PRISCILLA INVESTMENT LIMITED v. RANK CALL LIMITED

1988 No. A5914

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. In April 1977 Ming Fong Finance Co. Ltd. (Ming Fong) was the, registered owner of a commerical property at South Lantau Road Lantau Island which include shop premises known as A1 and A2. The shops comprise a ground floor and a cockloft. The plan which shows the division of the building into shops was approved by the Lands and Works Department and has formed the basis of all transactions in respect of Al A2 which have taken place since 1977. The plan shows the ground floor area of A1 and A2 divided by a staggered line which gives the occupants of A2 access to the stairs leading to the cockloft of A2. The cockloft areas of A1 and A2 are however divided by a straight line. No application has ever been made to the hands and works Department to amend the existing plan by making an alteration to the respective areas of the two so as to increase the area of A2 and consequentially reduce the area of A1; nor has an easement over part of the area of the A1 cockloft in favour of the A2 cockloft ever been created.

2. On the 28th December 1977, Ming Pong transferred Al to Apollo Knitting Manufactory (Hong Kong) Limited. The premises were transferred to Bisque Co. Ltd. which on the 10th September 1981 conveyed A1 to Aaron Investment Ltd. (Aaron) On the 18th May 1983 Aaron transferred A1 to the Plaintiff, Priscilla Investment Ltd.

3. Ming Fong transferred A2 to Pang King Suen on the 30th December 1977 and Mr. Pang transferred the premises to the Defendant Rank Call Limited (Rank Call) on the 9th July 1980. Rank Call was taken over by the Far East Band Limited (The Bank) in about 1982. The premises were renovated by The Bank for use as a branch office and were opened for that purpose in about mid-1982.

4. The Plaintiff claims that the Defendant without the approval or consent of the Plaintiff has erected an illegal structure which encroaches onto a portion of the cockloft of A1. The plaintiff requested the Defendant to remove the offending structure which the Defendant refused to do. The plaintiff now seeks an injunction to restrain the Defendant from retaining the structure in its present position and an order that the Defendant do forthwith demolish and remove the structure.

5. There is no dispute that a structural alteration has been made to the dividing wall between the two cocklofts which creates an encroachment from A2 onto the area of A1 as shown on the approved plan.

6. Mr. Shu Jaan-cheung, a director of the plaintiff, gave evidence for the Plaintiff and he states that in 1981 he was also a shareholder and director of Aaron, a company which had land holdings on Lantau Island. Aaron anticipated major land developments on Lantau Island following a statement of intent by the Government to erect an airport in the area. Mr. Shu on behalf of Aaron therefore went to inspect A1 with a view to purchasing the premises for the setting up of a branch office when the situation warranted it. Aaron did not take any further steps to fit it out the premises and in 1983 it transferred them to the plaintiff a company which also had large land holdings on Lantau Island.

7. It is Mr. Shu's evidence that in 1981 he did examine the plan of A1 when inspecting the premises and that there was at that time a wooden partition erected dividing the two cocklofts. The dividing wall was erected along the straight line of sub division as shown in the approved plan. The external windows at that time covered the full length of the external wall. It is his evidence that the structure, the subject of the dispute, was not then erected. After the purchase of A1 the premises were locked up and left until about the mid-1988 when a decoration company was instructed to renovate the premises for office use. As a result it came to Mr. Shu's attention that there was a structure encroaching into the cockloft area of A1. He went to inspect the premises and states that this was the first occasion that he became aware of the erection of the structure. He points out that the paint work on a structure is a different shade to that of the other walls in the cockloft. He also found that the end window frame and the glass panes had been removed to instal the structure and that the external wall in the affected part had been closed up and tiled. Mr. Shu found the window frame and panes of glass which had been removed lying on the floor of the cockloft. This can be seen in the photographs produced by the Plaintiff at the hearing.

8. There is no evidence as to who erected the structure and as to the date when the work was completed. It is the Plaintiff's case that the work was done after Aaron purchased the premises and that the inference to be drawn is that this was completed by The Bank in an endeavour to improve the access to the cockloft which The Bank now uses as the safe deposit box area, and also to enable the installation of the air-conditioning system.

9. Mr. Shu is unable to say who gained access to the cockloft premises to complete the work but his evidence is that on inspection he found the lock to the metal roll-up door to A1 broken open when he went to inspect the premises and as a result he has had installed an extra lock on the entrance door. Neither Aaron nor the Plaintiff have ever given consent to the erection of the structure.

10. Mr. Poon Po-cheung the Banks Organisation and Methods Department Manager gave evidence for the Defendant and confirmed that The Bank uses the space for the purposes of providing better access to the cockloft area and for air-conditioning purposes. He was involved on behalf of The Bank when The Bank purchased A2 and he visited the premises in 1982 when renovation work was being completed. He states that at that time the cocklofts were divided by a permanent wall but did not pay particular attention to the presence or otherwise of the structure which is in dispute. He did not produce the accounts detailing the renovation work ordered by The Bank but denied in cross examination that The Bank had authorised the erection of the structure to improve the access to the cockloft and for the installation of the air-conditioning system. It was only after The Bank had commenced business operations that Mr. Poon noticed the space in question. He conceded that he had never checked the approved plan against the actual state of the premises at the time of purchase. It is the defence case that the plan should not be relied upon as being accurate and that the Plaintiff has no proprietary right to the area in dispute. This submission is based upon the fact that in respect of A1 an internal staircase is not shown on the approved plan. There is no merit in this submission and I am satisfied that the Plaintiff is the legal owner of the area which is the subject of the action.

11. The defence also submit that if there is such an encroachment then there has been an express or an implied grant of a right of user to the occupant of A2 over the area of A1 occupied by the structure. It is pleaded that this right comes from the common owner Ming Fong who had the plan of sub-division of the building approved in 1977. There was no evidence written or oral that supports the creation of any express grant. The structure has two electrical wall connections installed which face into the cockloft area of A1. The defence submit that the inference to be drawn from this fact is that the common owner in 1977 installed the disputed structure with a view to make easier the sale of A2 by giving it better access to the cockloft; and that there is a resulting implied grant of a right of user. I find that no such inference cane drawn. If king Fong in 1977 had wished to partition the two areas in such a way, this would have been reflected in the approved plan. There is nothing which comes from the presence of the two electrical wall fittings which helps in pinpointing when the structure was erected. It is the evidence of Mr. Shu that at the time Aaron purchased the areas of A1 and A2 were in accordance with the approved plan. There were a series of transfers of both A1 aid A2 based on that plan and no amendments to it to reflect the encroachment have ever been made. I am satisfied that Mr. Shu is a witness as to the truth and that the structure was not erected prior to 1981 when he inspected the premises. I also accept his evidence that A1 was leftlocked and unoccupied from 1981 until mid 1988. It was suggested by the defence that this was most unlikely and that if it were not so it could be implied that the Plaintiff had knowledge of the structure and had impliedly consented to it. However, some corroboration of Mr. Shu's evidence on this point comes from the Defendant's witness, Mr. Poon, who while not totally sure said he believed that A1 had been left vacant. I am satisfied that there has been no implied grant to a right of user in favour of the owner of A2 in respect of the area of the encroachment and the structure constitutes a trepass onto the property of the plaintiff. There will be orders in respect of paragraphs 1 and 2 of the prayer with cost to the plaintiff.