Wong Chee Sing (or Wong Che Sing) (黃志成) (By His Next Friend Wong Tak Kwan Lilian) v. Hung Wah (孔华) Trading As Tak Hing Lung Medicine Co. (德兴隆藥業公司)

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Press Summary (Chinese)

FACV No 4 of 2026

[2026] HKCFA 33

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO 4 OF 2026 (CIVIL)

(ON APPEAL FROM CACV NO 595 OF 2021)

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JUDGMENT

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Chief Justice Cheung:

1.I agree with the judgment of Mr Justice Lam PJ.

Mr Justice Ribeiro PJ:

2.I agree with the judgment of Mr Justice Lam PJ.

Mr Justice Fok PJ:

3.I agree with the judgment of Mr Justice Lam PJ.

Mr Justice Lam PJ:

4.Section 17 of the Limitation Ordinance Cap. 347 provides that upon the expiration of the limitation period for any person to bring an action to recover land, the title of that person to the land shall be extinguished. The limitation period for recovery of land by a person other than the Government is 12 years[1]. Thus, a landowner who failed to bring a claim within 12 years could lose his property without any compensation. Some lawyers and judges have understandably considered this aspect of the law of adverse possession troubling[2].

5.However, the constitutionality of that law in Hong Kong was examined in Harvest Good Development Ltd v Secretary for Justice[3]and Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd (No 5)[4]. Constitutionality is not in issue in the present appeal. Instead, we shall examine whether a case of adverse possession was made out when someone has been in open occupation of a shop with the knowledge of the landowner and the latter did not demand the occupier to take up a lease or licence or provide a written acknowledgement of his title or bring proceedings to recover possession from him. In doing so, we have to review the development of the law since Wong Tak Yue v Kung Kwok Wai (No 2)[5] (“Wong Tak Yue”) in the light of the important elucidation of the law of adverse possession in England and Wales by the House of Lords in J A Pye (Oxford) Ltd v Graham[6] (“Pye”).

The facts

6.By a Government Lease of 18 March 1968, the appellant Wong Chee Sing (“Wong”) obtained the leasehold interest as a Government Lessee in the land known as Nos. 50 and 52 Battery Street, Kowloon Inland Lot No. 8768. A new building (“the building”) was erected on the land and an occupation permit was granted to Wong on 6 May 1966[7]. The ground floor of the building was for non-domestic use as a shop. Above it, the mezzanine floor was for office use. On each of the first to eighth floors, there were three domestic tenements.  Over the years, Wong has not sold any interests in the building and has let out the units in it as landlord. This case concerns the Rear Shop on the ground floor (“the Shop”). The Shop was first let out by Wong to a tenant Liu Shu Ming (“Liu”) by a tenancy agreement of 25 May 1966. Liu remained as a tenant of the Shop in 1974 and he traded there under the name of Wo Sang Medicine Shop. By a tenancy agreement of 19 March 1974, the Shop was again leased to him for 2 years from 25 February 1974 to 24 February 1976.

7.Liu apparently had financial difficulties and Wong did not obtain rent from him since a date after 24 February 1976 which he could not recall. The evidence is not clear as to what happened between 1976 and 1992 except that the Shop was occupied without any payment of rent to Wong. Though Liu had disappeared at some stage, his wife remained involved and she met Wong in 1995. At trial below, His Honour Judge Leong (“the Judge”) found that Wong somehow “believed that some form of rental agreement was reached” and he had not abandoned the Shop[8]. However, it was not disputed that no tenancy agreement or licence had been concluded between Wong and the respondent Hung Wah (“Hung”) and no rent had been collected from Hung[9].  

8.Hung came into occupation of the Shop in 1992[10] and he operated a business called Tak Hing Lung Medicine Company (“THL”) there. Hung testified that he had acquired the right to occupy the Shop from another person. The Judge found his testimony in that respect incredible and rejected it. However, it is not disputable that Hung has run the business of THL at the Shop from 1992 up to the present day and nothing has been paid to Wong in respect of the same. The Judge was not satisfied on the evidence that Hung was present at the 1995 meeting between Wong and Liu’s wife[11].

9.Although, Wong did not get any income from the Shop, he continued to pay all the rates and government rents in respect of the same after 1992. Through his agents, Wong also handled some Building Orders by which the Buildings Department demanded the demolition of illegal structures at the building, including a canopy (“the Canopy”) and a signage frame at the Shop. The Building Orders were initially addressed to Wong. In 2006, the authorized person who acted for Wong had approached THL about the Canopy and then reported to the Buildings Department that Wong was unable to comply with the order because THL denied responsibility and claimed that an earlier order had been discharged[12]. After that, some letters from the Buildings Department were copied to THL. In the correspondence between Wong’s agents and the Buildings Department, the agents described THL as “the tenant”. Though the first Building Order was issued in 2002, there was no evidence of the agents’ engagement with THL or Hung prior to 2005. In the end the Canopy was demolished in 2016 but the Judge did not make any finding of the identity of the party executing the demolition.

10.In an action brought by Wong in 2018, the Judge held that because Hung did not pay rates and government rents and did not deal with the Canopy order in a timely manner, he did not deal with the Shop in a way an occupying owner might have expected to. For that reason, he held that Hung failed to establish factual possession[13]. The Judge also held that as Hung simply tried to lie low to avoid payment of rent for as long as possible, he did not have the requisite animus possidendi[14]. Thus, the Judge rejected Hung’s defence and counterclaim based on adverse possession. Accordingly, he granted an order for possession in favour of Wong.

11.On appeal, the Court of Appeal[15] held that the Judge was erroneous in his conclusions on factual possession and animus possidendi as he had conflated the concept of ownership with possession[16]. The Court of Appeal reversed the Judge’s holdings on adverse possession and entered judgment in favour of Hung.  

12.On the application of Wong, the Appeal Committee granted leave to appeal based on the following questions:

(1)     Whether the law on animus possidendi as stated by this Court in Wong Tak Yue v Kung Kwok Wai (No 2) (1997-98) 1 HKCFAR 55 is consistent with the law as stated by the House of Lords in J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419. If not, whether this Court should depart from Wong Tak Yue v Kung Kwok Wai (No 2) and adopt the law as stated in J A Pye (Oxford) Ltd v Graham?

(2)   In respect of animus possidendi, notwithstanding the non-payment of rent, does the continued, unprotested dealing by a person occupying the property with the paper owner, knowing that, in such dealings, the latter believes he is acting in the capacity as the former’s landlord, negative the requisite adverse intent to possess?

The concept of adverse possession

13.The law of adverse possession is based on the Limitation Ordinance though the cases provide valuable explanations of how adverse possession can be established. The statutory concept of “adverse possession” is set out in Section 13(1) of the Limitation Ordinance which provides:

“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)…”

14.Similar provisions are found in the Limitation Act 1939[17] and the Limitation Act 1980[18]. The Hong Kong courts have referred to English cases in considering the concept of adverse possession. Thus, in Wong Tak Yue, Chief Justice Li cited Powell v McFarlane[19] and Buckinghamshire County Council v Moran[20] when discussing the law of adverse possession in Hong Kong. After the delivery of the judgment in Pye, it was also frequently cited in our courts: see for example the judgment of Nazareth NPJ in Incorporated Owners of San Po Kong Mansion v Shine Empire Ltd[21]and the Court of Appeal’s judgments in Gotland Enterprises Ltd v Kwok Chi Yau[22], and more recently in Tsang Woon Ming v Tsan Hing Tat Heidi[23]. Hence, if there is any divergence between this Court’s statements of the law in Wong Tak Yue and those set out in Pye[24], this Court should provide definitive guidance on the applicable law in Hong Kong.

15.Both Chief Justice Li in Wong Tak Yue[25] and Lord Browne-Wilkinson in Pye[26]referred to the provisions in the limitation statutes before discussing the authorities. Their Lordships did so because in considering whether a case of adverse possession is made out, the courts were in substance addressing whether a limitation defence could be established under the limitation statutes which leads to the extinguishment of the paper owner’s title. Thus, Chief Justice Li in Wong Tak Yue identified the question as one of a limitation defence[27].  

16.The above analysis is trite but it is worthwhile to ponder on its full implications. Sometimes lawyers debating the elements of adverse possession lose sight that adverse possession and the cause of action for recovery of land are two sides of the same coin. What constitutes adverse possession is the same as what constitutes possession that would give rise to a cause of action by the paper owner to sue for recovery of land. If the nature of occupation or use by a squatter or a trespasser of a piece of land is insufficient to give rise to a cause of action for recovery of land, that would not be sufficient to give rise to adverse possession by him. Conversely, if the nature of occupation or use is sufficient to give rise to a cause of action for recovery of land, that would be sufficient to give rise to adverse possession. This is the effect of the statutory definition of adverse possession in Section 13(1) of the Limitation Ordinance[28].

17.In Wong Tak Yue this Court was concerned with a defendant’s application to re-open his defence based on adverse possession which had previously been abandoned due to the earlier decisions in Chung Ping Kwan v Lam Island Development Co Ltd[29] affecting the arguability of that defence. Evidence regarding that defence had not been adduced in the courts below and no trial had taken place. Summary judgment had been entered against the defendant with the lower courts rejecting his other defence of tenancy. Given the exceptional circumstances of the case arising from the reversal of the decision of the Court of Appeal in Lam Island, this Court allowed the re-opening of the defence of adverse possession.

18.This Court then proceeded to consider whether such a defence would be arguable as a matter of law. Factual possession was not in issue. Chief Justice Li’s succinct discussion on animus possidendi focused on whether an affirmation by the defendant that he would be willing to pay rent to the owners if a request was made was inconsistent with the arguability of him having the intention to possess[30]. On holding that there was such an inconsistency, His Lordship did not find it necessary to carry out any extensive review of the legislative history of the limitation statutes and the relevant cases as the law lords did in Pye.   

19.Before us, Ms Eu SC[31] submitted that Wong Tak Yue was decided on the special facts of that case and there was no divergence between Wong Tak Yue and Pye. She did not advance any suggestion that the principles of law stated in Pye should not be followed in Hong Kong. In such circumstances, I shall first attempt to set out the principles of law as expounded in Pye before reverting to Wong Tak Yue.   

20.In Pye, Lord Browne-Wilkinson started his discussion of the law by dispelling the notion of “non-adverse” possession which permeated the judgments in Leigh v Jack[32], Littledale v Liverpool College[33], and Wallis’s Cayton Bay Holiday Camp Ltd v Shell-Mex and BP Ltd[34]. In reviewing the history of the limitation statutes and the rejection of the notion of ouster under the Real Property Limitation Act 1833[35], His Lordship said at [36] of Pye:

“Many of the difficulties with these sections… are due to a conscious or subconscious feeling that in order for a squatter to gain title by lapse of time he has to act adversely to the paper title owner. It is said that he has to ‘oust’ the true owner in order to dispossess him; that he has to intend to exclude the whole world including the true owner; that the squatter’s use of the land has to be inconsistent with any present or future use by the true owner. In my judgment much confusion and complication would be avoided if reference to adverse possession were to be avoided so far as possible and effect given to the clear words of the [limitation statutes]. The question is simply whether the defendant squatter has dispossessed the paper owner by going into ordinary possession of the land for the requisite period without the consent of the owner.” (my emphasis)

21.In so saying, His Lordship echoed the view of Slade J in Powell v McFarlane[36] which is worth repeating:

“… I would for my own part have regarded the word ‘possession’ in the 1939 Act as bearing the traditional sense of that degree of occupation or physical control, coupled with the requisite intention commonly referred to as animus possidendi, that would entitle a person to maintain an action of trespass in relation to the relevant land…”

22.On the true meaning of the phrase “adverse possession” in the limitation context, His Lordship said this at [35] of Pye:

“… In my judgment the references to ‘adverse possession’ in the 1939 and 1980 Acts did not reintroduce by a side wind after over 100 years the old notions of adverse possession in force before 1833. Paragraph 8(1) of Schedule 1 to the 1980 Act[37] defines what is meant by adverse possession in that paragraph as being the case where land is in the possession of a person in whose favour time ‘can run’. It is directed not to the nature of the possession but to the capacity of the squatter… Although it is convenient to refer to possession by a squatter without the consent of the true owner as being ‘adverse possession’ the convenience of this must not be allowed to reintroduce by the back door that which for so long has not formed part of the law.” (my emphasis)

23.Lord Hope expressed the same view:

“… At first sight, it might be thought that the words ‘adverse’ describes the nature of the possession that the squatter needs to demonstrate. It suggests that an element of aggression, hostility or subterfuge is required. But an examination of the context makes it clear that this is not so. It is used as a convenient label only, in recognition simply of the fact that the possession is adverse to the interests of the paper owner… The context is that of a person bringing an action to recover land who has been in possession of land but has been dispossessed or has discontinued his possession… His right of action is treated as accruing as soon as the land is in the possession of some other person in whose favour the limitation period can run. In that sense, and for that purpose, the other person’s possession is adverse to his.”[38] (my emphasis)

24.In short, in the context of the Limitation Ordinance, the word “adverse” in “adverse possession” refers simply to the lack of consent from the paper owner. The limitation period can only start to run when the paper owner has a cause of action to recover the land. If the occupation by a person is authorised or with the consent (whether express or implied) of the paper owner, no such cause of action can accrue as such possession is not adverse possession[39]. Whilst it is still possible for a paper owner to establish implied permission or licence as a matter of fact[40], such a licence cannot be implied from the mere inaction of the paper owner with knowledge of the occupation by the squatter[41].

25.Conversely, a squatter who is neither a tenant nor a licensee of the paper owner and does not have any right of possession vis-à-vis the paper owner would be in adverse possession. The paper owner could bring an action for recovery of the land and time would start to run as soon as such a squatter commences ordinary possession of the property[42].  Lord Browne-Wilkinson succinctly explained the relevant rationale in Pye at [38]:

“… There will be a ‘dispossession’ of the paper owner in any case where… a squatter assumes possession in the ordinary sense of the word. Except in the case of joint possessors, possession is single and exclusive. Therefore if the squatter is in possession the paper owner cannot be…”[43]

26.Based on the judgment of Slade J in Powell v McFarlane[44], Lord Browne-Wilkinson identified the two elements necessary for legal possession in Pye as follows:

“(1) a sufficient degree of physical custody and control (‘factual possession’);

(2) an intention to exercise such custody and control on one’s own behalf and for one’s own benefit (‘intention to possess’)…”[45]

27.The following explanation by Slade J of the first element in Powell v McFarlane was cited by Lord Browne-Wilkinson as an accurate statement of the law regarding factual possession[46]:

“Factual possession signifies an appropriate degree of physical control. It must be a single and [exclusive] possession, though there can be a single possession exercised by or on behalf of several persons jointly. Thus an owner of land and a person intruding on that land without his consent cannot both be in possession of the land at the same time. The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed… Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no-one else has done so.”

28.The test refers to a sufficient degree of exclusive physical control and it depends on the circumstances as to how the land is commonly used and enjoyed. As the inquiry is made in respect of factual possession, one is confined to physical control instead of other dealings concerning the property which is not physical and cannot be observed by the paper owner. The last sentence in the dicta of Slade J should be read in that context. As held by the Court of Appeal[47] and the Appeal Committee[48], the non-payment of rates and government rents by Hung is irrelevant. Likewise, his failure to respond to the Building Orders is also irrelevant to the issue of factual possession.

29.In respect of the intention to possess, Lord Browne-Wilkinson adopted the statement of principle of Slade J in Powell v McFarlane:

“… the animus possidendi 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 processes of the law will allow.”^[49]

30.The tailpiece of this dictum is an important qualification because, until the accrual of the full limitation period, a trespasser or a squatter is not able to exclude the paper owner from the property. In Pye[50] Lord Browne-Wilkinson dispelled the misconception arising from a broader statement on the requisite intent by Lindley MR in Littledale v Liverpool College[51]and highlighted the significance of the qualification[52]. In the article “Adverse Possession and Intention” (which was cited by Lord Browne-Wilkinson in Pye), Professor Martin Dockray discussed with great clarity why the court should prefer the approach of the Privy Council in Ocean Estates Ltd v Norman Pinder[53] to that of Lindley MR:

“Since possession only gives a relative title, a possessor cannot logically be required to have an unqualified intention to exclude the true owner as well as the rest of the world; at the most, a possessor might be required to have an intention to exclude all those who cannot show a title which is better than his own. To require anything more than this would be to require a possessor to intend to do something he cannot lawfully do and to have a right which is greater than any which is recognised by common law.”[54]

31.Lord Hope had this to say with regards to the intention to possess:

“… it is not necessary to show that there was a deliberate intention to exclude the paper owner or the registered proprietor. The word ‘adverse’ in the context of section 15(1) of the Limitation Act 1980 does not carry this implication. The only intention which has to be demonstrated is an intention to occupy and use the land as one’s own…”^[55]

32.The intention to possess distinguishes a transient or repetitive trespasser who merely uses the land occasionally from a squatter who stays as long as he can for his own benefit. Lord Browne-Wilkinson gave an example of the former in Pye[56]. On the facts of Powell v McFarlane, a child of 14 was held to be a trespasser without any intention to possess. If the acts are unequivocal, the intention to possess may be readily inferred and no further evidence is needed. Slade J observed:

“There are a few acts which by their very nature are so drastic as to point unquestionably, in the absence of evidence to the contrary, to an intention on the part of the doer to appropriate the land concerned. … The placing of a notice on land warning intruders to keep out, coupled with the actual enforcement of such notice, is another such act. So too is the locking or blocking of the only means of access.”^[57]

33.The position is different if the acts of occupation are equivocal. In Powell v McFarlane, Slade J alluded to how the plaintiff made use of the disputed land and concluded that he did not have the requisite intent:

“What he did, in effect, was to take various profits from the land… These activities, done, as they were, by a 14-year-old boy who himself owned no land in the neighbourhood, were in my judgment equivocal…”[58]

34.That was the context in which His Lordship said in the earlier part of the judgment:

“[In] a case where the question is whether a trespasser has acquired possession… the courts will, in my judgment, require clear and affirmative evidence that the trespasser… not only had the requisite intention to possess, but made such intention clear to the world. If his acts are open to more than one interpretation and he has not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will treat him as not having had the requisite animus possidendi and consequently as not having dispossessed the owner.”[59] (my emphasis)

35.As Hoffmann J (as Lord Hoffmann then was) pointed out in Buckinghamshire County Council v Moran[60], the requisite intention is an intention to possess, not an intention to own. It is not even an intention to acquire ownership. That observation has since been endorsed by the English Court of Appeal in Moran[61] and the House of Lords in Pye[62].

36.In line with the above understanding of the requisite intent, Lord Browne-Wilkinson opined that the fact that a squatter gave evidence that he was willing to pay for the occupation or to take a lease if asked to do so is not inconsistent with him having the intention to possess in the meantime. His Lordship said:

“… Once it is accepted that the necessary intent is an intent to possess not to own and an intention to exclude the paper owner only so far as is reasonably possible, there is no inconsistency between a squatter being willing to pay the paper owner if asked and his being in the meantime in possession. An admission of title by the squatter is not inconsistent with the squatter being in possession in the meantime.”^[63]

37.In the earlier decision of the Privy Council in Ocean Estates Ltd v Norman Pinder, the squatter said if the owner had challenged his occupation of land, he would either take a lease or get off the land. Lord Diplock said:

“Their Lordships do not consider that an admission of this kind which any candid squatter hoping in due course to acquire a possessory title would be almost bound to make, indicates an absence of the animus possidendi necessary to constitute adverse possession.”^[64]

38.For present purposes, I shall summarise Pye’selucidation of the law as follows:

(a)     The law on adverse possession is derived from the limitation statutes.

(b)     Since the Real Property Limitation Act 1833, the requirement of ouster and the doctrine of non-adverse possession were no longer part of the law. The use of the expression “adverse possession” in the Limitation Act 1939 and the Limitation Act 1980 does not revive those old abandoned concepts.

(c)     As stipulated in the statutes, adverse possession occurs when a right of action to recover land accrues to the paper owner and time begins to run in favour of the squatter.

(d)     Since possession is single and exclusive, the possession by a squatter without the consent of the paper owner is “adverse” to the latter. The assumption of possession by the squatter necessarily dispossesses the paper owner if the paper owner has not discontinued his possession before that.

(e)     In the absence of any consent from the paper owner, the question is simply whether a squatter has gone into ordinary possession of the land by obtaining a sufficient degree of physical custody and control with an intention to exercise such custody and control on and for his own benefit.

(f)     Such intention is frequently deduced from the physical acts of possession. It is an intention to possess, not an intention to own or an intention to acquire ownership, that is relevant.

(g)     Though the animus possidendi 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, this is only an intention to exclude the paper owner so far as is reasonably possible and so far as the processes of the law will allow.      

Is Wong Tak Yue a divergence and should this Court depart from it?

39.Like Lord Browne-Wilkinson, Chief Justice Li agreed with the law as stated in Powell v McFarlane[65]. As mentioned above, His Lordship focused on the defendant’s willingness to pay rent and held that in the light of that he could not have an intention to possess:

“[The 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…[66] which was held to be inconsistent with the intention to claim possession for the purposes of adverse possession.”[67]

40.Ms Eu submitted that Chief Justice Li made that observation with reference to the facts of that case and His Lordship did not lay down a principle of law that a willingness to pay rent must be inconsistent with the intention to possess. With respect, I cannot agree with that reading of Wong Tak Yue. His Lordship ruled out the defence of adverse possession because he regarded such a willingness as being inconsistent with the requisite intent. In his view, it was not an intention to possess “as of wrong”. As such His Lordship did not refer to the possibility of having other evidence pertaining to the possession by the defendant since his last payment of rent in 1963[68]. In a similar vein, Litton PJ said there was nothing for a trial court to investigate[69].  The citation by Chief Justice Li of R v Secretary of State for the Environment, ex p Davies[70] also indicated that His Lordship accepted Neill LJ’s view in that case that as a matter of law an offer to pay rent would be inconsistent with the intent to possess[71].

41.The contrary view of Lord Diplock in Ocean Estates Ltd v Norman Pinder[72] was not cited to the court in R v Secretary of State for the Environment, ex p Davies[73] and it was likewise not cited by counsel in Wong Tak Yue.  Subsequently, Lord Browne-Wilkinson in Pye expressly disapproved R v Secretary of State for the Environment, ex p Davies as inconsistent with principle[74].

42.I am of the view that there is a clear divergence between Wong Tak Yue and Pye as to the effect of the willingness of a squatter to pay rent. Moreover, Chief Justice Li’s dichotomy between possession “as of right” and possession “as of wrong” in the context of an intention to possess does not sit well with the views of Lord Browne-Wilkinson and Lord Hope that what is required is possession in the ordinary sense and there is no need to establish a specific intent to exclude the paper owner deliberately. Although Chief Justice Li referred to Nourse LJ’s use of these expressions in Buckinghamshire County Council v Moran[75], Nourse LJ did not use them in the context of addressing the requisite intention to possess. Insofar as the use of the phrase “possession as of wrong” is to highlight that adverse possession is without the consent of the paper owner[76], I would have no quarrel with it. However, as shown by His Lordship’s characterisation of the willingness of the defendant to pay rent as the manifestation of an intention to possess “as of right”, the approach of Chief Justice Li requires a squatter to establish an intention to possess unlawfully vis-à-vis the paper owner.  That approach is clearly inconsistent with the analysis in Pye.

43.As a matter of stare decisis we are not bound by Pye[77]. However, this Court does have the power to depart from its previous decision respectfully though such power should only be exercised sparingly with circumspection[78]. In deciding whether we should depart from Wong Tak Yue, I must bear in mind the fundamental premise of Their Lordships’ judgments in Pye as discussed above[79] which provides sound guidance to the development of the law on adverse possession. As mentioned earlier, the statements of principle by Their Lordships have been followed and applied in many cases in Hong Kong without any difficulties.

44.In principle, if a squatter has exclusive occupation coupled with an intent to exercise exclusive control over a land, the mere fact that he is realistic and candid enough to admit that he would be willing to pay the owner for such occupation if asked should not defeat the owner’s claim for recovery of possession. It logically follows that time should start to run against the paper owner.  

45.Wong Tak Yue has inspired some counsel to challenge claims for adverse possession in Hong Kong by asking squatters whether they would be willing to pay rent if demanded by paper owners[80]. With the greatest respect, once it is appreciated that the law has done away with the old concepts of ouster and non-adverse possession, the position adopted in Wong Tak Yue cannot be sustained and this line of argument should not be permitted since it is irrelevant to deciding whether the squatter has the requisite intent. This Court should not shy away from respectfully departing from Wong Tak Yue and I shall answer Question 1 accordingly.

Did the dealings between Wong and Hung negative the latter’s intention to possess?

46.As far as factual possession is concerned, Hung had the keys to the Shop and the doors were locked during non-business hours. Wong could not gain access to the Shop after it was locked up. This plainly establishes that Hung had sufficient exclusive physical control of the Shop. As no leave has been granted to Wong to challenge the Court of Appeal’s conclusion on factual possession, Ms Eu focused on animus possidendi.

47.Further, since it was not disputed that there was no lease or licence between Hung and Wong, and Wong did not run any case of estoppel against Hung regarding occupation by consent, Hung’s use of the Shop for the business of THL has to be adverse to Wong’s title according to the law as stated in Pye.  

48.The Judge found that Hung intended to “lie low” to avoid the need to pay rent for as long as he could[81]. He regarded such intention as being insufficient to satisfy the requisite intention for adverse possession. Though the Judge did not articulate his finding of the lack of the requisite intent by reference to Wong Tak Yue, he proceeded implicitly on the basis that, if pressed by Wong, Hung would have agreed to take up a tenancy and would have to pay rent accordingly.

49.For the reasons given above, even if Hung had harboured such intention, it would not have negatived his intention to possess. As a matter of law, lying low is not inconsistent with the intention to possess. As held in Pye, it is not necessary for a squatter to establish that he had the specific intent to exclude the paper owner deliberately. The intention to possess 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 so far as is reasonably practicable and so far as the processes of the law will allow.

50.Before the expiration of the limitation period, a squatter would not be able to challenge a paper owner as the latter has a superior right to possession. As it was graphically put by Neuberger J (as Lord Neuberger then was) in Purbrick v Hackney London Borough:

“… just as it is inherent that any squatter, who knows that he is squatting, would say that he would pay rent for the property if asked, so it is inherent in most squatters’ thinking that their possession may well be temporary. For 12 years, most squatters will know that they have no right to be there and are liable to be dispossessed as a right. The mere fact that they are aware of that, and that they cut their cloth accordingly, cannot, to my mind, prevent them from being in possession.”^[82]

51.Further, the Judge’s finding that Hung intended to lie low was based on finding that his intention was to avoid paying rent to Wong, his not paying rates and government rents and, from 2005 onwards his disputing the Building Orders concerning the Canopy. As mentioned above, Hung’s physical occupation of the Shop started in 1992. By 2005, more than 12 years had elapsed. Events in 2005 could not have any bearing on whether Hung had had the intention to possess from 1992 to 2004. In any event, the relevant intention is an intention to possess instead of an intention to own or to acquire ownership and the exclusion of the paper owner is exclusion from possession rather than from exercising rights and performing obligations pertaining to other aspects of ownership. I cannot see the relevance of the non-payment of rates and government rents and the disputes about the Building Orders regarding the Canopy in assessing Hung’s intention to possess at the relevant period in the light of his unequivocal exclusion of the whole world, including Wong from the Shop during the relevant period. The irrelevance of these matters to possession is quite plain if one were to examine them in the context of accrual of an action for recovery of land by the paper owner. None of these acts could give rise to a valid defence to such a claim if it was brought within the limitation period.   

52.Even though the Judge rejected the evidence of Hung as to his acquisition of the Shop from a third party, he did not disbelieve him (and there was no dispute between the parties) that THL operated at the Shop openly and Hung did not make any payment of rent to Wong. The nature of possession by Hung since 1992 is unequivocal. He ran the business of THL at the premises and locked up the Shop every day after the close of business. His stock was stored there and he was in occupation continuously. Wong could not have access to the Shop without the permission of Hung as the former did not have the keys. Hung also decorated and engaged a contractor to execute some repair and maintenance works in respect of the Shop. These physical acts constituted clear evidence of an intention to exclude the world at large, including Wong. I have no hesitation in rejecting Ms Eu’s submission that Hung’s acts of physical custody and control of the Shop were equivocal because of the matters mentioned in the preceding paragraph[83]. The authority Ms Eu relied upon, Littledale v Liverpool College[84], has to be read with caution in the light of Lord Browne-Wilkinson’s disapproval of the statement of law by Lindley MR. Further, the facts in that case were unusual concerning the erection of gates to protect a right of the party claiming adverse possession, namely a right of way over the strip of land from the public. In the present case, it is not disputed that Hung was not a tenant or licensee of Wong and therefore had no lawful basis to occupy the Shop. 

53.In the printed case of Wong[85] and in her reply submissions at the hearing, Ms Eu emphasised that adverse possession is more than possession and it has to be adverse, not in the sense of being hostile, but in the sense of exclusion of the paper owner[86]. For the reasons already canvassed, the possession of Hung was unequivocally exclusive and adverse to Wong’s title.

54.Ms Eu also submitted that Hung did not have the requisite intent because he knew Wong was the owner who was acting in the mistaken belief that Hung was his tenant. Whilst the Judge did make a finding that Hung knew of Wong’s ownership, he did not make any finding that Hung knew Wong acted under the mistaken belief that Hung or THL was his tenant[87]. There was no plea of such a mistaken belief on the part of Wong and there was no plea that Hung had knowledge of such a mistaken belief or misled Wong in that regard. There was no evidence to support the assertion that Hung was privy to Wong’s meeting with Liu’s wife in 1995. Nor was there any evidence that Hung was privy to the correspondence between Wong’s architect and the Buildings Department prior to 2005. The issue of Hung being instrumental to Wong’s mistaken belief was simply not raised nor properly explored before the Judge. Had that issue been raised, one would expect the Judge to have addressed how that mistaken belief was attributable to anything done by Hung and how the alleged knowledge of Hung could sit with the fact that Wong had never collected or demanded rent from Hung from 1992 to 2004. The Judge would also have to address how long Wong laboured under that mistake and how he came to realise that Hung was not a tenant and therefore instructed his solicitors to state in a letter of 25 January 2018 that Hung had occupied the Shop without Wong’s consent.  

55.In any event, even if Hung was aware of Wong having such a mistaken belief, it does not follow that Hung did not have the requisite intention to possess in view of his objective acts in respect of the Shop discussed above. By itself, such knowledge could not constitute a defence to a claim for recovery of land if such a claim was commenced by Wong within the limitation period. However, it may, coupled with representation by Hung to Wong (if any) and reliance by Wong, be capable of giving rise to a case of implied consent based on estoppel. Yet, because of the absence of such a plea, this cannot be of any avail to Wong in this appeal.

56.As a matter of law, in the absence of deliberate concealment or estoppel, it is irrelevant that an owner is ignorant that he has been dispossessed^[88]. It is also irrelevant that Hung knew of such a mistaken belief on the part of Wong. The intention to possess does not depend on an intention to possess “as of wrong”. This is clearly illustrated by the rule that a person who wrongly believes that he is a tenant can validly claim adverse possession. In Ofulue v Bossert Lord Neuberger said:

“… the fact that the [squatters] may have believed that they were in possession as tenants, in law or equity, of the [paper owner] does not prevent their possession having been ‘adverse’.”[89]

57.I shall answer the second question as follows: in the absence of deliberate concealment or written acknowledgement, when the dealings between the parties do not give rise to any implied licence by estoppel, the mistaken belief of a paper owner that he is the landlord of the squatter and the knowledge of such a belief by the squatter does not negative the squatter’s intention to possess manifested by the latter’s unequivocal exclusive physical use and control of the property.

58.It follows from the above analysis that the appeal falls to be dismissed with costs.

59.Wong may have an understandable sense of grievance that his neglect of the position of THL is being taken as the legal basis for depriving him of his title in the Shop. But he was unable to and did not advance a case of tenancy or licence (whether by estoppel or otherwise), or put forward a case of acknowledgment of title or fraudulent concealment. Without such pleas, this Court must decide the case by reference to whether adverse possession for the requisite duration has been established. In the circumstances, it is apposite to repeat what Lord Neuberger said in Purbrick v Hackney London Borough:

“… it is to some extent implicit in the present law of adverse possession, that an owner of property who makes no use of it… should be expected to keep an eye on the property to ensure that adverse possession rights are not being clocked up. A period of 12 years is a long period during which to neglect a property completely.”[90]

60.As observed by our Law Reform Commission and Nugee LJ in Healey v Fraine[91], the law of adverse possession serves important functions in our legal system, including the investigation of title in our conveyancing regime for unregistered titles. As far as land subject to the registered title regime under the Land Titles Ordinance Cap. 585 is concerned, a reform of the law has been undertaken. But there will still be many properties in Hong Kong subject to the unregistered title regime and the law of adverse possession discussed in this judgment shall continue to apply to them. Whether the law should be further changed to render it less pro-squatter and more pro-paper owner (either in the way recommended by our Law Reform Commission or in the way adopted in England and Wales for registered title under the Land Registration Act 2002[92]) is a matter for the Legislature.

Mr Justice Keane NPJ:

61.I agree with the judgment of Mr Justice Lam PJ.

Chief Justice Cheung:

62.Accordingly, the Court unanimously dismisses the appeal and makes an order nisi that the appellant pay the respondent’s costs.  If any party wishes to vary the order nisi, written submissions should be filed and served within 14 days of the handing down of this judgment and the Court will make a final order as to costs on the papers.

Ms Audrey Eu SC and Mr Maurice Chan, instructed by Liu, Chan & Lam, for the Plaintiff (Appellant)

Mr Edward Chan SC, Mr Andrew Mak and Ms Jamie Pang, instructed by Deacons, for the 1^st Defendant (Respondent)