The Judicial Committee of the Privy Council Decisions

Privy Council Appeal No. 30 of 1997

Sze To Chun Keung Appellant

v.

(1) Kung Kwok Wai David and

(2) Lam Chak Man Estate Limited Respondents

FROM

THE COURT OF APPEAL OF HONG KONG

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REASONS FOR REPORT OF THE LORDS OF THE

JUDICIAL COMMITTEE OF THE PRIVY COUNCIL

OF THE 23rd June 1997, Delivered the

27th June 1997

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Present at the hearing:-

Lord Goff of Chieveley

Lord Slynn of Hadley

Lord Lloyd of Berwick

Lord Hoffmann

Lord Hutton

  ·[Delivered by Lord Hoffmann]

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1. In this, the last appeal to Her Majesty in Council from Hong Kong, their Lordships indicated at the close of argument that they would humbly advise Her Majesty that the appeal should be allowed with costs in the Court of Appeal and that they would give their reasons later.  Their Lordships further agreed that the costs at first instance should be costs in the cause, and they directed that the respondents must pay the appellant's costs before their Lordships' Board.  Their Lordships' reasons for their decision now follow.

2. The respondents, whom their Lordships will call "the plaintiffs", are the registered owners of land in Tuen Mun, New Territories, which includes a house and land occupied by the appellant, whom their Lordships will call "the defendant".  There is no dispute as to the plaintiffs' title.  They hold under a Crown Lease  granted  on  24th January 1905 for 75 years from 1st July 1898, extended by the New Territories (Renewable Crown Lease) Ordinance Cap. 152.  In 1990 they commenced an action for possession against the defendant.  In his original defence, the defendant claimed to be entitled to retain possession by virtue of a Crown Land Permit which he held between 1961 and 1988.  The plaintiffs issued a summons to strike out this pleading as disclosing no reasonable defence and the defendant no longer contends that it does.  But the defendant applied for leave to amend the defence by substituting a defence under the Limitation Ordinance Cap. 347.  Both applications came before Le Pichon J., who refused leave to amend on the ground that the proposed defence was bound to fail.  She therefore struck out the defence and entered judgment for the plaintiffs.  The Court of Appeal affirmed her decision and the defendant appealed to their Lordships' Board.

3. The Limitation Ordinance is mainly derived from the provisions now contained in the English Limitation Act 1980.  The relevant sections are as follows.  First, section 7(2), as it stood at the relevant time, barred an action to recover land after the expiration of 20 years from the date on which the right of action accrued to the plaintiffs.  Secondly, section 8(1) provided that, where an owner was dispossessed, the right of action was deemed to have accrued on the date of the dispossession.  Thirdly, section 13(1) and (2) must be quoted in full:-

"(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.

(2)Where a right of action to recover land has accrued and thereafter before the right is barred, the land ceases to be in adverse possession, the right of action shall no longer be deemed to have accrued and no fresh right of action shall be deemed to accrue unless and until the land is again taken in adverse possession."

4. By section 17, at the end of the limitation period the title of the owner is extinguished.

5. It was accepted by Mr. Lewison Q.C., who appeared for the plaintiffs, that for the purpose of deciding whether leave to amend should be given, the facts alleged in the proposed amended defence must   be  regarded  as  true.  If  those  facts  would  disclose  a reasonably arguable defence, the investigation of whether they are true or not would be a matter for the trial judge.  As pleaded and amplified by the documents before their Lordships, the material facts are as follows.

6. In 1955 or thereabouts, the defendant went into occupation of the land, built a wooden hut and fenced the boundary.  In 1961 he was granted a Crown Land Permit which, in return for a fee of $21, entitled him to occupy the land "for a temporary period" and to erect a store, kitchen, pigsty and accommodation.  One of the conditions of the permit stated that it was not to be construed as creating the relationship of landlord and tenant.  Pursuant to this permit the defendant erected a two-storey brick house and enclosed the land with a brick wall.  The permit was renewed until 1988, when the Crown wrote to the defendant saying that it was cancelled because the land had been discovered to be in private ownership.  There was no communication between the Crown and the plaintiffs and it was only as a result of these proceedings that the plaintiffs discovered that for 27 years their land had mistakenly been the subject of a Crown Land Permit.  Since then, the defendant has remained in occupation. 

7. Mr. Lewison accepts that the plaintiffs were dispossessed by the defendant's taking occupation of the land in 1955 and that, by virtue of section 8(1), his right of action is deemed to have accrued on that date. Furthermore, the defendant was a person in whose favour the period of possession could run and his possession was therefore adverse for the purposes of section 13(1).  The question is then whether, as a result of the grant of the Crown Land Permit, the land ceased to be in adverse possession.  If so, by section 13(2) the right of action would be deemed not to have accrued until the land was again taken in adverse possession in 1988.

8. After the grant of the Crown Permit, the defendant remained in physical possession of the land. It was wholly enclosed and the defendant manifested the outward intention of excluding all other persons, including the owner and the Crown, which had granted him a right of exclusive occupation. So far as third parties, including the plaintiffs, were concerned, he was in possession: see Ho Hang-wan v. Ma Ting-cheung [1990] H.K.L.R. 649.  But the effect of the permit was that he possessed on behalf of the Crown.  By accepting the benefit of the permit, he became estopped from denying that the Crown had the right to allow him to occupy.

9. For the purposes of limitation, therefore, possession from 1961 must  be  regarded as having been in the Crown, which possessed through its licensee, the defendant.  Was that possession adverse to the plaintiffs?  Their Lordships consider that it was.  The position of the Crown was no different from that of any other person who had taken possession by a licensee.  The situation would have been no different if, for example, the defendant had sold his possessory title to a company which allowed him to remain in occupation and run the store as its manager.  The fact that the Crown was also the grantor of the lease under which the plaintiffs was entitled to the land is irrelevant.  The Court of Appeal said that the Government could not derogate from its grant to the plaintiffs.  This is true, but the consequence is that the Crown had no more right to take possession than any other person.  If it had had such a right, its possession would have been referable to a legal title and would not have been adverse.  Adverse possession is, as Nourse L.J. said in Buckinghamshire County Council v. Moran [1990] Ch. 623, 644, "possession as of wrong".  Thus the grant of the Crown Land Permit transferred possession to the Crown but did not stop the running of the limitation period.

10. Mr. Lewison says that even if the Crown was in adverse possession until 1988, this was retrospectively corrected in 1988 when the Crown acknowledged the plaintiffs' title and thereby transferred to the plaintiffs whatever rights the Crown had acquired.  Their Lordships consider, however, that, in cancelling the permit, the Crown did no more than to renounce, as between itself and the defendant, its right to license the defendant to occupy and therefore to take the benefit of the defendant's possession.  This could not rewrite the history of the past 17 years when the Crown had been in possession.  Nor did it amount to a conveyance to the plaintiffs of the Crown's title or an acknowledgement of the plaintiffs' title for the purposes of sections 23(1)(a) and 24 of the Ordinance.  By section 24(2) an acknowledgment must be made in writing "to the person, or to an agent of the person, whose title ... is being acknowledged" and there is no allegation that any such communication took place.

11. It therefore appears to their Lordships that, on the facts as pleaded, the land has been continuously in adverse possession since 1955 and that the plaintiffs' title was extinguished in about 1975.  To all outward appearances, there was no change in possession throughout the period and the licensing arrangements between the defendant and a third party, the Crown, did not affect the adverse nature of the possession as against the plaintiffs.  At the time when proceedings were commenced, the defendant had been in possession on his own account for only two years.  But this does not matter: the Limitation Ordinance is not concerned with whether the defendant has acquired a title but with whether the plaintiffs'  right  of  action  has been barred.  For this purpose, all that matters is that there should have been continuous adverse possession for the period of limitation.  The rights inter se of the successive persons who may have been in possession adversely to the plaintiffs since they were dispossessed are for this purpose irrelevant.  Thus the proposed defence disclosed an arguable ground of defence and the defendant should have been granted leave to amend his defence.

© CROWN COPYRIGHT as at the date of judgment.