WONG TAK YUE v. KUNG KWOK WAI DAVID AND ANOTHER

FACV No. 1 of 1997

IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 1 OF 1997 (CIVIL)
(ON APPEAL FROM CACV NO. 62 OF 1996)

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J U D G M E N T

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Chief Justice Li :

1. The plaintiffs are the owners of portions of Lot Nos 2003, 2006 and 2007 R.P. in Demarcation District No. 124 at Hung Shui Kiu in the Yuen Long District of the New Territories ("the land"). Its area is about 1,000 square metres. The 14th defendant and his family have been in occupation for many years.

2. In this action, the plaintiffs seek to recover possession from the 14th defendant. The essential question in this appeal is whether the 14th defendant should now be allowed to pursue a limitation defence.

3. The issues that arise for consideration can only be appreciated after the history of the present proceedings and earlier proceedings for possession taken by the plaintiffs' predecessors-in-title in 1980 have been set out.

The 1980 action

4. On 31 July 1980 the plaintiffs' predecessors-in-title commenced proceedings for possession by originating summons (subsequently ordered to continue as if the proceedings had begun by writ) against the 14th defendant and others ("the 1980 action"). The 14th defendant was in fact the 11th defendant in those proceedings but for convenience will be referred to as the 14th defendant. He was legally represented.

5. The 14th defendant filed an affirmation and a defence and further and better particulars thereof in response to a request. In his defence, he admitted the title to the land of the plaintiffs in that action who are the predecessors-in-title of the present plaintiffs. His case as set out in his affirmation, his defence and further and better particulars was that he had been in possession since about 1957 under a tenancy agreement dated 9 April 1957 for a term 7 years from that date at an annual rent of $325 ("the 7 year tenancy") and the last payment of rent was made on 19 May 1963 to Hop Yick Co. The 14th defendant maintained that he was a statutory tenant protected by Part I or II or V of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. His defence maintained an alternative defence of limitation based on 20 years' adverse possession. After October 1982, the 1980 action went to sleep.

The 1990 action

6. On 13 May 1990, the plaintiffs commenced the present action for possession by originating summons against the 14th defendant and others ("the 1990 action"). This appeal is an appeal in the 1990 action. The 1980 action had not been discontinued and the defendants therefore challenged the 1990 action on the ground of multiplicity of proceedings.

7. By his judgment on 2 November 1993, Keith J allowed the 1990 action to continue and ordered the proceedings to continue as if they had begun by writ. At the hearing before him, counsel for the plaintiffs indicated that if the 1990 proceedings were permitted to continue, the plaintiffs would give undertakings which would have the practical effect of bringing the 1980 action to an end. This was eventually achieved by a consent order made on 5 July 1994 by Master Jennings in the 1980 action whereby leave was granted to the plaintiffs to discontinue it against the 14th defendant and other defendants, such order of discontinuance to be without prejudice to the defendants' rights in the 1990 action.

8. It should be noted that although the 1980 action went to sleep after October 1982, it was still extant until its discontinuance in the above circumstances after the institution of the 1990 action. It could therefore be said that since July 1980, when the 1980 action commenced, the 14th defendant was on notice that the plaintiffs' predecessors-in-title in that action and then the plaintiffs in the 1990 action were seeking to recover possession from him and maintaining that they were entitled to do so.

9. The 14th defendant was again legally represented in the 1990 action. He took various steps which have a crucial impact on this appeal. Before referring to these steps, I must refer to the decisions at first instance and in the Court of Appeal in the case of Chung Ping Kwan and others v. Lam Island Co. Ltd. ("the Lam Island case") which must have influenced the course which the 14th defendant took in this action. For convenience I set out here the dates and citations of the Lam Island case at each level : Godfrey, JA's decision at first instance on 14 March 1994 [1994] 1 HKC 613, the decision of the Court of Appeal on 26 October 1994 [1994] 2 HKC 11 and the decision of the Privy Council on 8 July 1996 [1997] AC 38.

The Lam Island case at first instance and in the Court of Appeal

10. The background to this case was this. Until 1959, leases in the New Territories in Hong Kong were normally granted by the government for a term of 75 years from 1 July 1898 (which would expire on 30 June 1973), with the lessee having the right on request to a renewed lease for a further term of 24 years less three days. If the right were exercised, such further term would thus be due to expire on 27 June 1997. In 1969 the contractual option to renew the 75 year leases were superseded by the New Territories (Renewable Crown Leases) Ordinance, Cap. 152. This provided that the right of renewal should be deemed to be exercised and that a new lease for the period of 24 years less three days from 1 July 1973 should be deemed to be granted on that day and would therefore expire on 27 June 1997. The limitation period for actions to recover land was 20 years. (The law has been changed to provide for a 12 year limitation period but such change did not affect the Lam Island case and does not affect the present appeal.)

11. In the early 1990's various owners (the lessees from the government) began to litigate in the courts to recover possession from squatters. By that time, the pressure on the use and development of land in the New Territories was making such land increasingly valuable. The owners contended that the 20 year limitation period only started to run in favour of squatters from 1 July 1973, the commencement of the 24 year renewed term deemed to have been granted under the Ordinance and that the length of time the squatters had been in possession before 1 July 1973 was irrelevant. Thus, on that contention, proceedings commenced before 1 July 1993 would defeat the limitation defence.

12. In March 1994, Godfrey JA sitting at first instance ruled in favour of the owners' contention that time only started to run from 1 July 1973. His decision was upheld by the Court of Appeal in October 1994. The squatters then appealed to the Privy Council.

The steps taken by the 14th defendant in the 1990 action

13. I shall now refer to the steps taken by the 14th defendant which have an important impact on this appeal.

14. In July 1990, he filed an affirmation before Keith J's order that the proceedings be continued as if they had begun by writ. The facts deposed to in his affirmation were consistent with those he had relied on in the 1980 proceedings. He had entered into possession pursuant to the 7 year tenancy. The last payment of rent was in May 1963 when it was paid to Hop Yick Co. Since 1963 no one had requested rent.

15. In December 1990, he filed his defence relying on his possession since about 1957 pursuant to the 7 year tenancy and pleading that he was a protected tenant under Part V of the Landlord and Tenant (Consolidation) Ordinance. He maintained an alternative plea of limitation based on 20 years adverse possession.

16. As observed above, the first instance and the Court of Appeal decisions given in March and October 1994 respectively were in favour of the owners' contention that time only started to run from 1 July 1973. These decisions rendered the 14th defendant's limitation plea untenable. As time could only start to run from 1 July 1973, the plaintiffs were well within the 20 year limitation period when they commenced the present action in 1990.

17. In August 1995, not surprisingly, the plaintiffs applied to strike out the 14th defendant's defence and to enter summary judgment. Faced with this application, the 14th defendant filed in September 1995 an affirmation of his daughter Wong Mo Ching and in December 1995 applied for leave to amend his defence.

18. The daughter's affirmation repeated that after 1963 no one requested rent and added that there was no way to contact the owners and that, at all material times, the 14th defendant was ready willing and able to pay rent to the owners. Mr Erik Shum who appeared for the 14th defendant before us accepted that this affirmation together with the 14th defendant's earlier affirmation established as a matter of fact that since the expiry of the 7 year tenancy in April 1964, the 14th defendant's intention had been that he was willing to pay rent to the owners if they had requested payment and that he was ready and able to do so.

19. The 14th defendant's proposed amended defence sought to delete the plea of protected tenancy under Part V and the alternative limitation plea and sought to introduce the plea of protected tenancy under Part II.

The applications before the judge

20. So in January 1996, when the matter first came on before Le Pichon, J., the following applications concerning the 14th defendant were before her. First, the plaintiffs' application to strike out his original defence and to enter summary judgment. This was before the judge on an appeal from the Master who had dismissed the plaintiffs' application

in October 1995 on a technical ground which is not material to this appeal. Secondly, the 14th defendant's application to amend his defence. This application was taken out in December 1995 after the Master's order and just prior to the hearing before the judge. There was a total of 22 defendants and there were also similar applications in relation the other defendants except three.

21. In March 1996, in relation to the applications concerning the 14th defendant, the judge (1) refused leave to amend, holding that there was no arguable defence of tenancy protected by Part II; (2) struck out the original defence, holding that it disclosed no reasonable defence of tenancy protected by Part V or adverse possession; (3) entered summary judgment for possession against the 14th defendant save that execution was stayed pending the determination of appeal to the Privy Council in the Lam Island case. The judge had assumed "an election for adverse possession in the 14th defendant's favour."

22. The stay of execution order pending the decision of the Privy Council in the Lam Island case and the assumption of election in favour of adverse possession made by the judge require a little explanation. Before the judge, the 14th defendant was not pursuing the limitation defence. Indeed, he had applied to amend his defence to delete it. But it must be appreciated that there were a large number of applications by other defendants before the judge. In many of them, the limitation defence was pursued. The judge, quite understandably, apparently wished to adopt a uniform approach in dealing with the defendants who were relying on this defence. Where the defendant was also relying on a defence (such as a protected tenancy under statute) which was inconsistent with the limitation defence, her approach was to assume that the relevant defendant would elect to pursue the limitation defence and to stay execution of the judgment for possession until the Privy Council decision. It would appear that she envisaged that should the decision go against the owners, the defendants could take advantage of it, presumably on appeal. The judge no doubt out of fairness extended this approach to the 14th defendant although he was not relying on the limitation defence.

The Court of Appeal

23. The 14th defendant appealed to the Court of Appeal. Although the judge had stayed execution pending the decision of the Privy Council in the Lam Island case, it is clear from the 14th defendant's amended grounds of appeal that he was not pursuing the limitation defence. The orders he sought included the setting aside of the judge's order and the granting of leave to amend his defence to delete the limitation defence. His grounds of appeal made no mention of the limitation plea. On 4 July 1996, the Court of Appeal comprising Nazareth VP, Bokhary and Liu JJA (having heard arguments on 12 June 1996) dismissed the 14th defendant's appeal.

The Privy Council decision in Lam Island

24. On 8 July 1996, only 4 days after the Court of Appeal's judgment, the Privy Council delivered its decision in the Lam Island case. The case had been argued on 14, 15 and 16 May 1996. The Privy Council reversed the decision of the Court of Appeal and held against the owners. It concluded that time did not start to run only from 1 July 1973 but could start to run earlier. It held that where the original lease (granted by the government) contained an option to renew for a further term, the lessee had an existing property right which was specifically enforceable against the lessor (i.e. the government), and adverse possession for the prescribed period barred the lessee from asserting against the squatter all the rights granted by the lease, including that property right and the legal estate flowing therefrom. Whether a right of renewal was deemed to have been exercised and a new lease was deemed to have been granted under the New Territories (Renewable Crown Leases) Ordinance or the lessee actually exercised a renewal option and was granted a new lease, the lessee's right to bring an action to recover the land from the squatter had accrued on the date of dispossession and could not be exercised after the expiration of 20 years from that date. Upon the expiration of 20 years, the lessee's title under the new lease, as against the squatter, was extinguished.

The appeal to the Court

25. In June 1997, having regard to the decision of the Privy Council in the Lam Island case, the Court of Appeal granted the 14th defendant leave to appeal out of time to the Privy Council. The stay ordered by Le Pichon, J. and upheld by the Court of Appeal had come to an end with the decision of the Privy Council in the Lam Island case. The 14th defendant obtained from the Court of Appeal a further stay pending his appeal to the Privy Council.

26. On 1 July 1997, the People's Republic of China resumed the exercise of sovereignty over Hong Kong and the Hong Kong Special Administrative Region of the People's Republic of China was established under the principle of "one country, two systems" exercising a high degree of autonomy. On that date, the Court was established as the final appellate court of the Hong Kong Special Administrative Region.

27. The 14th defendant's pending appeal to the Privy Council came to the Court instead. In this appeal, the 14th defendant seeks to be allowed to re-open the limitation defence and to pursue it at trial.

The issues

28. The issues on this appeal are :

(1) Whether the 14th defendant should be allowed to re-open the limitation issue in this Court.

(2) If the answer to (1) is in the affirmative, whether he has on the materials an arguable limitation defence.

Whether allowed to re-open

29. The Court as a court of final appeal should be very reluctant to consider an issue which was not duly raised and considered in the Court of Appeal. The circumstances must be very exceptional. The statement made by the Privy Council in Ahamath v. Sariffa Umma [1931] AC 799, 803 which it applied in Attorney General v. Cheng Yick Chi (21 June 1983, Privy Council Appeal No. 32 of 1982, unreported) on an appeal from Hong Kong, is apposite:

"It must only be under very exceptional circumstances that an issue dropped in the intermediate Court of Appeal and for that reason not dealt with or referred to by that Court can be revived before this Board."

30. The history of the present proceedings is highly unusual. The judge dealt with the limitation plea in the circumstances referred to above, although the 14th defendant was applying for leave to delete it from his defence. The judge stayed execution of the judgment for possession pending the Privy Council's decision in the Lam Island case and thus kept the limitation issue open should that decision favour the positions of the 14th and other defendants. The Court of Appeal upheld the judge's order including the stay of execution. The hearing before the Court of Appeal took place on 12 June 1996 after the hearing before the Privy Council on 14, 15 and 16 May 1996 but before it delivered its decision. The Court of Appeal delivered its judgment on 4 July 1996 only 4 days before the Privy Council's decision on 8 July 1996. That decision settled the point authoritatively reversing the conclusions in the courts below.

31. In my judgment, the circumstances here are very exceptional and justify the Court allowing the 14th defendant to re-open the limitation point. Such circumstances lay in the fact that whatever be the stance of the 14th defendant, the judge envisaged the re-opening of the limitation issue by staying execution should the Privy Council's decision work in favour of the 14th and other defendants. So did the Court of Appeal in dismissing the appeal and allowing the judge's stay of execution order to stand.

32. In reaching this conclusion, I have also taken into account three factors. First, if the matter were allowed to be re-opened, the question with which we are concerned is whether there is an arguable limitation defence on the materials. In this case, this question is essentially one of law. Secondly, the plaintiffs as respondents to this appeal have had ample notice that the 14th defendant is seeking to re-open this issue. This is clear from the time of his application to the Court of Appeal for leave to appeal to the Privy Council out of time. Thirdly, the plaintiffs have not suffered any prejudice which could not be compensated by costs.

Whether arguable limitation defence

33. Limitation statutes are a common feature of many legal systems. A limitation statute has been aptly called "a statute of repose" and "an act of peace". See the speech of Lord Simon of Glaisdale in The Ampthill Peerage [1977] AC 547 at 575-576 quoting respectively Story, J. in the Supreme Court of the United States in Bell v. Morrison [1828] 1 Peters 351, 360 and Best, C.J. in England in A'Court v. Cross (1825) 3 Bing 329, 332-333. As Lord Simon of Glaisdale pointed out, it is in the interest of society that there should be some end to litigation and this fundamental principle finds expression in many forms, with limitation statutes being one of them.

The Limitation Ordinance

34. The Limitation Ordinance, Cap. 347 has followed the limitation legislation in England. The provisions which are material to this appeal are as follows:

Section 7(2)

"No action shall be brought by any other person to recover any land after the expiration of 20 years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person."

As has been pointed out this has now been changed to 12 years but this change does not affect this appeal.

Section 8(1)

"Where the person bringing an action to recover land, or some person through whom he claims, has been in possession thereof, and has while entitled thereto been dispossessed or discontinued his possession, the right of action shall be deemed to have accrued on the date of the dispossession or discontinuance."

Section 13(1)

"No right of action to recover land shall be deemed to accrue unless the land is in the possession of some person in whose favour the period of limitation can run (hereafter in this section referred to as adverse possession) and where under the foregoing provisions of this Ordinance any such right of action is deemed to accrue on a certain date and no person is in adverse possession on that date, the right of action shall not be deemed to accrue unless and until adverse possession is taken of the land."

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."

Section 10 relates to land held on trust and is not relevant to this appeal.

Requisite intention to possess

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

36. There is no dispute about the 14th defendant's factual possession. The crux of this appeal is whether the 14th defendant has an arguable case on the essential ingredient of the requisite intention to possess. Ms Gladys Li SC who appeared for the plaintiffs before us submitted that the 14th defendant plainly did not have the requisite intention.

37. As Nourse, LJ pointed out in Buckinghamshire County Council v. Moran at 644, adverse possession can be described as "possession as of wrong" and with limitation it is the intention of the squatter that is essential.

38. 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 at 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."

39. The question of intention to possess, as with any other question of intention, is one of fact. Whether it can be established depends on an assessment of all the circumstances in a particular case.

40. 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 scepticism. The courts would scrutinize the circumstances in which they were made and would give 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.

41. Here, as was accepted by Mr Erik Shum appearing for the 14th defendant and as the Court would in any event have held, his affirmation and that of his daughter established as a matter of fact that since the expiry of the 7 year tenancy in April 1964, his intention had been that he was willing to pay rent to the owners if they had requested payment and that he was ready and able to do so. The statements on affirmation were against interest and the Court would give them considerable weight. In my judgment, such an intention is plainly and completely inconsistent with the intention to possess which is requisite for establishing adverse possession and the 14th defendant has therefore failed to show an arguable case on this essential ingredient. That being so, he has no arguable case on limitation.

42. The 14th defendant's intention to pay rent if the owners had requested payment demonstrated that he was not intending to exclude the owner with the paper title but showed that he was treating himself as enjoying possession under a lawful title from the owners. His intention to possess was not "as of wrong" but was "as of right". Such intention is similar to the occupier's offer to pay rent in R. v. Secretary of State for the Environment Ex p Davies which was held to be inconsistent with the intention to claim possession for the purposes of adverse possession.

43. I should refer to the judgment of the Court of Appeal in Ho Hang-wan v. Ma Ting Cheung [1990] 1 HKLR 649 on which reliance was placed by Mr Erik Shum. I would make three observations. First, there is nothing in that judgment which is inconsistent with the approach I have adopted here. Intention is a question of fact and in determining it, the court has to assess all the circumstances. Secondly, the decision should be regarded as one on its own special facts. The Court presumed the requisite intention from the occupier's exclusive possession after the termination of the licence by death of the licensor although the licensee did not receive notice of death. Thirdly, there is nothing on the facts in that case equivalent to the evidence we have here of the 14th defendant's intention as regards the payment of rent.

44. My conclusion on the question of intention is sufficient to dispose of this appeal. It is therefore unnecessary to deal with Ms Gladys Li's further argument that the 14th defendant has shown no arguable case on limitation. This was that his defence filed on 31 March 1981 in the 1980 action, which acknowledged the title of the plaintiffs' predecessors-in-title, satisfied the requirements of a signed acknowledgment by an agent of the 14th defendant within sections 23 and 24 of the Limitation Ordinance although it was not signed by counsel who settled it. It only contained in typewritten form counsel's name above the typewritten words "Counsel for the 11th Defendant'. (The 14th defendant was the 11th defendant in those proceedings).

Costs

45. Full arguments had been addressed to us on costs. Costs in the appeal before the Court should follow the event. This would apply to all costs which had been reserved under any order.

Order

46. Accordingly, I would dismiss the 14th defendant's appeal with costs.

Mr Justice Litton, PJ :

47. I agree.

48. The law is clear. The owner of the land with the paper title is deemed in possession of the land. If the law is to attribute possession to a person who can establish no paper title to possession, and claims to be a mere trespasser, the burden is upon him to establish his intention to exclude the whole world: including the owner of the land. Only in this way can he establish "adverse possession" in terms of s13(1) of the Limitation Ordinance, Cap 347.

49. Here, the appellant has come no-where near establishing adverse possession. He unequivocally declared that at all times he was ready willing and able to pay rent to the owners, and did not do so only because no-one came along on behalf of the landlords to collect rent. Whether his acts and declarations in the course of the 1980 court proceedings amounted to an acknowledgment of the owners' title in terms of s23(1), or fell short of that, the fact remains that he had no intention to exclude the owners.

50. Where the facts are so clear, there is nothing for a trial court to investigate.

51. The dismissal of this appeal accords with the broad merits of the case. The fact is that, ever since 1980, the appellant knew that the land-owners were asserting their right to possession and, at that time, the appellant had no shadow of a case based on adverse possession. The 7-year tenancy under which the land was held only expired in April 1964: approximately 16 years before the 1980 action was commenced. So a defence to the 1980 action, based on 20-years' adverse possession, could never have got off the ground.

52. As regards Ho Hang-wan v. Ma Ting-cheung [1990]1 HKLR 101, upon which Mr Erik Shum relied, there the person in actual possession of the land (the plaintiff in that action) had denied the land-owner's case that she held the land under a licence and had asserted adverse possession at the outset. The question was whether, upon all the facts of the case, adverse possession was made out. At trial, the judge had found as a fact that the plaintiff and her husband regarded themselves as licensees throughout the time they were on the land, and concluded that the intent to exclude the owner had not been established. The Court of Appeal, however, came to a different view. It held that as a matter of law the licence to occupy the land had been revoked by the owner's death in 1964 (even though the plaintiff and her husband did not know of the owner's death), and that the finding as regards the plaintiff's state of mind (thinking of themselves as licensees throughout) could not stand against the other established facts: The act of the plaintiff and her husband covering the site with structures and using it as a store and a residence, coupled with the plaintiff's own assertion of right in the witness-box, so turned the scales that adverse possession was held established. In the Court of Appeal's words (at p106-E):

"In this case ... the plaintiff's possession after 1964 was certain and unequivocal and attributable to no continuing licence."

53. That was the crucial finding. The case turned upon its own peculiar facts and, despite Mr Erik's Shum's attractive arguments, it provides no guidance as to how this appeal should be resolved.

54. I too would dismiss this appeal, with costs.

Mr Justice Ching, PJ :

55. I agree that this appeal must be dismissed with costs for the reasons given by the Chief Justice. I need only add that there can be no better evidence of the intention of an occupier of land than his express declaration against his own interest.

Mr Justice Mortimer, NPJ :

56. I am in complete agreement with the judgment of the Chief Justice. For the reasons he gives, I also would dismiss this appeal with costs.

Lord Cooke of Thorndon, NPJ :

57. I fully agree with the conclusion and reasoning of the Chief Justice and with the orders proposed by him. I also agree with the views expressed by my brothers Litton and Ching.

Chief Justice Li :

58. The Court being unanimous, this appeal is dismissed with costs as abovementioned.