Illegality and adverse possession in Hong Kong after Patel

Introduction

Monat v All person(s) in occupation of part of the remaining portion of Lot No 591 in Mui Wo DD 4 No 16 Ma Po Tsuen, Mui Wo ([2023] HKCA 479) is an important case in several respects. First, it considers whether a squatter’s illegality has any possible impact on an adverse possession claim. Having decided that illegality can have an impact on the claim, the question is whether Hong Kong should follow England in moving from the Tinsley ‘reliance’ test to the Patel ‘range of factors’ approach. More fundamentally, the judgment addresses the status of judgments of the UK Supreme Court in Hong Kong.

The facts

The case concerned an adverse possession claim concerning land on which a squatter (the defendant’s father) built a house without obtaining the approval and consent for building works required by section 14 of the Buildings Ordinance.

The defendant’s adverse possession claim succeeded in the Court of First Instance (as explained in a previous post on Hong Kong Land Law). In the first instance judgment, Deputy Judge To said that illegality was generally not a factor to be considered in adverse possession claims unless the possession, or the manner of possession, was a breach of a statutory provision.

Adverse possession and illegality

Yuen JA (with whom the other members of the Court of Appeal agreed, referred to the statement in Les Laboratoires Servier and anor v Apotex Inc  that the ex turpi causa maxim should apply only to criminal acts, quasicriminal acts, non-criminal acts which engaged the public interest (eg dishonesty in the context of civil disputes), and infringements of rules enacted for the protection of the public ([23.5]).

Thus, the fact that the squatter’s use of the land contravened the Government lease restriction on uses other than agricultural use was irrelevant. Breach of section 14 of the Buildings Ordinance, however, was a criminal offence under section 40 of the Ordinance.

Tinsley or Patel?

Yuen JA decided that the effect of this illegality on the adverse possession claim should be assessed using the range of factors approach adopted in Patel v Mirza (again covered in an earlier Hong Kong Land Law post).

This approach requires the court:

‘(a) consider the underlying purpose of the prohibition which has been transgressed [e.g. in our case, s.14 BO];

(b) consider conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim [e.g. in our case, the justification of adverse possession in the use of land as a natural resource, and in discouraging stale claims];

(c) keep in mind the possibility of overkill unless the law is applied with a due sense of proportionality.’ ([101 in Patel and [36.4] in Yuen JA’s judgment].

At first instance, Deputy Judge To said that even if the Patel approach were applied, the adverse possession claim would succeed. Yuen JA agreed. The squatter’s possession itself did not contravene the Buildings Ordinance and the Ordinance did not seek to penalize squatters ([62.2] Yuan JA).

Deputy Judge To identified the policies underlying the doctrine of adverse possession: ‘The interest of the squatter who has been enjoying uninterrupted peaceful possession and putting idling land to good use is the public interest which the Limitation Ordinance seeks to protect. Discouraging the paper owner sleeping on his right and allowing his land to go idle is the public policy reasons behind the Limitation Ordinance’. ([62] in the CFI judgment. Yuen JA agreed with this ([62.2]).

Outcome

Although the breach of the Buildings Ordinance meant that the ex turpi causa principle was engaged, the squatter’s claim survived the application of the Patel approach and succeeded. The formal owner’s appeal failed.

The status of UK Supreme Court judgments in Hong Kong

Until now, the assumption has been that the Hong Kong approach to illegality is the reliance approach in Tinsley v Milligan (outlined in this blog post). Yuen JA argued that the CFA had not tied itself to the Tinsley ‘reliance’approach, not having had the opportunity to consider whether the Patel range of factors approach should be adopted. This was, therefore, an open question ([50.2]).

In A Solicitor v Law Society of Hong Kong ([2008] HKCFA 15) Li CJ explained the respect due to decisions of the House of Lords (and now the UK Supreme Court) (at [15]).

Yuen JA explained that it was, accordingly, appropriate to adopt Patel in the absence of any local Hong Kong factors making this inappropriate ([52.2]).

She continued:

‘In my view, it would be surprising if the common law as expounded by the highest authority in the UK (which the CFA has said should be accorded the greatest respect) is not to be regarded as the common law in Hong Kong simply because randomly, there may or may not happen to be a case involving the point being processed through the Hong Kong courts, which may or may not happen to reach the CFA.’ ([52.4]).

The CFA would, of course, be free to depart from the UK Supreme Court position ([52.5]).

This is potentially very significant. Even in the Land Law area, it is easy to think of UK Supreme Court decisions that might be treated as part of the common law of Hong Kong on this approach. The decision in Manchester Ship Canal Company Limited v Vauxhall Motors Limited ([2019] UKSC 46) (see this blog post) is probably an example.

Michael Lower

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Adverse Possession: Woo Sai Mui v Lam Island Development Company Limited

Background

In Woo Sai Mui v Lam Island Development Company Limited ([2022] HKCFI 39) Woo Sai Mui (‘the plaintiff’) sought a declaration that the defendant’s title to land in Peng Chau had been defeated by the plaintiff’s adverse possession.

The plaintiff claimed to have used the land for farming since 1980 and to have erected a building to store tools, equipment and seeds. The plaintiff’s claim failed. The court was of the clear opinion that the plaintiff had failed to come anywhere near establishing that she had taken possession of the land. It seems to have thought that she may have done little more than make occasional use of the land.

Standard of proof

The plaintiff must provide ‘compelling evidence’ of factual possession, but the standard remains the balance of probabilities test (Chang Shun Tak v Leung Sun Fat HCA 13809 / 1997 at [65]).

Is simply planting trees on open land enough?

There is a question mark over whether simply planting fruit trees on open land can be enough to demonstrate possession and intention to possess if not accompanied by some form of enclosure (Gatland Enterprises Ltd v Kwok Chi Yau CACV 260 / 2014 at [36] – [38]).

Willingness to pay rent

A squatter’s admission in cross-examination that they would have been willing to pay rent if asked is evidence of a lack of intention to possess ([49] – [57]), relying on Wong Tak Yue v Kung Kwok Wai at [49] – [57]).

Michael Lower

Adverse Possession: Wu Yim Chung v Lo Wai Ching

Background

In Wu Yim Chung v Lo Wai Ching ([2022] HKCA 100) Wu Yim Chung (‘the plaintiff’) argued that he had defeated the defendants’ title to land in Sai Kung through the doctrine of adverse possession.

The plaintiff was the original owner of the land. He sold it to the defendants’ predecessors in title but retained possession under the terms of two successive leases. The plaintiff remained in possession when the second of these leases came to an end on 14 October 1993.

In October 2013, the defendants’ solicitors wrote to the plaintiff in November 2013 complaining that the plaintiff was trespassing on the land and continuing to use it for the storage of materials. In the same month, the plaintiff began proceedings seeking a declaration that the defendants’ title was defeated by adverse possession.

Factual possession

The following facts, taken together, persuaded the first instance judge that the plaintiff was not in possession of the land for the full limitation period and that the plaintiff’s claim was defeated:

• There was an entrance on the southern boundary giving access to a driveway through the land which served not only the disputed land but also other land serving third parties;
• Unknown third parties simply abandoned scrap vehicles on the land;
• The defendants’ predecessor in title used containers to block the southern entrance (thus interrupting any possession that the plaintiff might have enjoyed before then);
• The defendants and their surveyors were able to access the land easily and without permission when they were carrying out pre-purchase inspections and investigations on the land (though this might have occurred after the end of the limitation period and so might not be relevant);
• The plaintiff’s alleged possession was not apparent to the plaintiffs when they carried out their pre-purchase inspection. ([11] – [15]).

Intention to possess

Giving the judgment of the Court of Appeal, Hon Chow JA pointed to the statement of the relevant principles concerning intention to possess in Tsang Hu (also known as FU) Keung v Chu Jim Mi Jimmy ([2017] 3 HKC 527).

Intention to possess:

‘involves the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with a paper title if he be not the possessor, so far as is reasonably practicable and so far as the processes of the law will allow’ (Powell v McFarlane at 471 – 2 and Wong Tak Yue v Kung Kwok Wai (No 2) (1997 – 98) 1 HKCFAR 55 at 68 (Li CJ)).

Where a squatter can establish possession then intention to possess will also normally have been demonstrated. Additional evidence of intention may be needed where the acts said to demonstrate possession are open to more than one interpretation (JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419 at [76] (Lord Hutton) and Powell v McFarlane (1979) 38 P & CR 452 at 472 (Slade J)).

The first instance judge found that there was no barrier at the entrance on the southern boundary. This lack of control of access to the site was obviously a key issue, both as regards possession and intention to possess:

‘Bearing in mind the nature and use of the Suit Land (an open ground for storage of construction materials and vehicles) and its location (in the New Territories) an occupying owner would normally be expected to control access, or secure entrance, to the Suit Land. A failure to do so would naturally attract unauthorized parking or storage, or other unauthorized uses, such as a dumping ground for construction waste or unwanted scrap vehicles.’ ([29]).

The significance of the fact that the plaintiff was previously the registered owner and tenant in occupation of the land

The plaintiff argued that the fact that he was undoubtedly in possession, as owner and then as tenant, was significant. There was no change in the nature of the occupation after the end of the second lease. Logically, the plaintiff remained in possession as before ([33]).

The Court of Appeal said that this may be relevant in cases where the question was whether a formal owner was excluded. It was irrelevant where, as here, the plaintiff had not ‘shown the requisite intention to possess vis-à-vis the world at large (other than the owner)’ (at [37]).

Michael Lower

Inappropriate to register successful adverse possession claimant as owner of property

In Lam Sai Man v Minloy Limited ([2022] HKCA 37) Mr Lam successfully established that he had been in adverse possession of farmland on Lantau since the late 1950s and that the formal owner’s title was extinguished by 1979. The Court of Appeal upheld the Court of First Instance judgment to this effect.

The Court of First Instance made a declaration that Mr Lam was entitled to be registered as owner of the land. The Court of Appeal decided that this was inappropriate. Adverse possession does not give rise to a statutory conveyance of the extinguished title. The Land Register is a register of instruments, not of title ([36]).

It is, of course, appropriate and important to register the judgment in Mr. Lam’s favour.

The judgment also dealt with other issues:

1. In 1993 Mr Lam gave a written acknowledgement of the formal owner’s title of part of the land (‘the 1993 acknowledgement’). This did not make any difference since the formal title had long since been extinguished ([14]);
2. Mr. Lam had proved that he had taken control of the whole farm and it was not necessary to show that he had thereafter actively farmed every part of it. There was no evidence that anyone else subsequently asserted control over any part of the land ([24]).

The formal owner argued that the 1993 acknowledgement cast doubt on Mr. Lam’s earlier animus possidendi. This was a new point that had not been argued at first instance. Since it was fact sensitive, it was too late to raise the question on appeal ([33]).

The 1993 acknowledgement recorded the fact that the parties were negotiating a possible lease of part of the land. Could this have been construed as the implied creation of a licence to Mr. Lam? Could a licence granted to a squatter by an already defeated formal owner be seen as the start of a period of adverse possession by the formal owner as against the successful squatter?

Michael Lower

Estate encroaching into neighbouring estate

Wah Fung (IO) v Morengo Court (IO) ([2021] HKCFI 3400) was an adverse possession claim by the incorporated owners of one estate (Wah Fung) against the incorporated owners of a neighbouring estate (Morengo). Counsel for Morengo suggested that the outcome of the case is likely to have implications for other neighbouring estates ‘in densely packed Hong Kong’ ([5]).

Wah Fung claimed that it had installed a number of ‘encroaching structures’ on the Morengo estate and that there was a long history of Wah Fung owners making use of these structures. The alleged possession began in 1986 so the limitation period was 20 years.

Recorder Chan SC outlined the essential elements of adverse possession and concluded that Wah Fung had failed to establish either that it had installed the encroaching structures or that Wah Fung owners enjoyed exclusive access to them or alone were able to make use of them. The adverse possession claim failed.

The judgment is perhaps notable in emphasizing (relying on Hong Kong authorities) the need for compelling evidence to establish the elements of adverse possession given its ‘draconian effects’.

The case provides a pointer as to the type and quality of evidence that might be needed in similar cases.

Even if the evidence will not support a claim to have enjoyed exclusive possession, there is the possibility of a claim to some other right such as an easement or a licence (possibly irrevocable) based on proprietary estoppel, the doctrine of lost modern grant or an actual implied licence.

Michael Lower

Monat Investment Limited v All person(s) in occupation of part of the remaining portion of Lot No 591 in Mui Wo DD 4 No 16 Ma Po Tsuen, Mui Wo

In Monat Investment Ltd v All Person(s) in Occupation of Part of Remaining Portion of Lot No 591 in Mui Wo DD 4, No 16 Ma Po Tsuen, Mui Wo Lantau Island ([2020] HKCFI 1970) the Court of First Instance had to consider the claim that a squatter’s unlawful actions meant that his adverse possession claim had to fail.

Facts

The disputed land comprised a building (‘the Brown area’) and an adjoining open area (‘the Green area’). D claimed to have acquired title to both by adverse possession.

D’s father built a wooden hut on the Brown area in 1954. Around 1977 or 1978 this was replaced by a two-storey brick house. D (one of eight children) moved out. In 1980, D’s father died and his mother remained in possession of the house with some of the children.

In 1996, part of the Green area was paved with concrete but not fenced in. D’s mother died in 1999. D did not live in the disputed land but kept the house under lock and key and paid the electricity bills. P (the owner of the paper title) brought possession proceedings.

Adverse possession

There was clear evidence, in the form of electricity bills, that D’s father took possession of the Brown area by January 1975 at the latest.

It was not until 1996 when the Green area was paved with concrete that D’s mother (after D’s father’s death) could be said to have taken possession of that area. Clearing vegetation from the Green area and then paving it was exactly what an owner might be expected to do ([33]).

D’s mother remained in possession with D’s brothers and sisters after the father’s death. She moved out before her death in 1999 but retained possession; the house was kept locked and she paid the electricity bills.

D took over possession after his mother’s death. He did not live there but, again, retained possession by keeping the house locked and paying the electricity bills.

Illegality

The plaintiff (‘P’) argued that D’s adverse possession claim failed because D had to plead his own illegality to establish his case. The illegal acts P relied on were: (i) trespass; (ii) erecting an unauthorised structure in breach of the Government lease and section 14 of the Buildings Ordinance.

Deputy Judge To pointed out that, of its nature, the doctrine of adverse possession has already balanced public policy and illegality ([59]). There is always some illegality in adverse possession cases; if the court were to frequently decide that illegality was a bar to success for an adverse possession claim, this would be to entirely defeat the doctrine ([62] – [63]).

Illegality is generally only relevant ‘when that the possession or the manner of possession is prohibited by some other statutory provisions’ ([63]).

Deputy Judge To said:

‘Even in circumstances where the possession or the manner of possession is prohibited by some other statutory provisions, given the legislative intent behind the Limitation Ordinance, it is difficult to see why the illegality associated with the squatter’s possession, use or occupation of land should have any impact on his entitlement to possessory title acquired by adverse possession. Usually, the prohibition could be enforced against the squatter after he has acquired title in just the same way as it could be or could have been enforced against him before he acquired legal title or could have been so enforced against the paper owner.’ ([64])

and:

‘Illegality whether in the act of possession or the manner of possession is generally irrelevant. It is only when the possession or the manner of possession is prohibited by some other statutory provisions that it becomes necessary for the court to resolve the conflict by statutory construction or by balancing the public interest and public policy behind the statutory provisions against those behind the Limitation Ordinance.’ ([79])

Conclusion

D’s adverse possession claim succeeded in respect of the Brown and Green areas. Even if there was a need to carry out a balancing exercise, D should succeed.

Michael Lower

Partition where squatter acquires title to part of land of paper owner

In Fan Kiu v Li Kwai Wan ([2020] HKCFI 130) F acquired title by adverse possession to land. The land in question was part of the land covered by three separate formal titles. F sought partition of the land in respect of which she had defeated the rights of the formal owners and a declaration that she was the sole owner of the relevant parts. She wanted to be registered as the sole owner of the land to which she had acquired title.

Deputy Judge William Wong SC held that she and the formal owners were co-owners for the purposes of the Partition Ordinance. A squatter of part of the land covered by a paper title could be seen as a co-owner with the formal owner who retained ownership of the rest of the land covered by the paper title. This was so even in respect of those parts of her land where the formal owner was a tso ([47]).

Partition would be beneficial to the development of the land. It would help F to get the consents she needed to demolish her existing dilapidated house on the land and build a new house. This was consistent with one of the purposes that the law of adverse possession is designed to achieve (encouraging the development and improvement of land) ([65]). The formal owners could not be contacted despite extensive efforts to do so.

Even without partition, F was entitled to a declaration to the effect that she was the sole owner of the land covered by her successful adverse possession claim ([59]).

F was granted the orders for partition and the declarations that she sought.

Michael Lower

Adverse possession: what is the limitation period when time began to run before 1 July 1991?

Section 7 of the Limitation Ordinance provides that the limitation period (other than for land owned by the Government) is twelve years.

Section 38A of the Limitation Ordinance provides, in effect, that the former twenty year limitation period applies where a period of adverse possession began before 1 July 1991 but had not expired by then.

In Tang Moon Lam v Tang Ying Yeung ([2019] HKCA 1102) the defendant was in adverse possession of the plaintiff’s land from 1990 to the end of 2007. The defendant argued that section 38A could be interpreted to mean that a squatter’s adverse possession claim could succeed where it could establish a twelve year period of adverse possession beginning on or after 1 July 1991 even if the period of adverse possession began before then.

The Court of Appeal rejected this argument. The adverse possession period is twenty years for all claims where the period of adverse possession began before 1 July 1991.

Michael Lower

 

Adverse possession: the slightest act of the paper owner sufficient to retain possession

Tierra Trading Ltd v Land Base Ltd ([2017] HKEC 1809) was an adverse dispute between neighbours. The disputed land comprised landings and staircases between the neighbouring buildings. The plaintiffs were the registered owners of the disputed land and they sought an order for possession against their neighbours (the defendants). The defendants claimed to have acquired title by adverse possession. They failed to establish the factual basis of their claim to have been in possession. Further, Deputy Judge Kenneth Kwok SC pointed to the statement by Slade J in Powell v McFarlane that the slightest act done by an owner in possession would negative discontinuance of possession. The plaintiffs had included the disputed land in their calculation of the Gross Floor Area of the development built on their land. This inclusion was a sufficient act to indicate their continued possession.

Michael Lower

Tierra Trading Ltd v Land Base Ltd ([2017] HKEC 1809) was an adverse possession dispute between neighbours. The disputed land comprised landings and staircases between the neighbouring buildings. The plaintiffs were the registered owners of the disputed land and they sought an order for possession against their neighbours (the defendants). The defendants claimed to have acquired title by adverse possession.

They failed to establish the factual basis of their claim to have been in possession. Further, Deputy Judge Kenneth Kwok SC pointed to the statement by Slade J in Powell v McFarlane that the slightest act done by an owner in possession would negative discontinuance of possession. The plaintiffs had included the disputed land in their calculation of the Gross Floor Area of the development built on their land. This inclusion was a sufficient act to indicate their continued possession.

Michael Lower

Objective nature of the intention to possess: where the squatter believed itself to be the true owner

In Pang Yiu Chor v Wong Wai Leung ([2017] HKEC 1874) the Government mistakenly believed itself to be the owner of land in Fanling. In fact, the land belonged to the plaintiffs.

The Government granted permits to occupy the land to licensees in the early 1960s. These licences were taken over by later generations of the families of the original licensees.

The plaintiffs informed the Government of their ownership in 2000. The Government terminated the licences in 2003.

The question was whether the Government had defeated the plaintiff’s title by adverse possession. The plaintiffs contended that this was not the case; the Government’s belief that it was the owner of the paper title, they argued, meant that it had no intention to possess.

This argument failed. Anthony Chan J was able to point to a number of Hong Kong and English authorities showing that believing oneself to be the true owner does not prevent a squatter from having the intention to possess.

The intention to possess requirement demands an intention ‘to exclude the world at large, including the owner, from the land so far as is reasonably practicable and so far as the law allows’. Further, ‘[e]vidence of subjective intent should be approached with caution. Intention is normally better assessed from the acts of the possessor in the light of the nature of the land and its use’ (Tsang Foo Keung v Chu Jim Mi Jimmy CACV 178 / 2015 at [22]).

That the Government had the necessary intention was clear from its intentional exercise of power over the land: ‘There can be little doubt that the Government had every intention to exclude any person who was on the land without its expressed or implied permission. This can only be consistent with the requisite animus possidendi ([49]).

The Court of Appeal said in Cheung Kwong Yuen v Sun Hai Fang ([2016] 1 HKLRD 464) that ‘ “adverse” in this context is a convenient label only, in recognition of the fact that the possession is adverse to the interests of the paper owner.’

The Government had defeated the plaintiffs’ title; it had been in possession of the land up to 2003 through its licensees.

That said, the defendants (the licensees) had no title to the land. Their possession was attributable to that of the Government.

Michael Lower