XCHRX HO YEE MING THERESA v. CHUNG LOI TAI AND ANOTHER

1991 No. A5204

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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H E A D N O T E

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Landlord and tenant - New Territories (Renewable Crown Leases) Ordinance - whether possession prior to the deeming of a new Crown lease on 1st July 1973 can be added to any period of adverse possession after that date so as to rely upon Section 7 of the Limitation Ordinance - whether grant of new lease on 1st July 1973 starts time running again and whether a squatter with less than 20 years adverse possession can be said to be a person with any "rights".

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J U D G M E N T

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1. A point of some importance to the law of property relating particularly to the New Territories came before me and has now ended up as a claim for possession of land and premises made pursuant to the provisions of Order 14A of the Rules of the Supreme Court. On the very day I had this summons before me no less than 3 judges in this building were hearing the same or similar points.

2. It is thus clear that the sooner this point is decided by the Court of Appeal the better. It is obviously in the public interest that this point be settled one way or the other as, at the moment, all decisions are at first instance. If this case goes on appeal, I hope that the appeal can be heard quickly so as to save other litigants the uncertainty and costs which the present position creates.

3. The Plaintiff claims possession of land, namely Lot 12 in DD 118 in Yuen Long. The Plaintiff is the registered owner of the lot. The 2nd Defendant is in possession of a part of the lot and she says that she has been there for 32 years, i.e. since about October 1960. A default judgment has been obtained against the 1st Defendant who has not been found and who is not in possession. All these facts were agreed in the hearing before me for the purposes of this application. It is thus common ground that on 30th June 1973, the date of coming into operation of The New Territories (Renewable Crown Leases) Ordinance Cap. 152, the 2nd Defendant had only been in occupation of the land for 12 or 13 years. However, by the date of the writ in this case, namely the 15th July 1991, she had been in occupation for some 31 years.

4. In normal circumstances, she would have had a good possessory title by about 1980 due to the provisions of Section 7(2) of the Limitation Ordinance Cap. 342 (see also Section 17).

5. However, it is argued on behalf of the Plaintiff that no such defence or claim is open to the 2nd Defendant for the following reasons. The Plaintiff's title stems from a Block Crown lease dated 24th January 1905 by which the lot in question was demised to the Plaintiff's predecessor in title for 75 years from 1898, thus expiring on 30th June 1973. However, the Block Crown lease contained an option for renewal which was expressed in the following terms:

"Provided also, and it is hereby further agreed and declared that each lessee shall in such cases where the premises are demised for term of 75 years been entitled on the expiration of the said term of 75 years to a renewed lease of the premises respectively demised to him or her for a further term of 24 years less three days without payment of any fine or premium therefore and at the rent hereinafter mentioned;"

6. It is clear that many persons in the New Territories were entitled to avail themselves of this provision and thus the New Territories (Renewable Crown Leases) Ordinance was passed, presumably to obviate the administrative inconvenience which would be caused by numerous applications for renewal of leases. The Ordinance achieves this purpose by providing in Section 4(1) as follows :

"In the case of an existing Crown lease of a lot which has not been divided into sections before the 1st day of July 1973, the right of renewal contained in the lease shall be deemed to have been exercised by the person entitled to that right and on that date there shall be deemed to be granted to such person a new Crown lease of the land held by him immediately before that date under the existing Crown lease."

7. The argument runs this way. On 1st July 1973 there is deemed to be a grant of a new lease to the Plaintiff. The writ in this action was in 1991 and thus the 20 year period had not expired by that date. The Plaintiff's present right to possession under the new lease commenced on 1st July 1973. Thus it is argued that the position is exactly the same as if the Crown had granted a new lease in 1973, not to the Plaintiff, but to somebody else. The 2nd Defendant could only claim, as against that person, adverse possession for 18 years and the position is no different at law merely because the new lease granted in 1973 is to the same person who was the Crown Lessee prior to 1973.

8. Now, this argument has a good pedigree. It has succeeded in the following cases :

(1) Cheuk Chan Co. Ltd. v. Chan Kwan Nam - 6th July 1983 - Mantell J :

(2) First Base Development Ltd. v. Or Lau Chun - 9th December 1991 - Keith J.

(3) Lam Kee On v. Lam Hing - 15th April 1992 - Godfrey J.

(4) Chui Shui On v. Tang Koon Yung - 7th October 1992 - Mayo J.

(5) Tang Shu Tin v. Tang Kin Kwok - 11th December 1992 - Godfrey J

(6) Fortune Year Development Ltd. v. Mui Shu Huen - 13th July 1993 - Deputy Judge Yam

(7) Birkenhead Properties v. Leung Fai - 7th February 1994 - Barnett J.

(8) Lam Island Development v. Lai Moon Hung - 14th March 1994 - Godfrey J.

9. The lone voice in the wilderness appears to be that of Deputy Judge Griffiths, Q.C. in Ng Fung Properties v. Lam Tin Sang -judgment delivered on 7th February 1994. However, that case was a claim for summary possession of land under the provision of Order 113 of the Rules of the Supreme Court. Deputy Judge Griffiths in refusing the grant of relief under Order 113, said this on p.6 of his judgment :

"The present case raises directly so far as I am aware for the first time (for on this point the observations of Mr. Justice Godfrey were obiter and Mr. Justice Mayo did not have to deal with the point), the question as to the effect of Section 4 of Cap. 152 in a situation where before 30th June 1973 a squatter's title had come into existence. This raises serious questions as to the intention and proper construction of Cap. 152 itself, and in particular the meaning in Section 4(2) in the phrase "separate new Crown leases of the land respectively held by them immediately before that date under the existing Crown Lease" of the underlined words, and of whether such a squatter's title falls within the words used in section 4(4)(c). It is in my view arguable that considering the wording and legislative intentions of Cap. 152, that Ordinance did not extinguish squatter's titles already then in existence, and that because of that wording, the principles applicable in a contractual situation, such as were considered in Fairweather's case, are not so much in point.

I consider that these questions can be the better resolved against the background of evidence as to exactly what on the site in question was done by the Defendant and his predecessors over the years adverse to the possession of the Plaintiff's predecessors."

10. The case before me is not one where the full 20 year period had expired prior to 30th June 1973. It is on all fours with the previous decisions to which I have made reference and Mr. Chan invites me to follow them and to grant him judgment for possession, with damages to be assessed, under Order 14A.

11. Mr. Andrew Chung, for the 2nd Defendant, has however attempted to raise a further argument. It goes like this. Firstly, when dealing with a deeming provision, which is a legal fiction, it is necessary not to deem more than is strictly necessary for the purpose of achieving the object of the legislation - in this case a general renewal of similar leases in the New Territories. He has cited a number of cases on deeming provisions, the best known of which is probably Ex parte Walton. In Re Levy (1881) 17 Ch. D 746 per James L.J. at 756/7 [See also Hill v. East and West India Dock Co. [1884]9 App. Cas. 448 per Earl Cairns at 456].

12. Mr. Chung contends that the legal fiction of a deeming provision must not be extended to (a) beyond what is absolutely necessary to achieve the purpose of the statute and (b) to create an unjust or absurd result. Thus he submits "that since the purpose of Cap. 152 is but to regulate the relationship between the Crown Lessor and the Crown Lessee only, there is no reason of "as a matter of legislative interpretation or construction" to extend the "deeming" provision to beyond that relationship"

13. He submits that this argument is conclusive of the matter. I disagree. The same legal result would have occurred if, instead of a deeming provision, the Plaintiff or a predecessor had made an application for a renewal and been given a new lease pursuant to the provisions in the 1905 Lease. The point would still have been taken that the Plaintiff's root of title only commenced in 1973 and by the date of the writ in this case 20 years possession, adverse or otherwise, had not expired. It seems to me that the Ordinance is a red-herring because the same result would have been achieved by the application of basic legal principles in the absence of the Ordinance.

14. Mr. Chung then argued that Section 4(4)(c) of the Ordinance expressly preserves third party rights and interest and thus, he submits, this shows that the draftsman was intending to preserve the status quo. Mr: Chung relies upon the wording of Section 4(4)(c) which provides as follows :

"Every new Crown lease and the land thereby deemed to be demised shall be deemed to be subject to such of the following encumbrances and interests as the land and the existing Crown lease relating thereto were subject to Immediately before the lst day of July 1993-

(a) ....

(b) ....

(c) any other rights, easements, tenancies or other burdens or encumbrances of whatsoever kind or nature, except such as were created by an instrument and were not thereby expressed to continue after the 30th day of June 1973."

15. Mr. Chung submits that the 2nd Defendant, as at the 30th day of June 1973, had a right within the meaning of sub-section (c). That right, he says, is the right which the 2nd Defendant had under the Limitation Ordinance. He accepts that after only 13 years there was no right to rely upon Section 7, but he put his case on the basis that after 13 years the 2nd Defendant had something in the nature of a contingent right and by the sub- section such rights were preserved.

16. I cannot accept this submission. It seems to be common ground that if this Ordinance had not been passed, the position would have been clear. The Plaintiff would have exercised the option contained in the Block Crown lease and the Crown would have been obliged to grant a new lease. That new lease would have been the root of the Plaintiff's title and from the date when that root of title commenced only 18 years have since expired, thus not bringing the matter within Section 7 of the Limitation Ordinance. If that was, as I think and as the other judges have held, the position absent the New Territories (Renewal Crown Leases) Ordinance then the 2nd Defendant could be in no better position merely because, for administrative convenience, this Ordinance was passed to prevent multiple applications for renewal under the terms of the Block Crown lease. I cannot see that Section 4(4)(c) covers the situation of the 2nd Defendant in this case. I am not satisfied that the 2nd Defendant has any right. It would be absurd to characterise as a right, the position of a squatter on day 1 of a 20 year period. In my judgment, the right to rely upon Section 7 does not accrue until the 20 year period has expired and that it is wrong to refer to "contingent rights" in the context of this case. It may be correct to refer to the position of the 2nd Defendant as being a person who was in the course of acquiring a right. But that right does not exist until the period has expired.

17. I cannot, therefore, accept that Section 4(4)(c) confers upon the 2nd Defendant any protection from the normal consequences which must flow from the particular facts of this case, namely that the Plaintiff has established a claim for possession which is not defeated by a claim under Section 7 of the Limitation Ordinance because at the date of writ, 20 years had not yet expired. In my judgment, it is wholly fallacious to argue that the New Territories (Renewable Crown Leases) Ordinance has made any change, one way or the other, to the position of persons like the 2nd Defendant. If the Ordinance had not been passed and the option exercised the 2nd Defendant would have been in exactly the same position today as if the Ordinance had been passed.

18. In all the circumstances, therefore, I am quite satisfied that this is an appropriate case to grant judgment to the Plaintiff under the provisions of Order 14A for possession of the premises and for damages to he assessed.

19. As this case may well go further, I ought perhaps to mention the manner in which an application under Order 14A of the Rules of the Supreme Court was raised. The first summons taken out by the Plaintiff was dated 25th August 1993, and it sought the striking out of certain paragraphs in the defence and counterclaim of the 2nd Defendant. Even if that summons had been wholly successful, the action would not have come to an end because an issue apparently existed on the pleadings as to the Plaintiff's title.

20. Additional evidence was filed and by summons dated the 12th January 1994, the Plaintiff sought final judgment under Order 14 of the Rules of the Supreme Court, for possession of the land and for damages to be assessed. Further or alternatively, the Plaintiff sought an order that the 2nd Defendant's defence and counterclaim be struck out under Ord. 18 r. 19 on the grounds therein set out. By this summons, the Plaintiff sought leave to withdraw the summons on the 25th August 1993.

21. During the course of the hearing before me, it became apparent that the issue as to whether the 2nd Defendant had acquired a squatter's title was dispositive of the whole action. In those circumstances, I raised with both Counsel, the suggestion that they should treat this summons as one taken out under Order 14A, so that I could determine the issue and not, perhaps, be forced to a conclusion that there was an arguable case which ought to go for trial because that would have placed the parties in a ridiculous position where they would have to go back to Court and argue the same point all over again with the additional costs involved. It seemed to me wholly appropriate that I should decide this point, one way or the other, and that if one of the parties thought it appropriate my judgment should be tested in the Court of Appeal as soon as possible, so that everybody in the position of these parties would know precisely where they were as a matter of law. I therefore gave leave to the Plaintiff with her counsels' consent to withdraw the summons dated 25th August 1992 and replace it with the one dated 12th January 1994 and I further gave the Plaintiff leave to amend by consent the summons dated 12th January 1994, so as to make this application one under the provisions of Order 14A of the Rules of the Supreme Court.

22. However, two days after the argument in this matter closed and after I had dictated and received the third draft of this judgment, Mr. Chan for the Plaintiff issued a summons and appeared before me seeking to withdraw his consent to the Order 14A summons to which I have just made reference. The basis of the application was that despite having his instructing solicitor seated behind him, despite having filed evidence in this matter and despite there having been pleadings, nevertheless, it was not appreciated by him, nor presumably by his instructing solicitor, that there was, so it is now said, a further ground upon which the Plaintiff seeks possession against the 2nd Defendant. This ground, never previously adverted to whatsoever and not before me, related to an allegation that the 2nd Defendant was the sub- tenant or assignee of the 1st Defendant who was the Plaintiff's tenant.

23. At the time when this matter was being raised by Mr. Chan I had made up my mind as to the decision which I have set out in this judgment. I did not communicate my decision to the parties because the judgment was still in the process of being tidied up. However, Mr. Chan made it clear that he feared that his client might suffer prejudice even on the basis that he might have persuaded me to grant the Plaintiff judgment under Order 14A as in fact he has. The argument runs thus. If I determine the matter in the Plaintiff's favour under Order 14A and the matter goes to appeal and the court reverses me they will give judgment for the Defendant and therefore the Plaintiff will never have had her day in court arguing that the 2nd Defendant never acquired sufficient adverse possession so as to be able to rely upon Section 7 of the Limitation Ordinance.

24. Mr. Cheung for the 2nd Defendant objected strongly to Mr. Chan withdrawing his consent to the use of Order 14A and I had considerable sympathy with his opposition. However, I would not want the Plaintiff to feel any prejudice as a result of what was an on the spot agreement by his legal team to a proposal made first by me. In those circumstances I gave Mr. Chan leave to withdraw the Plaintiff's consent to the use of Order 14A but instead substituted an order that Order 14A be utilised as a result of my own decision. The result as I understand it will be this. If the 2nd Defendant succeeds in persuading the Court of Appeal that, not only am I wrong but so are all the other judges, then the matter will go back for a trial on the allegation not yet raised on the pleadings that the 2nd Defendant has not enjoyed 20 years adverse possession. On this basis no doubt the Court of Appeal will also be sympathetic to allowing an appeal against my decision to utilise Order 14A. This seem to me a just solution in all the circumstances and that is why I granted Mr. Chan the urgent relief he sought. I ordered the Plaintiff to pay the 2nd Defendant's costs on a common fund basis. This was really something which the Plaintiff's legal team should have had in mind and I cannot understand why this matter had not been mentioned in any pleading or affidavit hitherto.

25. Both Counsel agreed that costs would follow the event and in those circumstances, having granted the relief which the Plaintiff seeks I also grant the Plaintiff the costs of these proceedings. As I have made clear if the 2nd Defendant wishes to appeal, I hope this appeal can be heard as quickly as possible if the point has not previously been considered by the Court of Appeal. If a number of cases involve the same point, it may be possible for them all to be heard by the Court of Appeal at the same time.

26. It only remains for me to thank Counsel for their most helpful, written and oral, submissions which enabled this interesting point to be argued in less than half the time allotted for it.