GLOBAL TRADING OFFSHORE (PTC) LTD v. ALL PERSONS IN OCCUPATION OF WALL SHOP (ADJOINING SHOP G) ON GROUND FLOOR OF SAVOY MANSION, NO.49 CARNARVON ROAD, KOWLOON, HONG KONG AND ANOTHER

DCMP 2043/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2043 OF 2013

_________________

_________________

_________________

J U D G M E N T

_________________

1.  This action is an application by the plaintiff, being the registered owner, for recovery of possession of the property known as Wall Shop (adjoining Shop G) on Ground Floor of Savoy Mansion, No 49 Carnarvon Road, Tsim Sha Tsui, Hong Kong (“the Wall Shop”).  There is a scavenging lane between No 49 and 51 of Carnarvon Road and the Wall Shop is at the wall on the side adjoining Shop G of No 49.

2.  It is not in dispute that the 2^nd defendant (“D2”) is in occupation of the Wall Shop.  The defence is that D2, together with the late Mr Chan Chung Tai (“the late Mr Chan”) had been in uninterrupted enjoyment and occupation of the Wall Shop in exclusion of the others, hence the plaintiff’s right to recover possession has been extinguished and statute barred by virtue of his adverse possession pursuant to the Limitation Ordinance, Cap 347.  The D2 counter-claims for a declaration to such effect.

Plaintiff’s Case

3.  Shop G and the Wall Shop were acquired by a Mr Chen Kong Mian (“Mr Chen”) and Madam Ng Soo Meau (“Madam Ng”) on 3 August 1971.  Mr Chen and Madam Ng are the parents of Mr Benson Chen, the director of the plaintiff.  At the time of acquisition, the Wall Shop was already leased out to a business called陳記 (“Chan Kee”) which was running a fruit and confectionary business at the shop directly across from the Wall Shop on the other side of the scavenging lane.

4.  By an assignment dated 22 December 2000 and registered in the Land Registry by Memorial No UB8297903, Shop G and the Wall Shop were transferred into the name of the plaintiff (B/89). Such transfer of the Wall Shop was subject to the tenancy with Chan Kee (“the T/A”). The plaintiff has no idea as to the identity of the operator of Chan Kee.

5.  The rent received under the T/A was still paid to Madam Ng even after the transfer of the ownership of the Wall Shop.  Madam Ng and a Mr 曾昭石 (“Mr Tsang”) a staff of the plaintiff, were responsible for the tenancy matter concerning the Wall Shop.

6.  On 5 May 2005, the plaintiff served a written notice on Chan Kee asking for an increase of the monthly rent from $3,800 to $20,000 with effect from 1 July 2005 (B/287).  By a reply letter dated 28 May 2005, Chan Kee replied saying it did not have the financial ability to pay the increased rent (B/159).  By a letter dated 2 June 2005, the plaintiff insisted on an increase of rent to $20,000 and should Chan Kee not be able to pay the increased rent, Chan Kee should deliver up vacant possession of the Wall Shop by 30 June 2005 (B/288). The last letter was returned.

7.  Chan Kee failed to pay rent and rates since July 2005.  The plaintiff started an action against Chan Kee in the District Court (DCCJ 4018/2005) (“DCCJ Action”).  In the course of the DCCJ Action, a Mr Chan Pui Tak admitted in an affirmation that he was the sole proprietor of Chan Kee and admitted occupying the Wall Shop by way of a tenancy agreement with monthly rental at $3,800 (B/169-173).  After an order for interim payment made on 17 February 2006, the DCCJ Action was left in abeyance. 

8.  Yet, the Wall Shop was still occupied.  A large banner with the name 陳記時果專門店 was being hung across the entrance of the scavenging lane. Posters showing the price of various kinds of fruit juice were hung up on the Wall Shop whilst some goods and chattels have also been stored at the Wall Shop.  As the rent since July 2005 was still outstanding, the plaintiff kept serving letters on Chan Kee asking for vacant possession.

9.  On the occasion when a letter was attempted to be served on 16 July 2013, Chan Kee claimed the posters, the goods and the chattels found at the Wall Shop did not belong to them and he had no knowledge as to the ownership of those items.  The present action was commenced.

10.  In a gist, the plaintiff alleged that Chan Kee was a tenant of the Wall Shop since before the plaintiff’s predecessors-in-title so there had not been adverse possession of the Wall Shop giving rise to protection under the Limitation Ordinance. And since the D2 had been occupying the Wall Shop in a new entity distinct from Chan Kee called Chan Kee Fruit since its business registration in 2010 (B/186-187), the plaintiff is suing the D2 based on a claim of trespass.

2^nd Defendant’s Case

11.  The late Mr Chan is the maternal uncle of the D2.  The late Mr Chan was a licensed hawker who had a Fixed-Pitch Hawker Licence and had been operating a fruit stall called Chan Kee at No 51 Carnarvon Road (“the Stall”).  The D2 had been working at the Stall as an assistant to the late Mr Chan since about 1980.

12.  When operating at the Stall, the late Mr Chan and the D2 have also been occupying the Wall Shop as part of the area of their business operation since about 1980 to the exclusion of others by placing carton boxes of fruits, tables and other miscellaneous items at the Wall Shop.  A metal cover stretched from the Stall to the Wall Shop had also been built in about 1980.  Neither the late Mr Chan or the D2 had ever paid any rent or fee for the occupation of the same.  Nor had anyone ever demanded rent or fee for the occupation of the Wall Shop.

13.  Upon the death of the late Mr Chan on 28 August 2009, the hawker licence was transferred to the D2 who continued to operate the Stall to sell fruits and confectionary.  According to the business registration document, the D2 is the sole proprietor of the Stall in the name of 陳記 and Chan Kee Fruit in English since 2 June 2010 (B/186-188).

14.  The D2 alleged that he had been in adverse possession of the Wall Shop since 1980 and the title of the plaintiff in it should have been extinguished by virtue of Section 7(2) of the Limitation Ordinance.

Issues in Dispute

15.  The plaintiff is asking for vacant possession of the Wall Shop, mesne profits for the wrongful occupation of the Wall Shop including interests.  The D2 is asking for a declaration to the effect that he had acquired a possessory title to the Wall Shop and the plaintiff’s right to recover possession has become statue barred and extinguished. 

16.  A joint valuation report had been filed in this case (B/243-284) and parties have no dispute on the assessment of market rent at $14,000 per month from July 2013 to 31 July 2015.  So the issues remained to be determined in this case is :

(a)     whether there could be adverse possession of an external wall; and

(b)     whether the D2 had established adverse possession of the Wall Shop.

Adverse Possession of an External Wall

17.  Before trial, I have brought the parties’ attention to the judgment of Sunbroad Holdings Limited v Unknown Occupiers & others [2012] 2 HKLRD 599 in which the Court of Appeal found that “just as there could not be a lease of the surface of a wall, there could be no adverse possession of such surface” (at 11).

18.  In Sunbroad (supra), the plaintiff is the owner of an external wall and the 3^rd defendant, a cobbler operating a stall located opposite to the external wall on a scavenging lane had erected structures on the external wall in around 1972 without the consent, licence or permission of the plaintiff.  The 3^rd defendant argued that he had been in exclusive possession of and has been using the external wall without the consent or permission from the owner, such that he has acquired a good title to the external wall by adverse possession.  The issue at first instance is whether, as a matter of law, the concept of "adverse possession" can apply to a vertical plane or surface such as the surface of the external wall.  Mr Recorder Chow (as he then was) found against the 3^rd defendant, relying on the findings by Byrne J in Midland Railway Co v Wright [1901] 1 Ch 738 at 744 that “(I)t is necessary that whatever is acquired by means of this exclusive possession should be measurable by precise metes and bounds and in some way cubically”.

19.  I found the facts in Sunbroad is by and large similar to the present case.  By adopting the principles found in Sunbroad, I found the Wall Shop, which is in fact the external wall of No 49 Carnarvon Road, cannot be adversely possessed.

20.  Mr Chow for the D2 is trying to distinguish the case of Sunbroad from the present case by relying on the judgment of Bridam Ltd & Anor v Sa Sa Cosmetic Co Ltd & Anor [2014] 1 HKC 305 in which Chan J, in dealing with a claim concerning the right to use the signage attached to the surface of the external wall of the building, distinguished Sunbroad by saying, “there was also no case of bolts and nuts having been driven into the wall.  That case is different from the present one.”   Mr Chow submitted that since the D2’s occupation of the Wall Shop does have some sufficient degree of attachment to the Wall Shop, the present case is akin to the Bridam case, hence Sunbroad is not applicable.

21.  I do not agree that the case of Sunbroad is a case not involving any attachment to the external wall.  In the first instance judgment, it is undisputed facts that the 3^rd defendant in that case had constructed a small metal box, a large metal box and a canopy on the external wall (at §5), and “it is not in dispute that the 3^rd Defendant erected the Structures, which are physically attached or affixed to the External Wall” (at §6) (emphasis added).  Any attachment or affixing to the external wall must involve some kind of bolts and nuts driven into the wall.  I cannot accept the contention that the case of Sunbroad did not involve any attachment to the Wall Shop and hence can be distinguished.  In fact, I found the facts of Sunbroad is similar to our case and is highly relevant.

22.  Mr Chow also submitted that the Court of Appeal in Sunbroad did not appear to have the benefit of considering the English authority of Prudential Assurance Co Ltd v Waterloo Real Estate Inc [1999] 2 EGLR 85 which had been considered by Deputy High Court Judge Au-Yeung (as she then was) in the case of Mak Kam Chuen v Triple Joy Investments Ltd & Anor [2012] 1 HKC 412. 

23.  In Mak Kam Chuen, Au Yeung DHCJ is considering whether there is a serious question to be tried in an application for interlocutory injunction to restrain the defendants from interfering with the plaintiff’s enjoyment of the building walls and open grounds which he claimed to have acquired by adverse possession.  It is found at §17 of the judgment that “(I)t is possible to adversely possess part of a stretch of wall : Prudential Assurance Co Ltd v Waterloo Real Esate Inc [1999] 17 EG 131” (underline added).   The issue in Prudential Assurance is not the surface of a wall but part of a stretch of wall, which is distinguishable from this case.

24.  I have also had the benefit of reading through the judgment of Prudential Assurance only to discover that the question as to whether the surface of a wall can be adversely possessed is not an issue on appeal.  The issue on appeal in Prudential Assurance is whether the claimant had demonstrated unequivocally its intention to possess and taking exclusive possession of the wall in question.  The case of Prudential Assurance is apparently not relevant to the issue in this case.

25.  I found, as a matter of law that, the surface of an external wall cannot be adversely possessed and the D2’s defence and counter-claim must fail.  Given such a ruling, the other issue in this case is superfluous.  But in case I am wrong on this legal issue, I shall deal with the second issue in this case below.

Whether D2 had established adverse possession

26.  It is not in dispute that if the possession by the late Mr Chan is by way of a licence or tenancy agreement, no adverse possession is established.  This issue turns on whether the allegation by the plaintiff that there was a tenancy agreement between the plaintiff and the late Mr Chan is accepted which means the possession by the late Mr Chan is with the permission of the owner and cannot be adverse possession as alleged by the D2.

27.  Having heard the evidence and on a balance of probability, I accept the evidence of the plaintiff. 

28.  The D2 is putting up a case that the tenancy between the plaintiff and Chan Kee had nothing to do with the late Mr Chan and the D2.  This is rebutted by the rental payment records produced by the plaintiff (B/310-311) (“the Payment Record”).  The Payment Record shows the payment of the sum of $3,800 by cheques drawn by the late Mr Chan dated 15 April 2005 and 1 May 2005 respectively with the payee being the plaintiff.  This is inconsistent with the saying by the D2 that the occupation of the Wall Shop had nothing to do with any permission from the plaintiff.  The amount drawn on the cheque is the same as the monthly rental alleged by the plaintiff.  The only inference to be drawn must be that this is a payment of rental by the late Mr Chan in accordance with the T/A. 

29.  And even if, as submitted by Mr Chow, the T/A has nothing to do with the Chan Kee run by the late Mr Chan, the fact that the late Mr Chan is paying the plaintiff in exchange for the use of the Wall Shop also rebuts the allegation of adverse possession.

30.  Mr Chow had also relied upon the business registration document of Chan Kee (B/291-295) to show that the late Mr Chan and the D2 had nothing to do with the Chan Kee named under the T/A.  But the fact that there was only one Chan Kee operating the fruit stall and the Wall Shop is admitted by the D2 in his evidence.  There may be a number of other people happened to be surnamed Chan to be the registered proprietor of Chan Kee at different stages, this does not refute the admission by the D2 that the late Mr Chan and the D2 are running this business called Chan Kee and there was only one Chan Kee ever.  Whether Chan Kee is run by several members of a Chan’s family is neither here nor there.  The crux of the matter is the status of the late Mr Chan in his occupation of the Wall Shop.

31.  Furthermore, the plaintiff had adduced evidence about letters issued to Chan Kee asking for an increase of rent and the reply letter from Chan Kee on 28 May 2005 (B/159).  If there is only one Chan Kee and coupled with the evidence of the Payment Record, the only inference to be drawn must be that the reply was made by the late Mr Chan and the fact that there was a tenancy with the plaintiff had never been denied in the reply letter.  This also tends to support the case of the plaintiff that there was a T/A with Chan Kee run by the late Mr Chan and the possession by Chan Kee was as a result of the T/A and not by way of adverse possession.

32.  I found as a fact that the late Mr Chan was allowed to occupy the Wall Shop by way of the T/A with the plaintiff.  Under such circumstances, there cannot be adverse possession of the Wall Shop during the lifetime of the late Mr Chan. 

33.  And since the D2 is an assistant working with the late Mr Chan, I do not accept that he can be considered as a squatter who had the intention to adverse possess the Wall Shop.  Even though the D2 may have been in sole possession as a distinct entity since 28 August 2009 after the passing away of the late Mr Chan, he had not been in adverse possession for the requisite period of 12 years before the issuance of these legal proceedings.

Conclusion

34.  I found the plaintiff had proved that the occupation by the D2 is by way of trespass and the plaintiff is entitled to have vacant possession of the Wall Shop to be handed up.  And since the D2 failed to establish a case of adverse possession, the counter-claim by the D2 must be dismissed.

Mesne Profits

35.  The plaintiff is entitled to have mesne profits for the illegal occupation of the Wall Shop by the D2 and the plaintiff is claiming the mesne profits from 1 July 2013 with the mesne profits to be assessed at market rent together with government rates payable by the plaintiff.

36.  Mr Hu had in his final submissions stated the total figure of this head of claims from the period from 1 July 2013 to 30 November 2015 to be $413,354.50, breakdown of which as follows :

(a) Monthly market rental at $14,000 from 1 July 2013 to 30 November 2015 ($14,000 x 29 months) in the total sum of $406,000;

(b) Government rates at $742.50 per quarter for the period July 2013 to March 2015 ($742.50 x 7 quarters) in the total sum of $5,197.50; and

(c) Government rates at $810.00 per quarter for the period April 2015 to November 2015 ($810 x 2 + 810 x 61/92) in the total sum of $2,157. 

37.  Mr Chow had no argument over these calculations.  I found the D2 is liable to pay these mesne profits for the illegal occupation of the Wall Shop during the relevant periods named above.  As for the period after 30 November 2015, the D2 should pay a sum of $14,000 plus $270 per month as mesne profits till delivery up of vacant possession.

Interest

38.  Mr Hu asked for post judgment interest at judgment rate on all sum in his final submission.  I see no reason to refuse the same.

Costs

39.  Costs should follow the event.  I shall make an order nisi that costs of this action be to the plaintiff, including all costs reserved, with Certificate for Counsel, to be taxed if not agreed.

Order

40.  It is ordered that :

(a) The defendants do deliver up vacant possession of the Wall Shop to the plaintiff;

(b) The 2^nd defendant do pay the plaintiff mesne profits from 1 July 2013 to 30 November 2015 in the sum of $413,354.50;

(c) The 2^nd defendant do pay the plaintiff mesne profits at the monthly rate of $14,270 from 1 December 2015 until delivery up of vacant possession;

(d) Interest on the judgment sum at judgment rate from the date of judgment until full payment;

(e) The counterclaim of the 2^nd defendant be dismissed; and

(f) Costs order nisi that costs of this action be to the plaintiff, including all costs reserved, with Certificate for Counsel, to be taxed if not agreed.  Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.