By Alex Liu

Hong Kong, 27 April 2026: In a significant judgment concerning land law, the Court of Final Appeal has effectively abolished the Milmo principle, which has been applied in Hong Kong for 80 years. The decision marks a rare occasion where our city’s top court departs from a long-established line of English case law.

The principle, arising from Milmo v Carreras [1946] KB 306, concerns situations where a sub-tenancy is granted for a term exceeding that of the head lease. It states that such an arrangement takes effect as an assignment of the head lease to the sub-tenant, rather than creating a sub-lease. As a result, the sub-tenant is directly responsible to the landlord, not the original tenant.

The CFA judgment changes this. It states that a sub-tenancy granted for a term exceeding the residue of the head lease should be treated as a contract to grant a tenancy for the term it purports to grant. Upon the expiry of the head lease, if the sub-tenant is evicted, he may have a claim against the former tenant for breach of contract.

The same judgment also considers application of the New Territories Leases (Extension) Ordinance (Cap 150) and section 3(2) of the Land Registration Ordinance (Cap 128). In relation to the latter, the CFA has held that the provision applies to situations involving two successive sales by the same vendor, where the first assignment is unregistered and the second sale is made to a bona fide purchaser. In such circumstances, the nemo dat rule is modified so that, notwithstanding the prior unregistered sale, title to the property passes to the second purchaser.

It should be explained that the Latin term nemo dat quod non habet – or “no one gives what they do not have” – signifies that a seller cannot transfer better title to goods than they possess.

The CFA’s judgment is made in To Sze On, the Personal Representative of Estate of To Cheong Lam, deceased v Yim Tin Took, since deceased (Yim Lok Man Winne, appointed by Order dated 10 May 2024 to represent the Estate of Yim Tin Fook, deceased) & Others [2026] HKCFA 17.

The case concerned a dispute over a patch of land in the New Territories. The CFA was told that a lady named Tang Yin held a government lease which was due to expire in 1997. Sometime in 1983, she granted a sub-lease to a man called To Cheong Lam which was to last until 1998, thus after the expiry of the government lease.

Despite the grant of the 1983 lease, Madam Tang executed a deed of gift in 1986 purporting to assign the residue of the government lease to a man named To Shui Ki and herself as joint tenants. After her death, To Shui Ki sold his interest to a company which further sold the land to subsequent purchasers.

This background gave rise to competing claims to the land made between the estate of To Cheong Lam – the appellant – and the subsequent purchasers.

Addressing the Milmo principle, the CFA states: “Its application is invariably the result of a mistake and it unnecessarily produces results which are not only unexpected but frequently unfair to one or the other parties.” The top court also agreed with the courts below that the effect of section 3(2) of the Land Registration Ordinance was to destroy To Cheong Lam’s unregistered 1983 lease as against the subsequent purchasers who, as a result, obtained good titles to the land. Accordingly, the CFA dismissed the appeal.

In conclusion, we can say that while the CFA’s decision is a rare departure from established English case law, it also demonstrates how Hong Kong courts continue to contribute to the development of the common law. It is also worth pointing out that Hong Kong land law is both historic and complex, thus any questions concerning ownership or tenancy require sound legal advice. Here at BC&C we have considerable experience in this practice area and are ready to help.

Alex Liu is Managing Partner of BC&C. He was Chairman of the Appeal Tribunal Panel (Buildings Ordinance) for nine years until 2018 and a frequent legal advisor on the TVB documentary series A Property a Day. His key areas of practice include commercial and corporate litigation, investigations by governmental bodies, and insolvency and debt restructuring. He can be contacted at alex@boasecohencollins.com.