WING MING GARMENT FACTORY LTD v. SANWA TRADING (H.K.) LTD

HCA 1805/2016

[2018] HKCFI 2166

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1805 OF 2016

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J U D G M E N T

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Introduction

1.  In this action, the plaintiff (“P”) essentially claims against the defendant (“D”) for possession of a car parking space and mesne profits (at a rate to be assessed) for wrongful occupation thereof from June 2011 until delivery up of possession.

2.  On 9 October 2017, P issued a summons under Order 14 rules 1 and 2 of RHC and the court’s inherent jurisdiction for summary judgment, seeking an order for possession of the car parking space (referred to by P as “Original CPS 2”) and mesne profits, or alternatively an injunction to restrain D from remaining in possession or occupation of the Original CPS 2 (“O14 Summons”).

3.  The key dispute in this case is whether the subject property sold by P to D under an assignment entered into by the parties dated 5 February 1992 (“Assignment”)[1] was the Original CPS 2 or a portion of the common area (referred to by P as “Re-Designated CPS 2”).

4.  P’s managing director Yuen Man Pui (“Yuen”) had filed two affirmations, one in support of O14 Summons and one in reply to the opposing affirmation filed by D’s director, Ng Kwok Wing (“Ng”).

5.  Counsel Mr Bernard Man SC and Mr Justin Lam appeared for P and Mr Jonathan Chang appeared for D.

Background

6.  P was the original developer and registered owner of Wing Ming Industrial Centre (“Building”).  The Building was built in accordance with building plans which were approved by the Building Authority in 1978, and a copy of the approved plan for the ground floor was attached to the statement of claim as “W-1” (“Approved Plan”).  The occupation permit of the Building was issued on 14 November 1978.

7.  The Building has 12 storeys respectively from G/F to the 11/F (Roof Floor) and in addition it has a Basement and an Upper Roof.  There are 11 car parking spaces (“Original CPSs”), and a container parking space, all of which are situated on the ground floor and are indicated on the Approved Plan.

8.  Shortly before 2 March 1991, P notionally divided the Building into 1,323 equal undivided shares, and the shares were allocated among various units and the Original CPSs within the Building. 

9.  On 2 March 1991, P (being the First Owner) entered into a deed of mutual covenant and management agreement (“DMC”) with a purchaser Super Kind Investment Ltd of two floors and two Original CPSs (being the Second Owner)[2], and the then manager of the Building, Essman Construction Company Ltd (“Essman”). Attached to the DMC were various floor plans including in particular, a Ground Floor Plan ( “DMC Plan”)[3].

10.  The following diagram is an extract from the DMC Plan as reproduced in Mr Man’s skeleton arguments indicating the areas marked “2”, “3”, and “4”, being the Original CPSs 2, 3 and 4:

Extract from DMC Plan

11.  As seen above, next to each of the Original CPSs 2, 3 and 4 is an area marked “VOID” (“Void Areas”). 

12.  P then decided to modify the ground floor of the Building.  The modifications carried out by P included: (a) construction of a partition wall (“Partition Wall”) to enclose the Original CPS 2, CPS 3 and CPS 4 for P’s exclusive possession in about January 1992 and (b) re-designating the original Void Areas as car parking areas.  Thus the Void Areas next to the Original CPSs 2, 3 and 4 were re-designated to be car parking spaces, and respectively referred to by P as Re-Designated CPSs 2, 3, 4.  The modifications are illustrated in the following diagram in Mr Man’s skeleton submissions:

Diagram showing Modifications in 1992

13.  It was not disputed that P and D entered into the Assignment for D to purchase at a consideration of HK$400,000 the “Property” stated therein, and the “Property” therein was described as follow[4]:

“All Those five equal undivided 1,373^rd parts or shares of and in All That piece or parcel of ground registered in the Land Office as NEW KOWLLON INLAND LOT NO 5491 And of and in the messuages erections and building thereon now known as ‘WING MING INDUSTRIAL CENTRE (永明工業中心)’ No 15 CHEUNG YUE STREET (‘the Building’) TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT CAR PARKING SPACE NO 2 on the GROUND FLOOR of the Building as shown coloured Green on the Plan hereto annexed. ”

14.  There was a plan attached to the Assignment (“Assignment Plan”) with the original Void Area next to the Original CPS 2 marked “G”[5].   This is the area referred to by P as the Re-designated CPS 2.

15.  Prior to execution of the Assignment, there was a letter dated 28 August 1991 sent by P’s agent Jones Lang Wootton (“JLW”) to D.  The letter was described as an “Offer Letter” therein[6], but the words “Sale + Purchase Agreement” had been added and typed above the letter head of JLW, and the letter was signed by JLW and also P[7]. It is P’s pleaded case that this document was a preliminary sale and purchase agreement (“PSPA”) which was not denied by D.  The copy of the PSPA exhibited by Mr Yuen in his affirmation had a plan attached to it called “Ground Floor Plan”, with an area coloured blue and marked “2”  and with “7.5H MIN 7.5’x15’ MIN” handwritten thereon (“PSPA Plan”)[8]. Next to the area coloured blue, there was vaguely a chop which appeared to be D’s company chop.

16.  It is P’s case that the PSPA Plan and the Assignment Plan expressly identified the “Property” or the subject matter of the Assignment and that the “Property” sold to D was, according to P, the Re-designated CPS2.

17.  In 1993, P had commenced a litigation under HCA 8805/1993 against The Incorporated Owners of the Building (“IO”) as 1^st defendant and New Gas & Company (a firm) (“New Gas”) as 2^nd defendant and Essman was the Third Party (“1993 Action”).  In the 1993 Action, P claimed against the IO for breach of the DMC, and P’s case was that it reserved a right to construct a loft in the air space over the Original CPSs 2, 3, and 4 and that in breach of that right and without authority from P, the IO permitted New Gas in August 1993 to install a fire services pipe which entered into and ran through the length of such air space, and as a result, P’s plans to construct a loft in the air space and to rent out the same were delayed.

18.  It was the case of the IO and New Gas, amongst other things, that there was no encroachment on any air space over the Original CPSs 2, 3 and 4 and that P unilaterally re-designed the common areas, namely the Void Areas marked in the DMC Plan and re-designated the Void Areas as CPS 2, 3 and 4, and P then constructed a loft over the Original CPSs 2, 3 and 4 and also the Re-designated CPSs 2, 3 and 4, and further P also constructed the Partition Wall, and that such works were unlawful, being contrary to the DMC and Conditions of Sale relating to the Building.

19.  It was held by Reyes J in his judgment of 20 December 2007[9] (“Reyes Judgment”) that:

(a)  The Void Areas were actually (and had always been since the date of the DMC) common areas of the Building, ie not owned by P (in the sense that P had no exclusive possession).

(b)  P was not entitled to make use of the Void Areas for parking purposes.

20.  P was ordered, amongst other things, to (a) demolish the Partition Wall and (b) restore the Original CPSs 2, 3 and 4. Reyes Judgment was upheld by the Court of Appeal under a judgment dated 27 June 2008 in CACV 27/2008[10].

21.  After its unsuccessful appeal, in or about June 2010, P demolished the Partition Wall and restored the Original CPSs 2, 3 and 4.

22.  In the present action, it is P’s case that P has never sold or assigned the Original CPS 2 to anybody and that P has retained ownership of the Original CPS2 all along.  It is further P’s case that since at least June 2011, D has been trespassing on the Original CPS2 by regularly stopping or parking its vehicles on, or driving its vehicles onto the Original CPS 2.  As a result, P has been deprived of the use and enjoyment of the Original CPS 2 and it is on this basis that P has issued the O14 Summons.

23.  On the other hand, D denies that the subject property that D had agreed to purchase and P agreed to sell under the PSPA and the Assignment was the Void Area/ Re-designated CPS 2 and it is D’s case that it was the common intention of P and D that P had agreed to sell and D agreed to purchase the Original CPS 2 on the DMC Plan.  D counterclaims for a declaration that it was at all material times and still is the legal and beneficial owner of the Original CPS 2 on the DMC Plan.  D further counterclaims for an order of rectification of the plan attached to the Assignment to depict the correct location of the property conveyed to D, namely the Original CPS 2 on the DMC Plan. D also seeks alternatively, if it is found that the subject property conveyed was the Void Area/ Re-designated CPS 2, then P was in breach of both the PSPA and the Assignment by failing to give good title to the Void Area/Re-designated CPS 2 and D seeks damages to be assessed for loss suffered.

Discussion

The PSPA

24.  According to Ng, D is a a company incorporated in Hong Kong in February 1973 and has been operating the business of design and production of fashionable jewellery and handbags etc for export to Europe and America.  In about 1990, Ng was looking for new premises for D and made enquiries from the management office of the Building.  He was brought to inspect the premises and also the car parking spaces of the Building by some one from JLW.  He then proposed to purchase the 5^th floor and car parking space no 2.

25.  Ng’s evidence was that he signed a preliminary sale and purchase agreement at JLW on 20 August 1981 for the purchase of the 5^th floor but was told by JLW at about that time that for the car parking space no 2, he had to wait as there were some legal problems which required to be resolved. Ng had produced a draft letter dated 22 August 1991 in relation to “Space Marked “2” on the Ground Floor of Wing Ming Industrial Centre” defined to be the “Property” therein (“Draft JLW Letter”)[11].

26.  Although Yuen had generally denied any allegations made by Ng and/or they were irrelevant, Ng’s evidence would appear to indicate that there was physical inspection of the 5^th floor and the car parking space “2” by him and representatives from JLW prior to about 20 August 1991.  As Mr Yuen’s evidence was that the Partition Wall was only constructed in about January 1992, it would appear at the time of Ng’s inspection, the Partition Wall had not been constructed and there was no enclosure of the Original CPSs 2, 3 and 4.

27.  The Draft JLW Letter was clearly marked “Draft” and was not signed, and there were no plans, nor DMC, attached.  However, the DMC was referred to in the draft.  Under the terms and conditions, in item 6(ii) under “Others”, there was a term that D had to pay various sums including the “Plan Fees for the Assignment and DMC”. 

28.  The Draft JLW Letter contained the following paragraphs (“Use Approval Paragraphs”):

“We have been informed by Wing Ming that it has applied to the Building Authority for approval to use the Property for parking of private car. There are also some legal matters that Wing Ming has to deal with before Sanwa’s above offer can be accepted. If the Building Authority does not give the approval sought or the legal matters cannot be dealt with, Sanwa’s above offer cannot be accepted by Wing Ming.

  If the Building Authority gives its approval and the legal matters can be dealt with, Wing Ming agrees to first consider accepting Sanwa’s above offer.  In consideration of this, Sanwa agrees to make its above offer irrevocable.”

29.  The PSAP was dated 28 August 1991, 6 days after the Draft JLW Letter.  Ng’s evidence was that D’s solicitors only obtained from P’s solicitors copies of the PSPA and the PSAP Plan after the commencement of the present action.  The copy of the PSPA produced by P did not bear D’s signature.  Ng said due to the lapse of time, he cannot now recall whether at the time, the PSPA Plan was in fact attached to the PSPA, nor is he now able to recall the circumstances under which D’s company chop (or what appeared to be D’s company chop) came to be affixed on the PSAP Plan[12].

30.  Apart from containing also the Use Approval Proposals, the PSAP contained a number of further terms and conditions including:

(i)  Under “Others”, item 6(ii) was added as a condition/term, the effect of which was that D’s offer to purchase the Property was subject to the DMC (a copy of which was stated to be attached to the PSAP) and D’s declaration that it had read through the DMC before signing on the PSAP (“Item 6iia”);

(ii)  An additional item 9, the effect of which was that P, as vendor, had reserved the right to alter common areas whenever P considered necessary and that P was to notify D of such alteration if the same would affect the Property to be sold, and provided for adjustment of the purchase price in the event of alteration affecting the original area (“Item 9”);

(iii)  An additional item 10, under which D, as purchaser, gave a “special covenant” to the vendor P, the effect of which was  that notwithstanding anything in the DMC, D or its successors and assigns shall not object in any manner but allow and consent to the Vendor its successors and assigns and the owners for the time being of Car Parking Spaces Nos 2, 3 and 4 to convert the said Car Parking Spaces Nos 2, 3 and 4 or any part or parts thereof to other lawful purposes provided such conversion is Subject to the approval of the Building Authority or other appropriate authority (as the case may be) AND further that ….”(“Item 10”).

31.  The PSPA only referred to one attachment to the PSPA, namely the DMC (which would include the DMC Plan).  As pointed out by Ng, there was no mention of the PSPA Plan being attached.  In fact, this can also be seen from Yuen’s own affirmation which stated that only the DMC and the DMC Plan were attached to the PSPA[13]. It was however P’s pleaded case in its statement of claim that the plan attached to the PSPA was the plan marked “W-3” annexed to the statement of claim (“W-3 Plan”)[14]. The W-3 Plan was a different plan to the PSPA Plan, although the area coloured yellow on the W-3 Plan appeared to be roughly the same area marked blue on the PSPA Plan.

32.  To summarise, at the present moment, there seemed to be 3 versions of P’s case as to which plan was attached to the PSPA, namely (i) the W-3 Plan as pleaded in the statement of claim; (ii) the PSPA Plan produced as part of the PSPA in Yuen’s 1^st affirmation; (iii) the DMC Plan referred to in the PSPA and in Yuen’s 2^nd affirmation.

33.  It is therefore not clear at the present moment whether the PSPA Plan was in fact attached to the PSPA.  Further, apart from what appeared to be D’s company chop on the PSPA Plan, there seemed to be two other initials/signatures, and it is not clear whose those were or when they were affixed thereon.  

34.  Although the PSPA was called a “Sale + Purchase Agreement”, as mentioned earlier, it was in a form of an offer letter sent by JLW and signed by JLW and P to D confirming D’s offer to purchase the Property subject to the terms and conditions stated therein.  In the final paragraph of that letter, D was in fact requested to sign an attached copy of the letter to confirm that D had made the offer irrevocably.  The last sentence of the letter further indicated that JLW would submit the letter to P for confirmation that after D had signed its confirmation.  At the present moment, even though Mr Ng did not specifically deny D having signed the PSPA, it is not clear when it was signed by D or whether there had been confirmation by P after D’s signature.

35.  Further, item 6(i) of the PSPA stated that D’s offer to purchase of the “Property” was subject to the condition that the “Property” was free from incumbrances and with a good title.  There is no evidence at the moment that the P had any good title to the so called Re-Designated CPS 2 as at date of the PSPA, or at any time thereafter.

36.  As said earlier, at the time of the inspection or at the time of the PSPA, the Partition Wall had not yet been constructed. There was no sufficient evidence at this stage that at the time of the PSPA, the Re-designated CPS 2 was already in existence.   In fact, it would appear that the CPSs 2, 3 and 4 stated in Item 10 of PSPA referred to the Original CPSs 2, 3 and 4 on the DMC Plan, since the “special covenant” was on the basis of notwithstanding anything contained in the DMC.

37.  There is also no evidence at present before this Court that P had ever applied to the Building Authority for approval to use the “Void Areas” as car parking spaces.  As seen in Reyes’ Judgment, P did not make any application to the relevant Government body to change the parking layout[15].   Reyes J found that P was not entitled to shift CPSs 2, 3 and 4 into the “Void Areas” and P did not obtain the approval of any other owners to vary the terms and definitions of the DMC, nor was there approval from the Building Authority, even though approval was apparently obtained by P for building a loft over the Void Areas and also over CPSs 2, 3 and 4, namely the air space.

The Assignment

38.  There is no dispute that the Assignment was executed by the parties on 5 February 1992 and the Assignment Plan was attached to the Assignment. 

39.  Clause 1 provided that “the Vendor as BENEFICIAL OWNER ASSIGNS to the Purchaser the property described in the SECOND SCHEDULE hereto (“the Property”)[16]”.

40.  Paragraph 1(a) of the Second Schedule provided the description of the Property which has been set out earlier in this judgment.   The Property to be assigned was five of those equal undivided 1,323^rd parts or shares in the Building TOGETHER with the sole and exclusive right to use and occupy the CAR PARKING SPACE NO 2 on the GROUND FLOOR of the Building as shown coloured Green on the Assignment Plan.

41.  From the above, and further as seen in the backpage of the Assignment, the assignment was of the “five equal undivided shares”, of which P held himself out to be the beneficial owner, and not merely of a right to use a car parking space.

42.  Although the part coloured Green on the Assignment Plan is the “Void Area” or what P referred to as the Re-designated CPS 2, there was no description of “Re-designated CPS 2” in the Assignment. The description used in the Assignment was “Car Parking Space No 2 on the Ground Floor” which corresponded with the description of the Car Parking Space No 2 on the Ground Floor in the DMC.  “Vehicle Parking Space(s)” and/or “Car Parking Space(s)” is defined under Clause (1) of the Recital of the DMC  to  mean all of the spaces in the Building for parking of vehicles (coloured green on the Ground Floor Plan)[17]. The “Ground Floor Plain” referred to was the DMC Plan.  More importantly, under Clause (2)8, Car Parking Spaces Nos 2-10 on Ground Floor have been allocated 5 shares each, totaling 45 shares.

43.  The part coloured Green on the Assignment Plan was the Void Area next to the Original CPS 2.  In Clause (3)1 of the DMC, there are 125 shares allocated to the Front Portion of the Ground Floor (colour blue on the DMC Plan, the Foyer and the Lofts therein, the Basement and the “void space above the Car Parking Spaces Nos 2, 3 and 4 (leaving for these car parking space a minimum clear headroom of 7’6)”.  There is no evidence before this Court at the present stage that 5 shares had been allocated to the Void Area next to the Original CPS 2 / Re-designated CPS 2 which P alleges was the Property assigned to D.  

Conclusion

44.  Having considered the all the above, I am of the view that D has satisfied this Court that there is a good defence, and that there is a genuine issue or question in dispute which ought to be tried, namely whether the subject property of the PSPA and the Assignment was the Original CPS 2 or the Void Area.

45.  In light of the above, I do not need to deal with the submissions on the counterclaim or whether the counterclaim was time-barred or not.

46.  P’s O14 summons is dismissed.  P is to pay D’s costs of and incidental to the summons, to be summarily assessed to be paid within 14 days after assessment.  D is to lodge its statement of costs within 7 days and P its list of objections within 7 days thereafter.