House No 29B) and its adjacent land, namely Lot No 28, A Kung Ngam (‘the said lot’) had already been built upon with a pre‑war stone house by one Cheung Wan Po, a fisherman.

Our client was given to understand that the said pre‑war stone house was owned by the said Cheung who claimed to be the owner of the same. Shortly thereafter, in the spring of 1949, our clients and members of his family (inclusive of his wife and 3 children) started occupying the said pre‑war house as their home which was then improved by them due to its then dilapidated state.

On a day in late 1951 or early 1952, our client entered into an agreement for the purchase of the pre‑war stone house with the said Cheung completion of which took place on 1^st April 1952 when our client obtained assignment of the said land lot from the said Cheung upon payment of $7,000.00 to him.

Immediately thereafter, on 15^th May 1952, our client entered into a written agreement with 林佐記 a builder to rebuild the said pre‑war building on exactly its same position and the design of the same was previously prepared by an architect.

Within 4 months, a new two‑storey building (made up of 6 smaller individual self‑contained units and made of concrete) (‘the said concrete house’) was completed at exactly the same and previous location of the said pre-war building. Since then, these 6 self‑contained units were respectively given House Nos 29, 29A and 29B and they were partly occupied by our client (and his family) and partly let out.

In 1956, our client (and members of his family) moved out of the said concrete house …”

59.  In my view, the above detailed account based on the plaintiff’s recollection given before the Clearance Action is consistent with his present evidence that his abode in 1949 was the Rented House that stood over the Leased Lot and the Government Land, and that it was in such a dilapidated state he had to carry out improvements.  It is plain that his recollection is not dependent on Mr Ng’s opinion which came about much later.

(d)   Expert evidence on land status, state and location

60.  The defendant claims that the plaintiff’s case is inconsistent with (a) what can be discerned from the relevant aerial photographs (with or without 3D effect) and (b) Mr Cheng’s opinion that such aerial photographs clearly show the roof of the Disputed House had gone and shrubs/trees occupied most of the floor area of the Disputed House with no sign of human dwelling.

61.  I will first consider whether in light of the expert evidence the images at the Disputed House on the relevant aerial photographs under 2D or 3D viewing lend itself to confident interpretation of the ground feature(s), and if they do, then further consider whether they were shrubs/trees and how such shrubs/trees square with the plaintiff’s case.

(i)   Available documents

62.  The experts’ evaluation turns on their interpretation of aerial photographs nos 6091 and 6092 taken by the British Air Force from 8,600ft on 8 May 1949 that contain images of the Leased Lot, the Government Land and the surrounding area (“6091 and 6092 Photos” or collectively, the “Photos”), corresponding portion enlargements of such aerial photographs (“Enlarged 6091 and 6092” or collectively, the “Enlarged Photos”), and 3D models generated from the Enlarged Photos.

63.  Certain parts of Enlarged 6092 (including the Disputed House and two patches of “dark substances” (“Dark Patches”) to the northeast of the Disputed House which Mr Cheng says were shrubs/trees) are blurred.  Mr Cheng says the quality of the 6091 Photo is superb, but Mr Ng says the professional standard is whether such photograph is fit or reasonably fit for purpose.  Mr Man says that such suggestion by Mr Ng is an attempt to downplay the value of the 6091 Photo.  I do not agree.  Mr Ng fairly accepts that in the absence of any other photograph of better quality, the 6091 Photo is fit for the purpose of establishing whether or not any roof structure can be observed over the Government Land in May 1949.

(ii)  Agreements between the experts

64.  Three house units  The Photos clearly show a building structure with external walls along the building perimeter and 2 partition walls dividing it into 3 house units, ie the Disputed House on the Government Land and 2 adjoining house units on the Leased Lot, which sits well with the layout of Houses Nos 3, 3A and 3B seen in the earlier survey and layout plans (see paragraph 3 above).

65.  Ruins and roof  The Photos show that the nearby buildings/ structures had become ruins, and the building that stood on the Leased Lot and the Government Land was scarred by war damage.  Mr Cheng (who has access to both Photos) says the roof of such building had disappeared leaving the top of the building walls and the ground floor inside the ruins exposed under the sun.  But when Mr Ng prepared the Ng Report he only had the 6092 Photo.  He found it difficult to tell with precision which part of such building structure (if any) was in ruins or what the physical state of the Disputed House was.  He says in the Ng Report that given the similarity of the grey tone and texture of the Disputed House to those of some roofed structures opposite it as shown in Enlarged 6092, it is possible that the Disputed House might have its roof built with some flimsy materials or deposited with dirt/debris which made such roof appear as dark grey in the monochrome 6092 Photo.  Mr Ng first sighted the 6091 Photo when he was given the Cheng Report by the plaintiff’s solicitors.  At the Joint Meeting, he accepted that Houses Nos 29, 29A and 29B shown in the Photos were in ruins, ie the roof of such house units (including the Disputed House) had gone leaving partly damaged supporting walls.

66.  Mr Man submits that Mr Ng’s omission to consider the 6091 Photo (which is publicly accessible through the SMO’s electronic MARS system) or to look for another aerial photograph which might have assisted him in preparing the Ng Report undermines his credibility.

67.  Mr Ng explains that it was his practice to delegate the task of searching for relevant aerial photographs (usually from the hard copy catalogue although the MARS system was sometimes used) to his assistant, and he cannot remember whether his assistant told him about the 6091 Photo.  He says that when the plaintiff first approached him with general instructions to see if a house stood over the Government Land (see paragraphs 18 and 57 above), he thought it would be economically proportionate for the purpose of preparing a preliminary report to review the 6092 Photo without further search for any other 1949 aerial photograph(s). He expected further instructions would follow if the plaintiff’s legal advisors in due course required more detailed investigation.

68.  Although it would have been more desirable for Mr Ng to have reviewed the 6091 Photo for the Ng Report, I find his explanation plausible and convincing, and such omission on his part does not undermine his expertise, professionalism and/or evidence.  First, even though Mr Ng cannot confidently confirm the ruin state of the Disputed House on the basis of the 6092 Photo, he fairly acknowledges in the Ng Report that Enlarged 6092 shows exposed external walls and partition walls that might be in a dilapidated state, and that these walls had different heights as evidenced by shadows of varying lengths casting from the walls.  Secondly, when he had the opportunity to study the 6091 Photo, he readily rectified his earlier opinion and accepted the ruin state of Houses Nos 29, 29A and 29B with loss of roof.  Thirdly, his observation in the Ng Report as to the possibility of there being a roof at the Disputed House made of flimsy materials or with dirt/debris thereon is not far different from his opinion in the Joint Statement made after studying the 6091 Photo that there might have been a rudimentary shelter made of flimsy materials over the Disputed House.  What Mr Ng fairly admits in the Joint Statement is that the original or pre‑existing roof of the building on the Leased Lot and the Government Land had disappeared.

69.  Walls  Both experts accept that the supporting walls were partly damaged.  Mr Cheng says the shadows of the front wall facing northwest and the side wall facing southwest were very slim indicating that the height of these damaged walls was very short, but the 2 partition walls and the back wall had broad shadows demonstrating that their height was considerably higher.  Mr Ng agrees (as borne out by his observations in the Joint Statement) that the upper parts of the northwest wall and the southwest wall had collapsed leaving the lower parts estimated to be about 2‑3ft high, and the “tops” of the partition walls had partially collapsed leaving the lower parts with varying wall heights estimated to be 5‑10ft.

70.  When the above wall height of the northwest wall was put to Mr Ng during cross-examination, he at first disagreed with his own views in the Joint Statement but later explained he had forgotten what he had stated.  I do not accept Mr Man’s suggestion that this reflects Mr Ng’s preparedness to say whatever he thought was the right answer.  If that were so, he would not have taken the effort to study the 3D anaglyph photograph he prepared from the Enlarged Photos (“Anaglyph Photo”) to work out the height measurements of the walls and record them in the Joint Statement.

(iii)  Approach to photographic interpretation

71.  Whilst the experts disagree over what can be distilled from the Photos, it is common ground that photographic interpretation requires the viewer to study the images of the Disputed House and compare them with the images in the surrounding area.  Hence, both experts have visualised the colour tone and textual details of the Dark Patches at the Disputed House and compared them with other Dark Patches in the surrounding area in coming to their different opinion as to the ground feature(s) at the Disputed House.

72.  The experts then apply “general knowledge” (ie the natural growth cycle of plants in the case of Mr Cheng and the post‑war population and housing condition in the case of Mr Ng) to their observations to draw conclusions as to whether the Disputed House was used as a dwelling as of 8 May 1949.  But such use of “general knowledge” by the experts has excited criticism by counsel.

73.  Since the starting point is to see what can be visualised from the Photos and the Enlarged Photos, I now turn to the 3D models generated from such aerial photographs by different methodologies, ie stereoscopy for Mr Cheng and anaglyph 3D for Mr Ng.

(iv)  Stereoscopy

74.  Stereoscopy creates the illusion of 3D depth from simultaneous visualisation of 2D offset images from a “stereo pair” (ie 2 photographic perspectives of the same subject with some deviation) through an optical device called the stereoscope.  The visual information acquired through the eyes is then processed or combined in the brain to give the perception of 3D depth.  Mr Cheng understands that the brain will strive to make meaningful sense of the visual information so as to determine the relative depth and/or textual detail of the perceived objects.

75.  But stereoscopy has its limitations.  First, the need for stereo-acuity and brain process is greater than what is required for anaglyph 3D.  Some people have weak stereoscopic vision that prevents them from depth perception based on 3D stereoscopic viewing.  Secondly, although side‑by‑side stereoscopic viewing requires no additional image processing, the size of the image presented is limited, and the stereoscope and the 2D images have to be re‑aligned to see an object outside the field of vision.

76.  Nevertheless, Mr Cheng says stereoscopy is the best method as it involves viewing the unembellished aerial photographs without further image processing, manipulation or distortion.  He says that even though the image quality of Enlarged 6092 is a bit blurry over the Disputed House and the nearby area, it can still provide depth perception for the 3D image and its weakness in image quality is compensated by the superb quality of Enlarged 6091 which provides the “skin” (or tone/texture) for the 3D image.  Mr Cheng says the brain will then process the visual information to produce a very good and sharp 3D image that enables confident interpretation of the ground feature(s) without difficulty.  He even goes so far as to say that even the single 6091 Photo itself can tell the whole story.

77.  Mr Chong says stereoscopy is flawed in this case because Mr Cheng admits that what the brain process does is to cause the brain to “deceive” itself into seeing a clear 3D image when in fact one of the 2D images (ie from Enlarged 6092) is blurred.  But in my view, Mr Cheng has coined the word “deception” because he is unable to give an anatomical explanation for a phenomenon which he as a land surveyor has experienced from using the stereoscope.  Anyway, since stereoscopy does not involve any processing, the images perceived via stereoscopy must come from the 2D photographs, and there is no basis for suggesting (and Mr Ng has not suggested) that stereoscopy will somehow produce a 3D image that does not reflect what is on the 2D photographs.  I do not accept that stereoscopic viewing of the Enlarged Photos is flawed for this reason.  Rather, the question is whether the 3D images perceived via stereoscopy enable confident interpretation.

(v)  Anaglyph 3D

78.  Anaglyph 3D is the 3D effect achieved by means of encoding each eye’s image using red and blue colour filters.  The anaglyph photograph image is generated by an image processing computer software programme from a pair of 2D photographs as source images.  When the anaglyph photograph image is viewed through the red and blue glasses, it produces a perception of a 3D scene that causes the object to “pop out”.

79.  It is easier to view anaglyph images (if viewed on a computer screen) than to view the “stereo pair” through the stereoscope.  As Mr Ng explains, anyone with normal vision can see the 3D anaglyph image with red and blue glasses.  Further, stereoscopy offers only a limited field of vision and an anaglyph photograph enables simultaneous viewing of the images of a disputed object as well as other nearby objects for comparison purpose, so Mr Ng says the modern approach favours use of anaglyph 3D rather than stereoscopy.

80.  Mr Cheng criticises the Anaglyph Photo as being produced by manipulation of the Photos using computer software and thus a result of computer processing and distortion.  However, he has not particularised what “manipulation” is required for producing the anaglyph image and how and to what extent the anaglyph image has been distorted as compared with the 2D source images.  Apart from the need for computer processing, Mr Cheng also has not explained how and to what extent the anaglyph image is inferior to the 3D image seen through the stereoscope.

81.  Mr Ng fairly accepts there may be some loss of image resolution by scanning the 2D photographs into the computer system, but it is a bearable loss if it does not compromise image interpretation.  He says that computer processing thereafter for generating the anaglyph image should not cause further loss of resolution.  I do not accept that the anaglyph 3D methodology is flawed.  Again, like stereoscopy, the question is whether the anaglyph 3D images enable confident interpretation of the ground feature(s).

(vi)  Stereoscopy vs anaglyph 3D

82.  Mr Man criticises Mr Ng for not using the stereoscope to consider the Enlarged Photos prior to his giving evidence, and says that in committing himself to his views in the Ng Report and the Joint Statement without using the stereoscope Mr Ng demonstrates that he is not a competent and independent expert.  Mr Man submits there are no sensible reasons why the stereoscope should not be relied on when Mr Ng has stereoscopic vision and (as demonstrated at the trial) it is possible to re-align the 2D images for stereoscopic viewing.

83.  Interestingly, although in the Joint Statement Mr Cheng criticises anaglyph 3D as opposed to stereoscopy, he has not mentioned he has studied the Anaglyph Photo or what particular aspects of the Anaglyph Photo he finds defective.  In my view, neither stereoscopy nor anaglyph 3D is flawed, and Mr Ng’s competency or independence is not undermined by relying on the Anaglyph Photo.  The essential question for both types of 3D viewing is whether one can confidently interpret the 3D image.  Having viewed and considered both 3D models together with the experts’ evidence, I cannot say that the stereoscopic image is materially superior to the anaglyph image for the purpose of image interpretation.

(vii)  Photograph quality

84.  Notwithstanding the different 3D methodologies, the clarity of the 3D image necessarily depends on the quality of the 2D source images.  Mr Ng says (and I agree) that using photograph(s) the quality of which has degraded to such extent as to interfere with confident interpretation will not aid either 2D or 3D viewing.

85.  In their closing submissions, both Mr Man and Mr Chong agree that the Enlarged Photos are affected by 2 types of image noise, namely, film-grain/particle noise and granular noise.  I therefore do not agree with Mr Man’s submissions that Mr Ng’s evidence on granular noise is a plain afterthought that detracts from his reliability as an expert.  

86.  Film‑grain is the optical texture of processed photographic film due to the presence of small particles of photosensitive substance in the course of photographic processing.  The coarseness of the grains/particles depends on the definition at which the photograph is observed. Photographic enlargement can cause the particles to enlarge so that film-grain not previously visible may become noticeable.  No image distortion will arise if the enlarged particles are still capable of forming a clear overall photographic image.  But distortion may occur if over-enlargement impairs the tone, shape and/or texture of the photographic image. Indeed, Mr Cheng agrees that aerial photographs should not be so over‑enlarged that image distortion compromises the optical effect and brain process.  Mr Cheng also accepts (and I agree) that enlarged particles can be seen throughout the Enlarged Photos.

87.  Granular noise is the scratch‑like or grain‑like effect in photographic film photographs caused by scratching, rubbing, adherence of translucent substances and/or dye loss over time.  Mr Ng says (and I accept) that such granular noise can be found throughout the Enlarged Photos.  The key question is whether such granular noise has so degraded the quality of the photographic images that it causes difficulty for image interpretation.

88.  But in considering whether it is possible to ignore interference by the enlarged particles and/or granular noise in order to confidently interpret the colour tone and textual detail of the Dark Patches at the Disputed House shown in the Enlarged Photos, Mr Man says I should not simply rely on my own observations but should give due weight to the expert opinion premised on expertise and experience in photographic interpretation.  I therefore proceed to consider the experts’ respective opinion before making my findings.

(viii)   Mr Cheng’s opinion

89.  Mr Cheng says that if film‑grain (ie the enlarged particles) is ignored, the different grey tones and textual details of the Dark Patches at the Disputed House depict shrubs and young trees no taller than the partition walls (since the top parts of such walls were not hidden by anything except shadow) with dome shape tree-crown occupying almost all the floor area.  He comes to such conclusion on the basis that (a) visual information received by the eyes and brain tells him such Dark Patches are not flat objects like a roof, and (b) other Dark Patches with similar appearance and textual detail found in the nearby area are obviously shrubs/trees and not any roof.

90.  Mr Cheng says the Disputed House shown in Enlarged 6091 was already in a ruin state similar to other ruins in the vicinity (and they were likely to have been destroyed during the war since Ah Kung Ngam Village was close to the then British military sites and believed to have been seriously bombed by the Japanese military) without any sign of dwelling.  Bearing in mind the natural cycle of plant growth, the shrubs/trees at the Disputed House must have grown for 1‑3 years to almost reach the top of the partition walls of, say, 7‑10ft (about the same height as the surrounding good‑condition houses).  Had there been human activity, the plants would have been removed to make way for habitation. Mr Cheng thinks it reasonable to conclude that shortly after the Disputed House collapsed the shrubs/trees started to grow there and continued to grow without influence by human activity, and no one used the Disputed House as a dwelling as at 8 May 1949.

(ix)  Mr Ng’s opinion

91.  Mr Ng says that white/grey granular noise can be found at the centre of the Disputed House shown in Enlarged 6091, and upon taking a closer look (whether under the 2D or 3D model) the poor quality of the images shown in the Enlarged Photos do not offer any positive and/or unequivocal determination as to what those features were.Visual perception of the images at the Disputed House on the Anaglyph Photo leads to the opinion that it is possible the objects were not shrubs/trees but rudimentary shelter made from flimsy material (eg wooden planks and canvas/tar sheets) with a roof that might not be of regular shape and height.  Such roof might not have covered the Disputed House entirely and there might be openings for ventilation, and the open areas not covered by any roof might be stacked with stuff and belongings of the occupiers.  Mr Ng says this may help explain the varying grey tones of the images at the Disputed House.  He is unable to come to a definitive conclusion as to what exactly was seen at the Disputed House shown in the Enlarged Photos, but given that the Dark Patches seen there are larger than those seen at House Nos 29 and/or 29A, the former is most probably a rudimentary shelter.

92.  Given the aforesaid doubt, Mr Ng finds it helpful to turn to the history texts as part of a surveyor’s “general knowledge” to place the interpretation in proper historical context.  There was acute housing shortage after the Second World War due to a significant increase in population and a large number of destroyed/damaged houses resulting in extensive squatting on all possible areas.  Mr Ng opines it is logical to infer that the Disputed House (which might be a rudimentary shelter made of flimsy materials capable of being used for habitation and conveniently located by the roadside with proximity to the Shaukeiwan Typhoon Shelter and the shipyards) was probably occupied and used as a dwelling even if it was in a dilapidated state with exposed walls.  After all, people would accept low living standard and rudimentary accommodation in those particularly difficult times.

(x)  Discussion on expert evidence

93.  On balance, I am not prepared to accept Mr Cheng’s opinion that 2D and/or 3D (whether stereoscopic or anaglyphic) visualisation of the Enlarged Photos clearly shows there were shrubs/trees at the Disputed House.  I am persuaded that as a result of interference by the enlarged particles and/or granular noise one cannot confidently interpret the colour tones and textual differences of the Dark Patches at the Disputed House shown in the Enlarged Photos (which include a dark grey patch in the middle with white grains, a dark grey patch near to the house frontage with black grains, and black patches close to or within the shadow cast by the eastern wall) to clearly identify the ground features.

94.  Bearing in mind (a) the Dark Patches at the Disputed House are smaller in size than the other Dark Patches said to be shrubs/trees by Mr Cheng, (b) the shadow cast by the eastern wall onto the Disputed House, (c) the interference by enlarged particles and/or granular noise, and (d) the difficulty in distinguishing the coarse grains (whether enlarged particles or granular noise) from the colour tone and textual detail of any ground feature, I agree with Mr Ng that confident visualisation and comparison with other images cannot be made.  Further, the Dark Patches at the Disputed House appear textually different from the other Dark Patches shown in Enlarged 6091 and said by Mr Cheng to be shrubs/trees.  So even though the dark grey patch with white grains at the Disputed House shown in Enlarged 6091 appears round in shape, I cannot confidently say it is a dome shape tree‑crown.  In short, what can be seen at the Disputed House from the Enlarged Photos under 2D and/or 3D viewing is not clear.

95.  In respect of the dark grey patch of rectangular rooftop with a light grey patch of shadow cast by the building (both of which must be flat and without shrubs/trees) to the southeast of the Disputed House shown in Enlarged 6091, Mr Cheng says visual information acquired by his eyes and brain tells him they are flat notwithstanding the presence of coarse black and white grains (which he says are merely enlarged particles), but visual information in respect of the Dark Patches at the Disputed House also with black and white grains tells him they are not flat, so he concludes there was no roof at the Disputed House.  But I am not persuaded that for the smaller Dark Patches within the Disputed House it is possible to visually ignore the grain‑like effect of image noise and safely perceive without any material distortion the underlying colour and texture of the images to say they are shrubs/trees.

96.  I also note that obvious black grains are seen on the narrow strip of land running northeast-southwest along the back wall at the rear of Houses Nos 29, 29A and 29B, which plainly had no shrubs/trees.  I accept Mr Ng’s view that it is not possible to say whether the black grains observed there depict miscellaneous objects (ie ground features) or are in fact image noise, which lends weight to the view that the grain‑like effect of enlarged particles and/or granular noise does interfere with confident interpretation of the ground features over the small area of the Disputed House (part of which was under the wall shadow).

97.  I also have reservations about Mr Cheng’s interpretation over other parts of the Enlarged Photos.  For example, whilst Mr Cheng accepts that some of the multiple white grains on the sea surface at Ah Kung Ngam bay (“AKN Bay”) on the Enlarged Photos may be enlarged particles or granular noise, he says most of them were glints of sunlight on the roll of sea waves caused by a strong wind.  On balance I prefer Mr Ng’s view that most of the white grains are granular noise that is noticeable against the dark background of the sea on the monochrome photographs.  Indeed, clear white grains can be found on the darker sea surface and along the shore even on the blurry parts of Enlarged 6092, which grains should be image noise.  Clear white grains found on the roofs of houses close to the shore and a largish black grain found over the wooden logs next to such houses on Enlarged 6091 but not mirrored in Enlarged 6092 also tell strongly of the presence of image noise.

98.  As a further example, there is a curved swathe of black grains on the whitish hillside in the middle of Enlarged 6091.  Mr Ng cannot imagine what ground features would present such grain‑like effect.  Mr Cheng says they are enlarged particles, but no dark substances (blurred or otherwise) can be seen on that particular whitish area in the blurred Enlarged 6092.  In my view, the curved swathe of black grains in Enlarged 6091 Photo is plainly image noise.

99.  Since I have found that no firm conclusion can be drawn from the Photos and the Enlarged Photos as to the precise ground features at the Disputed House, it is unnecessary for me to consider counsel’s objections to the application of “general knowledge” by the experts. But in case I am wrong, I will deal with this shortly.

100.  Mr Man says it is bizarre for Mr Ng to progress from possibilities as to what the images at the Disputed House might be to a conclusion that most probably there was a rudimentary shelter at the Dispute House merely on the basis of housing shortage after the war, especially when such “general knowledge” is outside his area of expertise.  On the other hand, Mr Chong complains it is not logical for Mr Cheng to conclude that the shrubs/trees must have started to grow after the Disputed House had collapsed and continued to grow without human influence merely based on the “general knowledge” of Japanese bombing of Ah Kung Ngam during the war and the natural growth cycle of plants when Mr Cheng cannot possibly know when the roof collapsed.

101.  I do not accept that land surveyors skilled in photographic interpretation especially of built up areas (ie places with human activity, influence or habitation at some stage) must not rely on any “general knowledge” of the natural/urban environment and/or human activity.  But “general knowledge” cannot assist when the image is so unclear that confident interpretation is not possible, and there is a limit to how far “general knowledge” can be used in formulating conclusions concerning the particular image in question.

102.  In the circumstances, I find Mr Cheng’s “general knowledge” does not really tell when the pre‑existing roof of the Disputed House had collapsed and when the plants started to grow at the Disputed House.  After all, some other houses in ruin state and without roof in the nearby area appear to be exposed with no shrubs/trees.  Likewise, Mr Ng’s “general knowledge” does not make the possibility of there being a rudimentary shelter more probable than the other possibilities of there being shrubs/trees or other ground feature(s) at the Disputed House.

103.  On balance, no firm conclusion can be drawn from the Photos and/or the Enlarged Photos as to the ground features, whether they be a rudimentary roof or shrubs/trees or otherwise, at the location of the Disputed House. I therefore turn to the factual evidence.

(e)  Plaintiff’s evidence as to state of his abode in 1949

104.  Mr Man says the plaintiff gave inconsistent evidence as to the state of the Rented House in 1949, and he tailored or changed his case when incontrovertible objective evidence emerged from the Photos (buttressed by Mr Cheng’s opinion) that demonstrate the Government Land was not used for dwelling as of 8 May 1949.  Mr Man further says Kwan Oy’s evidence is at best useless and at worst completely against the plaintiff.

105.  I have found that the Photos do not incontrovertibly demonstrate that the Government Land was not used as a dwelling as of May 1949.  But the defendant may still argue that the plaintiff has changed his case to forestall any possibility of a contrary finding by the court based on the Photos.  To consider such argument, it is necessary to trace what the plaintiff has said about the condition of the Rented House in 1949.

(i)  Plaintiff’s evidence

106.  In his 2^nd affirmation dated 2 December 2010, the plaintiff has this to say about the Rented House:

“該石牆木屋與附近木屋的結構一樣, 搭建簡單, 從地面至腰間的位置是石牆,石牆上則由木材搭建,上蓋部份有屋頂,由木材及石綿瓦造成,但廚房位置是露天的以便放煙。當時,香港經歷戰火不久,很多樓房都受到不同程度的破壞,而該石牆木屋亦不例外,……石牆木屋對我們一家而言已是一個不錯的居所。在獲得該張姓女子的同意後,我們一家便於約2月份遷入該地段及該3號屋,並以此為家。”

107.  In his 1^st witness statement dated 23 June 2011 made before the Joint Meeting, the plaintiff describes the condition of the Rented House:

“9. …… 該石牆木屋是背向山, 而前面不遠處是海邊, 地處偏僻荒涼。房屋的大門是位於屋前中間, 進入屋內, 便是客廳,右邊是一個睡房, 左邊則是厨房。該石牆木屋與附近木屋的結構一樣, 搭建得十分簡單, 從地面至腰間的位置是石牆, 石牆上則是由木材搭建, 上蓋部份有屋頂,但並非是用傳統的瓦坑搭成, 而是由木材及石綿瓦造成, 但厨房的後面位置有一部份是露天的, 以便在燒柴煮食後散煙。

10.   當時, 香港經歷戰火不久, 很多樓房都受到不同程度的破壞, 而該石牆木屋亦不例外, 但相比其他鄰近的房屋, 它的石牆仍被保留下來, 它受損的程受已算是少。 …… 因此, 該石牆木屋對我們一家而言已是一個不錯的居所。在獲得該張姓女子的同意後, 我們一家便於約2月份遷入該地段及該3號屋, 並以此為家。”

108.  Kwan Oy in her witness statement dated 23 June 2011 (made before the Joint Meeting) says as follows:

“2. …… 我家住處的後面是山, 而前面不遠處是海邊。我家的大門是位於屋前中間, 進入屋內, 便是客廳, 右邊是一個睡房, 左邊則是廚房。從地面到腰間的位置是石牆, 石牆上則由木材搭建, 上蓋部份有屋頂, 但廚房的後面位置有一部份是露天的。 ……”

109.  In his 2^nd witness statement, the plaintiff sought to clarify (or, as Mr Man contends, to alter) his 1^st witness statement by saying that in February 1949, “該地段上蓋的石牆木屋是有破損的, 部分石牆木屋是有屋頂的, 29B號所在地的一部分是有屋頂的, 另一部分是天井, 而29及29A號所在地是沒有屋頂的”, and after moving in he spent several months “修補該地段上蓋的石牆木屋”, including the walls (which were damaged in many places) and the roof. “屋頂的有些部分是用石綿瓦搭建而成的, 另外一些部分是用木材搭建而成的, 為防止雨水流入屋內, 我把瀝青布蓋在木材上面, 再用釘錮定位置。”  The plaintiff says that paragraph 9 of his 1^st witness statement in fact refers to the state and condition of the Rented House after he had carried out repairs.

110.  The plaintiff gave evidence at trial that when he moved into the Rented House in February 1949, House No 29B (except for the kitchen and a small open area next to it for smoke ventilation) had a makeshift roof made of wooden materials covered by some tar sheets, but there was no roof over Houses Nos 29 and 29A.  Even so, he was grateful that he and his family (who were refugees at the time) could move into the dilapidated Rented House and not become homeless squatters.

111.  He went on to say that even though he rented the whole Rented House comprising Houses Nos 29, 29A and 29B, he and his family initially lived in House No 29B (which had no partitioning except for the kitchen area at the rear) since the other 2 house units had no roof.  In March 1949, he spent about 8‑10 days working on the makeshift roof over House No 29B because the wooden materials and tar sheets were somewhat damaged and untidy (“有啲爛唔整齊”). After his efforts the roof became tidy (“整齊”), but he did not use any new materials because building materials were then scarce.

112.  The plaintiff also gave evidence that he started to engage in the repair and decoration trade himself in March 1949.  But since construction materials were then not easily available, he did not immediately work on House Nos 29 and 29A.  From about June/July 1949, the plaintiff and his workers started to carry out repairs and improvements (including putting up a roof) to Houses Nos 29 and 29A as and when he could secure construction materials (eg wooden materials with tar/asbestos sheets).  The work took several months, and thereafter he continued to repair and maintain the roof to prevent water seepage.

(ii)  Inconsistent and/or tailored evidence?

113.  Mr Man says the effect of the plaintiff’s evidence before the Joint Meeting (which does not refer to any repairs/improvements) is that as of February 1949 the whole of the Rented House was roofed save for an open area near to the kitchen, which contradicts his evidence after the Joint Meeting (see paragraphs 109-112 above).  Mr Man submits that the plaintiff changed his evidence because of the Photos (which clearly show there was no roof over Houses Nos 29 and 29A) and the Joint Meeting (during which Mr Ng conceded that the roof over the Leased Lot and the Government Land had gone), and he refers to the “extreme coincidence” of the plaintiff now saying he started repairs/improvements to Houses Nos 29 and 29A in June/July 1949 just shortly after the Photos recorded the land status as of 8 May 1949.

114.  But I do not agree with such submissions. First, the plaintiff gave evidence at trial that the pre‑existing roofs over houses in the area (including the Rented House) had been removed by the Japanese during the war as a clampdown against the resistance, so the houses were in a dilapidated state after the war.  He also gave similar evidence by way of the 1^st Deposition (before the Joint Meeting and any knowledge of the 6091 Photo) when he confirmed there was no proper roof with tiles and beams over the Rented House.  So it was the plaintiff’s consistent case all along (quite irrespective of Mr Ng’s views in the Ng Report) that the pre‑existing roof of Houses Nos 29, 29A and 29B had gone.

115.  Secondly, as early as on 28 January 2010 (ie a day before the Clearance Action and long before the commencement of the present action), the plaintiff’s former solicitors in their letter to the DLO/HKE have clearly set out the plaintiff’s instructions that he and his family moved into the Rented House “which was then improved by them due to its then dilapidated state” (see paragraph 58 above).

116.  Thirdly, when the plaintiff gave evidence at trial, he could not even remember the Joint Meeting and only had brief recollection of having seen the Photos at the time of the 1^st Deposition.  My impression is that whilst he has fairly good memory of his personal experiences, he does not remember much about extraneous events (eg the Joint Meeting and/or Mr Ng’s views about the Photos), which is unsurprising for a man of his age.  

117.  Fourthly, I see nothing strange in the plaintiff carrying out repairs/improvements to Houses Nos 29 and 29A only in June/July 1949.  After all, when the plaintiff and his family moved into the Rented House in/about February 1949, they already had a makeshift roof over their heads at House No 29B, and the plaintiff tidied it up so they could live and sleep underneath it.  Bearing in mind (a) the plaintiff was a newly arrived refugee who had just paid a substantial lease premium, (b) he was about to go into the decoration trade to make a living to support his family, and (c) construction materials were then hard to come by, it is unsurprising that he would reserve available building materials for his business rather than putting up a roof over Houses Nos 29 and 29A which he says were then used for storage of equipment.  But with the birth of his second son on 3 July 1949, there was every reason to expand the home living area for his family of six by carrying out repairs and improvements to Houses Nos 29 and 29A.

(iii)  Plaintiff’s drawing

118.  Mr Man places emphasis on the layout drawing on which the plaintiff marked (a) the location of the main entrance in the middle of the northwest front wall of House No 29B and (b) the area from the house frontage of House No.29B to the kitchen/open area at the rear to indicate the whereabouts of the makeshift roof cover.

119.  Mr Man submits that the plaintiff’s evidence is inherently implausible because there would not have been a main entrance through the remaining lower parts of the partially collapsed northwest front wall (2‑3ft high), and also the low height of the northwest front wall would not have supported a roof cover that extended all the way to the kitchen/open area.  Mr Man says the plaintiff’s assertions that he worked on the roof over House No 29B to cover it with tar sheets and to make it tidy (“整齊”) do not sit well with what can be readily seen on Enlarged 6091, namely, that any roof over House No 29B would not have extended fully right up to the northwest front wall.

120.  In my view, such submission reads too much into the layout drawing marked by the plaintiff. During the trial, as a matter of convenience, I invited the plaintiff to use the 1952 layout plan for the New Building as if it were a layout drawing of Houses Nos 29, 29A and 29B as at February/March 1949 for diagrammatic illustration of his oral evidence.  The plaintiff was expressly told to ignore the precise architectural features/details (eg the new walls) of the New Building.  Against such background, the large cross mark made by the plaintiff on the layout drawing at best depicts a rough reference to the approximate area within House No 29B that had a makeshift roof in contra‑distinction to the kitchen/open area that was without any roof.

121.  It will be reading too much into the large cross mark made by the plaintiff to say it represents a full‑length rectangular‑shaped roof that extended all the way from the kitchen/open area to lean on top of a full height northwest front wall completely covering the whole area from corner to corner.  This is borne out by the plaintiff’s evidence that the makeshift roof was in fact damaged when he first moved in, but he did not use any new material when he “tidied” it up to prevent water speepage.  In my view, the plaintiff only did a patch up job so that his family could quickly live and sleep underneath.  Further, even as early as the 1^st Deposition (ie before the Joint Meeting and any knowledge of the 6091 Photo) the plaintiff already said the damaged stone walls had partially collapsed leaving only half of the walls still standing.  In the circumstances, in marking up the layout drawing the plaintiff would not have meant that the makeshift roof actually leaned on a full‑height northwest front wall.  Further, I have no difficulty in accepting that in those difficult times when living in dilapidated houses was better than sleeping under staircases, an aperture through a partially collapsed stone wall (presumably where the main door would have been) would be regarded as the main entrance.

122.  In the circumstances, I do not find the plaintiff’s evidence inherently inconsistent.  I have warned myself that the evidence must be compelling and that I should regard self‑serving statements with caution, but in light of the above analysis and the discussion below I find the plaintiff’s evidence reliable and credible.

(iv)  Location of the Rented House

123.  Mr Man suggests that even though the Rent Receipt refers to AKNL28, it is not entirely clear where the Rented House was located, in particular whether it stood over the Government Land.  He postulates it was more likely that in March 1949 the plaintiff and his family moved into the roofed structure between House No 29B and the house on Ah Kung Ngam Lot No 27 (“Suggested Spot”) because it was roofed. Mr Man says this would give meaning to the expressions “上蓋木屋” and “石牆木屋” in the Rent Receipt for which someone would pay good money.

124.  The experts agree there existed partly a ruin and partly a roofed structure at the Suggested Spot.  The roof rested on one side over the ruin wall beside the Disputed House and on the other side next to Ah Kung Ngam Lot No 27.  Mr Cheng opines that the roof was made with flat material that was light‑grey in colour and curvilinear in shape with debris/dirt and small plants.  Part of the roof at the northwest built with flat and reflective material appeared to extend from and underneath the main roof and was more likely to be a canopy.

125.  I do not accept the argument in paragraph 123 above.  First, starting with the letter dated 28 January 2010 from his former solicitors to the DLO/HKE (see paragraph 58 above), the plaintiff’s evidence is consistent and clear that he rented the whole Rented House that comprised Houses Nos 29, 29A and 29B.  He denies that he moved into the Suggested Spot which he says belonged to someone else and had nothing to do with him.  One cannot cast suspicion on such denial by saying that the plaintiff has not given any particulars of his “neighbours” when there is no clear evidence the Suggested Spot was occupied in February/March 1949.

126.  Secondly, I find the Rent Receipt genuine and authentic.  Wai Oy photocopied the Rent Receipt and other title deeds/documents before the plaintiff emigrated to Canada in 1976 because she was tasked to look after his properties in Hong Kong (including the New Houses).  She kept the photocopies and found the Rent Receipt amongst them when she searched for documents at the request of the plaintiff’s solicitors after the Clearance Action.  The original, which cannot be found, may have been lost or discarded.

127.  Although the Rent Receipt does not specify the lot boundary and the Government Land is outside AKNL28, Mr Man’s postulation that the plaintiff rented the Suggested Spot contradicts the express reference to AKNL28 in the Rent Receipt. Further, the 2 house units on AKNL28 and the house unit on the Government Land adjoined one another since early last century, so it is likely that House No 29B was thought to be part of AKNL28.  But there is no evidence that the roofed structure on the Suggested Spot is an adjoining unit to bring it within the description of the leased property in the Rent Receipt.

128.  Thirdly, there is no or no satisfactory explanation as to how the reference to “上蓋木屋” in the Rent Receipt can sit with Mr Cheng’s opinion that the roof was made with flat material that was “curvilinear” in shape.  But “上蓋木屋” sits well with the plaintiff’s evidence that the makeshift roof over House No 29B was made of wooden materials covered by tar sheets.

129.  Fourthly, when the plaintiff purchased the Leased Lot on 1 April 1952 he thought it included the whole Rented House which he assumed was on the Leased Lot (see also the 1993 survey report in paragraph 11 above).  Mr Man’s postulation means that whilst the plaintiff rented the roofed structure at the Suggested Spot in March 1949, he abandoned his abode and purchased the Leased Lot (with Houses Nos.3, 3A and 3B) in 1952.  There is no plausible reason why he would do so.

130.  Fifthly, in 1952 the plaintiff engaged a contractor to demolish the Rented House and to erect the New Building on top of the old stone footing.  The fact that the New Building was built on exactly the same location as the Rented House is borne out by the terms (especially clause 15) of the Chinese building contract in paragraph 132 below and by the 1993 survey report in paragraph 11 above.  

131.  So on balance, I find that the plaintiff and his family moved into and occupied House No 29B that stood over the Government Land in/about February 1949 as a tenant of Cheung Wan Po (張韻波).  I further accept that from 1 March 1949 to 1 April 1952 they continued to live, use and occupy the Rented House as a tenant of Cheung Wan Po (張韻波) even though no further rent receipts were issued.  During this period, the plaintiff and his family had continuous and exclusive possession of the Leased Lot and the Government Land.

(f)  New Building

132.  After the plaintiff purchased the Leased Lot on 1 April 1952, he decided to erect the New Building on the original building site of the Rented House in order to improve his family’s living condition.  He engaged an architect/draughtsman to draw up layout plans.  On 15 May 1952, the plaintiff and the contractor 林佐記 entered into a Chinese building contract whereby 林佐記 was to demolish the original structure above the stone footing and erect the New Building comprising the New Houses on top of the old stone footing in accordance with the layout plan for a sum of $18,900.00.  The New Building was completed on 30 September 1952, and was occupied by the plaintiff and his three brothers and their families.

(g)  Conclusion

133.  Since the plaintiff accepts that the encroachment presumption has not been rebutted, I find that by 29 January 2010 the plaintiff has encroached upon the Government Land for the benefit of the Government qua landlord for over 60 years.  In the circumstances, subject to the third broad issue, the Clearance Action amounts to wrongful trespass for which the defendant is liable to pay damages to the plaintiff.

XI   THIRD ISSUE – POSSESSION BEFORE AND AFTER 1 JULY 1997

134.  This defence, namely, that the resumption of sovereignty over Hong Kong by the People’s Republic of China (“PRC”) on 1 July 1997 constitutes a break to the plaintiff’s possession of the Government Land for the purpose of determining whether the relevant limitation period has expired, rests on the argument that the SARG’s right to sue for possession only accrued as from 1 July 1997 when it came into existence.  In short, the defendant claims the SARG’s right of action is independent of any such right by the BHKG in right of the British Crown.  

135.  Mr Man says this defence does not (a) require any consideration of the proper construction and effect of international treaties or conventions, (b) raise any challenge to the presumption against retrospectivity, or (c) seek to deprive any rights that accrued immediately before 1 July 1997.

136.  There is no dispute that after 1 July 1997 the competent authority to recover possession of any Government land from squatters should be the SARG, and civil proceedings by or against the SARG shall be instituted by or against the defendant.[13]  So, the essential question is whether the SARG is time‑barred from asserting rights over the Government Land or, to put it in another way, whether the time clocked up against the BHKG in right of the British Crown can count against the SARG for the purpose of the LO.

(a)  Defendant’s case

137.  Mr Man argues that such essential question turns solely on the proper construction of section 7(1) of the LO.  Under section 7(1) of the LO, there are only two ways for saying the SARG’s cause of action over the Government Land is time‑barred, ie a right of action has accrued to (a) the SARG or (b) to some person through whom the SARG claims for more than 60 years by 29 January 2010.

138.  Mr Man says the plaintiff cannot rely on the first limb because the SARG’s right to evict the plaintiff from the Government Land has accrued for less than 60 years (calculated as from 1 July 1997) by the time of the Clearance Action on 29 January 2010.

139.  Mr Man submits that under the Basic Law of the HKSAR of the PRC (“BL”) being part of the Hong Kong municipal or domestic law, the Chinese State is entitled to all land in Hong Kong, which land is and has always been State property, and what happened on 1 July 1997 was a resumption of sovereignty over land that has always belonged to the Chinese State (“Ownership Argument”). He says this is evident from the preamble of the BL (“BL Preamble”) which provides as follows:

“Hong Kong has been part of the territory of China since ancient times; it was occupied by Britain after the Opium War in 1840. On 19 December 1984, the Chinese and British Governments signed the Joint Declaration on the Question of Hong Kong, affirming that the Government of the [PRC] will resume the exercise of sovereignty over Hong Kong with effect from 1 July 1997, thus fulfilling the long‑cherished common aspiration of the Chinese people for the recovery of Hong Kong.

Upholding national unity and territorial integrity, maintaining the prosperity and stability of Hong Kong, and taking account of its history and realities, the [PRC] has decided that upon China’s resumption of the exercise of sovereignty over Hong Kong, a [HKSAR] will be established in accordance with the provisions of Article 31 of the Constitution of the [PRC], and that under the principle of “one country, two systems”, the socialist system and policies will not be practised in Hong Kong. The basic policies of the [PRC] regarding Hong Kong have been elaborated by the Chinese Government in the Sino‑British Joint Declaration.

In accordance with the Constitution of the [PRC], the National People’s Congress hereby enacts the [BL], prescribing the systems to be practised in the [HKSAR], in order to ensure the implementation of the basic policies of the [PRC] regarding Hong Kong.”

Mr Man further submits that this view is fortified by article 7 of the BL (“Article 7”) which provides that land in Hong Kong shall be State property, and in particular the Chinese text (which prevails in case of discrepancy between the Chinese and English texts)[14] draws no distinction as to time:

“The land and natural resources within the Hong Kong Special Administrative Region shall be State property. The Government of the Hong Kong Special Administrative Region shall be responsible for their management, use and development and for their lease or grant to individuals, legal persons or organizations for use and development ……”

“香港特別行政區境內的土地和自然資源屬於國家所有，由香港特別行政區政府負責管理、使用、開發、出租或批給個人、法人或團體使用或開發，……”

140.  But before 1 July 1997, the SARG (which came into existence on that day) had no right of action to recover the Government Land in the Hong Kong courts because under the then prevailing Hong Kong law (a) the entity that had such right was the BHKG in right of the British Crown and (b) the Chinese State could not sue for possession even though it is and has always been the owner of land in Hong Kong.

141.  Mr Man claims that the position of the Chinese State is analogous to that of a reversioner who cannot sue for possession during the pendency of the lease (which is an estate in land limited by a term of years).  Like the reversioner and the lessee, the BHKG and SARG have different rights or entitlements at different points in time.  Before 1 July 1997, it was BHKG and not the SARG who had the right to sue for possession.  Since time running against the lessee does not run against a reversioner until he comes into possession, likewise time would not run against the SARG before 1 July 1997 as the SARG could only have sued for possession as from that date (“Reversioner Analogy”).

142.  In respect of the second limb of section 7(1) of the LO, section 2(2) of the LO provides that:

“A person shall be deemed to claim through another person, if he became entitled by, through, under or by the act of that other person to the right claimed …”

Mr Man contends that since all land in Hong Kong has always been a part of or belonged to China, the title of the Chinese State to land in Hong Kong (and hence the SARG’s right of action) is not derived from the British Crown whether by assignment or otherwise.  He submits that the SARG does not “claim through” the British Crown and is not entitled to land in Hong Kong by, though, under or by the act of the British Crown.  Instead, the SARG is entitled to claim for possession of the Government Land because it manages such land for the true owner being the Chinese State.

(b)  Discussion

143.  Mr Chong accepts that the SARG does not “claim through” the British Crown for recovery of possession of the Government Land, so I shall focus my discussion on the first limb of section 7(1) of the LO.

(i)  Ownership Argument

144.  Mr Man says this argument rests on the meaning and effect of Article 7 and the BL Preamble, so I shall start with some basic principles (which Mr Man does not seek to dispute) on the interpretation of the BL.

145.  First, Mr Man does not seek to rebut the presumption against retrospectivity for the purpose of the Ownership Argument.  In Cheung Lai Wah (an infant) & ors v Director of Immigration [1998] 1 HKC 617, 641, Chan CJHC (as he then was) in his dissenting judgment[15] said as follows:

“The courts have always viewed retrospective provisions with caution and disfavour. There is a presumption against retrospectivity: see Bennion Statutory Interpretation (2^nd Ed) p 214. The courts are usually slow to uphold provisions seeking to have retrospective effect, particularly when they affect accrued rights unless there is clear and express provision to this effect. This attitude is also reflected in section 23 of the Interpretation and General Clauses Ordinance (Cap 1).”

146.  Likewise, in Harvest Good Development Ltd v Secretary for Justice & Ors [2007] 4 HKC 1, 19‑20, Hartmann J (as he then was) held there is a presumption that legislative instruments shall not be construed as having retrospective effect (and such presumption was not rebutted in respect of articles 6 and 105 of the BL).[16] He said as follows at p 20:

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

67 The [BL], 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 [BL Preamble] reads :

“In accordance with the Constitution of the [PRC], the National People’s Congress hereby enacts the [BL] of the [HKSAR] of the [PRC], prescribing the systems to be practised in the [HKSAR], in order to ensure the implementation of the basic policies of the [PRC] regarding Hong Kong.” [my emphasis]”

The learned judge also discussed article 8 of the BL (which speaks of preserving and maintaining Hong Kong’s previous laws thereby leaning more towards acknowledging the presumption against retrospectivity) as well as article 6 of the Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the PRC on the Question of Hong Kong (“JD”) (which provides that rights concerning the acquisition, use and disposal of land would “continue” to be protected with emphasis on preserving what came before and not reaching back to change it).

147.  Secondly, Mr Man confines the Ownership Argument to a question of construction of the BL as part of the Hong Kong municipal or domestic law without any need to construe, enforce or adjudicate on international treaties and/or conventions or to review acts of state between sovereign states.  International obligations have no effect in municipal law, and the courts are bound to apply municipal law.[17]  It was held in Tang Ping‑hoi v Attorney General [1987] HKLR 324, 326‑328 and The Home Restaurant Ltd v Attorney General [1987] HKLR 237, 245 246 that the JD being an international treaty is not justiciable in the municipal courts. The municipal courts cannot undertake any exercise that involves construction of the JD or adjudication of transactions of sovereign states.

148.  Thirdly, on the interpretation of the BL, the well‑known principles authoritatively laid down in Ng Ka Ling & Others v Director of Immigration [1998] 1 HKC 617 and Director of Immigration v Chong Fung Yuen (2001) 4 HKCFAR 211 require the courts to adopt a purposive approach, and in resolving any gap or ambiguity the courts are bound to give effect to the principles and purposes declared in, and to be ascertained from, the BL and relevant extrinsic materials.

149.  The purpose of the BL is to establish the identity and status of the HKSAR being an unalienable part of the Chinese State with a high degree of autonomy under the principle of “one country, two systems” that reflects the terms of the JD.  The purpose of a particular provision may be ascertainable from its nature or other provisions of the BL and the BL Preamble or relevant extrinsic materials including the JD.

150.  As to the language of its text, the courts must consider the context and avoid a literal, technical, narrow or rigid approach.  But once the courts conclude that the meaning of the language of the text when construed in light of its context and purpose is clear, the courts are bound to give effect to the clear meaning of the language and will not on the basis of any extrinsic material depart from the clear meaning and give the language of the text a meaning which the language cannot bear.

151.  Here, Mr Man relies on the BL Preamble and Article 7.  But the former (unlike the latter) belongs to the introductory or surrounding part and not the operative or enacting part of the BL.  Nevertheless, Chong Fung Yuen at p 224 says that, where appropriate, the courts may utilise the BL Preamble as an internal aid to throw light on the operative part of the BL.

152.  To start, one should not read Article 7 in isolation but should consider the purpose and context of such operative part of the enactment (including any aids that may illuminate the text of such provision and make clear its intended meaning) in order to decide whether or not any real doubt exist as to its meaning.  If such study of the enacting words in their context and purpose shows they are plain and clear, then the BL Preamble cannot influence the meaning otherwise ascribable to Article 7 even if the latter falls short of the indications that may be gathered from the former.  It is only when the BL Preamble conveys a clear meaning as compared to the ambiguous or indefinite enacting words of Article 7 that the BL Preamble (especially if it goes further) may prevail.

153.  In my view, the language of the text of Article 7 does not support the contention that as a matter of local municipal law all land in Hong Kong is and has always been the property of the Chinese State, and it is not correct to say that Article 7 draws no distinction as to time.  In fact, Article 7 states that the land and natural resources “within the Hong Kong Special Administrative Region” shall be State property (“香港特別行政區境內”的土地和自然資源屬於國家所有).  Since the HKSAR only came into existence on 1 July 1997, there is plainly no express reference in the text of Article 7 to land ownership in Hong Kong before that date, and no ambiguity that the provision only concerns land in Hong Kong on and after 1 July 1997.

154.  Such interpretation is also correct in light of the context and purpose of the BL:

(a)  As explained by Hartmann J (as he then was) in Harvest Good Development Ltd, the BL, whilst recognising history, is a forward‑looking document that seeks to set up a new order, one to takeeffect on the resumption of sovereignty on 1 July 1997 and not one that reaches back to influence or alter what came before.  This is borne out by the BL Preamble itself which explains that the BL prescribes the systems “to be practised” in the HKSAR to ensure the implementation of the basic policies of the PRC regarding Hong Kong.

(b)  Mr Man has not identified any other article of the BL that has the effect of reaching back to influence land ownership prior to 1 July 1997, and there is none that I can find. Rather, articles 105 and 120 of the BL (as internal aids to interpretation) indicate that pre‑existing rights in relation to land (eg rights in respect of leases of land that extend beyond 30 June 1997 and rights of individuals and legal persons to the acquisition, use, disposal and inheritance of property) will be preserved on or after 1 July 1997.

(c)  As explained in paragraphs 156-160 below as to what came before 1 July 1997, under the local municipal law the British Crown and/or the BHKG in right of the British Crown were the only entities that exercised ultimate ownership rights over land in Hong Kong.  Indeed, the BL Preamble recognises such history by providing that “Hong Kong has been part of the territory of China since ancient times; it was occupied by Britain after the Opium War in 1840” (my emphasis).  The BL Preamble further provides that the resumption of the exercise of sovereignty over Hong Kong on 1 July 1997 took “into account of [Hong Kong’s] history and realities” (my emphasis).

155.  I therefore do not agree that, insofar as Hong Kong municipal law is concerned, the BL Preamble’s own meaning must be that all land in Hong Kong has always been the property of the Chinese State. In fact, the BL Preamble recognises Hong Kong’s history and realities including its occupation by Britain after the Opium War in 1840.  In coming to this view, I am fortified by the presumption against retrospectivity which Mr Man does not seek to rebut.  But I must make clear that such conclusion only concerns the municipal law and not acts of State between the British and Chinese Governments.  Insofar as the broad terms of the enactment background set out in the BL Preamble concern acts of State that led to the resumption of sovereignty, they are not matters that are justiciable in the municipal courts.

156.  This brings me to the question of land ownership in Hong Kong prior to 1 July 1997 which is not addressed in the BL.  Whilst Mr Man accepts that the Chinese State had no right to recover possession of the Government Land before 1 July 1997 because under the then prevailing Hong Kong law it was the BHKG in right of the British Crown that had such right, he shies away from identifying what is the “then prevailing Hong Kong law” that vested such right of action in the BHKG in right of the British Crown, or what are the underlying interests/rights over land in Hong Kong that gave rise to such right of action.  As will be seen below, the answer to these questions does not sit well with Mr Man’s proposition that all land in Hong Kong is and has always been State property.

157.  As a matter of the “history and realities” referred in the BL Preamble, Hong Kong was occupied by Britain after the Opium War in 1840.  The Letters Patent (The Hong Kong Charter) of 5 April 1843 established Hong Kong Island as the “Colony of Hong Kong” and laid down general principles for setting up the BHKG.  So all land on Hong Kong Island became owned by the British Crown and were managed/ administered by the BHKG in right of the British Crown.  The then newly established Legislative Council enacted the Supreme Court Ordinance 1844 which by section 3 provides inter alia that “…… in all matters and questions touching the right or title to any real property [in the Colony of Hong Kong], the law of England shall prevail ……”  Therefore, under Hong Kong municipal law, the British Crown was the owner over all land on Hong Kong Island.  Historically, save for the land over which St John’s Cathedral and the University of Hong Kong now stand (but the latter has been surrendered for the grant of a 999‑year lease), the BHKG only granted leasehold (and not freehold) title for 999 years over Hong Kong Island (eg the BCL for the Ah Kung Ngam lots).

158.  The land system described above also accords with the legal principles governing land ownership under common law.  First, the original basis of the law of real property is that all land is owned by the British Crown.[18]  Estates in land held from the British Crown are normally, but not invariably,[19] derivative in that title to land is usually obtained by some kind of transfer from its previous owner, either by conveyance inter vivos or under his will or through the law of intestate succession.  But when such an estate determines it will revert to the British Crown.[20]  The underlying principle is that land will never be without an owner.  As the Privy Council said in Ho Young v Bess [1995] 1 WLR 350, 355, the general proposition is that “the law abhors a vacuum and that title to land must always be in someone, whether the Crown or a subject”.

159.  Secondly, there can only be one person in possession of an estate in land at any one time.  In J A Pye (Oxford) Ltd & anor v Graham & anor [2003] 1 AC 419, 445, Lord Hope of Craighead said:[21]

“70. The general rule, which English law has derived from the Roman law, is that only one person can be in possession at any one time. Exclusivity is of the essence of possession. The same rule applies in cases where two or more persons are entitled to the enjoyment of property simultaneously. As between themselves they have separate rights, but as against everyone else they are in the position of a single owner. Once possession has begun, as in the case of the owner of land with a paper title who has entered into occupation of it, his possession is presumed to continue. But it can be lost when it is transferred from one person to another, and it can also be lost when it is given up or discontinued. When that happens, possession can be acquired by someone else. …”

160.  Thus, “the then prevailing Hong Kong law” recognises one owner of the land at any one time but not any “vacuum” or abeyance of ownership.  Since the maximum duration of leasehold estates granted by the BHKG in right of the British Crown was fixed in time, before 1 July 1997 “ownership” of land in Hong Kong (or at least on Hong Kong Island) in the fullest sense necessarily remained with the British Crown and/or with the BHKG exercising British Crown ownership,[22] which gave rise to the BHKG’s right to sue for possession of the Government Land.  I do not accept there was any abeyance or hiatus in the Chinese State’s “ownership” over land in Hong Kong before 1 July 1997 under the then prevailing municipal law.  I hold that under Hong Kong municipal law it is by virtue of the enactment of the BL (especially Article 7) and not as a result of ancient rights that all land and natural resources in the HKSAR became State property on and after 1 July 1997.  I reject the Ownership Argument.

(ii)   Reversioner Analogy

161.  In suggesting that the position of the Chinese State is analogous to that of a reversioner who cannot sue for possession during the pendency of the lease, Mr Man relies on the principles set out in Fairweather v St Marylebone Property Co Ltd [1962] 2 All ER 288, which Megarry & Wade, The Law of Real Property 8^th ed (2012) para 35‑059 at p 1489 summarises by way of an illustrative example:[23]

“…… Interesting questions can arise where a squatter bars a leasehold tenant. If L leases land to T for 99 years and S occupies the land adversely to T for 12 years, S has extinguished T’s title. But this has no effect on L’s title. L has disposed of his right of possession for the term of the lease, and nothing done by third parties in the meantime will give it back to him. L cannot therefore eject S, since apart from any right of forfeiture, no right of action to recover the land will accrue to L until the expiry of the term of T’s lease; and S being in possession, has the best immediate title.”

162.  Such principles turn on the true meaning of the reversionary interest. According to Megarry & Wade, The Law of Real Property 8^th ed (2012):

“… A reversion is such part of a grantor’s interest as is not disposed of by his grant. … In the case of a reversion, the land reverts to the grantor when the lesser estate determines. … Estates less than a fee simple, and upon which therefore … reversions … are expectant, are called “particular estates”, for such an estate is given for a particular portion of time, and is only a part (or particula) of the fee simple. …” (paras 9‑008 – 9‑009 at pp 315‑316)

“… From its very nature it follows that a reversion is a vested interest. It is the remnant of an estate which has never passed away from the grantor, and he or (if he is dead) his representatives stand ready to receive the land as soon as the particular estate determines. …” (para 9‑010 at p 316)

163.  Quite plainly, even on the defendant’s own case, the Chinese State is not a reversioner or in a position analogous to a reversioner.  Mr Man does not suggest that the Chinese State has disposed of a lesser estate in respect of all land in Hong Kong to the British Crown by way of a grant. In such circumstances and given my rejection of the Ownership Argument, the Chinese State’s entitlement to such land after 1 July 1997 cannot be the “remnant of an estate which has never been passed away from the grantor”.  Consequently, the Reversioner Analogy falls away, and the SARG’s right to sue for possession of the Government Land does not turn on any “reversionary” interest falling into possession or on any derivation of title.

164.  In my view, under Hong Kong municipal law, the transition of land tenure being part of Hong Kong’s transition from a British Colony to a Special Administrative Region of the PRC under the principle of “one country, two systems” upon the resumption of sovereignty by the Chinese State on 1 July 1997 is achieved by the enactment of the BL and the Hong Kong Reunification Ordinance (“HKRO”).  This has been usefully summarised by Hartmann J (as he then was) in Harvest Good Development Ltd at p 7:

“1. Historically, all land in Hong Kong has been vested in the Government [ie the BHKG]. The Government [ie the BHKG] has not granted freehold title. The system of land tenure, therefore, has been a leasehold system. While the [BL] has provided extensive guarantees of property rights, it has not changed that system of land tenure. [Article 7] vests all land in the state. However, in terms of the article, the Hong Kong Government [ie the SARG] is responsible for its management …”

The system of land tenure has not changed after 1 July 1997 save that all land in Hong Kong has become State property and is managed, used, developed and leased by the SARG (see articles 120‑123 in Section 2 of Chapter V of the BL).  This means that all rights of “ownership” held by the British Crown and/or the BHKG in right of the British Crown in respect of land in Hong Kong prior to 1 July 1997 are the same rights held by the Chinese State and/or the SARG in right of the Chinese State on or after 1 July 1997.

165.  Likewise, the HKRO enacted by the Provisional Legislative Council on 1 July 1997 gives effect to the transition envisaged in the JD and the BL as reflected in its long title:

“An Ordinance to confirm the Bills passed by the Provisional Legislative Council before 1 July 1997, … transfer the ownership of certain property and rights and provide for the assumption of certain liabilities on and after 1 July 1997, inconsequence of the resumption of the exercise of sovereignty over Hong Kong by the [PRC], and for connected purposes.”

The recitals of the HKRO refer to the establishment of the Provisional Legislative Council and go on to state that:

“It is necessary to confirm certain acts, in particular the acts referred to in the long title to this Ordinance, done before the reunification and resumption of the exercise of sovereignty by the [PRC] as valid acts,… and to provide for associated matters to ensure the continuity of the social order of Hong Kong,

THEREFORE this Ordinance is enacted by the Provisional Legislative Council.”

166.  Section 30(1) of the HKRO confirms that property vested in the British Crown or the BHKG in right of the British Crown before 1 July 1997 (which, as Mr Man accepts, arguably includes all land in Hong Kong being “Crown land”) was “vested in or transferred to the [SARG]” on 1 July 1997:

“30. Property to HKSAR Government

(1) For the avoidance of doubt, it is declared that all property, rights and liabilities vested in or belonging to the Crown or the Government of Hong Kong immediately before 1 July 1997 have been on and from that date, subject to the [BL], vested in or transferred to the Government of the HKSAR.

…….

(5) In this section‑

“Crown”(官方) means the Crown in right of the Government of Hong Kong” (section 30)”

167.  Section 16 of the HKRO provides for the vesting of rights of the British Crown unto the SARG on 1 July 1997:

“16. Vesting of rights

(1) Where immediately before 1 July 1997 the Crown, the Queen or a public officer enjoyed a right (including a contingent right)‑

(a) to bring proceedings;

(b) to appeal;

(c) to apply for a review of a decision; or

(d) to apply for a case to be stated,

in or to any court, magistrate, statutory tribunal or statutory board such right shall on and after that date vest in the Government of the HKSAR or in the corresponding public officer of that Government, as the case may require.

(2) Where immediately before 1 July 1997 any person enjoyed a right (including a contingent right) involving the Crown, the Queen or a public officer‑

(a) to bring proceedings;

(b) to appeal;

(c) to apply for a review of a decision; or

(d) to apply for a case to be stated,

in or to any court, magistrate, statutory tribunal or statutory board such right shall on and after that date continue to be enjoyed and shall be deemed to involve the Government of the HKSAR or the corresponding public officer, as the case may require.” (my emphasis)

168.  In respect of section 30(1) of the HKRO, Mr Man submits that since such provision is “subject to the [BL]” which makes clear that the Chinese State is and has always owned all land in Hong Kong, it does not mean that the SARG derives title from the British Crown.  Similarly, section 16(1) of the HKRO provides for the future and not the past, and it does not say that prior to 1 July 1997 the British Crown rather than the Chinese State was the owner of all land in Hong Kong.

169.  But for reasons explained above, I have rejected the Ownership Argument. Under Hong Kong municipal law and consistent with the meaning of the BL, section 30(1) of the HKRO vests and transfers all property, rights and liabilities belonging to the British Crown and/or the BHKG in right of the British Crown to the SARG on 1 July 1997.  Hence, the land rights held by the SARG over all land in Hong Kong are the same rights as those previously held by the British Crown and/or the BHKG in right of the British Crown.

170.  Turning to section 16 of the HKRO, Mr Man accepts that before 1 July 1997 the entity that had the right “to bring proceedings” to recover possession of the Government Land was the BHKG in right of the British Crown. Plainly, such right comes within section 16(1) of the HKRO, so the SARG continues to enjoy such right after 1 July 1997.  Mr Man’s suggestion that the SARG’s right of action was derived from the Chinese State would lead to the implausible situation of the SARG acquiring precisely the same right of action over the same piece of land (ie the Government Land) from the Chinese State (under Mr Man’s argument) as well as from the British Crown and/or the BHKG in right of the British Crown (under section 16(1) of the HKRO).  I reject such argument.

171.  In respect of section 16(2) of the HKRO, has the plaintiff (who had been in possession of the Government Land for less than 60 years as of 1 July 1997) “enjoyed a right (including a contingent right)” involving the British Crown and/or the BHKG in right of the British Crown which shall on or after 1 July 1997 continue to be enjoyed and be deemed to involve the SARG?

172.  Mr Man refers to Chung Ping Kwan & ors v Lam Island Development Co Ltd [1997] AC 38. In that case, the plaintiff became the lessee under a lease of Government land in the New Territories renewed for a further term of 24 years less 3 days from 1 July 1973 pursuant to section 4 of the New Territories (Renewable Crown Leases) Ordinance Cap 152 (“Renewal Ordinance”) instead of an actual exercise of the renewal option in the existing lease.  The plaintiff sought to recover possession of portions of the leased land from the defendants who had been in continuous possession adverse to the plaintiff and his predecessors-in-title for less than 20 years before 30 June 1973.  The deemed new lease under the Renewal Ordinance was held to be a legislative mechanism replacing but having the same legal consequences as an actual renewed lease to which the lessee had a right under the existing lease.  The Privy Council at pp 51‑52 said as follows:

“Section 4(4)(c) [of the Renewal Ordinance][24] has been much considered by the Hong Kong courts in connection with squatter cases. The view which has found most favour is that a squatter who had not been in adverse possession for 20 years by 30 June 1973 (a “post‑1935 squatter”) does not have a “right” within the meaning of this subsection. A post‑1953 squatter has no rights against the lessee at all. He is a trespasser, pure and simple, and can be ejected at any time.

Their Lordships would have considerable sympathy with this view if the legal position were that time would have run afresh from 1973 had there actually been a renewed Crown lease. If that were the legal position, no squatter however long in possession had a right which could survive the determination of the original lease. … But this “carry forward” provision [in section 4(4)(c) of the Renewal Ordinance] cannot have been intended to give a squatter, in respect of the deemed new lease, a right he would not have enjoyed in respect of an actual new lease.

As already explained, however, this is not the legal position. Thus this is not a correct starting point. The true position is that had a new lease actually been granted in 1973, a pre‑1953 squatter could not thereafter have been ejected by the lessee in reliance on the new lease. This being so, their Lordships consider that such a squatter has a right within section 4(4)(c).

The position of a post‑1953 squatter is not so obvious. By 1973 he had not barred the title of the lessee to the original lease. But to some extent the [LO] had already started to operate in favour of a squatter on 30 June 1997. Under the [LO] the lessee’s right of action had deemed to accrue on the date when the squatter moved in. Further, an actual new lease granted pursuant to the right of renewal would not have affected this. Their Lordships incline to the view that these potential benefits can be regarded as a right within paragraph (c).” (my emphasis)

173.  This is also echoed by the Court of Appeal in Chau Ka Chik Tso v Secretary for Justice [2011] 2 HKLRD 387.[25]  In that case, the plaintiffs were lessees of Government land in the New Territories which was subject to the Renewal Ordinance and the New Territories Leases (Extension) Ordinance Cap 150 that extended the term of the existing leases until 30 June 2047 without creating any new leases.  The plaintiffs claimed that the proper boundary of the subject leased land included an adjacent area which they had encroached upon for over 60 years before 1 July 1997.  Rogers VP at p 402 said at follows:

“39. Another way of considering the matter would be that if the matter had to be looked at on the basis that the lessee of Government land is entitled to the protection of s 7 [of the LO] after 60 years’ encroachment onto adjacent Government land, just as an adverse possessor, so an encroacher acquires inchoate rights. Whereas the adverse possessor acquires those rights against the lessee, the encroacher acquires those inchoate rights against his landlord, the Government. In view of the fact that the lessee has a specifically enforceable right against the Government to require the grant of the further lease of 24 years, those inchoate rights, which the lessee has built up, would be acquired in respect of the right under the original lease to have a renewal of that.” (my emphasis)

Likewise, Kwan JA at pp 405‑406 said as follows:

“52. The Privy Council in Lai Moon Hung v Lam Island Development Co Ltd overturned the decision of the Court of Appeal. Mr Mok sought to persuade us that the Privy Council decision on the inchoate rights of an adverse possessor where a new lease is granted pursuant to an option to renew in the old lease should have no impact on the inchoate rights of an encroacher in the same situation. …

53. I find it difficult to accept this argument. … The Deputy Judge held that if the rights had matured before the expiry of the old lease, the encroached land would have been held as a leasehold interest on the same terms as the lease of the Lot and those terms would include the option to renew which was exercised by [the Renewal Ordinance].

54. Thus, where the encroachment right had matured, the new lease granted would not have affected the pre‑existing right of renewal under the old lease, which precludes the landlord from ejecting the lessee. I fail to see why the grant of a new lease should affect such a pre‑existing right in the situation where the potential benefits of encroachment right were inchoate, not having yet matured. I am not persuaded the inchoate rights of an encroacher should be treated differently from the inchoate rights of an adverse possessor.” (my emphasis)

174.  Mr Man relies on the Reversioner Analogy to say that even though under the LO the BHKG’s right to sue for possession started to accrue on the date when the plaintiff moved in the Government Land, the plaintiff as squatter of such land who had not been in adverse possession for 60 years by 1 July 1997 has no rights against the SARG (being akin to a reversioner) at all for he is a trespasser, pure and simple.[26]

175.  But for reasons explained above, I have rejected the Reversioner Analogy. And in any event, although the plaintiff had not been in possession of the Government Land for 60 years by 1 July 1997, he had acquired “inchoate rights” as a encroacher or adverse possessor against the BHKG in right of the British Crown (see paragraph 173 above) or, to put it in another way, the LO to some extent had already started to operate in his favour on 30 June 1997 (see paragraph 172 above).  In my view, such inchoate rights necessarily come within the meaning of “a right (including a contingent right)” in section 16(2) of the HKRO which shall be deemed to involve the SARG in place of the BHKG after 1 July 1997.  In this respect, I bear in mind Mr Man’s confirmation that the defendant does not seek to deprive any accrued rights by raising this defence argument.

176.  Mr Man’s submissions also suffer from other inherent difficulties if taken to their logical conclusion.  This is particularly evident in the situation of a squatter who had been in adverse possession of Government land for more than 60 years before 1 July 1997 (as in the case of the plaintiffs in Chau Ka Chik Tso).  In such scenario, Mr Man does not seek to deny the historical fact that the full limitation period had accrued against the British Crown and/or the BHKG in right of the British Crown, and the squatter had acquired possessory title to the land in contra‑distinction to mere inchoate rights.  So he is constrained to accept that (apart from the HKRO) the Ownership Argument and the Reversioner Analogy would logically lead to the conclusion that time has to run afresh for another 60 years from 1 July 1997 in order to bar the SARG from taking action to recover possession of the Government land against the squatter.  This, of course, contradicts the actual decision by the Court of Final Appeal in Chau Ka Chik Tso FACV5/2011 (unreported, 8 December 2011) in which the SARG was barred from bringing action to recover the subject Government land which the plaintiffs had encroached upon for more than 60 years before 1 July 1997.  All Mr Man is able to say is that the SARG being the defendant in Chau Ka Chik Tso did not take this point of law on appeal even though such argument has been alluded to in the lower courts.

177.  But the harsh (and dare I say illogical) result of a squatter having to clock up another 60 years when he has already extinguished the title of the British Crown and/or the BHKG in right of the British Crown by being in possession of Government land for more than 60 years before 1 July 1997 has led Mr Man to submit that amelioration comes in the shape of sections 16 and 30 of the HKRO.  He says that pursuant to such provisions the squatter may well be able to keep his possessory title and the SARG may have “immense difficulty” in recovering possession of the land. This is because the SARG’s standing to do so as conferred by section 16(1) of the HKRO becomes questionable if the BHKG’s right of action had been extinguished upon expiry of the full limitation period before 1 July 1997.

178.  But such recognition of “immense difficulty” does not sit well with the Ownership Argument, which contends that the SARG derives its right to sue for possession of the Government Land from the Chinese State, and not from the British Crown and/or the BHKG in right of the British Crown presumably under section 16 of the HKRO which transfers and vests the right of the British Crown and/or the BHKG in right of the British Crown to bring proceedings unto the SARG.

179.  Further, if Mr Man’s submissions are taken to their logical conclusion, such “immense difficulty” should also arise where there had been less than 60 years of encroachment or adverse possession before 1 July 1997. In such scenario, the right of the British Crown and/or the BHKG in right of the British Crown to sue for possession would be vested and transferred to the SARG after 1 July 1997 (see section 16(1) of the HKRO), and the squatter would continue to enjoy the inchoate rights he had acquired against the British Crown and/or the BHKG in right of the British Crown as against the SARG after 1 July 1997 (see section 16(2) of the HKRO).  In my view, Mr Man has not been able to offer any convincing reason why such “immense difficulty” would disappear where time had not run for 60 years prior to 1 July 1997.

180.  Mr Man also shies away from any reference to section 20 of the HKRO which provides that “[nothing] in this Part shall be construed as extending any period of limitation within which any action or other proceeding must be brought”, which complements the proper meaning of the BL and the HKRO as explained above, but which does not sit well with his suggestion that the full limitation period has to run again as from 1 July 1997.

181.  For the above reasons, the notion that the SARG’s right to recover possession of the Government Land is an independent right derived from the entitlement of the Chinese State to all land in Hong Kong and not from the British Crown and/or the BHKG in right of the British Crown is misconceived.  In my view, the BHKG’s and the SARG’s respective right of action is the same right before and after 1 July 1997.  I reject this defence argument, and find that the plaintiff has been in possession of the Government Land for more than 60 years, and his claim for encroachment of the Government Land for the benefit of the Government qua landlord must succeed.

182.  This is sufficient to dispose of the action.  However, in case I am wrong, I will proceed to briefly deal with the plaintiff’s cause of action on proprietary estoppel.

XII.    FOURTH AND FIFTH ISSUES – PROPRIETARY ESTOPPEL

183.  Mr Chong accepts that the plea on proprietary estoppel is based on passive encouragement or estoppel by standing by.  He claims that the 5 probandas have been satisfied, but Mr Man disagrees.

(a)  1^st probanda – mistaken belief

184.  On the evidence, I have no doubt that when the plaintiff entered into possession of the Government Land he was under the mistaken belief that it was part of the Leased Lot.  The Rent Receipt as well as the layout plan and the building contract for the New Building all support the plaintiff’s evidence as to his mistaken belief.

(b)  2^nd probanda – plaintiff’s expenditure

185.  I accept that in 1952 the plaintiff incurred the cost of erecting the New Building on the Leased Lot and the Government Land in the sum of $18,900.00.  He acquired the Leased Lot and the pre-existing building thereon for $7,000.00 earlier in the year, so it is fair to say the construction cost was a substantial sum.  Since ⅓ of the New Building being New House No 29B is situate on the Government Land, a pro rata share of the construction cost at about $6,300.00 is still not a mean amount.  The plaintiff also carried out repair and maintenance work on the New Houses standing over the Leased Lot and the Government Land in the sum of $79,660.84 in 1991, and he gave evidence (which I accept) that thereafter until January 2010 he spent $8,000.00 to $10,000.00 every 2‑3 years on repair/maintenance for the New Houses.  I find and accept that the plaintiff incurred the aforesaid expenditure on the faith of his mistaken belief that he was the lessee of the Government Land.

(c)  3^rd probanda – defendant’s knowledge of his own legal right

186.  Mr Man concedes that on/about 18 December 1990 the Government through the DLO acquired actual knowledge that the Government Land was adversely occupied. It is the plaintiff’s pleaded case that the construction of the New Building was done openly and the BA’s staff inspected New Houses Nos 29 and 29A after the completion of the repair works in compliance with the BA Order, so the Government through its servants or agents has actual or presumed knowledge of his occupation and use of the Government Land and/or New House No 29B.  Mr Chong accepts that the plaintiff is bound by his pleaded case, but he attempts to support the plea of “presumed knowledge” by relying on the surveys for the 1918 and 1927 plans (see paragraph 3 above) to show that the Public Works Department knew the Government Land had been built upon.

187.  Whilst I have no doubt the construction of the New Building was done openly, there is no evidence the Government had any “presumed knowledge” that the plaintiff asserted adverse rights in 1952.  The Government’s knowledge of the surveys for the 1918 and 1927 plans cannot equate to awareness of its own legal rights such that it ought to have evicted the plaintiff or stopped him from incurring expenditure for erecting the New Building in 1952.  According to Ms Chiu, there is no approved building plan on record, and the BD has no record of building submissions or commencement of any new building works for the New Building.  The plaintiff by the 1^st Deposition also explained that at the time when New Building was being erected (ie during the post‑war period), the Public Works Department had not yet resumed its function.

188.  But Mr Chong asks me to draw adverse inference against the defendant.  He says the Government has withheld material evidence as to (a) its knowledge of the built upon status of the Government Land from the surveys for the 1918 and 1927 plans, (b) the reasons for not issuing any building order in respect of House No 29B in 1991 and for failing to take action against House No 29B during the period from 1918 to 2010, and (c) whether it knew the plaintiff was acting under a mistaken belief that the Government Land formed part of the Leased Lot, and has not offered any reason for not calling the relevant officers to give evidence.

189.  Mr Chong refers to Telings International Hong Kong Limited v John Ho & ors CACV10/2010 (unreported, 16 September 2010), but the passage from the judgment of Fuad JA in Hong Kong and Shanghai Banking Corporation v Chan Yiu Wah [1988] 1 HKLR 457, 467 cited therein makes clear that an adverse inference “cannot be made except upon certain conditions”.  Mr Recorder HC Wong SC cited Winiewski v Central Manchester Authority [1998] PIQR 324, 340 with approval in his judgment in Lai Cheong Ming v Cheung Chung Yu Eric trading as Hui Fung Metal Work Factory & anor HCPI504/2009 (unreported, 7 January 2013), and said “there must, however, have been some evidence, however weak, adduced …… on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue” (at paragraph 25).  Here, none of the matters Mr Chong has referred to in his closing submissions (see above paragraph) has been pleaded as material facts in respect of the defendant’s requisite knowledge, and at the trial Mr Chong after consideration decided not to amend the plaintiff’s pleadings.  In my view, the defendant has no case to answer on the matters now suggested by Mr Chong, and it is inappropriate to draw any adverse inference as suggested or at all.  In the circumstances, I am not persuaded that the plaintiff has shown any presumed or actual knowledge on the part of the Government in respect of its own legal rights prior to 18 December 1990.

(d) 4^th probanda – defendant’s knowledge of plaintiff’s mistaken belief

190.  Mr Man submits that where the estoppel is alleged to have arisen from mere silence, the Government’s knowledge of the plaintiff’s mistaken belief is required to raise unconscionability,[27] but again no material facts have been pleaded as to such knowledge on the part of the Government.  

191.  Mr Chong submits it is evident from the 1993 survey (see paragraph 11 above) that the Government was told that the plaintiff had no idea that New House No 29B was on Government land.  Mr Chong admits this has not been pleaded, but baldly asserts it must be considered. I decline to do so especially when after consideration Mr Chong decided not to amend the plaintiff’s pleadings at trial.  But even if I were to take the 1993 survey into account, there is no evidence that the Government knew of the plaintiff’s mistaken belief prior to 1993.

(e)  5^th probanda – defendant’s encouragement of plaintiff’s expenditure

192.  Gray & Gray, Elements of Land Law, 5^th ed (2009) para 9.2.61 at pp 1222‑1223 states there must be a “sufficient causal link” between the representation and the change of position which constitutes the detriment to the representee.  Mr Man accepts that the causal link can be established by inference that the representation was calculated to influence the judgment of a reasonable man, but says that in the present case there is neither plea nor proof that the plaintiff expended money because he thought the Government would allow him to occupy the Government Land for the remainder of the term of the Leased Lot.  Mr Man says this is particularly so when in June 1984 the plaintiff caused his solicitors to enquire whether the Government had granted him a building licence for the New Building and the answer was no.  He says this shows that although the plaintiff was concerned whether the New Building was in breach of the BCL which only allows “agricultural or garden use”, this did not deter him from allowing the New Building to stand or to maintain it subsequently.  Mr Man submits that plainly the plaintiff wished to keep New House No 29B there for as long as the Government took no enforcement action.

193.  On the other hand, Mr Chong says the magnitude of the plaintiff’s expenditure in 1952 and 1991 is indicative of his belief that he was entitled to remain at New House No 29B until the expiry of the Government grant for the Leased Lot.  Mr Chong reminds that the plaintiff has no clear recollection of the purpose of his solicitors’ enquiry with the Government in 1984, and the Registrar General’s reply as to the user of the land would not have affected the plaintiff’s mistaken belief that the Government Land forms part of the Leased Lot or the Government’s representation by silence in 1991 which would have dispelled any effect of the Registrar General’s reply in 1984.

194.  In my view, the construction of the New Building in 1952 could not have been encouraged by the Government since there is nothing to suggest that the Government had known about it (see paragraph 187 above).  But after acquiring knowledge of the fact that New House No 29B was erected on unleased Government Land in December 1990, the Government refrained from informing the plaintiff of such fact and abstained from taking enforcement action.  Although the BA issued the BA Order in respect of New Houses No 29 and 29A (and not New House No.29B), the Government well knew that the survey on the New Houses in November 1990 revealed that (a) New Houses Nos 29, 29A and 29B were part and parcel of the New Building built more than 40 years ago, (b) previous repairs had been done to all of the New Houses, and (c) defects requiring repairs had been identified for all of the New Houses including New House No 29B.  In my view, this is sufficient to enable reasonable inference to be drawn that the Government has passively encouraged the plaintiff to expend money on inter alia New House No 29B (being part and parcel of the New Building) and the Government Land by carrying out the repairs in 1991.

195.  Since 1991 the plaintiff continued to incur money in the maintenance and upkeep of the New Houses including New House No 29B.  I do not agree that such expenditure was merely premised on a desire or hope on the part of the plaintiff to possess the Government Land (and rent it out for profit) for so long as the Government refrained from taking action.  In all the circumstances, I find a reasonable inference can and should be drawn that such maintenance was due to passive encouragement by the Government who failed to take action to evict the plaintiff for over 19 years.

(f)  Unconscionability

196.  Mr Chong submits there are primarily 2 approaches in moulding the relief: an expectation-based approach which gives effect to the expectation of entitlement engendered by the parties’ dealings and a compensation‑based approach which reverses the unacceptable prejudice suffered.  But he accepts that when exercising discretion in all the circumstances to formulate the relief in terms of the minimum equity to do justice to the plaintiff,[28] there must be proportionality between the remedy and the detriment which is its purpose to avoid:[29]

197.  Mr Man says the mere fact of the Government’s long inaction would not render its claim unconscionable,[30] but even Lord Wensleydale in Archbold v Scully(1861) 9 HLC 360, 383 acknowledged that “acquiescence is a different thing” and “if a party, who could object, lies by and knowingly permits another to incur an expense in doing an act under the belief that it would not be objected to, and so a kind of permission may be said to be given to another to alter his condition, he may be said to acquiesce”.

198.  Although it is not clear that the plaintiff has made out all of the 5 probandas as I am not sure that the 4^th probanda has been satisfied, the 5 probandas do not straightjacket equity’s jurisdiction and I need to consider whether in all the circumstances it would still be unconscionable for the court to allow the Government to rely on the fact that the Government Land did not form part of the original grant of the Leased Lot. I bear in mind that in Andrews (see paragraph 44 above) it was likewise not clear that the 4^th probanda was satisfied, but in that case the court still considered it unconscionable for the defendant to be permitted to deny which “knowingly or unknowingly” he had allowed another to assume to his detriment.

199.  Here, the Government had actual knowledge of the plaintiff’s occupation of New House No 29B on the Government Land by 18 December 1990, but it made a conscious decision to “let sleeping dogs lie” and to let the plaintiff continue to expend money on New House No 29B.  I do not agree that the plaintiff’s expenditure is unspecific.  Even on a pro rata basis, he incurred a not insubstantial sum for the repairs for House No 29B in 1991, and he regularly maintained New House No 29B thereafter.  The 1990 survey shows that the physical condition of the New Houses built in 1952 was quite similar, so it is reasonable to infer that their need for maintenance would be similar too.  I am persuaded that the plaintiff only embarked on this programme of maintenance for New House No.29B for over 19 years because he thought he was entitled to hold the Government Land coterminous with the Leased Lot.

200.  Mr Man suggests that such expenditure is minimal when compared with the rent‑free period the plaintiff had enjoyed over the Government Land since at least 1952.  However, it must not be forgotten that the Government consciously decided to “let sleeping dogs lie” for over 19 years before taking the Clearance Action notwithstanding discovery of New House No 29B during 3 surveys in 1990, 1993 and 1995 (especially when the latter survey was for the purpose of determining the lot boundaries of the Ah Kung Ngam lots).  I am unable to place much weight on Mr Man’s reliance on the fact that the Government’s counterclaim for mesne profits only extends back for 6 years to July 2004 because the 6-year time‑bar was caused by the Government’s own delay in taking eviction action.

201.  In my view, it is unconscionable for the Government to now assert their legal title after having stood by and raised no objection for over 19 years when it well knew or ought to have known the existence of New House No 29B (being an old building structure that must have been on the Government Land for many years) and the plaintiff must have occupied and done maintenance to the same.  This is so whether or not all 5 probandas have been satisfied.  Therefore, had it been necessary for me to deal with the issue of proprietary estoppel, I would have been prepared to make a declaration that the Government is estopped from asserting its proprietary right over the Government Land and New House No 29B standing thereon against the plaintiff until expiry of the Government grant of the Leased Lot. The fact the lease term of the Leased Lot still has a few hundred years to run does not render such relief disproportionate since it is common knowledge that estates held from the Government on Hong Kong Island are for 999 years.

XIII.   CONCLUSION

202.  In the circumstances, I make the following orders:

(a) a declaration that by virtue of the encroachment upon the Government Land by Cheung Wan Po (張韻波) through the plaintiff from a day not later than 1 March 1949 to 1 April 1952 and by the plaintiff through himself, his family members and/or his tenants since 1 April 1952 for the benefit of the Government qua landlord, the plaintiff was/is entitled to possession of the Government Land as against the defendant as from 28 February 2009 until the determination of the Government grant in respect of the Leased Lot;

(b)  an order that the defendant do deliver vacant possession of the Government Land and New House No 29B to the plaintiff;

(c)  an order that the defendant do pay damages to the plaintiff in the sum of $231,685.00 being loss of rental income and/or mesne profits for the period from 29 January 2010 to 15 January 2013 with interest thereon at judgment rate from the date of the Writ of Summons to the date hereof at 8% pa and thereafter at judgment rate until the date of payment;

(d)  an order that the defendant do pay mesne profits for the ground and first floors of House No 29B on the Government Land for the period from 16 January 2013 to the date of delivery of vacant possession in the respective monthly sum of $5,360.00 and $4,150.00;

(e)  the defendant’s counterclaim is dismissed.

203.  Although there is no agreement between the parties as to the monthly amounts of mesne profits that may be payable for the period after 31 December 2013, there is no evidence to suggest that the monthly amounts as agreed by the parties are inappropriate for any subsequent period.  In the circumstances, I shall adopt the agreed rates for the entire period until the delivery of vacant possession.

204.  Mr Chong in his final submissions asks for a declaration against the defendant to indemnify the plaintiff against any claim that may be made by Mr Chung by reason of the Clearance Action on 29 January 2010.  However, apart from a letter from Mr Chung’s solicitors dated 13 August 2009 (see paragraph 16 above), the plaintiff has not led any evidence as to what action Mr Chung has taken (if any) against the plaintiff to date.  But the 1^st Deposition (see p 34 of the transcript) suggests that there has been litigation between the plaintiff and Mr Chung over the Clearance Action in the Lands Tribunal, yet the plaintiff has not informed this court of the outcome of such proceedings. Further, the proposed declaratory relief has not been sought in the Amended Statement of Claim.  I decline to grant such declaration.

205.  There is no reason why costs should not follow event.  I therefore grant a costs order nisi that the defendant do pay the plaintiff costs of this action (including all costs reserved if any) to be taxed if not agreed. Although the parties have prepared statements of costs, bearing in mind the history of this matter, including the need to take instructions from the plaintiff who is elderly, the need for expert evidence, and the 1^st and 2^nd Depositions, it is more appropriate to deal with the quantum of costs by taxation rather than summary assessment. Mr Chong informs this court that the plaintiff will not seek certificate for two counsel.

206.  It remains for me to thank counsel for their assistance.