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CACV 26/2010
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 26 OF 2010
(ON APPEAL FROM HCA NO. 10670 OF 2000)
BETWEEN
CHAU KA CHIK TSO
by its manager CHAU FUK SZE (now replaced
by CHOW LAP YAN and CHAU MOU
LIN TOMMY) duly registered under the
New Territories Ordinance, Cap. 97
1st Plaintiff
LAM CHI FAI 2nd Plaintiff
LAM CHI KIN ANDREW 3rd Plaintiff
LAM CHI LEUNG 4th Plaintiff
LAM CHI KWONG 5th Plaintiff
LAM SAI KIT 6th Plaintiff
LAM YUET YAU 7th Plaintiff
LAM TZE CHUN 8th Plaintiff
LAM CHUN SING 9th Plaintiff
LAM PING CHUNG 10th Plaintiff
LAM WING LAU 11th Plaintiff
LAM KWOK KEE 12th Plaintiff
LAM TZE CHOI 13th Plaintiff
LAM SHUI LUN 14th Plaintiff
LAM NGOK CHING 15th Plaintiff
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and
SECRETARY FOR JUSTICE Defendant
Before: Hon Rogers VP, Le Pichon and Kwan JJA in Court
Dates of Hearing: 14 – 15 December 2010 and 26 January 2011
Date of Handing Down Judgment: 14 February 2011
J U D G M E N T
Hon Rogers VP:
1. This was an appeal from a judgment of Deputy High Court
Judge L. Chan given on 30 December 2009. The action had commenced
almost exactly 9 years previously and was a claim by the plaintiffs in respect of
Lot 1212 in D.D. 115 (“the Lot”). The plaintiffs’ claim was that the proper
boundary of the Lot includes what has been referred to as the discrepant area.
The basis upon which that was put initially in the plaintiffs’ claim was that the
boundaries of the Lot had always included the discrepant area. The alternative
way in which the matter was put was that the various owners of the Lot had
encroached upon the discrepant area and that, as a result, the discrepant area had
become part of the Lot as regards the rights and liabilities between the plaintiffs
and their lessor, the Government. In consequence it was said that the plaintiffs
were entitled to treat the discrepant area as part of their tenancies of the various
parts of Lot 1212 until the determination of their interest in the Lot in 2047.
On the plaintiffs’ alternative case, although the original lease terms would give
an area of the Lot as 18 acres, with the inclusion of the discrepant area the total
area is some 24.67 acres. Initially the plaintiffs had also sought to rely on
adverse possession. However, it was conceded that the argument was
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mutually exclusive with the argument based on encroachment and was soon
abandoned, in practice if not explicitly.
2. The Government, represented by the Secretary for Justice,
contended that the plaintiffs were not entitled to treat the discrepant area as part
of the Lot because the period necessary for the use and occupation of the
discrepant area had not been sufficiently long prior to the renewal of the
original lease in 1973 to constitute that use and occupation as, in law,
encroachment.
3. The judge held in favour of the Government and dismissed the
plaintiffs’ claims. At the conclusion of the hearing of this appeal judgment
was reserved which we now give.
Background
4. The Lot is situated between the Shan Pui and Kam Tin rivers near
what appears to be their confluence. The Lot was described at the time of the
original grant in 1916 as “marshy land” and “a piece of Foreshore and Seabed
and Crown Land covered with water”. Lam Wun Chi, as trustee of Wing Wa
Tong, purchased the Lot at auction on 6 July 1916. The lease of the Lot was
then granted to the Tong under the Foreshore and Seabed Ordinance. On
21 May 1924, the Lot was then divided into five sections and sold by the Tong.
There is no dispute between the parties that the plaintiffs are the successors in
title in respect of the various sections and it is unnecessary, therefore, to trace
the various conveyances.
5. It was a requirement that the Lot should be used for agricultural
purposes. It is clear that the Lot had been used for fish farming from a very
early stage. There is no doubt that bunds were constructed and aerial
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photographs, dating from as early as 1924, show that the discrepant area was
included within the area of the fishponds. It would appear that fish farming
was carried on the Lot until the 1980s. The construction of the fishponds and
the bunds which surrounded them was a highly labour-intensive and costly
exercise.
6. The judge came to the conclusion that whoever built the fishponds
and constructed the bunds knew that they extended beyond the area of the Lot
into the discrepant area. The judge also held, at paragraph 170 of the judgment,
that the defendant, by that he must have meant the relevant Government
servants at the time, was not aware of the occupation of the discrepant area until
the 1980s. It is clear, however, that the relevant Government servants must
have been aware that there were fishponds; it was simply that no steps had been
taken to measure precisely the extent of the fishponds and the judge accepted
that all the Government records and plans had been inaccurate. It can, perhaps,
be understood that it was probably of little consequence to the Government that
the fishponds extended further north than the area of the Lot because it would
appear that Lot 1347, which was to the north of the fishponds and lay between
the fishponds and the apex of the confluence of the two rivers, was not rented
out until 1960.
7. Land in the New Territories has been governed by the New
Territories Ordinance Cap. 97. Section 8 provided that all land in the New
Territories was deemed from 23 July 1900 to have belonged to the Government
and occupiers of the Land would be deemed to be trespassers unless the
occupation had been authorized by Government grant. The lease granted to
the Tong in 1916 was in the form usual at the time namely for 75 years from
1 July 1898 and it contained a right of renewal for a further term of 24 years
less three days.
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8. The Lot was, of course, subject to the New Territories (Renewable
Government Leases) Ordinance, Cap. 152 (“the Renewal Ordinance”). The
effect of the Renewal Ordinance was considered in the case of Chung Ping
Kwan & Ors v Lam Island Development Ltd [1997] AC 38, which has been the
subject of considerable discussion in the present appeal. The lease of the Lot
has also been the subject of the extension of rights under the New Territories
Leases (Extension) Ordinance, Cap. 150 (“the Extension Ordinance”).
9. The plaintiffs now accept that the construction of the fishponds on
the Lot constituted an encroachment on Government land in respect of the
discrepant area. As noted above, it is the plaintiffs’ case that the consequence
of that encroachment is that the discrepant area has become part of the Lot for
the purposes of their rights and liabilities under the lease and that, as a result,
the plaintiffs are entitled to occupation of the discrepant area as part of their
occupation of the Lot until the expiration of the lease in 2047.
10. The defendant, on the other hand, contends that because the
plaintiffs had not shown that they had occupied the discrepant area for 60 years
prior to the time when the original 75-year period expired any inchoate rights
which they may have acquired prior to the expiry of the first term of the lease in
1973 have ceased to exist. It is the defendant’s case that the discrepant area
reverted to the Government, as the landlord, on the expiry of that lease and the
new lease, deemed to be granted in accordance with the Renewal Ordinance, did
not include the discrepant area as such: the plaintiffs remained trespassers on
the land comprised in the discrepant area. On the respondent’s notice, the
Government further contends that even if the plaintiffs were entitled to rely
upon encroachment in respect of the discrepant area prior to 1 July 1997, the
discrepant area ceased to be the subject of encroachment after 30 June 1997.
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The law relating to encroachment
11. The doctrine of encroachment is clearly of ancient origin and it has
not been possible to ascertain when it first arose. It is pertinent to point out,
however, that it is part of the law as to title. Citing authorities such as Bracton,
Blackstone’s Commentaries and Holmes on the Common Law, it is stated in
Williams on Real Property, see e.g. p. 637 of the 23rd
Edition:
“In English law, all title to land is founded on possession. Thus a
person, who is in possession of land, although wrongfully, has a title to
the land, which is good against all except those who can show a better
title; that is, can prove that they or their predecessors had earlier
possession, of which they were wrongfully deprived.”
12. The law of encroachment appears to have originated when lessees
annexed areas of what were manorial waste and used them as part of the
property which they had leased. An area encroached may be an area which
belongs to the landlord but was not part of the leased premises, or it may be an
area which was common area or it may be an area which belonged to some third
party. In each case there was a similarity in the application of the law, namely,
that the area encroached was treated as part of the premises that had been
leased.
13. Pennycuick V.-C. in the case of Smirk v Lyndale Developments Ltd
[1975] 1 Ch. 317 described the law in relation to encroachment as being in
“something of a tangle”. When that case went to the Court of Appeal,
Lawton LJ said that, although he agreed with that statement, he considered that
Pennycuick V.-C. had untangled it in a way which met with the approval of the
parties and that he accepted the statement of the law as being correct. The first
case to which Pennycuick V.-C. referred to was Kingsmill v Millard (1855) 11
Exch. 313. The leading judgment in that case was given by Parke B.
Parke B said at the commencement of his judgment at page 318:
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“The rule must be absolute for a new trial. It is laid down in all the
cases-whether the inclosed land is part of the waste, or belongs to the
landlord or a third person-that the presumption is, that the tenant has
inclosed it for the benefit of his landlord, unless he has done some act
disclaiming the landlord’s title. I am disposed to discard the
definition, that the encroachment is made “for the benefit of the
landlord,” and to adopt that of Lord Campbell, viz. that the
encroachment must be considered as annexed to the holding, unless it
clearly appears that the tenant made it for his own benefit.”
14. In so saying, Parke B. was referring to the direction which had
been given to the jury in that case which had been said to have been in
accordance with the ruling in the case of Doe on the Demise of Lewis v Rees
(1834) 6 C. & P. 610 (see the argument at page 314 of the Kingsmill case).
The report of that earlier case is pithy but states in clear terms that
encroachments were made for the benefit of the landlord. The judgment of
Lord Campbell to which Parke B. referred was Thomas Andrews v William
Hailes (1853) 2 E. & B. 349. In that case Lord Campbell had said at page 353:
“I think it must be considered that the encroachment in this case was
held by the defendant as part of the demised premises; and, that being
so, I think the defendant is not at liberty to deny that it was part of
them. I proceed on what the civil law calls exceptio personalis, and
the common law an estoppel, and say that the tenant cannot deny this.
I do not adopt the doctrine that the tenant steals for his landlord, and
that therefore the landlord, at the end of the demise, is entitled to claim
the stolen property; but I think that, when the property is taken and
used as part of the holding, the tenant can as little dispute the title to it
as he can dispute the title to any other part of the premises. The
strange doctrine, as to stealing for the benefit of the landlord,
originated in those cases where the landlord was lord of the manor, and
the tenant encroached upon the waste. In such cases it might well be
presumed that the tenant approved for the benefit of the lord who had a
right to approve: but the idea that he could steal the land of another for
his landlord is revolting to me, as it was to my predecessor
Lord Kenyon.”
15. Coleridge J agreed with what Lord Campbell had said and added
“the presumption is one depending on the inference to be drawn from the facts”.
He went on to say that he considered it was the tenant’s duty to preserve his
landlord’s boundary and that if at the end of the term of the tenancy the
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boundary had been confused by enclosing adjacent ground a very strong
presumption arose that the enclosed land was part of the holding. Erle J.
expressed himself thus:
“From the decided cases, I infer the law to be that, when the power to
encroach is derived from the occupation of the premises held from a
landlord, and the encroachment is occupied as if it was a part of the
holding, then, at the end of the tenancy, the presumption, as between
the landlord and tenant, is that it is part of the holding, and it belongs
to the landlord. I think there are many reasons why this should be so;
amongst others, I think the encroachment ought not to be permitted to
belong to the tenant, a wrong-doer. It is true that, for technical
reasons, stealing land is not larceny: but it is morally a theft; and it
ought not to enure to the benefit of the thief.”
16. Lord Campbell added further:
“The result seems to be that, in the opinion of this Court, where the
encroachment is on soil not the property of the landlord, the
presumption should be stated to be that the encroachment is part of the
holding: not that the tenant encroached for the landlord.”
17. Without, it is hoped, being too pedantic, it would appear that
having cited from Parke B.’s judgment Pennycuick V.-C. appears at 324F of the
report in the Smirk case to refer again to the presumption being that the tenant
had enclosed for the benefit of the landlord. It can only be presumed that the
very distinction drawn by Parke B. in the passage which appeared immediately
above that, was considered to be of no consequence in the Smirk case. As the
citation from the judgment of Willes J. in Whitmore v Humphries (1871) L.R. 7
C.P 1, which in Pennycuick V.-C.’s judgment followed immediately thereafter,
makes clear, the encroachment is deemed to be made by the tenant as an
addition to his holding and it is a consequence of that that it is for the benefit of
the landlord. The conclusion to which Willes J. came at page 6 was that:
“For these reasons I come to the conclusion that the meaning of the
word “encroachment” is quite apart from any question of assent or
dissent on the part of the landlord, and signifies something taken in by
the tenant by reason of his being tenant without anything to shew that
it was so taken otherwise than for the benefit of the landlord, to be held
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as part of the demised premises, and given up accordingly at the end of
the term.”
18. I would mention that in the case of Perrott (J.F.) & Co. Ltd. v
Cohen [1951] 1 KB 705 Denning LJ, as he then was, referred to the principle
underlying the cases on encroachment as not, perhaps, strictly being an estoppel
but being akin to it. In so saying he was not only echoing the sentiments
previously expressed by Lord Campbell but was referring to statements such as
that by Charles J in the case of Tabor and others v Godfrey (1895) 64
L.J.Q.B. 245 where at page 247 he had referred to the principle of
encroachment applying in the case because the landlord and tenant had treated
the particular part encroached as being part of the land demised. He said:
“But I think twelve years have elapsed of occupation of this strip of
land inconsistent with the user of it as a right of way; and I should,
apart from the legal question here, have to hold, certainly as to the strip,
that the defendant had acquired a right to the freehold under the statute.
But that is not the true inference, nor do I think the Statute of
Limitations has anything to do with the case. But I do think that in
the events which have happened, both the landlord and tenant have
treated this strip as part of the land demised. At the end of the lease
the tenant could not have set up that the strip was his own, or said that
it was not part of the land included in the lease. A tenant who enters
under one title cannot turn round and say he entered under another.”
Is the 60 year period relevant?
19. The parties argued this appeal on the basis that a period of 60 years
was relevant in considering the plaintiffs’ claims. I found it difficult to
understand the basis upon which the 60-year period was relevant to the issue of
encroachment. The way it seemed to be considered was that the statutory
limitation period was applicable by way of analogy. But application by
analogy of a statutory provision is a somewhat precarious notion. Usually a
statutory provision is applicable or it is not.
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20. The reference to 60 years could only come from section 7 of the
Limitation Ordinance, Cap. 347 (“the Ordinance”) which reads:
“(1) No action shall be brought by the Government to recover any land
after the expiration of 60 years from the date on which the right of
action accrued to the Government or, if it first accrued to some person
through whom the Government claims, to that person.
(2) No action shall be brought by any other person to recover any land
after the expiration of 12 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:
Provided that, if the right of action first accrued to the Government
through whom the person bringing the action claims, the action may be
brought at any time before the expiration of the period during which
the action could have been brought by the Government, or of 12 years
from the date on which the right of action accrued to some person
other than the Government, whichever period first expires.”
21. The textbooks, specifically The Law of Real Property 7th edition by
Megarry & Wade (para 35-27) and Adverse Possession by Stephen Jourdan
(Chapter 25) seemed to quote the conclusion that the limitation period was
relevant without any full explanation as to why it was relevant. It was for that
reason that the parties were asked to make further submissions on this aspect.
22. The reality is that in nearly all the reported cases the period of
occupation of the encroached land has not been of importance as regards the
issues in the cases. Hence there is little or no explanation as to why the
specific period is relevant.
23. Having heard further argument and considered the cases, it seems
to me that the start of the consideration must be the principle upon which the
law relating to encroachment depends. Reference has already been made to
what Lord Campbell CJ said in Andrews v Hailes at page 353 and to what
Lord Denning said in Perrot (J.F.) & Co. Ltd v Cohen at page 710 and to what
Charles J said at page 247, the top of the right hand column in Tabor v Godfrey
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(1895) 64 L.J.Q.B. 245. The start of the consideration of the principle lying
behind the law relating to encroachment would thus appear to be that it is
something akin to estoppel. Because the encroacher has been able to trespass
on the encroached land by reason of his lease and because he has used the
encroached land as if it were part of the leased premises, he is debarred from
treating the encroached land otherwise than as part of the leased premises. If
the lessor has tacitly or otherwise permitted the encroachment then questions of
limitation do not arise. In other circumstances the lessee is still entitled to be
protected under the statutory provisions as to the limitation period, but the
estoppel becomes relevant to the extent that the lessee/encroacher must still
treat the encroached land as part of the demised premises.
24. It would seem that, perhaps, the most useful statement relating to
the length of the period, where considerations of implied consent or permission
do not apply, is that of Cohen LJ in the case of King v Smith [1950] 1 All
E.R. 553 at 557B where he said:
“First, he says the presumption ceased to apply when the defendant
purchased the reversion of Gunnislake. He says that the defendant
then acquired all the rights of the landlord, including such rights as the
landlord had in the disputed strip on which the defendant had
encroached. ……I think counsel for the plaintiff supplied the right
answer to this point when he said that the true effect of the
presumption was that, from the time of the encroachment, the disputed
strip became an accretion to the demised premises, and at the
expiration of twelve years from the date of the encroachment, the
defendant acquired a leasehold interest in the disputed strip and the
landlord had the freehold reversion therein.”
25. The way that Cohen LJ seems to treat the matter is that the court
treats the intention of a lessee who encroaches on other land of his lessor as
being an intention to occupy the encroached land as part of the leased premises.
In some circumstances, of course, it has been acknowledged that the tenant may
have used the encroached land for some purposes quite unconnected with the
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lease and he may be treated simply as a squatter and the law of encroachment
would, in those circumstances, not apply. But assuming that is not the case,
the law of encroachment would apply. That would bind both the lessee and
the lessor. They would both have to treat the encroached land as being part of
the leased premises. The effect would be, as Cohen LJ put it, that when the
law of encroachment applies the lessee is treated as having acquired a leasehold
interest and the landlord has the reversion therein. The limitation period is
relevant in that during the time when the period is accruing the landlord may be
able to recover possession of the encroached land, that is assuming the landlord
has not acted in a way that it has bound itself to treat the land as part of the
leased premises.
26. The only other point, which I do not consider arises in the final
analysis in the present case, is whether the Government should be treated as the
Government under section 7(1) of the Ordinance or as a private landlord under
section 7(2) of the Ordinance.
The application of the principle in the present case
27. Although there was no substantial dispute in the present case as to
many aspects of the law relating to encroachment, I have found it useful to
examine the concept since I consider it is too easy to elide the conclusion that at
the termination of the tenancy the landlord is entitled to the land encroached
with the reason therefor, namely that the encroachment during the period of the
tenancy has been occasioned because of the tenancy and the encroached land
has been used as and become, in effect, part of the tenancy. As the judges in
the past have been at pains to point out particularly where third party land is
concerned the concept of encroachment is not based on any notion that what the
tenant has done has been for the benefit of the landlord although, at the end of
the day that may be the consequence.
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28. The major dispute in the present appeal as it was argued initially
turned upon whether on the plaintiffs’ case they were still entitled to treat the
discrepant area as part of the leased premises or whether, on the Government’s
case, the plaintiffs would not be able to claim any right in the discrepant area
because they had not occupied and used the discrepant area for a period of
60 years. Central to the Government’s case was the proposition that although
the plaintiffs and their predecessors had occupied and used the discrepant area
at least from 1924, the initial lease had expired in 1973 before a period of
60 years had elapsed and thus the discrepant area would have reverted to the
Government in 1973 and although a new lease was granted it did not include the
discrepant area, because the discrepant area had not been included in the new
lease.
29. The plaintiffs’ answer to the Government’s proposition is that the
effect of the Renewal Ordinance as explained by the Privy Council in the Lam
Island decision meant that even if it were necessary for them to show that they
had occupied the discrepant area for a period equivalent to the period necessary
to establish adverse possession against the Government, they were entitled to
rely on periods both before and after 1973. In order to resolve this initial
dispute it is necessary, therefore, to consider the decision in the Lam Island
case.
The Lam Island decision
30. The Lam Island Development Company Limited (“Lam Island”)
held land in the New Territories, as in the present case, under the terms of a
Crown lease for 75 years from 1 July 1898 with the right to request a renewal of
the lease for a further term of 24 years less three days. The Renewal
Ordinance provided that the right to renew contained in the Crown lease should
be deemed to have been exercised and a new Crown lease for 24 years less three
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days (i.e. expiring in 1997) should be deemed to have been granted. Lam
Island issued possession proceedings against, amongst others, Chung Ping
Kwan.
31. The defendants claimed to have been in adverse possession.
There were two cases. In one case adverse possession began in 1953; in the
other it began in 1959. In each case, the relevant limitation period of 20 years
had not been completed by the time of the renewal but the period of 20 years
had been completed by the time that the case was heard in 1993.
32. Whereas a person who had established adverse possession against a
lessee was entitled to enforce his right of possession against the lessee he could
not enforce it against the landlord. Hence when the tenancy determined the
landlord could take possession of the premises and his rights were not affected
by those of the person who had been in adverse possession. The landlord
could thus grant a new lease on the termination of the old lease that would be
free from any rights acquired by the adverse possessor.
33. The question that thus arose in the case was whether, in a case
where the original lease had contained a right or option to renew and that option
had been exercised, an adverse possessor of premises was entitled to rely on
periods both before and after the renewal to establish the requisite period under
the Limitation Ordinance. Lord Nicholls of Birkenhead phrased it at
page 48B:
“Thus the question to be addressed is whether adverse possession bars
the lessee from asserting against the squatter this specifically
enforceable right, and the legal estate which flows from this right, as
much as it bars the lessee from asserting against the squatter the other
rights granted to him by the lease.”
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34. The answer given by the Privy Council was in the affirmative.
Starting on the premise that the reversioner, that is the Government in the case
of the New Territories, had no right as against any person occupying the land
until his reversionary estate or interest fell into possession, Lord Nicholls then
went on to consider the position where there was a right of renewal. Because
the right of renewal was a specifically enforceable right, the reversioner would
have no right to enter and eject the trespasser because the landlord was bound to
renew the lease. As against the lessee, the reversioner had no right to
possession. Lord Nicholls then carried on at page 48F:
“Conversely, and unlike the reversioner, the lessee has slept on his
rights. There seems to be no compelling reason why, as between him
and the trespasser, his rights under the renewal option in the lease
should not be defeated just as much as his other rights under the lease.
It is true that when he exercises the option the lessee obtains a new
legal estate, but this is no more than implementation of a pre-existing
contract. He acquires a new legal estate by virtue only of a right
included in the lease whose title has been extinguished as against the
trespasser. To ignore the legal source of the lessee’s entitlement to his
new legal estate would be to exalt form (a new legal estate) over
substance (a pre-existing right to the estate).”
35. Lord Nicholls then went on to consider whether the position was
any different because of the Renewal Ordinance and considered that the
Ordinance was essentially administrative machinery designed to facilitate and
promote the existing rights and obligations under the then existing Crown leases.
He said at page 50F:
“The deemed new lease is to be regarded as having the like
consequences in law as would have followed from an actual exercise
of the renewal option and an actual grant of a new lease.”
36. Lord Nicholls then went on to consider the position under
section 4(4)(c) of the Renewal Ordinance. That new section now reads:
“4. Every new Government 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 Government
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lease relating thereto were subject to immediately before the 1st day of
July 1973-
…….
(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.
37. In respect of squatters who had not been in occupation for a
sufficient period to be able to rely on the provisions of the Limitation Ordinance
by the time that the administrative machinery set up by the Renewal Ordinance
had taken effect in 1973, Lord Nicholls said (at page 51H-52E):
“Section 4(4)(c) 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-1953 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. If that were so,
there would be much force in this interpretation of the Ordinance.
The context requires that rights in section 4(4)(c) should be given a
wide and flexible meaning. So also does the language: “any …
rights … or … burdens or encumbrances of whatsoever nature …” But
this “carry forward” provision 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 Limitation Ordinance had already started to operate in
favour of a squatter on 30 June 1973. Under the Limitation
Ordinance the lessee’s right of action had deemed to accrue on the date
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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).”
38. Turning to the present case, it would appear that, first of all, the
reality of the situation is that the original lease granted to the plaintiffs was a
lease for 99 years. It is not in dispute that it was expressed to be in two
sections, the first being for 75 years and the second would take the lease up to
the end of the 99-year period. The plaintiffs had a specifically enforceable
right to carry through to the end of the second period. As was said by
Lord Nicholls in the Privy Council, if one were to regard the matter as there
being 2 leases, the first for a 75-year period and the second for a 24-year period,
that would be elevating form over substance.
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 section 7 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.
40. On either basis the plaintiffs would be entitled to rely on the period
after 1973 as well as before 1973 in calculating the 60-year period of
encroachment.
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41. The case, it seems to me, can be put very simply. As referred to
above, absent any tacit or implied consent by the lessor, the law of
encroachment treats the encroacher as a squatter until the period of limitation
expires. Once the limitation period has expired, the landlord is treated as
barred from bringing proceedings because of section 7 of the Ordinance, but can
still claim the reversion.
42. On the respondent’s notice the Government sought to raise the
question as to whether, on the basis that it should be presumed that the
plaintiffs’ encroachment should prior to 1997 be regarded in law as having had
the result that the discrepant area should be treated as part of the leased
premises, the same situation would prevail after 30 June 1997 or whether the
effect of the Extension Ordinance was that the period following 30 June 1997
should be treated as being a new lease. The argument was put on a number of
bases. In my view it is untenable in view of the decision of the Court of Final
Appeal in the case of Chan Tin Shi and others v Li Tin Sung and others
(2006) 9 HKCFAR 29. The basis of the argument that had succeeded in the
Court of Appeal, namely, that there was a new grant was held to be inapplicable
in the Court of Final Appeal. The Court of Final Appeal made it quite clear
that the Extension Ordinance provided the original lease was simply extended,
the lease after 30 June 1997 was the same lease as that before 1 July 1997.
The Ordinance provided that there was a continuation of the existing state of
affairs and not the creation of a new one. In those circumstances the argument
sought to be raised on the respondent’s notice cannot succeed, it was the
argument that succeeded in the Court of Appeal and the losing argument in the
Court of Final Appeal. The references that are found in the Court of Final
Appeal judgments to the anomaly that existed because a lessee would be
deprived of his right to possession by an adverse possessor but still be liable for
Government rent were references to observations that were made by this Court
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and in respect of which the Court of Final Appeal was unable to find a
satisfactory solution. The core of the dispute on that occasion was, however,
as to whether there had been a new grant.
The broader consideration relating to the occupation of the discrepant
area
43. Although the basis upon which the matter was argued initially was
that if the plaintiffs had established occupation and use of the discrepant area
for a period of 60 years they would be entitled to possession of that as part of
the premises leased until 2047, at the adjourned hearing the question as to the
broader consideration was raised.
44. In the present case, albeit acknowledging that the judge below
rejected the case which had been put on the basis of estoppel, in part because
any investments which the plaintiffs and their predecessors had made had been
fully compensated by the period of occupation, I consider that the plaintiffs are
entitled to rely upon the broader principles of encroachment. The inaction by
the Government in failing to ascertain the extent of the occupation of the
plaintiffs and their predecessors from the time when the fishponds were built
and allowing that situation to continue for 70 years demonstrates that the use of
the discrepant area can have been of little or no concern to the Government
during that period. The Government’s inaction after it became fully aware that
the fishponds were situated on unleased Government land demonstrates that the
Government was content to let that situation continue. That, in my view,
constitutes an acceptance by the Government of what had been the existing state
of affairs for a very long time. That acceptance is confirmed, if anything, by
the continued inaction even after the leased premises and the discrepant area
ceased to be used as fishponds. It may not amount to estoppel but, adopting
the phraseology of Lord Denning in Perrot (J.F.) & Co. Ltd v Cohen at
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page 710, it is something akin to estoppel; in that regard see also
Lord Campbell CJ in Andrews v Hailes at page 353; Charles J in Tabor v
Godfrey expressed it at page 247 as being upon the basis that although the lease
excluded the encroached area, it was an inference which the court drew from the
way in which the landlord had permitted the tenant to occupy the land;
Lord Russell CJ in Lord Hastings v Saddler (1898) 79 LTR 355 at page 356
approved of what Charles J had said and said it was a conclusion to be come to
as being suggested by all the circumstances of the case. Although
Pennycuick V.-C. in the Smirk case pointed out that something was wrong with
the report of the Lord Hastings case, I consider that what Lord Russell had said
was sufficiently accurately reported as regards this aspect.
45. In the present case no doubt given the type of locality, the
Government had not been disposed to make any use whatever of the area to the
north of the Lot for 50 years or more from the date of the original lease.
Whilst the judge held that the Government was unaware of the encroachment
until the 1980s, it is clear that the Government was not unaware of the existence
of the fishponds probably from the time when they were built. In 1960 the
Government made no attempt to rent out the discrepant area when it leased the
land at the apex of the confluence of the 2 rivers namely Lot 1347. Finally, in
the 1980’s, when the Government unequivocally became aware that the
fishponds were on unleased Government land, no objection to the plaintiffs’
occupation of the discrepant land was raised. The only reasonable inference is
that there was a tacit consensual arrangement between the parties, namely that it
has been accepted that the discrepant area was occupied and used as part of the
leased premises, namely, Lot 1212. Indeed, in their pleadings, the
Government rely upon the absence of any objection by the plaintiffs to the
building of the access road as a ground for suggesting that it was accepted by
the plaintiffs that they had no rights in respect thereof. It was, if anything, an
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acknowledgement by the Government that the plaintiffs and their predecessors
were occupying and evidently had occupied the discrepant area for upwards of
70 years. Moreover, as Mr Chain pointed out at the adjourned hearing, the
building of a road was of undoubted assistance to the plaintiffs who could then
use the road for access.
46. Mr Mok also drew attention to paragraph 216 of the judgment and
the finding of the judge that the various plans submitted by and on behalf of the
plaintiffs over the years showed the boundary of the land according to the lease
and excluded the discrepant areas. That may be true, but it does not preclude
the fact that the plaintiffs have always occupied the discrepant areas as part of
the leased premises and the Government never objected right up until the
commencement of these proceedings in 2000.
47. What is clear is that both parties considered that the discrepant area
was part of Government land but that did not affect any rights which had
accrued to the plaintiffs in respect of their occupation. Conversely, it can be
added, that it also bound the plaintiffs who were bound to treat the discrepant
area as part of the leased Lot 1212 in all respects.
Hon Le Pichon JA:
48. I agree with the judgments of Rogers VP and Kwan JA.
Hon Kwan JA:
49. I agree with the judgment of the Vice-President and would like to
add a few remarks.
50. The principal issue in this appeal is the legal effect on the
encroachment by a tenant of other land of the landlord not included in the
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demise upon the renewal of the lease pursuant to an option to renew contained
in the old lease. Apart from the first instance decision of Tam Mo Yin v.
Attorney General [1996] 1 HKC 379, there would appear to be no reported
decision on this issue.
51. Mr Mok relied on Tam Mo Yin, which applied the decision of the
Court of Appeal in Lai Moon Hung v. Lam Island Development Co. Ltd.
[1994] 2 HKC 11. Following that decision, Yam J held that the renewal took the
form of a new Crown lease, that the person claiming adverse possession could
not aggregate adverse possession before and after 1 July 1973, and that a
possessory title in the course of being acquired was not an encumbrance or right
within section 4(4)(c) of the Renewal Ordinance. Whatever right the
Government lessee might have in encroaching on Government land had
terminated with the old lease on 30 June 1973 and on 1 July 1973 the required
period of 60 years would start to run again. The judge found the situation in that
case “quite inequitable”, but the decision of the Court of Appeal in Lam Island
was binding on him.
52. The Privy Council in Lam Island 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. It was argued that under
the law of encroachment, the tenant’s interest over the encroached land is
coterminous with his lease so whatever rights the tenant acquired over the
encroached land would end at the expiration of his tenancy. Hence the inchoate
rights accrued by encroachment up to 30 June 1973 were not continued.
53. I find it difficult to accept this argument. If this were correct, it
should make no difference whether the rights accrued by encroachment were
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inchoate or matured when a new lease is granted pursuant to the option of
renewal, as no matter how long the period of encroachment had been, the rights
would terminate with the old lease. However, that was not the legal position
found by the judge in paragraph 203 of the judgment. The judge held that if
the rights had matured before the expiry of the old lease, the encroached land
would have been held as 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.
55. I am fortified in this view by the decision of the English Court of
Appeal in Tower Hamlets LBG v. Barrett [2006] 1 P&CR 132. The tenants in
that case encroached on third party land adjoining the leased property and the
rebuttable presumption that possessory title of the adjoining land encroached on
by a tenant is acquired by the landlord (and deemed to be included in the
tenancy) applied. The landlord and tenant thereafter agreed a sale of the
freehold of the leased property. It was held where the adjoining land remains
included in the tenancy, and the landlord and tenant thereafter agree a sale of
the reversion or the grant of a new tenancy, there is a presumption that the sale
or new tenancy should extend to the adjoining land. This was regarded as a
logical and fair extension of the doctrine where circumstances give rise to a
presumption that possessory title to adjoining land encroached on by a tenant is
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acquired by the landlord and deemed to be included in the tenancy, one is
entitled to take account of subsequent acts to see whether the presumption
applies or is rebutted (at paras. 108 to 112).
56. The encroachment in the present case is not third party land but
other land of the landlord not included in the demise. In this situation, where a
new lease is granted pursuant to a right of renewal, I see no reason why
subsequent acts should not be taken into account to see whether the presumption
that the tenant occupied the encroached land as part of the leased premises
would still apply or be rebutted, as in the case of encroachment on third party
land.
Hon Rogers VP:
57. The appeal will, therefore, be allowed. The order below will be
set aside. There shall be orders in the following terms:
I. By virtue of the encroachment of the Discrepant Areas of
Sections A and E of Lot 1212 in D.D. 115 by Wing Wa Tong
trustee Lam Wun Chun, the predecessor-in-title of the 1st plaintiff,
it is declared that:
(1) the said Discrepant Areas became an accretion to the land
(comprising the remainder of Sections A and E) leased by
the Government to the 1st plaintiff’s predecessor-in-title;
(2) the 1st plaintiff is entitled to possession of the said
Discrepant Areas as well as the remainder of Sections A
and E until the expiry of the term of the Lot on 30 June
2047;
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(3) the said Discrepant Areas are entitled to the same treatment
as the remainder of Sections A and E in so far as any
extension of the term of the Lot that may occur in the
run-up to 30 June 2047 is concerned.
II. By virtue of the encroachment of the Discrepant Area of Section D
of Lot 1212 in D.D. 115 by Wing Wa Tong trustee Lam Wun Chun,
a predecessor-in-title of the 11th to 15
th plaintiffs, it is declared that:
(1) the said Discrepant Area became an accretion to the land
(comprising the remainder of Section D) leased by the
Government to the predecessor-in-title of the 11th
to
15th plaintiffs;
(2) the 11th
to 15th plaintiffs are entitled to possession of the
said Discrepant Area as well as the remainder of Section D
until the expiry of the term of the Lot on 30 June 2047;
(3) the said Discrepant Area is entitled to the same treatment as
the remainder of Section D insofar as any extension of the
term of the Lot that may occur in the run-up to 30 June
2047 is concerned.
58. The court will hear the parties as to costs but with the indication
that in the absence of any argument as to costs, it would be disposed to make an
order that the defendant do pay the 1st, 11
th, 12
th, 13
th, 14
th and 15
th plaintiffs
their costs here and 80% of the costs below to be taxed if not agreed.
(Anthony Rogers)
Vice-President
(Doreen Le Pichon)
Justice of Appeal
(Susan Kwan)
Justice of Appeal
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Mr Benjamin Chain, instructed by Messrs Y.S. Lau & Partners, for the 1st, 11
th
to 15th Plaintiffs/Appellants
Mr George Chu, instructed by Messrs Leung Kin & Co., for the 2nd
to
10th Plaintiffs/Respondents on 14 December 2010
Mr Mok Yuek Chi and Mr Anthony Chan, instructed by Department of Justice,
for the Defendant/Respondent
http://legalref.judiciary.gov.hk/doc/judg/word/vetted/other/en/2010/CACV0000
26_2010.doc