Harvest Good Development Ltd v. Secretary for Justice and Others
Read the full judgment text of HCAL 32/2006 on BabelCite. This High Court CFI judgment was delivered on 16 July 2007.
1. Historically, all land in Hong Kong has been vested in the Government. The Government has not granted freehold title. The system of land tenure, therefore, has been a leasehold system. While the Basic Law has provided extensive guarantees of property rights, it has not changed that system of land tenure. Article 7 of the Basic Law vests all land in the state. However, in terms of the article, the Hong Kong Government is responsible for its management and this includes the lease or grant
Cites 6 cases
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HCAL 32/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO. 32 OF 2006 --------------------- BETWEEN
---------------------- Before : Hon Hartmann J in Court Dates of Hearing : 15 – 17 January 2007 Date of Handing Down Judgment : 16 July 2007 ------------------------- J U D G M E N T ------------------------- Introduction 1.Historically, all land in Hong Kong has been vested in the Government. The Government has not granted freehold title. The system of land tenure, therefore, has been a leasehold system. While the Basic Law has provided extensive guarantees of property rights, it has not changed that system of land tenure. Article 7 of the Basic Law vests all land in the state. However, in terms of the article, the Hong Kong Government is responsible for its management and this includes the lease or grant of land to individuals for “use and development”. As an underlying principle, therefore, the Basic Law looks to land being put to use for the benefit of Hong Kong people. 2.Hong Kong does not have a system of land registration under which the fact of registration is proof absolute of title. The Land Registration Ordinance, Cap.128, which has been in force over 150 years, does facilitate the tracing of title but it does not itself give title : see, for example, the judgment of Hunter J (as he then was) in Financial and Investment Services for Asia v. Baik Wha International Trading Co. Ltd [1985] HKLR 103, at 112I. 3.It is therefore fundamental that in Hong Kong land law possession is at the root of title. An individual who possesses land is presumed to have leasehold ownership unless a better title can be demonstrated. This is because title to unregistered land is relative and depends ultimately upon possession. The person best entitled to the land is the person with the best right to possession of it. 4.If a person comes onto land and occupies it for a long enough period in defiance of the rights of the registered leaseholder, it does not matter that he came onto the land wrongfully as a squatter, that period of adverse possession will entitle him, as against the leaseholder, to possessory estate in the land. 5.It is important to note that, whatever the position may have been, or is, in the United Kingdom, in Hong Kong physical possession alone is not sufficient to constitute adverse possession. It must be accompanied by the intent to do so as an adverse possessor. In Wong Tak Yue v. Kung Kwok Wai David (1997-8) 1 HKCFAR 55, the Court of Final Appeal held that a declaration by a person claiming adverse possession of a willingness to pay rent to the registered leaseholder was inconsistent with the necessary intent. 6.The Limitation Ordinance, Cap.347, was enacted in 1965, being modelled on the Limitations Act of 1939. The Ordinance contains a scheme in terms of which a person who has been in adverse possession of a piece of land for a specified period of time acquires possessory title in that land, not as against the freeholder; that is, the state, but as against the individual who has been granted the leasehold rights in that land. Not only does the adverse possessor acquire the possessory estate – the right to occupy and use the land – but he does so without any need to pay compensation to the leaseholder. Originally, the Ordinance specified that 20 years adverse possession was required before possessory title was lost by the leaseholder and gained by the adverse possessor. In 1991, however, that period was reduced to 12 years. 7.This application for judicial review seeks to determine whether, in light of the property rights guaranteed by the Basic Law, the scheme contained in the Limitation Ordinance is consistent with those guaranteed rights. 8.The statutory scheme is contained in two sections. Section 7(2) of the Limitation Ordinance provides that adverse possession for a period of what is now 12 years bars the right of the registered leaseholder to bring an action to recover possession of the land. The section provides what I perceive to be a procedural safeguard for the adverse possessor; namely, that :
9.The consequence of the registered owner being barred from taking action to recover possession is that, as against the adverse possessor, his title in the land (his possessory estate) is extinguished. In this regard, section 17 of the Ordinance provides for the loss of a substantive right by leaseholder and a corresponding acquisition of a substantive right by the adverse possessor :
10.Sections 7(2) and 17 do not therefore simply bar claims to recover but give practical effect to that bar by transferring possessory title. What is left to the leaseholder is a mere ‘paper title’. 11.To expand on what I have said earlier, the land law of England and Wales – and Hong Kong – is at root only a law of possession and not a law of ownership. As Lord Hoffmann expressed it in Hunter v. Canary Wharf Ltd [1997] AC 655, at 703 :
12.Possession suggests use and implementation, if only at the most basic level of occupation. Adverse possession is a form of exclusive possession, de facto as opposed to de jure. The concept of adverse possession, and the recognition of its consequences, are long-standing, fundamental features of Hong Kong’s land law. 13.In a system of land tenure based primarily on exclusive possession, it has been said that adverse possession, while superficially appearing to be solely negative, even parasitic, does have a constructive role to play. That being said, however, it has been recognised that adverse possession, in its present stark and unequivocal form, can give rise to unfairness as between the registered leaseholder and the adverse possessor. 14.In a judgment of the Court of Final Appeal, which preceded this application for judicial review but, for reasons which I shall explain, is integrally related to it, Lord Hoffmann NPJ recognised that there is much that is troubling in the proposition that a squatter can, simply by wrongful occupation for a specified period, in effect, if not in legal theory, acquire a valuable property, leaving the registered leasehold owner with the sole privilege of paying the annual rent to the freeholder; that is, to Government : see Chan Yuk Yin and Another v. Harvest Good Development, unreported FACV No.13 of 2005. In the same judgment, Litton NPJ observed :
15.It should be said that the consequence, in practice, is not always so harsh as may, at first blush, appear. The Rating Ordinance, Cap.515, provides that both the leaseholder and the occupier of a tenement are liable to pay rates and, in the absence of agreement, the rates are to be paid by the occupier. As for both rates and Government rent, the leaseholder would be entitled to obtain reimbursement from the occupier. But, of course, in seeking reimbursement, the leaseholder is forced to take the occupier as he finds him; in many cases, no doubt, he will find him to be a man of straw. 16.In England and Wales, Parliament has acted to alleviate the harshness of adverse possession, seeking to bring it more in line with contemporary concepts of fairness. 17.As I have indicated earlier, at the heart of this application is the assertion that – as it stands – the scheme contained in the Limitation Ordinance is inconsistent with the rights of private ownership guaranteed by the Basic Law, more especially the right to be compensated for lawful deprivation of property. 18.The articles of the Basic Law which are relied upon to found this assertion are articles 6 and 105. Article 6, in stating a general principle, states that the Hong Kong Special Administrative Region ‘shall protect the right of private ownership of property in accordance with law’. Article 105, in more substantive terms, provides that :
19.For the Secretary for Justice, it is contended that sections 7(2) and 17 of the Limitation Ordinance are not engaged by articles 6 and 105 of the Basic Law. This contention is founded on the assertion that article 105, in protecting the right to compensation for lawful deprivation of property, is not concerned with regulating property rights between individuals but is concerned instead with the right of an individual to be paid compensation when the state or a state agency deprives him of his property for some public purpose; essentially therefore when there is a resumption in order to build roads or railways or to advance some other public interest. 20.Accordingly, the first substantive issue to be determined is whether the statutory scheme which creates and regulates the acquisition and loss of possessory title by way of adverse possession is even engaged by the Basic Law. 21.If the Basic Law is engaged, the second substantive issue to be determined is whether the statutory scheme – as it stands – is inconsistent with the Basic Law. 22.The importance of the substantive issues which this application seeks to determine is not disputed. If not determined in this application, they will undoubtedly have to be determined in another case in the not too distant future. Indeed, as I understand it, challenges of essentially the same nature have already come before our courts. But, while the first respondent, the Secretary for Justice, acknowledges the importance of the substantive issues, it is his case that this particular application for judicial review is not a suitable vehicle for their determination. He has based this preliminary opposition on two grounds :
23.In light of these preliminary grounds of opposition, it is necessary, as a first step, to visit the history of the dispute which has given rise to this application. Background 24.The land which is the subject of this application is situated in the New Territories in the hills near Tai Po. It is made up of five lots of land which together constitute a farm. There is no dispute as to its boundaries. 25.In or about February 1951, Madam Wong Yam Tai, the third respondent, and her husband leased the land from the then registered leasehold owner for a period of ten years. When that lease ended in or about February 1961, the couple continued to live on the land and to work it, growing fruit and raising livestock. However, they did so as squatters, paying no rent. 26.Shortly thereafter, in or about May 1961, Mr Lee Shau Kee and two friends became the registered leasehold owners of the land. But no formal agreement of lease with Madam Wong and her husband was entered into. 27.Madam Wong’s husband died and she remarried. In 1964, a daughter was born of this second marriage who was raised on the land. She is Madam Chan Suk Yin, the second respondent. 28.It was only in 1993, some 32 years after paper title had been obtained and after his two friends had died, that Mr Lee Shau Kee took legal action to have Madam Wong and her family removed from the land. The action was instituted on the strength of a High Court judgment which, by its interpretation of certain relevant legislation, seemed to enable Mr Lee to successfully avoid the defence that he was barred by way of adverse possession from instituting action to recover the land. That judgment, however, although uphold by the Court of Appeal, was reversed by the Privy Council in 1996. In the result, Mr Lee’s action, which was defended on the basis that title had been lost to him by adverse possession, did not go to trial. It was discontinued. 29.In 1997, Mr Lee transferred leasehold ownership of the land to one of his companies, Harvest Good Development Limited, the applicant in this matter. 30.The earlier action having been discontinued, in 2000, Madam Wong and her daughter, Madam Chan, instituted action themselves in respect of the land. In their action they claimed that they had been in adverse possession of the land for over 20 years, that being the time then required by the Limitation Ordinance. They sought a declaration pursuant to section 7(2) of the Ordinance that the applicant, the new registered leaseholder, was therefore barred from bringing any action at law to recover the land and a further declaration pursuant to section 17 that, as a matter of substantive law, the company’s title to the land had been extinguished. 31.The action was defended on the basis that in 1961, both before and after Lee Shau Kee and his two friends had purchased the land, Madam Wong and her first husband had been visited and given permission to continue to occupy the land as licensees. 32.In a judgment handed down in February 2004, the Court of First Instance held that Madam Wong and her first husband had not been given a licence to remain on the land and that it had been held in adverse possession since at least 1962. Accordingly, by 1982, the land had been held for the then required period of 20 years and by that time the registered leaseholder’s title has been extinguished in terms of section 17 of the Limitation Ordinance. Madam Wong and her daughter were therefore granted their declarations. 33.That judgment was appealed. The Court of Appeal did not upset the factual finding that the land had been held in adverse possession for at least 20 years. However, it found for Harvest Good Development on a new ground. By a majority, the court held that a provision in the 1988 New Territories Leases (Extension) Ordinance, Cap.150, which extended by 50 years leases that would otherwise expire before 30 June 1997, created new leases and those leases gave a new right of possession to the registered leaseholder not affected by the Limitation Ordinance. 34.The Court of Final Appeal, however, did not find that to be a true construction of the provision. In its judgment of January 2006, it held that new leases were not created but that existing leases were merely extended. As to whether the land had been held in adverse possession or under licence, the Court of Final Appeal was not prepared to upset the findings of fact made by the judge at first instance. In the result, the declarations made at first instance were restored. 35.Although the litigation instituted by Madam Wong and her daughter had commenced after the Basic Law had come into effect, at no time was the defence raised in that litigation that sections 7(2) and 17 of the Limitation Ordinance were inconsistent with the Basic Law. 36.In February 2006, however, shortly after the Court of Final Appeal had given its judgment, solicitors for the applicant wrote to the Secretary for Justice, the first respondent, asserting that sections 7(2) and 17 were inconsistent with the Basic Law and should be amended or struck down. 37.It appears that the letter was motivated by a judgment of the European Court of Human Rights in J.A. Pye (Oxford) Ltd v. United Kingdom (2005) 19 BHRL 705. In that judgment, the court had found that provisions in the Westminster statutes, similar to sections 7(2) and 17 of the Limitation Ordinance, in depriving the applicant companies of their title to certain registered land by way of adverse possession, had —
38.In light of this, in their letter to the Secretary for Justice, the solicitors for the applicant made the following demand :
39.The solicitors for the applicant also wrote to the legal representatives of Madam Wong and her daughter. The letter was to the same effect but concluded with a different demand :
40.The Secretary for Justice did not make a direct response, dealing with the merits. It appears that Madam Wong and her daughter made no response at all. In a further letter addressed to the Secretary for Justice, the solicitors for the applicant said that they would take the lack of direct response to mean that the Secretary was not prepared to undertake the requested measures. The present judicial review proceedings were then instituted. An overview of the applicant’s case 41.It is, of course, the gist of the applicant’s case that, as result of the scheme contained in the Limitation Ordinance, it has been deprived of its land without compensation, contrary to articles 6 and 105 of the Basic Law. 42.It is the applicant’s case, first, that there is no legitimate reason to deprive a lawful owner of his right to private property by reason only of a specified effluxion of time and, second, even if there is a legitimate reason to do so, deprivation of private property without any compensation fails to achieve a fair balance between the legitimate objectives to be achieved and the protection of property rights under the Basic Law. As it was argued on behalf of the applicant, under the present statutory regime the squatter enjoys a windfall benefit at the expense of the lawful and rightful leasehold owner. It requires the owner to make a ‘compulsory gift’ to the squatter. The ‘decision’ challenged and remedies sought 43.One decision only has been challenged, that decision forming the basis of the application. It is the decision of the Secretary for Justice, by omission or otherwise, to refuse the demand made to bring sections 7(2) and 17 of the Limitation Ordinance in line with the Basic Law and, in so doing, either to reinstate the effective property rights of Harvest Good Development or alternatively to provide adequate compensation for the loss of those rights. 44.The relief that has been sought is to the following effect :
The disjoinder of Madam Wong and her daughter 45.Prior to the substantive hearing of the application for judicial review, Madam Wong and her daughter made an interlocutory application to have all claims against them struck out and to be disjoined as parties to the proceedings. 46.In a judgment handed down on 19 December 2006 (‘my December judgment’), I ruled that the ‘Basic Law point’; that is, the issue of whether sections 7(2) and 17 of the Limitation Ordinance were inconsistent with articles 6 and 105 of the Basic Law, could – and should – have been raised in the earlier litigation and that it would now constitute an abuse of process to allow the judicial review proceedings to be continued against them. I therefore ordered that the claims against them be struck out and they be disjoined as respondents. 47.My December judgment was appealed but there was insufficient time for the appeal to be heard before the commencement of the substantive judicial review hearing. In the circumstances, Mr David Pannick QC, leading counsel for the applicant, took the view that the mother and daughter remained parties to the proceedings and could, if they wished, be heard. However, the mother and daughter, understandably, no longer being represented in court, and having been given no warning that they should attend, Mr Pannick addressed his advocacy only to the issues arising between the applicant, Harvest Good Development, and the Secretary for Justice. The first preliminary issue : does the Basic Law have any application in this case? 48.On behalf of the Secretary for Justice, it was submitted that irrespective of whether the applicant is correct in its contention that sections 7(2) and 17 of the Limitation Ordinance contravene articles 6 and 105 of the Basic Law, the Basic Law itself has no relevance to this case. Mr Benjamin Yu SC, leading counsel for the Secretary, advanced this submission on two grounds :
a. When was the applicant deprived of its land? 49.It was submitted by Mr Yu that the declarations made by the Court of First Instance, and restored by the Court of Final Appeal, were binding declarations that it was in 1982 that possessory estate in the land had been lost by the then registered leaseholder and had accrued to the adverse possessors. From that date therefore a right of adverse possession had become vested in Madam Wong and her daughter, that right at that time requiring no quid pro quo by way of monetary compensation. 50.While the legal proceedings which resulted in Madam Wong and her daughter securing declarations pursuant to sections 7(2) and 17 of the Limitation Ordinance had only been commenced after the Basic Law had come into effect, it was Mr Yu’s contention that the date of the proceedings was immaterial. What mattered was the finding of fact that the land had been held in adverse possession from 1962 to 1982 and that accordingly, in 1982, the possessory title then held by the registered leaseholder had been extinguished. There should be no confusion, he said, between the date when a right is extinguished and the date when a court determines that it has been extinguished. 51.In the result, said Mr Yu, as at 30 June 1997, the day before the Basic Law came into effect, Madam Wong and her daughter, by operation of law, already held possessory title in the land, that being a substantive right. 52.As for the applicant, said Mr Yu, it only purported to acquire a possessory title in the land in October 1997. By that date, however, by operation of law, the title of the previous owner had been extinguished. As Mr Yu put it, the applicant could not have acquired any title and accordingly could not have been deprived of anything by the operation of the Limitation Ordinance. All it acquired in 1997 was paper title. Insofar it has lost the value of the bargain it made in acquiring any interest in the land, its cause of action, if any, said Mr Yu, was against the vendor of the land for breach of the covenant of good title. 53.That Madam Ho and her daughter enjoyed accrued rights in the land before the coming into effect of the Basic Law was a matter of importance, said Mr Yu. The law was clear and of long-standing. In In re Athlumney; Ex parte Wilson [1898] 2 Q.B. 547, 551-552, Wright J said :
54.In this regard, see also Yew Bon Tew and Another v. Kenderan Bas Mara [1983] AC 553, a judgment of the Privy Council in which Lord Brightman said, at 558 :
55.It was Mr Yu’s contention that, in the litigation instituted by Madam Wong and her daughter, the cause of action, and all events related to it, had taken place before the coming into effect of the Basic Law. The Basic Law therefore had no relevance to the issues that fell for determination. In this regard, Mr Yu made reference to Malhous v. Czech Republic (2000) App. No. 33071/96, in which the Grand Chamber of the European Court of Human Rights rejected any submission that the Convention operated retrospectively in respect of private property rights and rejected also the assertion that deprivation of ownership was a continuing situation :
56.On behalf of the applicant, however, it was submitted that the date of commencement of legal proceedings was of central importance. The issue of adverse possession, it was said, was not finally determined until the judgment of the Court of Final Appeal was handed down in January 2006. It was only after it had been determined that there was a lawful deprivation of property, said Mr Pannick, that any right to compensation under article 105 of the Basic Law became engaged. That cause of action; namely the right to compensation, did not arise therefore until it was finally determined in January 2006 that there had been a lawful deprivation. In the circumstances, retrospectivity plays no part. 57.Mr Pannick argued that the litigation instituted by Madam Wong and her daughter was only instituted well after the Basic Law had come into effect and there was nothing in the Basic Law to suggest that proceedings would not be determined according to that Law. The action, said Mr Pannick, was defended on two bases, one factual and one legal. Neither of these issues was resolved until the Court of Final Appeal handed down its judgment until 2006. The factual issue was whether Madam Wong and her family had occupied the land as licensees, the legal issue was whether the New Territories Leases (Extension) Ordinance created a new possessory estate in the land. Those issues, therefore, remained live issues until the conclusion of the litigation. Indeed, in respect of the legal issue, it was the law for a period of time after the Court of Appeal had given its judgment that the New Territories Leases (Extension) Ordinance did create a new possessory estate. 58.While I accept that, in certain circumstances, the date of legal proceedings may be important – mainly, I would think, in matters going to the fairness of those proceedings – I do not accept that they are determinative in the present case. I say that because it is clear, in my view, that the declarations obtained by Madam Wong and her daughter, no matter when, by an accident of history, they were made, stated that, in law, they had acquired possessory title in the land some 18 years before the Basic Law came into effect. 59.Likewise, the defences raised went to historical issues; namely, whether, at some time before the coming into effect of the Basic Law, title to the land had been extinguished and, if so, whether the introduction of legislation in 1988 had created a fresh title. In determining both those issues, the declarations restored by the Court of Final Appeal were to the effect that in 1982 Madam Wong and her daughter had acquired a substantive right in the land and that right had not in any way been compromised by the later legislation. 60.As for the issue of compensation, whether it was or was not an independent consequential action, it still fell for determination in the context of history. If it properly should have been paid, when should that have been? 61.Underlying the submissions made on behalf of the applicant was the contention that there is nothing in the Basic Law to suggest that it does not apply to all court proceedings instituted and determined after it came into effect. But that, it seems to me, essentially begs the question. The question is whether the Basic Law may apply so as to determine the substantive issues in civil suits which concern matters arising before the Basic Law came into effect. 62.As I have said, the litigation commenced by Madam Wong and her daughter resulted in declarations that, at the time when the Basic Law came into effect, they were already vested with right of possessory title. I appreciate the difficulties that are faced in attempting to define what is or is not a vested right. In the present case, it is sufficient, I think, to note that possessory title was acquired at a particular moment in time as the result of an extended period of conduct; that is, of exclusive possession and use. It was at that time that certain rights in the land were extinguished and others acquired. 63.In the result, the applicant having had its title extinguished in 1982, it seems to me that the question to be asked is whether the Basic Law is able – in these circumstances – to operate retrospectively so as to reach back and revive that loss of title. b. Does the Basic Law operate retrospectively so as to protect rights of private property? 64.As I have indicated earlier, there is a presumption in our law that legislative instruments shall not be construed as having retrospective effect unless that is clearly intended. In his judgment in L’Office Cherifien v. Yamashita Ltd[1993] 3 WLR 266, at 273, Sir Thomas Bingham confirmed that the presumption may correctly be expressed in the following terms :
65.This presumption finds concrete expression in section 23 of the Interpretation and General Clauses Ordinance, Cap.1, which provides inter alia that, when a statute repeals, in whole or in part, any other statute, that repeal shall not affect any right or privilege which has accrued or been acquired under the repealed statute. 66.As to retrospectivity, I start by saying that, reading the Basic Law in the context of its purpose, I can find no provision to the effect that, concerning rights of private property, the Law shall operate retrospectively. There is certainly no clear language that it shall have such effect. Nor, in my view, on a reading of the Law or relevant extraneous materials, does such a construction arise by necessary implication. 67.The Basic Law, it appears to me, while it recognises history, seeks to set up a new order, one to take effect on the resumption of sovereignty on 1 July 1997. It is therefore a forward-looking document, not one that seeks to reach back in order to influence or alter what came before. In this regard, the third paragraph to the preamble to the Basic Law reads :
68.As to the operation of law, article 4 directs that the Hong Kong Special Administrative Region shall safeguard rights and freedoms in accordance with law while article 84 requires the courts to adjudicate cases in accordance with the applicable laws, the power being given to refer to precedents of other common law jurisdictions. As to what are the applicable laws, article 8 directs that :
69.While couched in broad language, it seems to me that article 8 leans more towards acknowledging the common law presumption against retrospective operation of legislative instruments rather than implying that its provisions may be employed retrospectively. The article speaks of maintaining Hong Kong’s previous laws unimpaired. Put another way, it speaks of preserving them. Article 8, therefore, as with the Basic Law itself, looks to continuity and stability. It looks to preserving all previous laws except those which – with the coming into effect of the Basic Law, and at no earlier date – are found to contravene that law. 70.In matters concerning private property, during the course of submissions Mr Yu made reference to article 86 of the Joint Declaration which emphasised that rights concerning the acquisition, use and disposal of land would ‘continue’ to be protected. Here again, the emphasis is on preservation of what came before not on reaching back to change it. The article reads :
71.But that does not end the matter. I say that because the presumption against retrospective operation of legislative instruments – and it is only a presumption – is based on the principle of fairness and what fairness demands covers a broad range of circumstances. 72.In what has become a seminal statement, Staughton LJ, in Secretary of State for Social Security v. Tunnicliffe [1991] 2 All ER 712, at 724, defined the presumption in the following manner :
73.As I understand it, therefore, if, on a weighing of all relevant factors, it appears that the makers of the legislative instrument – in this case, the Basic Law – must have intended it to have some retrospective operation then the presumption against retrospectivity cannot act to stifle that intent. 74.In his speech in L’Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd [1994] 1 AC 486, at 525, Lord Mustill spoke of this more nuanced approach in the following terms :
75.A little further in his speech, Lord Mustill said :
76.In his speech in the more recent judgment of the House of Lords in Wilson v. First County Trust Ltd (No.2) [2004] 1 AC 816, at 868, Lord Scott spoke of the presumption as follows :
77.Can it be said, therefore, that it is clear that the drafters of the Basic Law intended articles 6 and 105 to have retrospective effect? In answering this question, I take a number of matters into account. 78.First, as a constitutional document, the Basic Law must be construed purposively, avoiding what has been called ‘the austerity of tabulated legalism’. As it was said in Ng Ka Ling & Others v. Director of Immigration (1999) 2 HKCFAR 4, a purposive approach is necessary because a constitution states general principles and expresses purposes without condescending to particularity and definition of terms. In construing the provisions of the Basic Law, the language is to be considered in the light of its context and purpose. Extrinsic materials which throw light on that context and purpose may generally be used. 79.Second, fundamental rights set out in Chapter III of the Basic Law must be given a generous interpretation. As Li CJ said in Ng Ka Ling & Others v. Director of Immigration (1999) 2 HKCFAR 4 :
80.The protective guarantees concerning private property rights are not contained in Chapter III. Article 6 appears in Chapter I, headed ‘general principles’, while article 105 appears in Chapter V, headed ‘economy’. But, in the Basic Law, private property rights are rights of real importance just as they are deeply rooted rights in the common law. While therefore they may not be seen through the prism of universality, such as the right of equality before the law or freedom of conscience, nevertheless, bearing in mind that the Basic Law entrenches Hong Kong’s capitalist system, they are rights, in my view, which warrant a generous interpretation. 81.Third, that being said, however, it must be recognised that the give and take of civil society frequently requires that the exercise of private rights in land should be restricted in the public interest; for example, that land should be utilised and not left fallow. The Basic Law does not prohibit the lawful requisitioning or resumption of land. It requires only that there should be compensation in return. As Lord Hoffmann expressed it in R. (Alconbury Ltd) v. Environment Secretary [2003] 2 AC 295, at 325, all democratic societies recognize that, while there are certain basic rights which attach to the ownership of property, they are heavily qualified by considerations of public interest. 82.Fourth, by way of broad observation, I would add that, as to the occupation and use of land, what the public interest may demand is a matter best judged in a democratic society such as Hong Kong by its representative bodies. Equally, it is important to recognise that, in respect of the occupation and use of land, Hong Kong has its own unique history of land tenure and its own continuing demands as to how land is best employed for the greater benefit of Hong Kong people. 83.If articles 6 and 105 had retrospective effect, it would mean that they would operate to reach back over an indefinite period of time to any given date to be weighed in the balance with all relevant factors which at that date went to the efficacy of the prevailing policies of land occupation and use. To illustrate the point, albeit hypothetically, in the present case, it would mean reaching back and considering all relevant conditions as early as the 1960s. Perhaps at that time land in parts of the New Territories had such little value (in comparative terms) that there was little incentive on the part of leaseholders to occupy and use it. Perhaps at that time there was correctly perceived to be a real advantage in the public interest in giving possessory title without the need for compensation to those who had been prepared to occupy the land and work it over an extended period of time. 84.In looking to articles 6 and 105, we are not talking of rights classified by the Basic Law as fundamental rights which must prevail in favour of the individual over the interests of society. We are talking about rights which, as society evolves, are quite properly qualified by considerations of public policy. 85.These rights, it seems to me, ought to be established by reference to the law as it was at the time. At that time those who occupied and utilised land in adverse possession knew the risks they faced and the possible rewards. Equally, leaseholders knew the risk they faced if they themselves did not ensure possession and utilisation of their land. 86.For these reasons, I do not see how it can be said that, on the principle of fairness, the drafters of the Basic Law must have intended that articles 6 and 105 would operate retrospectively. To find otherwise, in my view, would be more a formula for unfairness. I say that because, in my view, the consequence of events under the civil law should, in the circumstances related to the possession and use of land, be established by reference to the law prevailing at the relevant time. In that way all parties are able to ascertain the extent of their rights and obligations. That cannot be so if subsequent enactments can operate to reach back and diminish or compromise those rights and obligations. 87.In my judgment, therefore, the presumption that the drafters of the Basic Law did not intend that Law to operate retrospectively in respect of property rights is a correct presumption. It is not rebutted, certainly not so as to alter accrued rights or to impose obligations where none previously existed. 88.By way of a postscript, I record that during the course of submissions, the authorities of R. v. Lambert [2002] 2 AC 545 and R. v. Kansal (No.2) [2002] 2 AC 69 were analysed and debated, both of these authorities going to the issue of retrospectivity under the Human Rights Act 1998. However, I did not find these authorities to be of assistance in the present case. 89.First, they fell very much to be decided on the particular construction of the Human Rights Act itself. By way of illustration, Lord Lloyd began his speech in Kansal by saying :
90.Second, the fundamental rights under consideration went to the fairness of criminal proceedings. In Lambert, for example, the issue concerned the presumption of innocence. In this application, however, the issue concerns substantive rights in property lost or acquired before the Basic Law came into force. 91.In the circumstances, I am satisfied that, in the present case – where all relevant events as to the acquisition and loss of possessory title took place before the coming into force of the Basic Law – that Law has no application. 92.On this basis, this application for judicial review must be dismissed. However, in the event that I am wrong, I move on to consider the second preliminary ground of opposition raised on behalf of the Secretary for Justice. The second preliminary issue : does this application constitute an abuse of process? 93.As I have said earlier, after the judgment of the Court of Final Appeal had been handed down in January 2006, the solicitors for the applicant wrote to the Secretary for Justice. In their letter the solicitors demanded that the Secretary take steps to repeal or amend the Limitation Ordinance so as to make it consistent with the constitutional protections contained in articles 6 and 105 of the Basic Law. The letter has to be read as a demand that necessary legislative measures must be placed before the Legislative Council for its consideration. However, in addition to seeking a change of the law, a demand was made for the reinstatement of the applicant’s possessory title in the land or, failing that, for payment of compensation out of the public purse. 94.Put simply, having failed to raise the constitutional issue in the litigation, the applicant now looked, not to the party from whom the defective title had been acquired, but to the Government, demanding that the Government either reinstate its possessory title or pay compensation. 95.The demand for reinstatement or compensation remains. In this regard, paragraph 36 of this judgment sets out the relevant relief sought. Before they were disjoined, the same demand was, of course, made of Madam Wong and her daughter. 96.On behalf of the Secretary for Justice, it was contended that if, as the applicant contends, sections 7(2) and 17 of the Limitation Ordinance are inconsistent with articles 6 and 105 of the Basic Law, it could – and should – have raised the issue in the litigation instituted by Madam Wong and her daughter in 2000, litigation which endured for some five years. As Mr Yu put it, it is a principle that, save in exceptional circumstances, jurisdiction to grant judicial review will not be exercised when other remedies have been available and have not been employed. 97.The exercise of judicial review is, of course, discretionary. Even if a case is made out, the court may refuse a remedy. As Sir John Donaldson MR put it in R. v. Epping and Harlow General Commissioners [1983] 3 All ER 257, at 262 :
98.It was Mr Yu’s submission that the litigation instituted by Madam Wong and daughter in 2000 was the ideal forum for resolving the constitutional question. The constitutional issue, if raised in that litigation, would not have been peripheral, it would have been integral to it and would have been capable of being fully determined in that litigation. If it had been raised in that litigation, the issue by now would have been determined conclusively by the Court of Final Appeal. The applicant, however, did not to raise the issue in the litigation. Instead, it waited until the litigation was exhausted and then, still seeking what had been sought in the litigation; namely, possessory title in the land, turned to Government and proceeded against it. In the circumstances, said Mr Yu, the failure to raise the constitutional issue in the earlier litigation but instead to institute fresh proceedings against the state seeking effectively the same relief that it had sought in the litigation, not only permitted this court to refuse to grant a remedy but went further and constituted an abuse of process. 99.The applicable rule, I think, is now well settled. When material issues of a substantive nature could, and should, have been raised in earlier proceedings, the creation of fresh proceedings for the purpose of having those issues resolved may constitute an abuse of the process of the court. The rule is an extension of the doctrine of res judicata. There need not be a specific finding as to cause of action estoppel or issue estoppel. It will suffice if there is a finding that, in all the circumstances, the attempt to raise issues which could, and should, have been raised earlier goes against the public interest; that is, the general interest in ensuring finality in litigation as well as the interests of the parties themselves. In Barrow v. Bankside Agency Ltd [1996] 1 WLR 257, at 260, the Court of Appeal described the rule in the following terms :
100.More recently, Lord Bingham, in his speech in Johnson v. Gore Wood & Co. [2002] 2 AC 1, at 31, defined the rule as follows :
101.The rule, of course, is to be applied with caution. In Bradford and Bingley Building Society v. Seddon [1999] 1 WLR 1482, Auld LJ, in the Court of Appeal, put it in the following terms :
102.There are circumstances in which a party may justifiably refrain from litigating an issue in one set of proceedings and yet raise it in another. Mr Pannick, for the applicant, made reference to the judgment of the High Court of Australia in Port of Melbourne Authority v. Anshun Pty Ltd (1981) 147 CLR 589, in which it was held that estoppel did not arise unless the matter relied on in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to raise it earlier. In that case (per Gibbs CJ, Mason and Aickin JJ), the observation was made that the issue raised in the second action was so closely connected with the subject matter of the first action that it was to be expected that it would be relied upon in that first action. If successful in that first action it would have determined substantive issues. As it was, by being reserved for the second action, it had increased costs and given rise to a conflicting judgment. 103.Each case, therefore, is to be judged according to its own circumstances. As to the approach, I can do no better than look to the dictum of Lord Bingham in Johnson v. Gore Wood, at 31, when he said that what was is required is —
104.I remind myself that the burden of demonstrating abuse rests on the party alleging it, in this case the Secretary for Justice. It is a burden of some weight. 105.The first and fundamental question, of course, is whether the constitutional issue had any relevance to the litigation instituted by Madam Wong and her daughter and, if so, whether it could properly have been raised in that action. 106.In my judgment, it is unarguable that the constitutional issue was directly relevant to that action, indeed of central and fundamental relevance. If raised successfully, it would have determined all issues. The court would have been bound to declare sections 7(2) and 17 of the Limitation Ordinance inconsistent with articles 6 and/or 105 of the Basic Law and thereby to remove from the statute books any provision for acquisition of possessory title in land by way of adverse possession. In short, the applicant would have been left with possessory estate. 107.As to the difficulties of retrospectivity, in my December judgment (in which I disjoined Madam Wong and her daughter) I said :
108.The question to be asked is whether it was to be expected that the constitutional issue would be raised in the earlier litigation? In my judgment, if its potential value was then appreciated, it would most certainly have been raised. I can see no reason why it would not have been raised. Itmay be the case, and I put it no higher than that – for simple oversight was not admitted – that the potential value of the constitutional point was only appreciated late in the earlier litigation. If that was the case, it is, in my opinion, relevant to the issue of abuse of process. But in my December judgment I determined this matter in the following terms :
109.On behalf of the applicant, it was argued that the issues that fell for determination in the litigation instituted by Madam Wong and her daughter were, first, whether the land had been occupied by way of adverse possession or licence and, second, whether the New Territories Leases (Extension) Ordinance created a new possessory estate in the land. These issues, it was said, were not being pursued further. By contrast, the issues arising in the present judicial review proceedings looked only to the consequences of the finding made that the applicant’s possessory title in the land had been extinguished. 110.In my judgment, however, that is a distinction without substance. The litigation instituted by Madam Wong and her daughter was founded on a single premise; namely, that the land had been held in adverse possession for the period of time (then) required by the Limitation Ordinance and that, as a result, possessory title had been lost to the registered leaseholder and acquired by the adverse possessors. The defences raised were the defences which at the time were thought best to meet that claim. There has been no suggestion that the value of the constitutional issue was understood at an early stage of the proceedings but deliberately held over. For the defence, the real issue in the earlier litigation was how best to resist the claim for adverse possession. The constitutional issue, raised for the first time in these judicial review proceedings, would, if successfully raised in the litigation, have done away with any need to prove the asserted fact of occupation by way of licence or to prove that the New Territories Leases (Extension) Ordinance, on a true construction, created a new possessory estate in the land. 111.As I understood Mr Pannick’s argument, it was, however, to the effect that, whether the constitutional point should or should not have been raised in the earlier litigation, this application for judicial review raises independent issues. As he put it, the issues in this judicial review look to what remedies, if any, are available under the Basic Law for a deprivation of private property by way of adverse possession without compensation. 112.Again, I confess that the distinction is too fine for me. Of course, in this judicial review, the issues are going to be couched in a manner different from how they would have been couched in the earlier litigation. But once that varnish is removed and we are back to plain wood, what do we see? We see that the applicant seeks possessory estate in the land or, if that is no longer possible – because the applicant failed to raise the constitutional issue in the earlier proceedings – we see that he seeks at least a form of monetary compensation. In short, we see that an attempt is being made to pursue the earlier litigation by other means. To that extent, because what is sought effectively is a reversal or compromise of the awards flowing from the declarations made in the earlier litigation, it may be said that the action now pursued constitutes a collateral attack on that earlier litigation. 113.Insofar as it was contended that it would have been premature to raise the constitutional issue in the earlier litigation, in my December judgment, I said :
114.It is fundamental, in my view, that, if the constitutional issue had been agitated in the earlier litigation, there would have been no need at all for this judicial review application. 115.I accept, of course, that, as matters now stand, Madam Wong and her daughter are no longer parties to these judicial review proceedings. The proceedings now are between the applicant and an entirely new party, the Secretary for Justice. There is no longer that additional element of unjust harassment of a party. But for abuse of process to be demonstrated in the manner advocated by Mr Yu it is not necessary that the parties remain the same. That was confirmed by Auld LJ in Bradford and Bingley Building Society v. Seddon, page 226F, who commenced his examination of relevant authorities by saying :
116.Abuse of process goes to abuse of the court’s process and that may take on many forms. In the present case, it seems to me that the applicant, having had the ideal forum open to it in the earlier litigation and having failed to make use of that forum, has been forced to create an essentially artificial forum to determine what should have been determined earlier. 117.Even though Madam Wong and her daughter have been disjoined, the applicant still seeks restoration of its possessory title in the land, this time through the agency of Government. Madam Wong and her daughter, on this basis, remain at risk even though the judgment of the Court of Final Appeal conclusively determined that they had rights to the land which had accrued to them as far back as 1982. This application for judicial review, if it is successful, will deprive Madam Wong and her daughter of those rights, albeit on a new basis in law. Nevertheless, the consequence will be in direct conflict with the judgment of the Court of Final Appeal. Such a result does not sit happily with how I believe the common law should work. 118.Even if reinstatement of title is not obtained and only some form of monetary compensation is payable, it means that Madam Wong and her daughter will remain at risk, except now they will stand to be visited with an obligation that may be the equivalent of their loss of title. Either that or the public purse is to be made liable for the compensation. But why should the public purse pay compensation when, if the Basic Law point had been raised in the earlier litigation, as it should have been, there would be no need for any such payment? 119.If the remedies of reinstatement of possessory estate or compensation are to be denied the applicant, what then is left? The applicant then is reduced to asking for what in effect is an advisory judgment as to the constitutionality of sections 7(2) and 17 of the Limitation Ordinance. Its only standing in that case is that it was the losing party in earlier private litigation in which it could have raised the same point with the benefit of practical consequences but failed to do so. 120.In the circumstances, I am satisfied that the Secretary for Justice has demonstrated that this application for judicial review is not simply an artificial construct, it constitutes, as against, the Secretary, an abuse of this court’s process. 121.Even if I am wrong in this regard, for the reasons given, this seems to me to be a case in which, whatever the merits of the constitutional issue, the applicant should be denied a remedy by way of reinstatement of title or monetary compensation. Deprivation, delimitation or simply defect in title? 122.In his speech in Wilson v. First County Trust Ltd (No.2), para.106, Lord Hope said :
123.As I understood his submission, Mr Yu did not go so far as to say that, as all Hong Kong land is subject to the limitations imposed by sections 7(2) and 17 of the Limitation Ordinance, there can be no deprivation of property if possessory title in land is extinguished by way of adverse possession. If that was the basis of his argument I would reject it. 124.The test, as I understand it, is to consider whether the restrictions qualifications or limitations ‘bit’ at the moment the land was acquired, and were therefore at all times an incident of the acquired rights or whether they only ‘bit’ at a later stage. All leasehold owners in Hong Kong acquire land subject to the risk that possessory title may be lost to an adverse possessor but, as I see it, the effect of adverse possession in terms of the statutory scheme will only ‘bite’ at a later stage if and when a specified period of adverse possession has been achieved. 125.On behalf of the applicant, it was contended, by way of analogy, that it would be impossible to sustain an argument that a leasehold owner of land in Hong Kong only acquires a defeasible title because there is always the risk that at some future time a resumption order may be made against the land under the Lands Resumption Ordinance, Cap.124. Likewise, it should not be a defeasible title simply because at some future date there may be a squatter who is able to remain in occupation of the land for the number of years specified in the Limitation Ordinance. 126.Accordingly I am satisfied that the operation of sections 7(2) and 17 of the Limitation Ordinance is not to be regarded as an incident of, or limitation on, the title of all leasehold owners of land in Hong Kong. 127.But as I have said, Mr Yu’s submission, as I understood it, was not founded on such a broad assertion. It was founded instead on the contention that, when the applicant acquired the land, that land was already subject to adverse possession for the period of 20 years then required by the statutory scheme. Accordingly, there was, in law, no risk that at some future time the legislation would ‘bite’ to deprive it of possessory title, the legislation had already ‘bitten’. As Mr Yu put it, when the applicant acquired the land the interest of its predecessor-in-title had already been extinguished in accordance with sections 7(2) and 17 of the Ordinance. In short, the risk to which all Hong Kong land is subject had, in respect of this land, already crystallised. Loss of possessory estate was therefore, from the moment of acquisition, a delimitation of the applicant’s rights. 128.This seems to me, however, to be not so much an issue of delimination of title as defect in title. Put simply, as I see it, the applicant acquired paper title and no more. In terms of the declarations restored by the Court of Final Appeal, possessory title had been extinguished in 1982. To this extent, it may be said that the applicant’s predecessor-in-title was deprived of possessory estate but not the applicant. The applicant was not deprived of such title because it never acquired it. Do sections 7(2) and 17 of the Limitation Ordinance engage the Basic Law? 129.It is a fact that, as a result of the operation of sections 7(2) and 17 of the Limitation Ordinance, the applicant was deprived of possessory title in the land – to all rights to occupy and utilise it – without payment of compensation in return. It was asserted on behalf of the applicant that this deprivation without compensation is contrary to the guarantees contained in articles 6 and 105 of the Basic Law. The guarantees are to the effect that, in protecting the rights of private ownership of property, the Hong Kong Special Administrative Region shall, in accordance with law, protect the right of all persons ‘to compensation for lawful deprivation of their property’. 130.On behalf of the Secretary for Justice, Mr Yu contended that, in terms of articles 6 and 105, the right to compensation for lawful deprivation of property arises only when it is the state or an agency of the state which, in accordance with law and for some public purpose, deprives an individual of his property. Sections 7(2) and 17 of the Limitation Ordinance, however, are concerned with the regulation of property rights as between individuals not as between individuals and the state. Accordingly, said Mr Yu, the constitutional guarantees contained in articles 6 and 105 are simply not engaged. 131.Mr Yu’s contention was not based on the English text of article 105 which specifically guarantees the right to compensation for lawful deprivation of property. ‘Deprivation’ in the English language is not a term of art. As I understand it, it refers simply to the fact of being deprived; that is, of being disposed or divested of something. There is no intrinsic or implied meaning that it must be the state which disposes or divests. Indeed, it would seem to me that, in giving to the word a generous interpretation, as I am required to do, it would include the circumstances of the present case; that is, where, as a result of legislative action, one individual has the right in law to seriously interfere with the property rights of another. 132.But, as I have said, Mr Yu’s contention was not based on the English text. It was based instead on a reading of the Chinese text, specifically to the term “徵用” which, I am told, may be romanised as zhengyong. In Chinese characters, article 105 reads :
133.In a recent judgment of the Court of Appeal, Tang VP said that the word ‘deprivation’, as it is used in article 105, is to be read as ‘expropriation’, that being the expression used in the Chinese text : Weeson Investment Ltd v. Commissioner of Inland Revenue [2007] 2 HKLRD 567, at 585. 134.As to the definition of the term ‘expropriation’, in his text, Constitutional Property Clauses (1999, Juta & Co. Ltd) Professor AJ van der Walt, at p.18, wrote :
135.In his article, The Basic Law and the Protection of Property Rights (1993) HKLJ 31, at p.60, Albert Chen, with reference to a number of dictionary entries, wrote the following :
136.Mr Yu drew my attention to the fact that the term zhengyong has been used in accordance with its dictionary meaning in the 1954, 1975 and 1978 Constitutions of the People’s Republic of China. Mr Yu further drew my attention to the 1982 Constitution which, under article 10, recognised that not all land was owned solely by the state. This being so, article 10(3) provides that : ‘The state may, in the public interest, requisition land for its use in accordance with law’. The term used in article 10(3) is zhengyong. As Mr Yu put it, by the time of the enactment of the Basic Law in 1990, the term zhengyong had a well-established usage in the constitutional documents of the People’s Republic consonant with its understood meaning of compulsory acquisition by the state or a state agency. 137.The result, of course, is that there is a clear difference in meaning between the English and Chinese texts, the Chinese text requiring a more specific, and thereby limited, interpretation. In the event of such a discrepancy, the position is clear : the Chinese text must prevail. In this regard, the Standing Committee of National People’s Congress adopted the following decision on 28 June 1990; namely, that —
138.Accordingly, in my view, I am bound to read the English text of article 105 to mean that the Hong Kong Special Administrative Region shall in accordance with law, protect the right of individuals to compensation for the expropriation of their property by the Government or a Government agency. 139.This narrower interpretation of article 105 does not, in the eyes of the common law, lead to a surprising consequence. To the contrary, the consequence is well recognised. In his judgment in Grape Bay Ltd v. Attorney General of Bermuda [2003] 1 WLR 574, at 583, Lord Hoffmann observed that —
As to when compensation is payable, Lord Hoffmann went on to say :
Lord Hoffmann continued by emphasising that :
140.While, on behalf of the applicant, it was accepted that there is an apparent difference in meaning between the word ‘deprivation’ used in the English text of article 105 and the term zhengyong used in the Chinese text, it was said that in substance there is no difference. It was submitted that the compulsory acquisition of property by the state may be accomplished by legislation which has the effect of transferring property from one individual to another. An example is to be found in the judgment of the European Court of Human Rights in James v. United Kingdom (1986) 8 EHRR 123. As legislation is a use of sovereign power vested in the Hong Kong Special Administrative Region through the Basic Law, the transfer of property from one person to another is no more than acquisition by the state from one person and the transfer by the state to another through the instrumentality of legislation. That being the case, in respect of the loss of title by one individual to another by way of adverse possession, the transfer having been accomplished by way of legislation, the term zhengyong should not bear a different meaning from the word ‘deprivation’. 141.In support of this contention, it was submitted that the rights guaranteed by articles 6 and 105 of the Basic Law should be given a generous and purposive interpretation, construed in such a way as to give maximum protection. On this basis, it was argued that there is no sound policy reason why protection should be given when property is acquired by the state but not when it is acquired by other individuals under legislation enacted by the state. In both cases there has been a loss of a substantive right. 142.In considering this submission, I start with what must be the self-evident observation that articles 6 and 105 are not to be read as requiring that all forms of deprivation of property authorised by legislation require payment of compensation. The confiscation of property found to have been used in the commission of a crime is after all a form of deprivation of property but nobody would suggest that it must be met with compensation. The High Court of Australia, in Mutual Pools & Staff Pty Ltd v. The Commonwealth [1993-1994] 179 CLR 155, at 189, in looking to s.51(xxxi) of the Australian constitution, per Deane and Gaudron JJ, expressed the principle as follows :
143.How is it then to be determined when compensation is or is not payable for deprivation of property? It seems to me that one method of approach must be to look to the character of the legislation authorising the deprivation. To repeat Lord Hoffmann’s dictum in Grape Bay Ltd v. Attorney General of Bermuda : “It is well settled that restrictions on the use of property imposed in the public interest by general regulatory laws do not constitute a deprivation of property for which compensation should be paid.” 144.If therefore the legislation is of a general regulatory nature, authorising deprivation in the public interest so as to regulate the rights and duties of society then a deprivation of property under that legislation may not constitute a deprivation for which compensation must be made. 145.Moving on from this general observation, the first difficulty I have with the submission that the term zhengyong should not bear a different meaning from the word ‘deprivation’ is that, even on a generous and purposive interpretation, the meaning of the Chinese text of article 105, read in context, must prevail. That meaning is clear. It is to the effect that the right to compensation is guaranteed only when there is expropriation of property by the state for some public purpose. The statutory scheme governing adverse possession, while it provides for a transfer of rights between individuals, is not confiscatory in nature. There is no confiscation of land by the state for public purposes. 146.While I accept that expropriation may take on different forms, direct and indirect, in my judgment, the statutory scheme is not to be read as a scheme of de facto expropriation. It is to be distinguished from James v. United Kingdom where the legislation under scrutiny was the Leasehold Reform Act 1967 which conferred on tenants holding long leases the right to purchase compulsorily the freehold subject to prescribed conditions. 147.The Limitation Ordinance, while it does provide for the effective transfer of a possessory right, seeks to do no more than avoid protracted uncertainty as to where the title to land lies; in short, to bring certainty into a system which is so open to uncertainties. It ensures that the reality of unopposed occupation of land and its legal ownership coincide. The scheme therefore provides for the general regulation of rights and obligations pertaining to the possession of land. It does so in the public interest and its operation is applicable to all land and all persons. 148.In advocating the submission that, in the context of article 105 of the Basic Law, the term zhengyong should bear the same broad meaning as the word ‘deprivation’. Mr Pannick went on to adopt certain observations made by Albert Chen in his article to which I have referred in paragraph 135 of this judgment. As to why a word with a narrower meaning than ‘deprivation’ was not used in the English text of article 105, Mr Chen wrote :
149.On the basis of these observations Mr Pannick submitted that, in order to reconcile the difference in the English and Chinese terms, bearing in mind the central importance of the protection of property rights in the Basic Law, the term zhengyong should be given a wider meaning, one that equates with ‘deprivation’. This would accord with the use of the two terms, each being equally authentic, in the Joint Declaration. 150.But equally, of course, reconciliation can be achieved by giving ‘deprivation’ a narrower meaning. Although property rights are to be given an ample interpretation, that cannot be at the expense of the integrity of the language of the Basic Law itself and, if the Chinese text of the Basic Law itself is to take precedence, that would seem to be the route a court is obliged to take. In any event, as I have said earlier, this would not, in the eyes of the common law, lead to a surprising consequence. Indeed, on one view, it may be said to be entirely in accord with common law concepts which have long recognised that rights in property are heavily qualified by considerations of public interest. 151.What is to be remembered is that the Joint Declaration did not herald an increased protection for property rights. Nor has the Basic Law, as I read it, achieved one. What has been achieved is a continuation of the recognition of property rights so that Hong Kong’s stability as a capitalist society may be assured. With Hong Kong’s system of land tenure being based primarily on possession, it would seem to me that any such continuation of property rights would include recognition of possessory rights and that, in turn, would include recognition of rights of adverse possession. 152.Accordingly, I am satisfied that, on a true construction, article 105 of the Basic Law, even as buttressed by article 6, seeks only to guarantee the right to compensation for lawful deprivation of property when that deprivation constitutes expropriation of property by the state or a state agency. I am further satisfied that a loss of possessory title pursuant to the operation of sections 7(2) and 17 of the Limitation Ordinance does not constitute an expropriation, de facto or otherwise. 153.That being the case, I am satisfied that articles 6 and 105 are not engaged by the operation of sections 7(2) and 17 of the Ordinance. 154.However, if I am wrong in this regard, or it is the case that the general protection of private property rights contained in articles 6 and 105 has sufficient reach, I turn to the final issue; namely, the assertion that sections 7(2) and 17 of the Ordinance, which provide for the loss of substantive rights in property without compensation, are inconsistent with the Basic Law. Is the statutory scheme governing adverse possession constitutional? 155.The scheme of adverse possession contained in sections 7(2) and 17 of the Limitation Ordinance visits draconian consequences on the leaseholder whose possessory rights are extinguished. That, I think, is self-evident. 156.The scheme requires that no notice be given of impending loss of title. As Lord Hope expressed it in his speech when Pye was before the House of Lords (paragraph 73) :
157.When Pye had earlier been determined at first instance, Neuberger J said the following as to the consequences that may be visited upon an inadvertent landowner :
158.Pye, of course, was a case concerning registered land when the registered owner may be forgiven for thinking that registration itself was a sufficient protection of his rights. It may be said that, when title is ultimately founded in possession, a duty is imposed to possess. Nevertheless there must be occasions – as in Pye – when the culpability of the leaseholder is minimal while the trespasser, in exploiting an opportunity, has come away with a prize of disproportionate value. The scheme, in its starkness, leaves itself open to such inequities. 159.Under the scheme, the leaseholder not only loses possessory title but does so while retaining obligations in respect of the land : rates, rent and other covenant responsibilities may have to be met. As I said at the beginning of this judgment – paragraph 15 – the disadvantages may not be as severe as, at first blush, they may appear. But the fact is that the equities, even after loss of title, continue to be unbalanced. 160.Finally, of course, there is no provision for any form of compensation. 161.When Pye came before the European Court of Human Rights, the Court, as I have said earlier in this judgment, found that the applicants’ deprivation of title by way of adverse possession was inconsistent with the rights of property contained in Article I of the first protocol to the Convention. Article I is to the following effect :
162.While recognising that a wide margin of appreciation must be given to the national authorities to decide when the deprivation of property is in ‘the public interest’, the Court went on to say (paragraph 46) :
163.In looking to the issue of proportionality, the court accepted that the operation of the relevant legislation pursued a legitimate aim. In this regard, in part, the following was said (paragraphs 68-71) :
164.The court, as I have said earlier, went on to conclude that the relevant English legislation upset the fair balance between the demands of the public interest on the one hand and the applicants’ rights to the peaceful enjoyment of their land on the other. The legislation was therefore inconsistent with article 1. 165.In his 2006 judgment in The Hong Kong Buddhist Association v. The Occupiers, HCMP 4108 of 2003, Deputy Judge Saunders, as he then was, was persuaded by the judgment of the European Court. 166.However, in my judgment, while Pye is, in a number of respects, highly persuasive, I do not believe too much weight can be placed upon it. It is distinguishable on a number of grounds. Most importantly, however, Pye was concerned with registered land. Proof of title, therefore, rested solely on the fact of registration. Hong Kong land, as I have said many times in this judgment, is unregistered land, proof of title depending ultimately upon possession. 167.In Pye, the distinction was always well understood. In his speech in the House of Lords, Lord Bingham said :
168.The European Court itself, in considering the legitimate aim of the English legislation, made the following observations (paragraphs 64 and 65) :
169.The qualification by the European Court is direct and forceful. It must be borne in mind that in any event there were three judges who dissented, holding that, even in respect of registered land, loss of title by way of adverse possession was not inconsistent with Article I. It may, therefore, be argued, I think, that – if unregistered land had been in issue – the judgment of the Court would have been different. Certainly, the Court recognised that the social, economic and regulatory dynamics which govern unregistered land in England and Wales are different from those which govern registered land. 170.Those social, economic and regulatory dynamics also, to a greater or lesser degree, govern land in Hong Kong, said Mr Yu, all Hong Kong land being unregistered. In this regard, Mr Yu made the following submissions. 171.First, it has long been a matter of policy that there is the need to ensure that land – a scarce resource in Hong Kong – is utilised and not left abandoned for an extended number of years. Arising from this, there is the requirement to encourage a leaseholder not to sleep on his rights. 172.In Hong Kong, since the mid-1800s, all leaseholders have known that their title ultimately depends on possession and that they are under an obligation to assert that possession. If there is a failure to do so, as a matter of public policy formulated in the general interest, they are at risk of losing the land they hold under leasehold. There may be occasions when a leaseholder’s culpability is minimal but in all instances, if title is extinguished by way of adverse possession, there must at least have been a culpable omission on the part of the leaseholder extending over a period of many years. This is to be considered in the light that in Hong Kong, said Mr Yu, the rights of the adverse possessor have always been recognised. 173.Second, in the absence of a system of registration of title, it has always been, and still remains, a material aid to conveyancing. In a 1998 consultative document entitled ‘Land Registration for the twenty-first century’ the Law Commission of England expanded on this by saying :
174.Third, adverse possession helps protect against stale claims. In respect of registered land, the claim is established or refuted by registration. But that is not the case in Hong Kong. A stale claim in Hong Kong may be refuted by proof of subsequent adverse possession. 175.Fourth, the scheme of adverse possession promotes certainty as to title. It thereby avoids hardship in cases where land boundaries on the paper title are uncertain or open to dispute. As Mr Yu said, title defect can arise because of lost deeds, concerns as to validity of execution or doubts as to the identity of a predecessor-in-title. A vendor who is able to prove a continuous period of undisturbed possession may be able to cure such defects. In this regard, see Chan Chu Hang & Others v. Man Yun Sau [1997] 2 HKC 144, at 150, where Le Pichon J, as she then was, noted that —
176.The Law Commission to which I have just referred, expanded on this by saying :
177.The Law Commission continued :
178.On behalf of the applicant, it was accepted that in England and Wales there may be good reason why a scheme of adverse possession should regulate possession of unregistered land. But it would be fundamentally wrong, said Mr Pannick, to assume that the imperatives which determine the regulation of unregistered land in England and Wales are the same in Hong Kong. They are not. 179.Whereas there are many types of tenures in England and Wales dating back centuries and perusal of extracts of title may have to go back a very long time in conveyancing, adding considerable cost to the process, there is only one type of tenure in Hong Kong. Conveyancing in Hong Kong is therefore simpler and less costly. All leaseholders hold their land from a grant from the Government, upon the terms of a lease, which is the root title of all leaseholders and this is always traceable to the Government. Perusal of extracts of title at the time of conveyancing in Hong Kong is therefore relatively simple and only requires the vendor to produce the Government (Crown) lease and the documents which prove the devolution of the vendor’s title from the Government (Crown) lease. In addition, there are important statutory presumptions going to the due execution of documents and the truth of recitals in documents of over 15 years vintage. In this regard, section 13 of the Conveyancing and Property Ordinance, Cap.219 applies. 180.During the course of submissions, emphasis was placed by Mr Yu, for the Secretary for Justice, on the rudimentary survey of land in the New Territories between 1900 and 1905, that survey still being the basis for boundaries. This, he said, has given rise to many problems. If a system of adverse possession barring stale claims by extinguishing title was not present, it could render a significant amount of land in the New Territories difficult to market. 181.In response, it was argued on behalf of the applicant that, while Hong Kong may not have a system of registration of title, its system of registration of title deeds has acted to give very considerable certainty to matters of land tenure. In practice, therefore, on a day-to-day basis it may be said to act effectively as a system of registration of title. In respect specifically of land in the New Territories, while the original survey may have been rudimentary, the Land Registration Ordinance and the New Territories Ordinance, Cap.97, together with regulations made under them, have brought in a system of conveyancing and probate practice which is not only relatively simple to operate but provides reasonable certainty as to land title. As to disputes over boundaries, the Land Titles Ordinance, Cap.585, provides a system of determination. 182.Mr Pannick said that real estate developers in the New Territories have long found ways of living with the problems inherited from the original survey of the New Territories. They have done so by commissioning their own land surveys when necessary and executing surrender and re-grants with the Government. The fact that the New Territories are so well developed attest to the fact that titles are freely marketable. 183.I accept the validity of many of the submissions put forward on behalf of the applicant. But, as I understood Mr Yu’s submissions, they were not to the effect that, without adverse possession, our law of land tenure would be entirely unworkable. As I understood Mr Yu, his submissions went instead to the contention that, since the mid-1800s, the mechanism of adverse possession has been integral to Hong Kong land low. While there has been an improvement in the sophistication of our system of land law, making it more workable, the mechanism of adverse possession nevertheless remains integral. It not only encourages the utilisation of land in Hong Kong by encouraging leaseholders to assert possession but also, because title to all land still ultimately rests on possession, ensures that, when problems do arise, there is a system of resolution. 184.Bearing in mind that Hong Kong does not have a system of registration of title, I think it must be accepted that the scheme of adverse possession contained in sections 7(2) and 17 of the Limitation Ordinance clearly pursues a legitimate aim. In this regard, I note that Deputy Judge Saunders, in his judgment in The Hong Kong Buddhist Association v. The Occupiers was of the same view. 185.The real issue, it seems to me, is whether a fair balance has been struck between the aims of the statutory scheme and the hardship visited upon those whose possessory title is extinguished. 186.In my judgment, the mechanism of adverse possession is clumsy. In the result, there can be occasions when it works inequitably. Parliament in England has devised a more equitable system and perhaps in due course the same will be done in Hong Kong. But the question is not whether a better system may be created. It is whether the present statutory scheme is inconsistent with the protection of property rights in the Basic Law. 187.In the course of his submissions, Mr Yu said that, in a system of law which is possession-based, it is a matter of policy for the legislature, and not for the courts, to decide whether the law should favour the one who has continuously been in possession of the land or the one who has a paper title but has slept on his rights for an extended period of years. In my judgment, he makes a telling point. 188.It cannot be disputed that land – a scarce resource in Hong Kong – should be utilised. Article 7 of the Basic Law provides for ‘use development’ of land. Being granted leasehold rights over land brings with it duties as well as rights. As I said earlier, if title is ultimately based on possession then it would seem that there is a duty to possess, not to leave land effectively abandoned for an extended period of years. Certainly, as I see it, the legislature and the administration is entitled to conclude that there are good reasons, social and economic, why land should at least be occupied rather than left abandoned and to put all leasehold owners on notice of this. 189.The Hong Kong legislature and the Government have considered it to be contrary to the public interest to allow land to lie effectively abandoned for an extended period of years. The required period of adverse possession has not been extended; it has been decreased. While the Basic Law may provide protection for property rights, such rights have always been heavily qualified by regulation in the public interest. As to how land, a fundamental resource is to be best regulated is pre-eminently a matter for democratic decision : see, for example, Grape Bay Ltd v. Attorney General of Bermuda, page 585. 190.As Mr Yu emphasised, the law as to limitation and adverse possession has been part of Hong Kong’s system of land law since 1843. The law has operated on numerous occasions in the past to serve the social needs of protecting individuals from stale claims, avoiding hardship in cases where boundaries or paper titles are uncertain, preventing land from falling into disuse and facilitating conveyancing. Today, the need to employ the mechanism of adverse possession may have been reduced by legislative enactments and regulations. But, in my judgment, it cannot be denied that it is still integral to our system of land law and, as such, can, and does, play a constructive role, not simply a destructive one. 191.In all the circumstances, it has not been an easy decision to reach. In my view, the mechanism of adverse possession can bear harshly. But, being obliged to give a wide margin of appreciation on the basis that the policy of adverse possession is founded on economic and social imperatives, I am satisfied that, if articles 6 and 105 are engaged, the statutory scheme of adverse possession is nevertheless consistent with the protections contained in those articles. Conclusion 192.For the reasons given in the body of this judgment, this application for judicial review must be dismissed. 193.As to costs, I am satisfied that costs should follow the event and I awarded to the 1st respondent, the Secretary for Justice.
Mr David Pannick, QC, Mr Anthony Neoh, SC, Mr Johannes Chan, SC and Ms Barbara Wong, instructed by Messrs Christine M. Koo & Ip, for the Applicant Mr Benjamin Yu, SC and Mr Y C Mok, instructed by Department of Justice, for the 1st Respondent | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCAL 32/2006