The Hong Kong Buddhist Association v. Cheng Ka Leung Michael and Others

HCMP 4108/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 4108 OF 2003

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BETWEEN

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Before: Deputy High Court Judge Saunders in Court

Dates of Hearing: 6 & 7 September 2006

Date of Judgment: 8 September 2006

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J U D G M E N T

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Introduction:

1.In these proceedings the plaintiff, the registered proprietor of the residential property at 3^rd Floor, 1 Cannon Street, Causeway Bay, Hong Kong, (the property), seeks recovery of vacant possession of the property from the defendants, together with mesne profits and costs.

2.The 2^nd defendant, Mr Michael Cheng, resists the action and contends that since 28 August 1991, he has been in adverse possession of the property.  Relying upon that adverse possession Mr Michael Cheng, by counterclaim, seeks a declaration that he has acquired a good possessory title to the property.  Mr Lau, for Mr Michael Cheng, argued that the right to recover possession by the Hong Kong Buddhist Association arose on 1 September 1991.  Any other occupants of the property have taken no steps in the proceedings.

3.The Originating Summons for possession was issued on 18 September 2003, that is 12 years and 18 days after the date upon which Mr Michael Cheng asserts his adverse possession began.

4.By s 7(2) Limitation Ordinance Cap 347, an action for recovery of land may not be brought after the expiration of 12 years from the date on which the right of action accrued.  Consequently, if Mr Michael Cheng can establish that his adverse possession began at any time during the 17 days of his occupation prior to 18 September 1991, he will be entitled to the declaration he seeks.

The factual circumstances:

5.The facts that I now state are, unless indicated, facts which are not in dispute.  Where there is a dispute I shall indicate the dispute, and how I have resolved the dispute.  I record now that there is a dispute as to the fact of physical possession of the premises by Mr Michael Cheng, and as to the intention of Mr Michael Cheng in relation to that possession.

The tenancy of the property:

6.As since at least November 1967, Mr Michael Cheng’s father, Cheng Hon Ming, (Mr Cheng Snr), occupied the property pursuant to an oral tenancy arrangement.  At that time the property was owned by Madam Lo Wai

7.Ying.  Madam Lo was a good friend of Mr Cheng Snr’s wife.  Although the tenancy itself was an oral tenancy, there are a number of documents recording the payment of deposits by Mr Cheng Snr to Madam Lo.  In particular the deposit receipt made on 1 November 1967, records that the tenancy was on the basis of one months written notice.  The document states:

“Both parties expressly state that if the resident ceases to rent or the landlord recover possession of the property, there requires one month prior written notice.”

They even went to the trouble of endorsing the document with a $0.15 stamp.  Mr Cheng Snr kept a personal record of the deposits paid which accords with the receipts, and demonstrate that by February 1990, the monthly rental was $3,222.

8.In about 1989 Mr Cheng Snr purchased a property in Tai Po with a view to his whole family moving and living there.  The Tai Po property was a Housing Authority property, apparently then under construction.  Possession of the Tai Po property was delivered to Mr Cheng Snr in April 1991, after the occupation permit for the development had been granted.  It was then necessary for Mr Cheng Snr to engage contractors to renovate the premises before he could move into them.  He was informed by the renovation contractor that it would take about two to three months to finish the renovation.

Notice to terminate the tenancy is given:

9.Mr Cheng Snr said that he then orally informed Madam Lo that his family would be moving from the property in two to three months.  He said that in June 1991 when the telephone line for the Tai Po property was available he gave that number to Madam Lo.  He says that he was informed by the renovation contractor in about mid July 1991, that the renovation work would be completed by the end of July 1991.  Mr Cheng Snr said that he then wrote a letter to Madam Lo informing her that the tenancy of the property would terminate on 31 August 1991.  Mr Cheng Snr now does not have a copy of that letter, but the fact that he wrote and delivered such a letter is consistent with the fact that on 2 August 1991, he paid a sum of $3,422.50 as a final rental instalment.  Mr Cheng Snr attributes the additional $200.50 to an agreement that he would pay any increase in the government rates.  I am satisfied that nothing turns on the difference.

10.Mr Cheng Snr said that the whole family began moving out of the property to the Tai Po property in mid-July 1991, completing the move by about the middle of August 1991.  By arrangement, in mid-August 1991, Mr Cheng Snr met Madam Lo and returned the key to her in order that she may allow prospective tenants to inspect the property.  Madam Lo told Mr Cheng Snr that she could not return the deposit held by her as the bills for the utilities, (which were still registered in the name of her late husband but were paid by Mr Cheng Snr), had not yet been received.  Mr Cheng Snr has taken no steps at all to recover the deposit, amounting to $3220.

The death of Madam Lo:

11.On 26 August 1991, Madam Lo died unexpectedly.  The Cheng family learned of the death on 27 August 1991, having been informed of this by an inspector of police from Wong Tai Sin Police Station.  At the time of her death Madam Lo had been living at Tsz Wan Shan, so it is entirely logical that an officer from that station should be involved in the notification.

12.By a will made on 14 November 1970, Madam Lo left her entire estate, including the property, upon trust for the charitable use of the Buddhist Hospital at Han Lam Street, Lo Fu Ngarm, Kowloon.  There is no dispute that the Buddhist Hospital is a wholly-owned subsidiary of the Hong Kong Buddhist Association.  There is no issue as to the right of the Hong Kong Buddhist Association to bring these proceedings.

The Cheng family resume possession of the property:

13.The case for Mr Michael Cheng is that he learned of the death of Madam Lo from his father, on 27 August 1991.  His evidence was that, having moved from Causeway Bay to Tai Po, and working in Chai Wan, he had found travel to be difficult.  He said also that the Tai Po property was not as spacious as the property.  His evidence was that on 28 August 1991, in the late afternoon, he went to the property and found that it was unoccupied.  He was able to gain access through the backdoor which he knew had not been properly locked.  Upon gaining entry he found a set of keys placed on a small hook beside the door and he took this set of keys away.

14.Mr Michael Cheng said that having found the premises empty he decided to move back into them.  In evidence in chief he gave as his reason for moving back into the property, its proximity to his place of work, and its size.  He told his father of his decision.  Mr Cheng Snr said that he decided to move back to the property with his son because he missed his friends and neighbours whom he had known for many years.  The evidence of both was that they moved into the property on about 29 August 1991, and that they had remained there ever since.

The steps taken by the Hong Kong Buddhist Association: 

15.Both Mr Michael Cheng and Mr Cheng Snr asserted that no one had ever asserted title or made demand against them in respect of the premises.  The undisputed evidence of Mr Cheung Man In, an executive officer of the Hong Kong Buddhist Association was that in July 2000, he, together with a colleague, visited the property for inspection.  He said that a male answered the call.  He said that upon disclosure of their identity and purpose of the visit the male responded by saying that he did not know anything and closed the door.  He did not identify either Mr Michael Cheng and Mr Cheng Snr as the male who answered the door.

16.On 15 July 2003, solicitors for the Hong Kong Buddhist Association wrote a letter addressed to the occupants of the property requesting them to produce documentary evidence to establish their right of tenancy and to permit an inspection.  Both Mr Michael Cheng and Mr Cheng Snr denied receiving or seeing that letter.  On 11 August 2003, a second letter was written by the solicitors requiring a response within five days failing which an order would be sought from the court.

17.Although the first letter indicates that it was to be sent “by leaving” and the second letter “by hand”, there is no evidence that either of those two steps were taken.  In the circumstances of this case the mere indorsement of those words on the letters is insufficient to establish that they were delivered in that manner.  Unfortunately the solicitors did not commence their proceedings immediately following the expiry of the five-day period, but waited until 18 September 2003.  Thus the Limitation issue arose.

The Law:

Time for commencement of the action:

18.By s 7 of the Limitation Ordinance an action to recover land must be brought prior to the expiration of 12 years from the date on which the right of action accrued.  It is quite clear from the deposit receipt given by Madam Lo to Mr Cheng Snr that the tenancy was a monthly tenancy.

19.I am satisfied that notice was given by Mr Cheng Snr in mid-July 1991.  That, together with his payment of rent for the month of August 1991, had the effect of terminating the tenancy at 31 August 1991.  As the tenancy had been terminated it was not necessary for any further notice to be given by the landlord, who was entitled to possession from and after 1 September 1991. 

20.If it is accepted that Master Michael Cheng entered into the property on or about 29 August 1991, when the tenancy was still subsisting, it follows that the cause of action arose on 1 September 1991 on which date the Hong Kong Buddhist Association were lawfully entitled to bring the proceedings.

Adverse possession:

21.Mr Lau correctly accepted that the burden of proof to establish adverse possession was on Mr Michael Cheng.  The question of what is required to establish adverse possession was considered by the Court of Final Appeal in Wong Tak Yue v Kung Kwok Wai David & Anor [1998] 1 HKC 1.  The following passage from the judgement of Li CJ is relevant:

“The principles for the application of these provisions are well established.  A person claiming to be in adverse possession must be shown to have both possession and the requisite intention to possess.  See the Court of Appeal decisions in England in R v Secretary of State for the Environment, ex p Davies (1990) 61 C & CR 487, Buckinghamshire County Council v Moran [1990] Ch 623, [1989] 2 All ER 225 which treated as authoritative and applied the principles enunciated by Slade J. in Powell v McFarlane (1997) 38 C & CR 452.

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

As Nourse J pointed out in Buckinghamshire County Council v Moran (op cit), at 664 (Ch), 238H (All ER), adverse possession can be described as ‘possession as of wrong’ and with limitation it is the intention of the squatter that is essential.

The requisite intention to possess has been referred in various authorities under its Latin tag animus possidendi.  I shall refer to it simply as the intention to possess.  As Slade J. observed in Powell v McFarlane at 471-472, the intention to possess requisite for adverse possession

“involves the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as is reasonably practicable and so far as the process of the law will allow.”

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

Where the occupier has made self-serving statements as to what was his intention, whether during the period of occupation or when challenged in legal proceedings, the courts should approach them with some scepticism.  The courts would scrutinise the circumstances in which they were made and would give them such weight, if any, as they may deserve.  Conversely, where the occupier has made statements as to what was his intention and such statements are against his interest, the courts would usually accorded to them considerable weight.”

22.It should be noted that although the former tenant of the property was Mr Cheng Snr, he makes no claim for adverse possession.  That claim is made by his son, Mr Michael Cheng, alone.  It is accordingly necessary to examine carefully the state of mind of Mr Michael Cheng during the 20 day period he said that he was in occupation of the property prior to the commencement of the period of 12 years prior to the issue of the proceedings.  If he can establish both the fact of possession, and the requisite intention to possess during that 20 day period, he must necessarily succeed in the claim.  In the present case both the fact of possession and the requisite intention are in dispute.

The fact of physical possession:

23.The first question that must be addressed is whether or not Mr Michael Cheng, was in physical possession of the property during the period 1 September 1991, to 17 September 1991.  The position adopted by the Hong Kong Buddhist Association is that the evidence is not sufficient to establish that physical possession.  It is, they say, simply too convenient that the Cheng family should have resumed possession of the property in that period of time.

24.There is no evidence as to when Madam Lo’s executor learned of her death.  Both Mr Michael Cheng and Mr Cheng Snr knew that Madam Lo had no children and believed that she had no other relatives.  Having regard to the relationship, that of landlord and tenant, between Mr Cheng Snr and Madam Lo, in the absence of any living relatives of Madam Lo, it is entirely logical that the police would contact the Cheng family consequent upon her death.  I accept the evidence that the Cheng family learned of the death of Madam Lo on 27 August 1991.

25.Mr Michael Cheng gave as his first reason for going back to the property following Madam Lo’s death, that he had found it very inconvenient to travel from Tai Po to Chai Wan.  That is an entirely understandable reason.  Causeway Bay is much more convenient to Chai Wan, than is Tai Po.  He gave as his second reason the fact that the Tai Po premises were not as spacious as the property.  That is equally understandable.

26.He said that upon learning the news of the death of Madam Lo he decided to go back to the property to look to see if there was anyone occupying the property.  Having found that no one occupied property he decided to move back in on 28 August 1991.  There is no evidence to the contrary.

27.Mr Chai relied principally upon the absence of documentary evidence to establish any involvement between the Cheng family and the property during the period September 1991 until June 1993, the month in which Mr Michael Cheng executed a Deed Poll, the first document to carry his name and the address of the property following 1 September 1991. 

28.I have carefully weighed the absence of documentation in the balance.  Having regard to the reasons given by Mr Michael Cheng for wishing to return to live in Causeway Bay, it is entirely logical that upon learning of the death of Madam Lo, knowing that she had no relatives and finding that the property had not been re-let, he should, for his travel convenience, return to live in the property.  Notwithstanding the absence of documentation, I am satisfied on the balance of probabilities that from on or about 29 August 1991, Mr Michael Cheng physically occupied the property.

29.He has accordingly satisfied the first test required to establish adverse possession.

Animus possidendi:

The changing of locks:

30.The primary evidence upon which Mr Michael Cheng can rely to demonstrate that he held the necessary intention is his assertion that upon resuming residence in the property he changed the locks.  Mr Michael Cheng had gained entry to the property by forcing the lock on the back door.  His explanation for changing the locks following his resumption of residence in the property was that on calling the locksmith to repair the lock of the back door he thought it might be a good idea to change the lock on the front door at the same time, to save the locksmith coming again.  He asserted that he did so because he and his father had decided to treat the premises as their own.

31.It is right that the changing of locks of premises is a very significant act when having regard to the intention of a person in relation to premises: see Powell v McFarlane at 477-478.  In relation to residential premises, particularly in a high-rise building such as exist in Hong Kong, the changing of locks may be less significant.  Any tenant in such premises will wish to keep his premises secure from intruders.  It is not unusual for a tenant to change locks out of a concern that a previous tenant may still have the key to the existing lock.  In such circumstances the changing of locks may not be an assertion of ownership but merely an assertion of a desire for personal security.

32.It is in this context that I have weighed the fact that the locks were changed, with the other evidence upon which Mr Michael Cheng relies to assert the necessary intention.

Payments by Mr Michael Cheng towards the property:

33.Mr Michael Cheng was asked why he thought he had the right to claim the property.  He said that he had acquired that right because he had paid expenses and maintenance in relation to the property.

34.There is no evidence at all that at any stage during the 12 year period any maintenance payments in relation to the property were paid by Mr Michael Cheng.  There is evidence that since he has been working he has paid his father a regular monthly sum for his father’s living expenses, and that from that sum, together with other sums paid by his brothers to their father, Mr Cheng Snr paid matters of rates and utilities in respect of the property.  There is no evidence at all of any payments for the maintenance of the property by Mr Cheng Snr, as distinct from payment of rates and utilities.

35.The necessary intention must arise in, or exist in, Mr Michael Cheng prior to the commencement of the period of 12 years before the issue of the proceedings, in this case a period of 17 days from 1 August 1991 to 17 August 1991, the 12 year period commencing on 18 August 1991.

36.There is no evidence at all that during that period of 17 days Mr Michael Cheng made any payments whatsoever in relation to the property, or even to his father for the purposes of the property, which might be such as to give rise to a belief in his mind that by virtue of those payments he was entitled to exclude the world at large from the property.  It may well be that as the years went by during his occupancy of the property Mr Michael Cheng formed a view that he was entitled to ownership of property by virtue of his period of the residence there and payments that he was making in relation to the property through his father.  But I am quite satisfied that he did not, and could not, have held that view, for that reason, prior to 17 September 1991.

The change of name on the rates record:

37.The evidence established that on 18 April 1996, in response to an application made by Mr Cheng Snr, the Rating and Valuation Department issued an acknowledgement of change in the ratepayer’s name, recording that future demands for rates I were to be sent to Mr Cheng Snr.  Reliance was placed upon that document as an assertion of the necessary intention.

38.In Bree v Scott (1903) 29 VLR 692 the payment of rates was relied upon by a claimant for adverse possession to support the claim.  Madden CJ said:

“Then it is said that (the owner) paid the municipal rates and the water rates.  Of course if (the owner) anticipated a difficulty in dispossessing (the claimant) he would naturally pay the rates and he might do that quite unknown to (the claimant).  He might procure himself to be rated.  Municipal councils do not care who pays the rate, so long as it is paid.  Every man who is willing to pay rates is a perfectly welcome subject with them.  Therefore from that class of act a very slight inference on the question of actual possession can be drawn.  A person in adverse possession who actually pays rates is in a very different case, because a person who holds possession as a tenant of the true owner when asked for rates would naturally say ‘You better ask the owner.’ but when (the claimant) wants the world to understand that she claims the land herself she naturally would pay the rates herself, and there would be a strong inference in her favour.” (The emphasis is mine).

The assertion was also made that Mr Cheng Snr paid the rates for the property prior to changing the name on the rating role to his name, and thereafter.

39.For two reasons neither the change of name document, nor the payment of rates by Mr Cheng Snr assists Mr Michael Cheng.

40.In the first place the request to change the ratepayer’s name was not made until April 1996, and is accordingly not evidence of any intention on the part of Mr Michael Cheng between 1 September 1991, and 17 September 1991.  Had the application being made during that period it might have been of assistance. 

41.Second, and equally importantly, the application was not made to assert Mr Michael Cheng as the person to whom the demand should be sent, but his father, Mr Cheng Snr.  Rather than being an assertion of intention on the part of Mr Michael Cheng it could only be an assertion of intention on the part of Mr Cheng Snr.  Even Mr Cheng Snr did not say that the purpose for the change of address was to assert a proprietary right to the property.  His reason for changing the address was to ensure that the rates demand did not go missing.  In any event an assertion by Mr Cheng Snr as to a proprietary right to the property would not assist Mr Michael Cheng.  As I have recorded Mr Cheng Snr makes no claim for adverse possession.

42.Further, the documents produced show that even to this day the utilities accounts from the Water Supplies Department and The Hongkong Electric Co Ltd remain in the name of Mr Lau Yim, Madam Lo’s late husband.  No explanation was offered as to why, if Mr Michael Cheng was asserting a proprietary right to the property during the relevant period, both authorities were not notified of a requirement on the part of Mr Michael Cheng to have the accounts sent to him.

43.In simple terms, Mr Michael Cheng, by not registering the property with those authorities in his name, was not taking responsibility for the utilities accounts incurred in respect of the property.  Such an attitude is entirely inconsistent with an assertion to a proprietary right in relation to the property.

Documents carrying the address of the property:

44.Mr Michael Cheng produced a copy of a Deed Poll made by him on 19 July 1993, in which he gave the address of the property as his address.  The document does not assert a proprietary right to the property, but merely records his place of residence.  The document does not assist.  In any event it was not made during the relevant period.  The same may be said of an income-tax demand produced by Mr Michael Cheng for the financial year 1993/94, giving his address as the property.  In the first place it does not assert a proprietary right to the property, in the second place it is outside the relevant period.  When asked why he did not produce his tax returns or demands for the 1991/92 year, the relevant year, he said that he did not know that they were important.

45.Mr Lau says that Mr Michael Cheng should not be criticised for not producing documents for the 1991/92 year, because they were not asked for by the Hong Kong Buddhist Association.  That is no answer.  There is no obligation on a plaintiff to ensure that a defendant calls the necessary evidence to establish a counterclaim.  The obligation lies entirely upon the party making a claim to establish his case.  The party resisting a claim is perfectly entitled to sit back and say that the claim has not been made out.

The response to a demand for rent:

46.Both Mr Michael Cheng and Mr Cheng Snr were asked what they would have done had someone come to them and proven that they were the lawful owner of the property, and demanded rent.  Both asserted that they would reject any demand for rent and would refuse that person entrance to the property.  At first sight that response might appear to be sufficient to substantiate the necessary intent.  But an examination of the reasons for that assertion show that that is not so.

47.When asked why they would refuse rent both said that no person could have the right to claim rent because Madam Lo had died without children or any other relatives.  It is plain that both formed the view that because of those circumstances no other person or body could possibly have a right to claim the property.  But that is not so.  Neither have contemplated the possibility that Madam Lo might, by a will, leave the property to some other person or body.  Neither have contemplated the possibility that an institution such as the Hong Kong Buddhist Association might be lawfully entitled to the property.  Mr Cheng Snr, when cross-examined on this aspect said first that he did not pay rent because there was no one collecting rent.  The inference arises from that answer that had someone come to collect rent he would have paid it, notwithstanding his assertion to the contrary in evidence.

Discussion as to intention: 

48.The intention that is required is an intention “to exclude the world at large”: see Slade J. in Powell v McFarlane at 471-472, approved in  Wong Tak Yue at 12.  It is right that in the recent decision of the House of Lords in J A Pye (Oxford) Ltd v Graham & Anor [2003] 1 AC 419 doubt is cast upon the passage cited from Powell v McFarlane.  In the speech of Lord Browne-Wilkinson at 446C there appears the following passage:

“The important point for present purposes is that 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.

49.In Pye, the House of Lords held, directly contrary to the Court of Final Appeal in Wong Tak Yue, (which was not cited), that it was not inconsistent with a claim for ownership of land for a squatter to be willing, if asked, to pay the paper title owner, while being in possession in the meantime.  There is accordingly a direct conflict between the House of Lords and the Court of Final appeal in this respect.  But that is not a matter that I need, (or can), resolve in this judgement.  It is clear from Wong Tak Yue, that the law in Hong Kong at the present time is that the intention that must be established is that set out in Powell v McFarlane. 

50.The changing of the locks by Mr Michael Cheng is strong evidence of an intention to treat the property as his own.  However that is the only evidence of that intention.  In the circumstances of this case, the building being a high-rise residential building, the changing of locks is equally evidence of a desire for personal security.  Mr Michael Cheng did not pay rates for the property, he contributed a sum to his father, for his father to meet the obligations of the property.  He, apparently deliberately, avoided taking on the responsibility, normally falling upon an owner-occupier, of the utilities, by not registering them in his name.  He did not take on the responsibility for rates, permitting his father to bear that burden.  There is no evidence at all of any payments made by Mr Michael Cheng in relation to the maintenance of the property.

51.Weighing all of the foregoing matters I am not satisfied on the balance of probabilities that during the period one September 1991 to 17 September 1991, Mr Michael Cheng had formed an intention to possess the property to the exclusion of the world at large.

52.I am not satisfied that Mr Michael Cheng has established adverse possession in relation to the property during the period 1 September 1991 to 17 September 1991.  He did not have the necessary animus possidendi on 18 September 1991, the date upon which the proceedings were commenced.  Any intention he had to possess the property as an owner arose after that date, consequently the proceedings to recover possession have been commenced within the limitation period established by s 7 of the Limitation Ordinance.

53.It follows that the claim by Mr Michael Cheng for a declaration that he has acquired a good possessory title to the property must be dismissed.  The Hong Kong Buddhist Association is entitled to an order for vacant possession of the property.  There will be an order accordingly.

Mesne profits:

54.The statement of claim contains a claim for mesne profits.  The expression mesne profits is another term for damages for trespass arising from the particular relationship of landlord and tenant: Bramwell v Bramwell [1942] 1 KB 370.  There was no evidence as to mesne profits.  Mr Chai, upon formal instruction, was content with nominal damages.  I accordingly fix mesne profits at the sum of $1.00.

The Basic Law point:

55.Having found that there is no factual basis for a claim for adverse possession by Mr Michael Cheng, it is not strictly necessary for me to consider the constitutional issue argued by Mr Chai, that the limitation provision in s 7 of the Limitation Ordinance is contrary to the provisions of Article 6 and Article 105 of the Basic Law, in that the provision has the effect of depriving a person of private ownership of property without compensation.  In case I am wrong on my view of the facts I set out briefly my conclusion on the point.

The argument:

56.There is no doubt that the effect of s 7 of the Limitation Ordinance is to deprive an owner of his interest in land upon the expiration of 12 years in the event of adverse possession being established.  There is no provision in the law for compensation.

57.Article 6 of the Basic Law provides that:

“The Hong Kong Special Administrative Region shall protect the right of private ownership of property in accordance with law.”

Article 105 of the Basic Law, (so far as is relevant), provides that:

“The Hong Kong Special Administrative Region shall, in accordance with the law, protect the rights of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property.

Such compensation shall correspond to the real value of the property concerned at the time and shall be freely convertible and paid without undue delay.”

58.A similar question has been considered in J. A. Pye v The United Kingdom E Ct HR Aplic. No. 44302/02, in which, in a judgement delivered on 15 November 2005, the European Court of Human Rights considered the validity of the Limitation Act 1980 (UK), in the light of Article 1 of Protocol No. 1 of the Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention).  The Court held that there had been a violation of Article 1 of Protocol No. 1.  That provides:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions.  No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

The similarities between that provision and the provisions of the Basic Law are readily apparent.  The argument that is made is that in the absence of appropriate provisions for compensation of the registered owner, the effect of the limitation provision fails to protect the rights of affected individuals.

Discussion:

59.Mr Chai, sensibly, did not contend that limitation provisions do not serve any legitimate aim.  The legitimate aim of such provisions is to:

“…ensure legal certainty and finality, to protect potential defendants from stale claims which might be difficult to counter and prevent the injustice which might arise if courts were required to decide upon events which took place in the distant past on the basis of evidence which might have become unreliable and incomplete because of the passage of time.”

See Stubbings and Ors v The United Kingdom, a judgement of the European Court of Human Rights, 22 October 1996, Reports of Judgments and Decisions 1996-IV §51, cited in Pye v United Kingdom at para 63.  The important issue is whether the means adopted by the Limitation Ordinance are reasonably proportionate to the aim sought to be realised.

60.It is relevant for the consideration of this issue that the land, the subject of these proceedings, is registered land.  Specifically in respect of this property, and generally in respect of registered land, there is no uncertainty of ownership.  That is not the case in respect of unregistered land such as a great deal of land in the New Territories.  The risk that there might be uncertainty of ownership is even lower in respect of domestic premises on the third floor of the building in Causeway Bay, a circumstance readily compared to the usual sort of adverse possession action that comes before the court, involving either open area in the countryside, unsurveyed, with a doubt as to whether fences all walls up on appropriate boundaries, or a narrow strip of land upon which an adjoining house has allegedly intruded.  In a multi-storey residential building in Hong Kong there is much less likelihood of any dispute as to the lawful boundaries of a dwelling.

61.The submission made by Mr Chai was that there was no justification for depriving somebody of title, without compensation, and in this case, even defeating the administration of Madam Lo’s estate, simply because no objection had been raised against a third person using the land for 12 years.  It was submitted that there is no public benefit in transferring the property to persons in adverse possession in the circumstances such as this case.

62.In Pye v Graham, in the House of Lords, the argument that the consequence of the effect of the limitation provision was incompatible with the Convention was not pursued, (it later succeeded in the European Court).  It is relevant however that Lord Bingham of Cornhill had this to say on the justification for the limitation provision:

“In the case of unregistered land, and in the days before registration became the norm, such a result could no doubt be justified as avoiding protracted uncertainty win the title to land lay.  But where land is registered it is difficult to see any justification for a legal rule which compels such an apparently unjust result, and even harder to see why the party gaining title should not be required to pay some compensation at least to the party losing it.”  (Para 2, 426G).

63.In Pye v Graham, at first instance, Neuberger J considered the result of the application of the limitation period was:

“….draconian for the owner and a windfall for the squatter that just because the owner has taken no steps to evict the squatter for 12 years the owner should lose 25 ha of land to the squatter with no compensation whatsoever.”  (Cited in Pye v United Kingdom at para for71.)

64.Mr Lau drew my attention to the difference between the provisions of the Basic Law and the terms of Article 1.  In particular he noted the requirement under European law that the deprivation of possession may take place only in the public interest, and subject to the general principles of international law.  Neither of these requirements are present in the Basic Law.

65.In my view the argument made by Mr Chai is compelling.  In the absence of a provision for compensation, and in circumstances where there is no issue as to either title, the extent of the title, or the identity of ownership, to deprive the owner of the land, without compensation, merely because he has taken no steps in relation to the land for a period of 12 years, is not reasonably proportionate to the aim being sought to be realised by the Limitation Ordinance.  There is in my view no logical reason why Mr Michael Cheng should benefit by windfall to the extent of some $1,700,000, (the estate duty value of the property), merely because he occupied the property for a period of 12 years, rent-free, while the Hong Kong Buddhist Association slept on its rights.  Were Mr Michael Cheng required by law to pay some compensation the limitation provision would be seen in an entirely different light.

66.Article 105 of the Basic Law requires the protection of rights of inheritance of property.  Such rights must be viewed from two directions, first the right of beneficiaries to receive property by inheritance, and secondly, and equally importantly, the right of persons to choose to whom their property should pass after death.  In the present case not only would the consequence of the application of the Ordinance deprive the Hong Kong Buddhist Association of its property, it would have the effect of denying the lawful right of Madam Lo of determining who may inherit her property upon her death.

67.The injustice of the operation of the limitation provision is readily seen in the circumstances of this case.  The consequences cannot be justified in terms of the rationale for a limitation provision, because none of the factors normally justifying such provisions exist in this case.  I cannot see that it can be argued that the public interest requires that Mr Michael Cheng should enjoy a windfall in the nature that would follow should he be found to be in adverse possession.

68.In the absence of any compensatory provision to ameliorate the rights that the Basic Law requires the Hong Kong Special Administrative Region to protect, I am driven to the conclusion that s 7 of the Limitation Ordinance, as it presently stands is inconsistent with the Basic Law.  Consequently, had I found there to be adverse possession on the part of Mr Michael Cheng, I would have declined to enforce the limitation provision upon which he relies.

Costs:

69.The Hong Kong Buddhist Association, having succeeded on both the claim and counterclaim is entitled to an order nisi for its costs, to be taxed on a party and party basis.

Mr Michael Chai, instructed by Ms M K Lam & Co, for the Plaintiff

The first Defendant, in person, absent

Mr Roland Lau, instructed by Ms Chow, Griffiths, for the 2^nd Defendant