WUI FUNG LEE INVESTMENT CO LTD v. THE INCORPORATED OWNERS OF HONG KONG MANSION, CAUSEWAY BAY

HCA 2197/2013

[2019] HKCFI 2739

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2197 OF 2013

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J U D G M E N T

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A. INTRODUCTION

1.  By this action, the plaintiff seeks against the defendant, inter alia, a declaration that the plaintiff is the owner of an area (the “Disputed Area”) on the Mezzanine Floor of Hong Kong Mansion, No 1 Yee Wo Street, Causeway Bay, Hong Kong (the “Building”).

B.  THE UNDISPUTED FACTS

2.  The undisputed facts, as summarised by the plaintiff, are as follows.

B1.  The Parties and the Disputed Area

3.  The defendant is the registered incorporated owners of the Building.

4.  By an assignment dated 5 March 1974 (“1974 Assignment”), the plaintiff became the registered owner of, inter alia, “Shops “G”, “H”, “I” and “J” on the Ground Floor…  (including the Mezzanine Floors above each of the said Shops…) [which] … are more particularly shown and coloured Pink” on the Plan annexed to the 1974 Assignment.

5.  Hing Wan Investment Company Limited (“Hing Wan”) was the developer of the Building.  Hing Wan was dissolved in September 1986.

(1)  At the material times, Mr Chung Ming Fai (“CMF”) and his associated company, Aik San Realty Limited (“Aik San”), collectively held 17.12% shareholding of Hing Wan.

(2)  The plaintiff was and is 50% indirectly owned by CMF and CMF’s family.

6.  The Disputed Area is located on the mezzanine floor of the Building, and is marked “Bloom Store (non-domestic)” on the mezzanine floor building plan of the Building dated 20 January 1966, as approved by the Building Authority (the “1966 Approved Building Plan”).

B2.  Hing Wan’s First Assignment and the DMC

7.  By a Crown Lease dated 25 April 1961, the developer of the Building, Hing Wan, obtained a lease pursuant to Conditions of Sale in relation to the Building.

8.  Hing Wan proceeded with construction of the Building from 25 April 1962 to 19 March 1966.  The Building consists of a commercial portion with shops and offices from the basement to the 2^nd floor, and residential units from the 3^rd floor to the 23^rd floor.

9.  On 20 January 1966, the 1966 Approved Building Plan was approved by the Building Authority, and an occupation permit (“OP”) was granted on 19 March 1966.

10.  On 15 April 1966, by first assignment (“1966 First Assignment”), Hing Wan assigned Flat I on the 13^th Floor to the first purchaser, Tse Po Har (“First Owner”).

11.  On 23 April 1966 (about one week after the execution of the 1966 First Assignment), the Deed of Mutual Covenant (“DMC”) of the Building was executed between Hing Wan and the First Owner.

12.  By a document known as the “Control Card” registered in the Land Registry, the Building was apportioned into 353 undivided shares.  Shop G on the Ground Floor was marked to be “including mezzanine floor” and was assigned 1 share.

B3.  The Assignments in 1966 Relating to the Mezzanine Floor

13.  By an assignment dated 25 April 1966 (the “April 1966 Assignment”), Hing Wan assigned various units (including some units on the mezzanine floor but not affecting the Disputed Area) to a subsequent purchaser.  According to the mezzanine floor plan annexed to the assignment (the “April 1966 Floor Plan”), the Disputed Area was not marked “Bloom store (non-domestic)”. 

14.  By another assignment dated 25 July 1966 (the “July 1966 Assignment”), Hing Wan assigned various units (including some units on the mezzanine floor but not affecting the Disputed Area) to another purchaser.  According to the mezzanine floor plan annexed to the assignment (the “July 1966 Floor Plan”), again the Disputed Area was not marked “Bloom store (non-domestic)”.

B4.   Hing Wan’s Tenancy with Madam Cheng between 1970 to 1974

15.  In about October 1970, Hing Wan (as represented by Aik San) rented Shop G on the ground floor and the mezzanine floor above Shop G (including the Disputed Area) to a Madam Cheng Miu Fun (“Madam Cheng”).

16.  Madam Cheng’s tenancy continued until 1974, when she defaulted in rental payment.  Upon expiry of the tenancy, and upon delivery of vacant possession, there was no partition wall between the Disputed Area and the rest of the mezzanine floor above Shop G.

B5.   The 1974 Assignment to the Plaintiff

17.  By the 1974 Assignment dated 5 March 1974, Hing Wan assigned 11 undivided shares of the Building to the plaintiff, and conferred to the plaintiff the right to hold, use, occupy and enjoy, inter alia, the basement, “Shops “G”, “H”, “I” and “J” on the Ground Floor…  (including the Mezzanine Floors above each of the said Shops…) [which] … are more particularly shown and coloured Pink” (the “P Premises”) in the annexed mezzanine floor plan (the “1974 Assignment Floor Plan”).

18.  In the 1974 Assignment Floor Plan, in particular in relation to the area coloured pink:

(1)  The coloured pink area marked “G” covered not only the unit adjacent to the Disputed Area as shown on the 1966 Approved Building Plan but also the Disputed Area;

(2)  There was no partition between the Disputed Area and the unit adjacent to it as shown on the 1966 Approved Building Plan.

B6.   The Approved Alteration and Addition Works in mid-1983

19.  In mid-1983, the plaintiff proposed to conduct alteration and addition works in relation to the ground floor and mezzanine floor of the P Premises, as shown on the approved alteration and addition plan (“A&A Plan”).  In the A&A Plan, the Disputed Area was shown as being included within the unit marked “G” without any partition wall.  The Building Authority approved the A&A Plan on 17 August 1983.

20.  The alteration and addition works were completed in December 1984.

B7.   The Plaintiff’s Continuous Letting-out of the P Premises (including the Disputed Area)

21.  Sometime after 1983, the plaintiff installed a perforated metal roller gate at the entrance to the Disputed Area (the “Gate”).

22.  From November 1986 to November 2008, by various tenancy agreements, the plaintiff continuously leased the P Premises (including the Disputed Area) to Yatheng Investments Limited (“Yatheng”), which was the predecessor of King Fook Jewellery Group Ltd (“King Fook”).

23.  From November 2008 to November 2011, the plaintiff leased the P Premises (including the Disputed Area) to King Fook.

24.  From June 2013 to June 2016, the plaintiff leased the P Premises (including the Disputed Area) except for a portion of Shop J to Chow Tai Fook Jewellery Company Limited (“Chow Tai Fook”).

25.  In respect of all of the leases:

(1)  the leased premises were defined as “flats G, H, I and J” “on the ground and mezzanine floors” of the Building;

(2)  the tenancy agreements were attached with mezzanine floor plans to indicate the leased areas (the “Tenancy Floor Plans”), all of which showed that the Disputed Area was included as part of the leased areas.

B8.   The HCMP 2990/2004 and HCMP 2991/2004 Proceedings

26.  On 16 November 2004, the plaintiff commenced two High Court proceedings (HCMP 2990/2004 and HCMP 2991/2004) (the “Previous Actions”) against two occupiers to recover the possession of the staircase areas in various locations from the basement to the ground floor of the Building (the “Staircase areas”).

27.  In the Statements of Claim of both Previous Actions, the plaintiff pleaded at paragraph 8(2) that, by the 1974 Assignment, [Hing Wan] assigned to the plaintiff: “The full right to hold, use, occupy and enjoy the basement and shops G, H, I and J on the ground floor of [the Building], including the mezzanine floors above each of the shops and the driveway serving the basement, they are more particularly shown and coloured pink in the plan annexed to the [1974 Assignment].  A copy of which is appended hereto for identification.” Under the mezzanine floor plan annexed to the 1974 Assignment, the Disputed Area was coloured pink.

28.  When the plaintiff discovered that the defendant had leased out the Staircase areas to the occupiers, the defendant was joined as a third party as the second defendant to the two Previous Actions.  In the defendant’s Defence and Counterclaim in both Previous Actions, the defendant pleaded at paragraph 15 that “Paragraph 8(2) is admitted in so far as that Hing Wan assigned and/or granted to [the plaintiff] the full right and privilege to hold, use, occupy and enjoy the whole self-contained basement and shops G, H, I and J on the ground floor of [the Building] (including the mezzanine floors above each of the said shops and the driveway serving the basement), which were more particularly shown and coloured pink on the plan appended to the Assignment.”

B9.   The Defendant’s Assertion of rights against the plaintiff in respect of the Disputed Area

29.  By a letter dated 30 April 2012, the defendant asserted that the Disputed Area formed a “common space” of the Building and demanded for the plaintiff’s return of the Disputed Area to the defendant, as well as for the removal of the Gate installed at the Disputed Area. 

30.  On 2 August 2012, representatives of the plaintiff met with the Chairman of the defendant where the plaintiff rejected the defendant’s assertions and grounds of complaint.

31.  On 5 June 2013, the plaintiff leased the P Premises (including the Disputed Area) to Chow Tai Fook.

32.  On 17 June 2013, Chow Tai Fook commenced installation of an air-conditioning unit in the Disputed Area.

33.  On 18 June 2013, Chow Tai Fook received a letter from the Buildings Department notifying the plaintiff that:

(1)  the Buildings Department had received a complaint relating to building works at the P Premises;

(2)  a consultant had been engaged to carry out inspection;

(3)  it was not yet confirmed whether the building works under construction had obtained prior approval and consent in accordance with the provisions of the Buildings Ordinance, and the plaintiff was asked to provide related information for the Building Department’s further investigation and verification of the status of the works.

34.  By a letter dated 18 June 2013, the defendant again demanded that the plaintiff should vacate the Disputed Area and to remove the Gate within 3 days of the letter.

35.  By a letter dated 19 June 2013, the plaintiff reiterated its reasons and conveyed its stance that the Disputed Area was assigned to the plaintiff pursuant to the 1974 Assignment.  The plaintiff further warned that any removal or dismantling of any fixture of the Disputed Area would constitute trespass and criminal damage.

36.  By two letters dated 20 June 2013, the defendant replied to the plaintiff’s letter dated 19 June 2013 and issued an ultimatum for the plaintiff to dismantle the Gate, alleging that failure to do so would result in the defendant dismantling it at the cost of the plaintiff.

37.  On 27 June 2013, in order to avoid further enquiry from the Building Department and to commence business as soon as possible, Chow Tai Fook relocated the air-conditioning unit and put up a partitioning wall between the Disputed Area and the rest of the mezzanine floor directly above Shop G.

38.  On or around 6 July 2013, Chow Tai Fook had the soft opening of its retail shop located at the P Premises.

39.  On 17 July 2013, the Gate was found to be dismantled and removed.

40.  By a letter dated 5 September 2013, Messrs Wilkinson & Grist (“W&G”) on behalf of the plaintiff demanded the defendant to admit the plaintiff’s title to the Disputed Area and enquired if the Gate was dismantled and removed by the defendant.

41.  On 17 September 2013, the plaintiff discovered that a wooden door (the “Door”) was installed at the entrance of the Disputed Area and was locked, such that the plaintiff/Chow Tai Fook were denied access to the disputed Area.

42.  By a letter dated 23 September 2013, W&G on behalf of the plaintiff demanded the defendant to confirm that it dismantled the Gate and installed the Door and to admit liability for trespass and conversion.

43.  By letter dated 24 September 2013, the defendant asserted that it had repossessed the Disputed Area, and admitted to installing a Door and taking away the Gate.

44.  By a letter dated 21 January 2014, the plaintiff received a letter from Messrs David SK Au & Associate Limited, enclosing a Building Order ordering the plaintiff to demolish certain unauthorized building works in relation to the external wall and window at M/F, which included the exterior wall of the Disputed Area.  The purported unauthorized building works were not carried out by the plaintiff. These unauthorised building works were carried out after the defendant had started occupying the Disputed Area in July 2013. 

45.  By a letter dated 17 February 2014, W&G on behalf of the plaintiff wrote to the defendant demanding it to carry out the necessary works to comply with the aforesaid Building Order, or to allow the plaintiff access to the Disputed Area to carry out all necessary works to comply with the Order.  This demand was ignored by the defendant.

C.  THE PARTIES’ RESPECTIVE CASES

C1.   The Plaintiff’s Case

46.  By its Statement of Claim dated 13 November 2013, the plaintiff claims that it is the legal and beneficial owner of the Disputed Area, by virtue of:

(1)  The 1974 Assignment which expressly included the Disputed Area as the subject matter of the assignment; and

(2)  The fact that in any event, the plaintiff has been in continuous and exclusive possession of the Disputed Area and had the intention to possess the Disputed Area to the exclusion of all other persons since the date of the 1974 Assignment for more than 20 years, and as such, has acquired title by adverse possession under the Limitation Ordinance (Cap 347).

47.  As such, the plaintiff claims against the defendant for, inter alia, (1) a declaration that the plaintiff is the legal and beneficial owner of the Disputed Area; (2) an order that the defendant forthwith dismantle the Door and deliver vacant possession to the plaintiff; and (3) damages suffered for the defendant’s trespass and breach of DMC.

C2.   The Defendant’s Case

48.  By its Re-Amended Defence and Counterclaim, the defendant claims that the Disputed Area is a common part of the Building for the common use and enjoyment of all of the owners of the Building.

49.  As to the 1974 Assignment, the defendant admits that (i) the plaintiff was the registered owner of the P Premises; and (ii) the Disputed Area was coloured pink on the Assignment Floor Plan.  However, the defendant advances 3 alternative contentions:

(1)  The Disputed Area was at all material times designed, built, and designated as part of the common parts of the Building by Hing Wan and was intended for use and benefit of all the owners of the Building, and as such, Hing Wan was not entitled to assign the Disputed Area to the plaintiff under the 1974 Assignment.

(2)  The Disputed Area was incapable of being the subject matter of the assignment on the ground that no interest in land has been allotted to it under the frameworks of the DMC.

(3)  The Disputed Area does not form part of the P Premises, which only relates to the mezzanine floor above Shop G.

50.  As to the plaintiff’s case of exclusive possession, the defendant claims inter alia (i) the Disputed Area was a common part within the meaning of section 2 of the Building Management Ordinance (Cap 344) (“BMO”); and (ii) under section 34I of the BMO, no person is entitled to convert a common part of the Building to his own use.

51.  By its Counterclaim, the defendant claims that, since a date unknown to the defendant, by occupying the Disputed Area which was a common part, the plaintiff is in breach of the DMC and/or section 34I of the BMO for unreasonable interference with the common use of the Disputed Area, and claims against the plaintiff for loss and damages suffered.

D.  ISSUES AT TRIAL

52.  As identified in the plaintiff’s written opening and the parties’ agreed list of issues, this court has to decide the following questions: –

(1)  Did Hing Wan reserve to itself the right to exclusive possession of the Disputed Area in April 1966?

(2)  If so, did Hing Wan assign the Disputed Area to the plaintiff in March 1974?

(3)  If the plaintiff did not become the legal or equitable owner of the Disputed Area in March 1974, did the plaintiff acquire possessory title of the Disputed Area by adverse possession?

(4)  What relief, if any, is the plaintiff entitled to in these proceedings?

E.  CREDIBILITY OF WITNESSES

E1.  Factual Witnesses

53.  Chan Man Kong (“Chan”) gave clear and consistent evidence for the plaintiff.  He fairly conceded on issues on which he had no personal knowledge.  I agree that his evidence was not in any way shaken in cross-examination.  His evidence on the plaintiff’s exclusive possession and use of the Disputed Area, and the events from 2012 to 2014, is accepted by the court.

54.  Harry Chan is the Chairman of the defendant and gave evidence for the defendant.  I agree that his evidence was highly unreliable for the reasons submitted by the plaintiff. 

(1)  In paragraph 10 of his witness statement, he asserted that the partition wall separating the Disputed Area and the adjacent unit above Shop G was demolished after the 1974 Assignment.

(2)  When asked as to the basis of this assertion, he claimed that this was based on (a) observation, and (b) a letter from the Buildings Department which was posted to the door of the Disputed Area in 2013. 

(3)  According to the plaintiff’s unchallenged evidence, the partition wall was already no longer in existence after the termination of Madam Cheng’s tenancy in 1974.  Plainly, Harry Chan could not have personally observed the demolition of the partition wall given that he only started residing in the Building in 1996.  Moreover, the June 2013 Letter posted by the Buildings Department on the door/Gate of the Disputed Area says nothing about when the partition wall was demolished.

(4)  When Harry Chan was asked by the court to explain how he would know whether the partition wall was demolished before or after 1974, he gave an absurd answer.

“J: You don’t seem to understand the question- how do you know it was done after 1974 as opposed to before 1974. Why do you say that?

A: May have been demolished before 1974. But obvious it must have been demolished by 1974 when the Government posted a letter on the door.

J: Are you saying that the government posted the letter on the door in 1974?

A:  Must be.”

(5)  Harry Chan also appeared evasive in relation to his/the defendant’s involvement in the dismantling of the plaintiff’s Gate.  Despite issuing (a) an ultimatum letter for the dismantling of the Gate on 20 June 2013, and (b) his letter dated 24 September 2013 admitting that the defendant “repossessed the Disputed Area” and had taken away the Gate as trash, when asked whether the defendant was responsible for dismantling the Gate, Harry Chan appeared evasive and reluctant to admit that the defendant was responsible for its dismantling.

55.  Tse Kam Cheong also gave evidence for the defendant.  The following examples demonstrate how unreliable his evidence was.  I reject his evidence in its entirety for the reasons submitted by the plaintiff.

(1)  He gave inconsistent evidence as to when he first became involved in the management of the Building.

(a)  In his oral testimony, he claimed that he was a committee member of the management committee in late 1965 or 1966.

(b)  However, in paragraph 3 of his affirmation, he stated that he became a committee member in 1970.  Similar evidence was given in paragraph 2 of his witness statement.

(c)  He was given the opportunity to explain the inconsistency in cross-examination and was unable to do so.  Eventually, he admitted that he was not very sure as to when he first became a member of the management committee.

(2)  During his cross-examination, he asserted for the first time that, between 1966 to 1974, the Disputed Area was used for an additional purpose of holding management committee meetings.

(a)  In paragraph 3 of his witness statement, he positively asserted that the Disputed Area was used for two specific purposes, namely storage of janitorial things and installation of electrical cabling/wiring switch circuit boards for the building’s common use.

(b)  These two specific uses were also the defendant’s only pleaded case.

(c)  He was unable to satisfactorily explain to the court why he never mentioned about the additional purpose in his witness statement.

(3)  In his cross-examination, he asserted for the first time that the Disputed Area contained the main riser cable (which supplied electricity to all floors of the Building).

(a)  This is different from “installation of some electrical cabling/wiring switch circuit boards” as asserted in paragraph 3 of his witness statement.

(b)  This has never been pleaded by the defendant, or mentioned by anyone on behalf of the defendant.

(c)  In his examination-in-chief, the plaintiff’s electrical engineering expert Dr Paul Li gave evidence that it was unlikely that the main riser cable would be placed in the Disputed Area given the physical location of the Disputed Area.  Dr Li’s evidence was not challenged in cross-examination.

E2.  Expert Witnesses

56.  Dr Paul Li gave electrical engineering evidence as the plaintiff’s expert. 

(1)  He gave consistent evidence, and very fairly limited his answers to his observations and professional expertise. 

(2)  His opinion is that it is unlikely that the Disputed Area had been used as an electrical room to serve the common areas of the Buildings.  Such an opinion is partly based on the fact that there were 2 electrical rooms and some switchgears on the corridor wall on the mezzanine floor such that it would be highly unlikely that some switchgears would be installed inside the Disputed Area to serve the common areas.  This reasoning was not challenged in cross-examination.  I accept his opinion.

57.  Kenneth Kan was the plaintiff’s architectural expert. He gave answers in a straight-forward manner and limited his answers to his professional expertise and observations.  During his cross-examination, he repeatedly explained that questions posed to him went beyond his professional expertise, and it was not for him to speculate the intention of the designer. His opinions as stated in his reports are reasonable and are accepted by the court.

58.  Choong Yin Lee was the defendant’s architectural expert. For the reasons submitted by the plaintiff, I reject his opinions on the following issues.

(1)  The partition wall was a 4.5-inch reinforced concrete (“RC”) wall and his consequential opinions based on this.

(a)  In paragraph 18 of his Report, he claimed that the partition wall was “shown” to be of RC material.  He further built on that alleged observation and alleged that there was a general practice in 1966 that internal partitions between units would be 9-inch brick walls, whereas internal partitions between common corridors and common parts would be 4.5-inch RC walls.

(b)  However, when asked in cross-examination on what basis he could claim that the partition wall was made of RC, he claimed that he could observe the same based on drawing convention in the plans, and that he could observe “dots” among the Partition Wall on the 1966 Approved Building Plan.  However, this was plainly not evident: (i) the whole plan was already dotted based on unsatisfactory quality of the photocopying/original document; (ii) the partition wall was denoted by two extremely slim lines and it is impossible to discern whether there were additional dots within the two lines; (iii) as to the areas clearly marked with dots which are discernible from the approved building plan, such only appears to be in relation to columns, but not walls.

(c)  He then attempted to explain that he based his assumption (that the wall would be of RC material) on certain slenderness and rigidity ratio based on the height of the ceiling floor.  He was, however, unable to point to any material to support such an assumption.

(d)  In any event, Kenneth Kan gave evidence that there were no 4.5-inch RC walls, and that this was never used in his professional experience in the 1960s. Such evidence directly contradicts Choong’s evidence about the alleged general practice in 1966.

(2)  The Disputed Area is an independent fire compartment and prior statutory approval must be obtained to knock down one of the fire resisting walls of the Disputed Area.

(a)  In cross-examination, he was asked to identify the legislation requiring such an approval to be obtained.  Initially, he relied on the Buildings Ordinance but was unable to identify the relevant provision.

(b)  He then mentioned the Building Regulations.  Relevant parts of the Building (Construction) Regulations of 1956 were then shown to him and he agreed that he had regulation 97 in mind when he referred to statutory approval in paragraph 4.1(2)(e) of the Joint Report.  He further agreed that he treated the Disputed Areas as a “compartment of a building” for the purpose of regulation 97.

(c)  Having been shown the statutory definition of “compartment of a building” in regulation 94 and Table XVI in regulation 96, he retracted his earlier evidence that regulation 97 was the applicable provision.

(d)  Even though he referred to the Buildings Department’s Code of Practice in paragraph 4.2(2)(e) of the Joint Report, he was unable to tell the court which version of the Code he consulted.  He was also not able to say whether the relevant Code of Practice on fire resisting construction was already in force in March 1966.

F.  DID HING WAN RESERVE TO ITSELF THE RIGHT TO EXCLUSIVE POSSESSION OF THE DISPUTED AREA IN APRIL 1966?

F1.  Construction of the Relevant Documents in April 1966

59.  Whether Hing Wan reserved to itself the right to exclusive possession of the Disputed Area is a question to be determined from a proper construction of the relevant contemporaneous documents in April 1966. 

F1a.  The relevant principles on construction

60.  The relevant legal principles are uncontroversial.  An interpretation of a document involves the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at at the time of the document.  See Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279 at 296D-E (Lord Hoffmann NPJ); and Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351 at §15 (Ma CJ).

61.  Further, to ascertain the intention of the parties, the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties’ relationship and all the relevant facts surrounding the transaction as far as known to the parties.  To ascertain the parties’ intentions, the court does not inquire into the subjective states of mind but makes an objective judgment based on the materials already identified.  See Bank of Credit and Commerce International SA v Ali [2002] AC 251 at §8 (Lord Bingham) as approved by Mortimer NPJ in Marble Holdings Ltd v Yatin Development Ltd (2008) 11 HKCFAR 222 at §19.

62.  Post-agreement conduct and statement of the parties are not generally relevant: Marble Holdings Ltd v Yatin Development Ltd, ibid at §22 (Mortimer NPJ).

63.  There is no dispute between the parties in relation to the above principles.

64.  During April 1966, three important documents were executed by Hing Wan, namely (1) the 1966 First Assignment executed on 15 April 1966; (2) the DMC executed on 23 April 1966; and (3) the April 1966 Assignment dated 25 April 1966. 

F1b.  The 1966 First Assignment

65.  Under the 1966 First Assignment (which is strictly a Memorial), Hing Wan assigned to the First Owner one equal undivided 353rd share in the land.  Without more, the ownership of this one undivided share would entitle the First Owner to exert rights of possession to every part of the Building in common with her co-owners.  This is what is meant by the expression “unity of possession”.  See Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279 at 290E-F (Litton PJ).

66.  Because of unity of possession, the First Owner under the 1966 First Assignment had to grant to Hing Wan (the developer) all the parts in the Building which were intended for Hing Wan’s exclusive possession and were not intended to be common parts.  This would ensure that the First Owner would not be entitled to possession of all the other parts of the Building other than Flat I on the 13^th Floor.  This regrant[1] of areas which were intended for Hing Wan’s exclusive possession and were not intended to be common parts can be seen from the following words in the 1966 First Assignment (“the Regrant Clause”):

“… (b) the [First Owner] in consideration of the grant thereinbefore and hereinbefore contained THEREBY GRANT unto [Hing Wan] the Confirmor and others the co-owners other than the [First Owner] from time to time of the said premises (if any) full right and privilege to hold use occupy and enjoy ALL THOSE remaining self-contained portions flats basements mezzanine floors and shops including the open yards (if any) thereof the exterior walls of the said buildings the flat roofs and other roofs thereof and the driveway and the loading and unloading spaces in the basement thereof and the transformer room of the said buildings and other portions (not otherwise intended to be used for the common enjoyment of the co-owners and co-occupiers for the time being of the said messuages or buildings) save and except the said “Flat I” on the Thirteenth Floor…” (emphasis added)

67.  I agree that under the Regrant Clause in the 1966 First Assignment, the First Owner regranted to Hing Wan, amongst other things, (1) the entirety of the mezzanine floor and (2) all the remaining self-contained portions in the Building.  The Disputed Area is a space on the mezzanine floor, and was a self-contained portion at that time. Therefore, Hing Wan had specifically reserved to itself (to the exclusion of the First Owner) the full right and privilege to exclusive possession of the Disputed Area.

68.  I further agree with plaintiff’s submission that the words in parenthesis in the Regrant Clause (namely “not otherwise intended to be used for the common enjoyment of the co-owners and co-occupiers for the time being of the said messuages or buildings”) are only to qualify “other portions”, but not each of the areas expressly identified in the Regrant Clause.

(1)  The purpose and context of the Regrant Clause is plain: it was to enable Hing Wan to reserve to itself all areas which were not common parts.  Hing Wan would naturally want to ensure certainty and therefore spelt out in the Regrant Clause as far as possible all the areas over which it was to be regranted exclusive possession by the First Owner.  This was done by specifically mentioning a long list of areas in the Regrant Clause.  There would be common parts in the Building which would not be regranted to Hing Wan.

(2)  The defendant’s contended construction that the words in parenthesis were intended to qualify each of the areas before the words “other portions” ignores the purpose of the Regrant Clause.  I agree that this construction is incorrect.

(a)  If the defendant’s construction were correct, it would mean that it is necessary for one to first define what was or was not part of the common areas as at the date of the 1966 First Assignment before being able to know which area(s) had been expressly reserved by Hing Wan.  That would lead to a completely uncertain result as common parts of the Building were not defined at the time when the 1966 First Assignment was executed.  The parties to the 1966 First Assignment could not have intended this result. 

(b)  Further, if the defendant’s construction were correct, it would mean that the Regrant Clause simply had the effect of regranting to Hing Wan everything in the Building which were not common parts.  That result could have been achieved by much simpler drafting, and would mean that the long list of areas expressly specified in the Regrant Clause would be surplusage and have no real meaning and effect.  The parties to the 1966 First Assignment could not have intended this result.

(c)  Moreover, having regard to the contents of the entire Regrant Clause, the words in parenthesis cannot be sensibly used to qualify each of the areas preceding the words “other portions”.  In particular, they cannot be used to qualify “flats”, “the driveway” and “the transformer room”.

(i)  The word “flats” was likely to be used to refer to an apartment for domestic use on the 3/F to 23/F of the Building.  This was how the word was used to described the area to which the First Owner was granted exclusive possession (ie Flat I on the 13^th Floor).  It would be non-sensical to suggest the flats for domestic use (in respect of which exclusive possession would be conferred) would somehow be “intended to be used for the common enjoyment of the co-owners and co-occupiers”.

(ii)  There is only one “driveway” in the Building, leading from G/F to the basement.  It would make no sense to say in the Regrant Clause that the driveway was regranted to Hing Wan, but that the regrant was immediately taken away because it was “intended to be used for the common enjoyment of the co-owners and co-occupiers”.

(iii)  The same logic applies to the “transformer room”.[2]

(3)  Contrary to the defendant’s submission, there is no absurdity to construe the words in parenthesis as qualifying “other portions” only. 

(a)  The defendant’s argument is that if the entirety of the mezzanine floor was regranted to Hing Wan under the Regrant Clause, there would not be any common parts on the mezzanine floor, which would be an absurd result.

(b)  One cannot derive from any of the 1966 plans what must or must not be common parts of the Building. For example, one cannot just look at the mezzanine floor plans, say that the corridors and staircases must be common parts so as to enable co-owners to have access to certain places, and contend that the plaintiff’s construction of the Regrant Clause is absurd.  It is important to note that the words “RIGHT OF WAY” were printed on the 1966 mezzanine floor plans along the corridors and staircases, suggesting that easements were intended to be conferred in respect of such areas.  As Lord Hoffmann NPJ explained at 297B-F in Jumbo King, the developer could have exclusive possession of areas such as lifts, staircase and passages subject to quasi-easements granted to the other co-owners.

69.  The reservation of the right to exclusive possession of other areas in the building by the developer to itself was expressly approved by the CFA in the case of Jumbo King. 

(1)  Being the owner of 352/353^rd shares in the land and building and entitled to possession of the entire Building other than the part allotted to the First Owner, Hing Wan could do with the Building as it pleased.  See 287I of Jumbo King.

(2)  The allocation of space within the non-domestic portion on the mezzanine floor was of no conceivable interest to the First Owner.  See 288D of Jumbo King.

(3)  It would be far-fetched to suggest that Hing Wan and the First Owner intended that the right to occupy those spaces in the non-domestic portions of the Building, including the Disputed Area on the mezzanine floor, should be shared as between Hing Wan and the First Owner of a domestic unit on the 13^th Floor.  See 290J-291B of Jumbo King.

(4)  The factual background to the 1966 First Assignment is that the Building was new and consisted of 2 parts, namely non-domestic use on G/F to 2/F and domestic use on 3/F to 23/F: see OP.  It would make no practical sense for the First Owner on the 13^th Floor to have rights of occupation in the non-domestic parts of the Building.  See 296J-297B of Jumbo King.

F1c.   The DMC

70.  The DMC was executed by Hing Wan and the First Owner 8 days after the 1966 First Assignment was executed, ie 23 April 1966.  It does not define in any way the common parts of the Building.

71.  Recital 3 of the DMC.

(1)  This recital provides “For the purposes of the sale of shops basements apartments and other portions in the said building, the said premises and building have been notionally divided into 353 equal undivided parts or shares and one or more of such shares is intended to be assigned to the Purchaser or Purchasers thereof together with the rights to the exclusive use occupation and enjoyment of one or more of the said shops basements or apartments or any other portions as shown on the assignment plans to be annexed to the assignments thereof.” (Emphasis added)

(2)  Recital 3 recites Hing Wan’s intention to assign undivided shares and other portions of the Building to other purchasers.  Specifically, and importantly, it states that the parts of the Building which Hing Wan intended to assign to subsequent purchasers in the future would be shown on the future assignment plans. 

(3)  A function of recitals is to express in general terms the intention with which the agreement was made.  A recital may be taken as encapsulating the factual matrix which the contract is to be interpreted.  See Sir Kim Lewison, The Interpretation of Contracts (6^th ed, 2015) §§10.10 – 10.11.

(4)  Therefore, it makes no difference that Hing Wan’s clear and unambiguous intention was set out in the recital of the DMC, rather than in the operative parts thereof.

72.  Clause 1.

(1)  This clause provides “[Hing Wan] shall for all times … have the full right and privilege to hold use occupy and enjoy to the exclusion of the [First Owner] all those shops basements apartments other portions in the said building (save and except only the said Flat “I” on the Thirteenth Floor thereof assigned to the [First Owner]) together with the appurtenances thereto and the entire rents and profits thereof and the exterior walls flat roofs and other roofs and the drive way (if any) and the loading and unloading spaces (if any) and car parking spaces (if any) an also the transformer room of the said premises.”

(2)  Clause 1 is not in identical terms to the Regrant Clause in the 1966 First Assignment.  Be that as it may, I agree that clause 1 should be construed in such a way so that it does not achieve a result which is inconsistent with the Regrant Clause.  The 1966 First Assignment is mentioned in Recital 4 of the DMC and the Regrant Clause therein may therefore be taken as an aid to interpreting clause 1 of the DMC: see Lewison §10.11.

(3)  The Disputed Area can clearly be considered as part of the “other portions in the said building” for the purpose of clause 1.  Following from the construction of the Regrant Clause as set out above, Hing Wan had similarly reserved to itself (to the exclusion of the First Owner) the full right and privilege to exclusive possession of the Disputed Area under clause 1 of the DMC.

73.  As submitted by the plaintiff, I agree the statutory definition of “common parts” in the Multi-storey Buildings (Owners Incorporation) Ordinance (Cap 344) (now known as the Building Management Ordinance) has no application to the DMC for this Building.

(1)  The DMC was executed on 23 April 1966.  Cap 344 was enacted on 19 June 1970. 

(2)  In Hollywood Shopping Centre Owners Committee Ltd v Wing Wah Building Mongkok Kowloon (IO) [2011] 4 HKLRD 623, Kwan JA (as she then was) at §34 did not question counsel’s acceptance that the statutory definition of “common parts” would have no application to a DMC executed before the enactment of Cap 344.

F1d.  The April 1966 Assignment

74.  In the April 1966 Assignment, which was roughly contemporaneous with the DMC, Hing Wan assigned various units in the Building to a company called Ruby Enterprises Ltd.  There was a clause similar to the Regrant Clause in the April 1966 Assignment. Adopting the same reasoning as those set out above, Hing Wan had reserved to itself the right to exclusive possession of the Disputed Area under the April 1966 Assignment.

75.  It should also be noted that the Disputed Area was not marked “Bloom store (non-domestic)” on the assignment plans attached to the April 1966 Assignment.

76.  From the above analysis of the three contemporaneous documents made in April 1966, I hold that Hing Wan had clearly reserved to itself the right to exclusive possession of the space occupied by the Disputed Area.  Therefore, it also follows that Hing Wan did not intend the Disputed Area to be common parts of the Building.

G.  IF SO, DID HING WAN INTEND TO ASSIGN THE DISPUTED AREA TO THE PLAINTIFF IN MARCH 1974?

G1.  The 1974 Assignment

77.  Under the 1974 Assignment, Hing Wan assigned to the plaintiff 11 equal undivided 353^rd parts or shares in the land and building and granted the plaintiff exclusive possession of the areas shown and coloured pink on the assignment plans.

78.  It can be noted from the mezzanine floor assignment plan that:

(1)  the Disputed Area was coloured pink, suggesting clearly that it was intended to be assigned under the 1974 Assignment;

(2)  there was no partition wall between the Disputed Area and the unit adjacent to it marked “G”; and

(3)  the entirety of the area marked “G” (including the Disputed Area) was stated to have an area of 552.4 square feet, showing an increase of 80 square feet from the equivalent space as shown in the April 1966 Floor Plan, suggesting that Hing Wan had deliberately included the Disputed Area as part of Shop G in the 1974 Assignment.

79.  I agree that on a proper construction of the 1974 Assignment, it is plain that Hing Wan intended to assign, and did assign the Disputed Area to the plaintiff.  Specifically, Hing Wan granted to the plaintiff full right to hold, use and occupy the assigned areas (including the Disputed Area) to the exclusion of Hing Wan and other co-owners to the intent that the plaintiff would have in all respects the rights of an absolute owner of the assigned areas.

G2.  Matters Relied Upon by The Defendant

80.  The defendant has relied on various matters to contend that Hing Wan could not confer title of the Disputed Area on the plaintiff under the 1974 Assignment.  The defendant’s contentions are rejected for the reasons set out below.

81.  First, the defendant submits that a space in a building which has not been allocated any share cannot be assigned.

(1)  The same point was taken in Jumbo King but was rejected by the court: see 289G-290H (Litton PJ) and 297H-298I (Lord Hoffmann NPJ).

(2)  In the present case, on the true construction of the DMC, Hing Wan had exclusive possession to the Disputed Area immediately before the execution of the 1974 Assignment.  There was no conceptual objection for Hing Wan to assign the right to occupy the Disputed Area to the plaintiff together with any undivided shares, even if the Disputed Area had not previously been attached to any particular number of the developer’s undivided shares. 

(3)  Under the 1974 Assignment, Hing Wan paired 11 of its undivided shares to the coloured parts in the 1974 Assignment plans, which included the Disputed Area.  According to the Court of Final Appeal in Jumbo King, this assignment would be perfectly valid.

82.  Second, the defendant submits that clauses 13 and 14(b) of the DMC prevent the Disputed Area from being the subject matter of ownership.

(1)  Clause 13.

(a)  This clause provides that “[the] right to the exclusive use occupation and enjoyment of any shop basement or apartment or other portion shall not be sold, assigned, mortgaged, charged, leased or otherwise dealt with separately from the undivided share or shares with which the same is held”.

(b)  As submitted by the plaintiff, on its proper construction, clause 13 provides that a space in the Building cannot be alienated separately from the undivided share or shares with which the same is held.  For example, X owns the basement and the basement is held with 6 undivided shares.  The effect of clause 13 is that X cannot alienate the basement but not assign the entirety of the 6 undivided shares.  Therefore, if X purports to sell the basement but only seeks to assign 4 undivided shares, clause 13 would be engaged and would prohibit X from doing so.

(c)  However, clause 13 says nothing to prohibit the alienation of a space in the Building which has not previously been allotted any undivided share(s).

(d)  In the present case, there could be the following two alternative scenarios, both of which would lead to the same conclusion.

(i)  1 undivided share was initially allocated to Unit G (on G/F and M/F): see the Control Card. Subsequently, Hing Wan changed its mind and wished to pair the Disputed Area with Unit G (on G/F and M/F).  Hing Wan was able to do this because the Disputed Area had been reserved by it as the developer under the 1966 First Assignment and the DMC in 1966.  The pairing was effected under the 1974 Assignment.

(ii)  The 1 undivided share allocated to Unit G (on G/F and M/F) as shown in the Control Card already included the Disputed Area.  It was provided in Recital (3) of the DMC that the areas to be attached to the undivided shares would be coloured Pink in future assignment plans.  Under the 1974 Assignment, Hing Wan paired 11 of its undivided shares to the coloured parts in the 1974 Assignment plans, which included the Disputed Area.

(e)  The analyses articulated in (d) are supported by Jumbo King and Recital 3 of the DMC. 

(f)  Contrary to the defendant’s submission, it does not require any variation of the DMC for this analysis to be valid.  Clause 5 of the DMC expressly provides that every owner of any undivided shares may alienate his interest in the lot and building together with the right to occupy any portion held with the undivided shares without reference to the other owners.  Once Hing Wan had paired 11 of its undivided shares with the pink portions on the 1974 assignment plans, it could alienate them without reference to the other co-owners.  See also Sheenip Industries Ltd v Champion Billion Development Ltd (unreported, HCMP 1390/1995, 4 July 1995) pp 12-15 (DHCJ Maria Yuen, as she then was).

(2)  Clause 14(b).

(a)  This clause provides the words “owner” or “owners” in the DMC shall include “the person or persons for the time being in whom the legal estate in any undivided share in the said premises and building is vested …”.

(b)  It is unclear how this inclusive definition assists the defendant.  All clause 14(b) says is that as long as at least one undivided share is vested in a person, that person would be treated as an owner for the purpose of the DMC. 

(c)  Immediately before the 1974 Assignment, Hing Wan had paired 11 of its undivided shares with the pink portions on the 1974 assignment plans.  Under the 1974 Assignment, Hing Wan assigned those pink portions held with the 11 undivided shares to the plaintiff.  Under clause 5 of the DMC, Hing Wan was the “owner” and could effect the assignment without reference to the other co-owners.

83.  Third, the defendant places considerable reliance on the 1966 Approved Building Plan to contend that the “design concept” expressed therein would somehow suggest that the Disputed Area was not the subject matter of the sale by Hing Wan to the plaintiff. However, as submitted by the plaintiff:

(1)  The 1966 Approved Building Plan cannot show how the developer wishes to sell the building even at the time the plans were drawn.  For example, corridors may be shown in the building plans for a commercial podium.  But the developer might not have intended to sell the commercial podium floor at all and the corridors can at any time be blocked by the developer for other use. 

(2)  In the 1966 Approved Building Plan, the Disputed Area was marked “Bloom store (non-domestic)”.  Even if one were to look at such plans, it is not possible to say that Hing Wan had no intention to sell the Disputed Area as at January 1966.

(3)  Whatever meaning maybe attached to the words “Bloom store”, it is right to point out that the word “non-domestic” also appears on the plan, and that there are windows at the Disputed Area.  It is reasonable to think that the description “non-domestic” was used to earmark the Disputed Area for non-domestic use, similar to other type of non-domestic use like “office for shop”.  Further, the use of the description “non-domestic” for the Disputed Area should be contrasted with the lack of such description for other spaces on the mezzanine floor (for example, “Store”).  Seen in this way, it would not be reasonable to conclude with any degree of certainty that the Disputed Area was not intended by the developer to be for sale as at January 1966.

(4)  As to the defendant’s contentions based on the allegation that the partition wall was a 4.5-inch RC wall, I reject the same for the reasons set out at paragraph 58(1) above.  Further, according to the plaintiff’s expert Kenneth Kan, the method of construction of the non-structural partition wall, be it in brickwork or RC, is irrelevant.  To demolish a 4.5-inch non-structural RC wall should be no more difficult than knocking down a 9-inch thick brick wall, except for the need to use electrical mechanical equipment to break the concrete and cut the steel bars, instead of hand tools.  

84.  Fourth, the defendant relies on the sale brochure to suggest that the Disputed Area was not intended to be the subject matter of sale.  However, 

(1)  There is no evidence on when the sale brochure was prepared by Hing Wan.  However, given that Flat 13I was already sold pursuant to an agreement for sale and purchase dated 23 August 1962, it is reasonable to infer that the sale brochure might already have been in existence as early as 1962.

(2)  Even if, which is not accepted, Hing Wan did not intend to sell the Disputed Area at the time when the sale brochure came into existence in 1962, there was nothing from stopping Hing Wan from changing its mind afterwards.

(3)  In any event, as pointed out by the court during the defendant’s oral opening, the sale brochure in relation to the mezzanine floor contained obvious errors (for example, it depicts the mezzanine floor having a driveway) and cannot seriously represent the developer’s intention as to the usage of the spaces on the mezzanine floor even at the time.

(4)  I accept the plaintiff’s submission that the court should attach no or minimal weight to the sale brochure to ascertain the question of whether the Disputed Area was ever intended to be sold by Hing Wan.

85.  Fifth, the defendant relies on the control card and submits that the absence of reference to the Disputed Area would suggest that Hing Wan did not intend for it to be sold. However, as submitted by the plaintiff:

(1)  The control card is not a title document and is not conclusive to show which areas have or have not been reserved by the developer.  Put in another way, the absence of reference to a space in the control card does not mean that the developer (a) has not reserved the space for itself, or (b) cannot pair that space with other undivided share(s) for the purpose of sale.

(2)  The above can be demonstrated by the following.  Flat roof(s) was not mentioned in the control card and was therefore not allocated any undivided share(s) therein.  However, the flat roofs in the Building were expressly reserved by Hing Wan to itself in the 1966 First Assignment and the DMC.  Further, Hing Wan assigned several flats on the 3^rd Floor including flat roofs under the April 1966 Assignment.  No one has ever taken issue with Hing Wan’s ability to assign the flat roofs even though such flat roofs were apparently not included in the allocation of any undivided shares in the control card.

86.  For the above reasons submitted by the plaintiff, I reject all of above matters as relied upon by the defendant.

H.  IF THE PLAINTIFF DID NOT BECOME THE LEGAL OR EQUITABLE OWNER OF THE DISPUTED AREA IN MARCH 1974, DID THE PLAINTIFF ACUQIRE POSSESSORY TITLE OF THE DISPUTED AREA BY ADVERSE POSSESSION?

87.  In view of my finding that the Disputed Area was not common parts of the Building; that Hing Wan had clearly reserved to itself the right to exclusive possession of the space occupied by the Disputed Area; and that under the 1974 Assignment, Hing Wan intended to assign, and did assign the Disputed Area to the plaintiff, it is not necessary for me to address the alternative case put forward by the plaintiff based on the doctrine of adverse possession.

I.  RELIEF

88.  In the present case, by a Consent Order dated 8 June 2016, the parties have agreed to the value of mesne profits of the Disputed Area as follows:

89.  The parties have also agreed to adopt HK$4,000 per month as the amount of mesne profits from 1 January 2019 to the date of judgment.

90.  The plaintiff relies on 3 causes of action to seek compensation in respect of its loss of the Gate installed at the Disputed Area: namely, trespass to land, breach of the DMC and nuisance.  To compensate the plaintiff for damage to real property, the guiding principle is whether the plaintiff has suffered loss, and if so, what measure would best achieve complete restitution (so far as monetary compensation is capable).  An award based on the cost of reinstating the land can be made where expenditure on repairs or rebuilding is reasonable in all the circumstances. See: D Elvin QC & J Karas, Unlawful Interference with Land (2^nd ed, 2002) §§4-003 to 4-006 (on damages for trespass); §3-063 (on damages on breach of covenant) & §§4-031 to 4-032 (on damages for nuisance).

91.  As I am satisfied that the Disputed Area was assigned to the plaintiff in March 1974, I would grant the following relief (as set out in the Statement of Claim):

(1)  A declaration that the plaintiff since 5 March 1974 has been, and still is, the legal and beneficial owner of the Disputed Area.

(2)  An order that the defendant do forthwith dismantle and remove the Door and deliver vacant possession of the Disputed Area to the plaintiff.

(3)  Mesne profits from 24 September 2013 as per the rates as agreed between the parties.

(4)  Damages for trespass to the Disputed Area, breach of DMC, and nuisance, being the cost of the dismantled Gate (ie HK$9,000).

(5)  Interest on damages from the date of writ until judgment at the Judgment Rate.

92.  I order that all costs (including all reserved costs) of and occasioned by this action be paid by the defendant, such costs are to be taxed if not agreed with a certificate for two counsel.

93.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

94.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.