Cheuk Chau Co Ltd v. Chau Kwan Nam and Others

HCMP000274/1982

Limitation of Action - Recovery of land - Squatters title - Title acquired against lessee - Effect of surrender of lease - Whether on re-grant the lessee is entitled immediately to re-enter

A piece of land was assigned to the plaintiff in 1980. Unknown to the vendor and the plaintiff it included a strip on which the defendants had lived for upwards of 20 years. The plaintiff surrendered the lease to the Crown and took a re-grant of the same land.

Held:-

1982,No.274

IN THE SUPREME COURT OF HONG KONG

MISCELLANEOUS PROCEEDING

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BETWEEN

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Coram: Hon. Mantell J.

Date: 6th July, 1983.

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JUDGMENT

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1. On 20th March 1980, the plaintiff took an assignment of a parcel of land at Tan Kwai Tsuen in the New Territories.  The vendor was Mui Yeung. In the conveyance on sale, the land was described as

"All That piece or parcel of ground of about 35,719 square feet or 0.82 acr. now registered in the District Office, Yuen Long as Lot No.3965."

The preceding Agreement for Sale on 23rd November 1979 described the land in similar terms except that the Demarcation District was specified.

2. On physical inspection of the land prior to the assignment and throughout the negotiations, Mr. Lo of the plaintiff had been given to understand that one boundary to the land was formed by a wire fence and it was his belief, therefore, and that of the plaintiff's that the plot of land was bounded on one side by the wire fence. That was clearly Mr. Mui's belief also. Both parties, therefore, understood the assignment to include only the land on one side of the fence. There was, at that time in the District Land Office, a small scale plan of Lot 3965. It has been produced to me. When the plaintiff's surveyors surveyed the land by reference to that plan, they found that the Lot extended beyond the wire fence to include a strip of land on the other side. It is important to note that up to that time, neither the previous owner nor the plaintiff considered that this strip of land. was included in the sale. On the strip of land were a number of huts, four of which were the dwellings of the four defendants in this action and it is in relation to those huts or rather the land upon which they stand that the plaintiff now seeks orders for possession on the ground that the defendants' by remaining there are trespassers.

3. The burden in the first instance of showing entitlement to possession, of course, rests upon the plaintiff and the first point taken in the case on behalf of the defendants is that the plaintiff does not have title to the strip of land beyond the fence or, at least, that I should not be satisfied that they have established their right to title. That is supported by a number of indications, as counsel has described them, which might lead me to accept such a view. The first of those is the existence of the fence which on the evidence as I find has been there for a great many years, probably upwards of 20 years. The second is that there is involved in enlarging a small scale plan always the inherent possibility of error. That must be right to this extent at least that if there is an error in the small scale plan to whatever degree, it will be magnified by the number of times by which the plan is enlarged and so, if in drawing the small scale plan, there had been a mistake made to the extent even of one foot and the magnification or enlargement was by a factor of ten, then the eventual error could be as much as ten feet in any given boundary. Thirdly, and much stress is laid upon this fact if fact it be, that in 1957, the 5th defendant was given something which, at any rate, looks like a permit and which refers to the defendants' occupation of the but where he still resides as being situated in an adjoining Lot and not in Lot 3965. Fourthly, the fact in itself that all the defendants have enjoyed uninterrupted possession for a very long time is relied upon and lastly, though not quite lastly is the fact that it was at all material times up to and after the assignment, the belief of the parties to it that the strip of land was not included in the sale. I say almost lastly because the point is taken, and it must have some weight if it be right that the 5th defendant was given a permit in relation to his own hut, that the result of that would be so it would seem that irregularity would be produced in the boundary to the land leading to the inference , it is said that it could not have been the boundary.

4. Despite all those matters and somewhat reluctantly, I am satisfied on the evidence of the surveyor that at all material times, Lot 3965 did include the strip of land on which the four defendants have their huts.

5. The second point take and by this time, the burden has shifted to the defendants is that the defendants have each occupied their respective dwellings for upwards of 20 years prior to the bringing of these proceedings and, therefore, are able to resist the plaintiff's clam by virtue of adverse possession under the provisions of the Limitation Ordinance. Section 7 of that Ordinance provides in sub-section (2) that:

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

and section 17 of the same Ordinance provides that:

"Subject to the provisions of section 10, at the expiration of the period prescribed by this Ordinance for any person to bring an action to recover land, the title of that person to the land shall be extinguished."

I find, in the case of each defendant that adverse possession had been established at the latest by February 1980 and that conclusion on the evidence, I may say, has never been seriously contested by Mr. Chan. On the face of it, therefore, the plaintiff's claim would seem to be doomed to failure since it could not take, so it would be thought, from Mr. Mui more than Mr. Mui had to give, "nemo dat quad non habet". More than that such a result, in my view, would not give offence, I believe, to any fair-minded observer of events. It would leave the defendants undisturbed where they have lived for many years and where one of them had been born. It would leave the plaintiff in possession of that piece of land which it had believed it had contracted to and did, in fact, purchase.

6. But that is not the end of the story, bearing in mind those observations, I regret to have to say. Without any sinister purpose, as I find, but purely as a matter of re-negotiating the conditions of the lease under which the land was held from the Crown, the plaintiff surrendered the lease in respect of Lot 3965 and took, at a considerable premium, the re-grant of the same land with some minor adjustments to the boundaries. The Lot was now re-styled Lot No. 4209. Those adjustments to the boundaries do not affect the area in dispute between. the plaintiff and the defendants. Why should that surrender and re-grant make any difference? If Mr. Mui's title had been extinguished and the plaintiff could take no more than Mr. Mui had to assign, how could the plaintiff surrender the land or any interest in it on which the defendants reside and so, be in a position to receive a re-grant of it.

7. The difficulty that I have felt in understanding how that would come about was apparently shared to some degree by Lord Morris as appears from his dissenting speech in the case of Fairweather v. St. Marylebone Property Co. Limited. ⁽¹⁾  But the answer to the difficulty was answered in the speeches of Lord Radcliffe and Lord Denning which formed the decision in that case. Now that case is not entirely on all fours with the present one. The facts are somewhat complicated. They are, perhaps, most easily extracted from the speech of Lord Radcliffe but I do not intend to read that part of the speech which deals with them. In effect, the issue which arose was whether or not adverse possession having been established against the holder of a lease, the surrender of the lease to the freeholder had the effect of bringing to an end the right of occupation by the dispossessor and it was held that it had. There was, it is to be noted, no question of a re-grant in the sense that it has occurred in this case. Nonetheless, much as one might seek for some basis for distinguishing between that case and the present, I have been unable to find any.

8. Until I had the advantage of reading the speeches of Lord Radcliffe and Lord Denning, I would have thought the result in law might have been that which was cursorily dealt with by Lord Denning at page 1033:

"The first suggestion is that the title of the leaseholder to the shed is extinguished completely, not only against the squatter, but also against the freeholder. So that the leasehold interest disappears altogether, and the freeholder becomes entitled to the land. I reject this suggestion completely. It would mean in this case that the freeholder would have become entitled to possession of the shed in the year 1932 and time would have begun to run against him from 1932. So that 12 years later the title of the freeholder to the shed would have been extinguished, that is, in 1944. That cannot be right, and it was not seriously suggested. In 99 cases out of 100, the freeholder has no knowledge that the squatter is on the premises at all. It would be utterly wrong if the title of the freeholder could be eroded away during the lease without his knowledge. The correct view is that the freehold is an estate in reversion within section 6(1) of the Act of 1939, and time does not run against the freeholder until the determination of the lease."

I have found difficulty with the reasoning behind that proposition because it seems to me that the acquisition of title by adverse possession should not and is not affected by any question of notice. Nonetheless, that reason appealed to the House of Lords and certainly in the case of Lord Denning formed a basis of the decision. What Lord Denning and in different words, Lord Radcliffe concluded was that the title of the leaseholder to the shed in that case, was extinguished as against the squatter but remained good as against the freeholder. That seems, said Lord Denning:

"to be the only acceptable suggestion. If it is adopted, it means that time does not run against the freeholder until the lease is determined - which is only just.  It also means that until that time the freeholder has his remedy against the leaseholder in the covenants, as he should have; and can also re-enter for forfeiture, as he should be able to do: and can give notice to deter-mine on a 'break' clause or notice to quit, as the case may be. Further, it means that if the leaseholder should be able to induce the squatter to leave the shed - or if the squatter quits and the leaseholder resumes possession - the leaseholder is at once in the same position as he was originally, being entitled to the benefits and subject to the burdens of the lease in regard to the shed.  All this seems to me eminently reasonable but it can only be achieved if, despite the presence of the squatter, the title of the leaseholder remains good as against the freeholder."

Transposing that proposition to the present case, the title of the lessee remains good against the lessor. Continuing from the speech of Lord Denning:

"On this footing it is quite apparent that at the date of the surrender, the leaseholder had something to surrender. He still had his title to the shed as against the freeholder and was in a position to surrender it to him. The maxim nemo dat quod non habet has no application to the case at all.''

Therefore, the fact that there has been a re-grant, in this case, cannot avail the defendants either on a common sense extension of the proposition which is the basis of the decision but also by reason of some explicit words of Lord Denning at page 1036. He was dealing with a situation different to the situation here because he was presupposing some mala fides on the part of the lessee and lessor or lessee and freeholder which I have found expressly not to be the case. The more so, it seems to me that the proposition I am about to extract from the speech of Lord Denning must have application.

"The only reason, it seems to me, which can be urged against this conclusion is that it means that a squatter's title can be destroyed by the leaseholder and freeholder putting their heads together. It is said that they car by a surrender - or by a surrender and regrant - destroy the squatter's title completely and get rid of him. So be it. There is no way of preventing it. But I would point out that, if we were to deny the two of them this right, they could achieve the same result in another way. They could easily do it by the leaseholder submitting to a forfeiture. If the leaseholder chooses not to pay the rent, the freeholder can determine the lease under the proviso for re-entry. The squatter cannot stop him. He cannot pay the rent without the authority of the leaseholder. He cannot apply for relief against forfeiture. The squatter's title can thus be defeated by a forfeiture - or by a forfeiture and regrant - just as it can be a surrender - or by a surrender and regrant. So there is nothing in the point."

9. So, notwithstanding the difficulty I have felt with regard to that case, not least because it seems to me that the effect of it is very largely to stultify the effect of possession acquired under section 7 of the Limitation Ordinance since in Hong Kong all land is held from the Crown, I am bound to apply it. It seems to me that applying the principle in Fairweather, if adverse possession having been achieved against Mr. Mui, Mr. Mui had surrendered the land in question and taken a re-grant of it, the effect would have been to extinguish the title acquired by each of the defendants under the Limitation Ordinance. Does it make any difference that subsequent to Mr. Nut's title being, so to speak, extinguished, except for that residuum of the lease described and defined in Fairweather's case, a reiteration of which I will not attempt, that subsequently Mr. Mui purported to assign his interest in the land to the plaintiff. It might, if it were possible to read into the assignment some words which would suggest that Mr. Mui had retained his residual. interest in the strip of land now occupied by the defendants. I cannot construe either the assignment or the conveyance on sale in that way. If folows that his status, that is Mr. Mui's status as lessee in relation to the Crown and in relation to the strip of land beyond the fence was transferred by assignment to the plaintiff, putting the plaintiff precisely in the same position as Mr. Mui would have been and consequently, it follows that upon the surrender of the lease by the plaintiff to the Crown and on the subsequent re-grant of hart of the land including that in question to the plaintiff, the rights of the defendants to remain in occupation of their dwellings came to an end. Consequently, there will be a judgment in this case for the plaintiff and I shall make orders for possession in relation to the land on which the defendants' huts stand in favour of the plaintiff.

(1)   [1962] 2 ULR p.1020

Not recorded but appearing from Clerk's Notes:

Representation:

Patrick Chan instructed by H.H. Lau & Co. for Plaintiff.

Ian Payne instructed by Chan, Ng & Leung for 3rd defendnat to 6th defendant.