WEALTH GUIDE LTD v. 各佔用人 AND ANOTHER

HCMP 1678/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1678 OF 2013

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JUDGMENT ON COSTS

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1.  This is an action by the plaintiff against the 2nd defendant, Mr Choi Lin Cho for possession of part of the roof of Wang Fung Building, No. 33 Chi Kiang Street, Kowloon. This part of the roof (“the Small Roof Area”) is comprised of two parts with one part having an unauthorized structure erected thereon (“the Roof Structure”) and the other being an open area outside the Roof Structure (“the Open Area”).

2.  Mr Choi counterclaimed that he had already defeated the plaintiff’s title to the Small Roof Area by adverse possession.

3.  The plaintiff conceded to the counterclaim on the third day of the trial on 9 December 2016.  It, however, argues that it should only pay costs to Mr Choi up to Mr Choi’s discovery of documents on 14 February 2015 and the costs thereafter should be paid by Mr Choi’s solicitors to it. 

4.  The plaintiff relies on ss. 52A (4) to (7) of the High Court Ordinance; Cap. 4 as follows:

“(4)  In any civil proceedings before it, the Court of Appeal or the Court of First Instance may, in accordance with rules of court, by order disallow, or order the legal representative concerned to meet, the whole or any part of any wasted costs.

(5)  When determining whether or not to make an order under subsection (4), the Court of Appeal or the Court of First instance shall, in addition to all other relevant circumstances, take into account the interest that there be fearless advocacy under the adversarial system of justice.

(6)  In subsection (4), “wasted costs” (虛耗訟費) means any costs incurred by a party as a result of—

(a)  an improper or unreasonable act or omission; or

(b)  any undue delay or other misconduct or default,

on the part of any legal representative, whether personally or through an employee or agent of the legal representative.”

Units subject to the plaintiff’s right of exclusive occupation

5.  By an assignment dated 30th September 1987, the plaintiff purchased from Ansbrow Estates Ltd (“Ansbrow”) 82 equal undivided 492nd parts or shares of and in the Remaining Portion of Kowloon Inland Lot No. 8070 (“the Lot”) with the exclusive right to occupy the following units of the building erected thereon known as Wang Fung Building (“the Building”).  The units (“the Plaintiff’s Properties”) are:

(i) the Ground Floor of Nos. 39 and 41 To Kwa Wan Road;

(ii) the whole of the First Floor of Nos. 31 and 33 Chi Kiang Street;

(iii) the open yards at the rear of the Ground Floor of Nos. 29 and 29A Chi Kiang Street; and

(iv) the roof of Nos. 31 and 33 Chi Kiang Street (“the Roof”).

6.  In order to understand the merits of Mr Choi’s counterclaim to the Small Roof Area, it is necessary to study how the shares of the Lot were allocated to the individual owners (tenants in common) together with the exclusive right to possess and occupy the individual units in the Building. 

7.  There is a Deed of Mutual Covenant for the Lot and Building dated 10th August 1974 (“the DMC”).  Clause 1 and Schedule 1 of the DMC provided for the rights of the owners to the exclusive occupation of parts of the Building as follows:

Description of the Parties		Building allotted
SHIU CHAN TIENG (邵燦添) of … Gentleman (hereinafter called “the First Owner”) of the one part		All the self-contained portions (other than Flat D on the Eight Floor hereinafter mentioned) and all the flat roofs and the roof of the said building.
HO JAN CHEU (何俊超) of … Gentleman (hereinafter called “the Second Owner”) of the second part		Flat D on the Eighth Floor of No. 33 Chi Kiang Street as shown and coloured Pink on the Plan annexed to an Assignment bearing even date herewith and made between the First Owner of the one part and the Second Owner of the other part.

8.  Schedule 2 of the DMC further provided that the First Owner (“Mr Shiu”) had 490 equal undivided 492nd undivided parts or shares of the Lot and the Second Owner had two equal undivided 492nd parts or shares.  Hence, the 490 parts or shares owned by Mr Shiu carried with them the exclusive right to occupy the units of the Building in the second column of the table above opposite to Mr Shiu.  Such units include the Roof.  Hence, the Roof is not part of the common parts of the Building.

9.  By an Assignment dated 4^th May 1978, Mr Shiu assigned 188 of his 490 undivided shares to Ansbrow together with the right to exclusive possession of:-

(1)  Ground Floor of Nos. 29, 29A, 31A, 31B, 31C, 31D and 31E Chi Kiang Street;

(2)  Ground Floor of Nos. 41, 39, 37 and 35 To Kwa Wan Road;

(3)  First Floor of Nos. 31 and 33 Chi Kiang Street; and

(4)  The Roof.

10.  Ansbrow executed a deed poll dated 3^rd October 1979 which was registered at the Land Registry by Memorial No. UB1928000 (“the Deed Poll”) to carve out the rear open yards from Ground Floors of No. 29 and No. 29A Chi Kiang Street and allocated one share out of the 12 undivided shares of No. 29 and one share out of the 16 undivided shares of No. 29A to carry the right to the exclusive occupation of each of the yards.

11.  By an assignment dated 30^th September 1987, Ansbrow assigned 82 undivided shares of the Lot and Building to the plaintiff together with the right to exclusive possession of the Plaintiff’s Properties.

12.  Of the 82 undivided shares registered in the plaintiff’s name, two had been allocated by the Deed Poll to carry the rights to the exclusive occupation of the two rear open yards.  For the remaining 80 shares, no right to the exclusive occupation of any other unit of the Plaintiff’s Properties is specifically allocated to any of them.  Hence, they together carry the right to the exclusive occupation of all the units of the Plaintiff’s Properties except the two rear yards.

13.  The control card of the Land Registry, however, relates the rights to the exclusive occupation of units of the Plaintiff’s Properties (save and except the two rear yards) to the 80 undivided shares of the Lot as follows (and without relating any share to the occupation of the Roof):

Floor	Units	Shares/Unit	Total shares
Card No. 1
G/F	39, 41 (To Kwa Wan Road)	7	14
1/F	- (Nos. 31 and 33 Chi Kiang Street)	66	66
Card No. 2
Roof	- (No. 31 Chi Kiang Street)	(Nil)	(Nil)
Card No. 3
Roof	- (No. 33 Chi Kiang Street)	(Nil)	(Nil)

14.  The two shares which carry the rights to exclusive occupation of the two yards are not shown in the card as the Deed Pool was only executed and registered some years after the control card was prepared.  The carving out of the yards from the shop premises can only be ascertained by tracing the titles of the Ground Floor of Nos. 29 and 29A Chi Kiang Street.

15.  I have on more than one occasion requested the solicitors for the plaintiff to obtain from the Land Registry a copy of a deed or other instrument which allocated the shares of the Lot for carrying the exclusive occupation rights to the individual units of Ground Floor Nos. 39 and 41 To Kwa Wan Road, First Floor Nos. 31 and 33 Chi Kiang Street and the Roof as recorded in the control card.  However, the Land Registry has confirmed to the plaintiff’s solicitors that there is no such deed or instrument. 

16.  The Land Registrar in his reply dated 28 September 2016 to the plaintiff’s solicitors said:

“Control Cards and land registers were normally created in accordance with registered instruments or shares schedule provided by solicitor representing the developer. However, apart from the registered instruments affecting Wang Fung Building which are available for public search, no memorandum or schedule of allocation of undivided shares for Wang Fung Building can be traced in this office to ascertain whether the captioned Roof has no undivided share or not.”

17.  Therefore, despite the information in the control card, the 80 undivided shares owned by the plaintiff together carry the right to exclusive occupation of all these units including the Roof (but excluding the two rear yards).  The allocation as shown in the control card is just what was contemplated at the time when the card was prepared back in about 1974.  Though the control card states that the occupation of the Roof is not related to any share of the Lot, the right to exclusive occupation of the Roof is in fact carried by the 80 shares.

The 2nd defendant’s premises

18.  By an Assignment dated 1^st March 1991, Mr Choi and his mother-in-law Madam Tse Koon Tai purchased Flat E on the 14th Floor of the Building (“the Flat 14E”) as joint tenants.  They then assigned it to Mr Choi’s wife Madam Lau Lin Tai on 23 November 2000.  Mr Choi said in evidence at the trial that Madam Tse had passed away in 2012.

19.  Flat 14E is immediately underneath the Small Roof Area.  Mr Choi claimed to be the owner of the Small Roof Area. He believed that the transfer of Flat 14E to him and his mother-in-law included the Small Roof Area.  He claimed to have been in continuous and actual possession and occupation of the Small Roof Area (including the Roof Structure) since the completion of purchase of Flat 14E on 1 March 1991.

These proceedings

20.  The plaintiff discovered that the Roof Structure in around September 2011.  The Structure is associated with an iron staircase leading from it down to the corridor on the 14th floor outside Flat 14E.  The plaintiff later launched these proceedings against Mr Choi.  Mr Choi then counterclaimed for adverse possession of the Small Roof Area. 

21.  The trial commenced on 6 December 2016.  Mr Choi was cross-examined on that day.  A site visit was then interposed in after the morning break. 

22.  On the second day of trial, the evidence of DW2 Mr Chan Choi Sang was also interposed in Mr Choi’s cross-examination. 

23.  After the evidence of DW2 was concluded, Mr Choi’s solicitors produced a letter from the China Light & Power Hong Kong Ltd. (‘CLP”) to them and dated 21 August 2013 (“the CLP Letter”) and an electricity bill as evidence in the trial.  Counsel for both the plaintiff and Mr Choi had not seen the two documents hitherto.  The letter stated:

“PREMISES: Flat E Penthouse, Wang Fung Building, 33 Chi Kiang Street, To Kwa Wan, Kowloon

Account No. 18750-…-…

We refer to your request and would confirm that the above account has been registered in name of “Choi Lin Cho” since 14 March 1991.”

24.  The two documents showed that Mr Choi had applied for an independent electricity meter to serve the Roof Structure exclusively on 14 March 1991 which was 14 days after he and his mother-in-law had purchased Flat 14E.

25.  The trial was then adjourned to 9 December 2016.  When the trial resumed, the plaintiff conceded to Mr Choi’s counterclaim and discontinued its claim against Mr Choi.  However, the plaintiff asked for costs of the action from Mr Choi’s discovery up to its concession.

The argument on costs

26.  Mr Leung Wing Hang of Mr Choi’s solicitors made an affirmation to oppose the application for costs against his firm.  He tried to explain why the CLP Letter was not considered to be discoverable until after the evidence of DW2 Mr Chan.  Mr Leung said in his affirmation that the address stated in the CLP Letter as served by the electricity meter was “Flat E Penthouse, Wang Fung Building, 33 Chi Kiang Street, To Kwa Wan, Kowloon”.  His firm was unable to ascertain whether the address included both the Small Roof Area and Flat 14E.  Owing to this uncertainty, neither his firm nor Mr Choi was in a position to ascertain or establish the relevance of the CLP Letter to the counterclaim.  Hence, this letter was not exhibited in Mr Choi’s affirmation filed on 31 July 2013 for joinder in the action or in his list of documents filed for his counterclaim on 14 February 2015.  

27.  Since Mr Choi’s solicitors only disclosed the CLP Letter and electricity bill after the conclusion of the evidence of DW2, Mr Chan, my logical deduction is that they must have regarded that Mr Chan’s evidence had shown the letter to be relevant to the counterclaim. 

28.  However, Mr Chan had already said in his witness statement that he had rented the Small Roof Area (including the Roof Structure) from Mr Choi from April/May 2000 to about 9 and 10 days of the first lunar month in 2002. He further said in §3 of his witness statement:

“3.  該天台屋內包括有客廳、兩個房間、廚房、洗手間及外面有一個相連的花園。而本人所支付的租金並不包括電費，至於是否包括水費，本人並不清楚。該天台屋擁有自己的電錶，本人當時每期電費大約需要繳交約港幣1千多元。

3. There was a living room, two bedrooms, a kitchen and a toilet in the Rooftop together with a connecting forecourt outside. The rent paid by me did not include electricity charges and I did not know if water charges were included. There was an independent electricity meter at the Rooftop and I had to pay about HK$1,000 for electricity charges per period at that time.” (English translation) (Emphasis supplied)

29.  Mr Chan did confirm in oral evidence in chief that Mr Choi had shown him an electricity metre that served the Small Roof Area exclusively.  But he had already said in his witness statement that there was “an independent electricity meter at the Rooftop”.  His oral evidence only served as a confirmation.

30.  Furthermore, Mr Choi has also made it plain in his witness statement that there was an independent electricity metre serving the Small Roof Area.  He said in §§ 5 and 6 of his witness statement:

“將該物業與該天台屋分開電錶

5.  該物業的上手業主是居住於該物業內，只出租該天台物業給該夫婦。而該物業及該天台屋本身是共用水電錶。在本人於1991年買入該物業後，因為該物業及該天台屋都作出租之用，本人便分別向水務處及中華電力有限公司(“中電”) 申請分拆水電錶。

6.  水務處拒絕本人分拆水錶的申請，理由是該天台的位置太高。而中電則接受本人分拆電錶的申請，因此該天台屋及該物業是共用水錶，但電錶則是分開的。

Separating electricity meters of the Property and the Rooftop

5.  The former owner of the Property was living in the Property therein and was only renting out the Roof Properties to the said pair of couples. The Property and the Rooftop itself shared the water meter and the electricity meter. After I purchased the Property in 1991, since the Property and the Rooftop were both used for rental purposes, I had made applications to the Water Supplies Department and CLP Power Hong Kong Limited (“CLP”) to split the water meter and the electricity meter respectively.

6.  The Water Supplies Department rejected my application for splitting the water meter for the reason that the position of the Roof was too high. CLP had accepted my application for splitting the electricity meter. Therefore, the Rooftop and the Property share the water meter but their electricity meters are separate.” (English translation) (Emphasis supplied)

31.  If there were an independent electricity metre and account, there must have been documents related to them. Hence, even if the CLP Letter and electricity bill should be ambiguous on the supply address, that could not have stopped the plaintiff’s solicitors from making further enquiry with CLP for clarification or for Mr Choi to confirm in evidence that the two documents indeed relate to the exclusive metre.  I therefore do not accept Mr Leung’s reason for not disclosing the two documents until after the conclusion of the oral evidence of Mr Chan.  I think Mr Leung only gave the explanation hoping to avoid his firm from being held to be negligent in not making discovery of the two documents in Mr Choi’s list of documents.

32.  Since Mr Leung has not given any other acceptable reason for the late disclosure of the two documents, I can only conclude that Mr Choi’s solicitors had overlooked the two documents and only realized their existence and/or importance upon the conclusion of Mr Chan’s evidence and hence disclosed it then.

33.  However, I have to consider whether the plaintiff or its solicitors had been prejudiced by the late disclosure of the two documents before I can consider making a costs order against Mr Choi’s solicitors.  I have to consider the matter from the early without prejudice correspondence.

34.  Mr Choi’s solicitors, after the service of the plaintiff’s originating summons on Mr Choi, wrote on a without prejudice basis on 24 July 2013 that Mr Choi had enjoyed exclusive possession of the Roof Structure since he had purchased Flat 14E in March 1991.  They further said that Mr Choi had registered in his own name a customer account with CLP in respect of the Roof Structure.  They also enclosed a copy of an electricity bill dated 4 March 2013 issued under that account.  They proposed to adjourn the hearing of the originating summons for negotiation of settlement. 

35.  The electricity bill bears the account number of 18750-…-…  The registered customer and supply address of the account are stated to be:

Choi Lin Cho

Flat E Penthouse

Wang Fung Building

33 Chi Kiang Street

To Kwa Wan Kowloon

36.  The plaintiff’s solicitors replied openly on 25 July 2013:

“We refer to your letter of 24 July 2013 and have now taken client’s instructions. We do not believe you have laid the foundation for negotiation without any affirmation filed by your client. All your client’s allegations are not accepted and strict proof is needed. …” (Emphasis supplied)

37.  Mr Choi’s solicitors wrote on a without prejudice basis again on 29 August 2013 and proposed terms of settlement for the plaintiff’s consideration.  The letter also said:

“In order to facilitate the settlement of the dispute, we make an early discovery and enclose herewith the following documents which support our client’s claim:

1. Copy of letter by CLP dated 21 August 2013 (the CLP Letter); and

2. Copy of enlarged aerial photo taken on 15 March 2001 of the said rooftop.

Please take your client’s instruction and revert to us within 14 days.” (Emphasis supplied)

38.  I have already referred to the contents of the CLP Letter above.  The plaintiff’s solicitors replied on a without prejudice basis on 3 September 2013:

“We refer to your letter of 29 August 2013. We are now taking client’s instructions and shall revert to you as soon as possible.” (Emphasis supplied)

39.  Mr Liu, counsel for the plaintiff advised me that the plaintiff’s solicitors did not make any further reply as the parties had then entered into mediation for alternative resolution though it did not bear fruit in the end.

40.  Hence, the existence of the electricity bill and CLP Letter were known to the plaintiff and its solicitors in as early as the end of August 2013.

41.  The electricity bill and the CLP Letter coupled with the evidence in the witness statement statements of Messrs Choi and Chan made it quite clear to the plaintiff and its solicitors that Mr Choi was relying on the independent electricity metre as part of his case in the counterclaim. 

42.  Unfortunately, Mr Choi’s solicitors had overlooked the two documents and did not include them in Mr Choi’s list of documents.  However, the plaintiff’s solicitors could not have been in any doubt about Mr Choi’s intent to reply on the existence of this electricity metre which exclusively served the Roof Structure since March 1991 as the witness statements of both Mr Choi and Mr Chan referred to this independent metre. 

43.  If the plaintiff’s solicitors should have been in any doubt, they could have enquired the same with Mr Choi’s solicitors.  The plaintiff’s solicitors did not enquire.  Mr. Liu submitted that they had no duty to ask.  That may be right.  Hence, I conclude that the plaintiff’s solicitors did not ask for specific discovery of the CLP Letter and electricity bill because they were hoping that Mr Choi’s solicitors would overlook them till the end so that there would be no documentary evidence to corroborate Mr Choi’s case on the existence of the metre and electricity account.  Alternatively, they might have overlooked the need to ask for them or they had also overlooked their existence until their disclosure after Mr Chan’s evidence was concluded. 

44.  However, even without the CLP Letter and electricity bill, it would still have been difficult for Mr Liu to shake or defeat the evidence of Messrs Choi and Chan on the existence of such a metre and CLP account.  Indeed, after Mr Chan had confirmed in his oral evidence in chief that there was an independent electricity metre for the Roof Structure when he rented it from Mr Choi since April/May 2000, Mr Liu did not even challenge him on this in cross-examination. 

45.  In fact, when Mr Choi was cross-examined on the first day of trial (6 December 2016) on whether his tenant had requested him to carry out any minor repair to the Roof Structure, Mr Choi answered that his tenant was an electrician who offered to carry out for him the work on the lighting and Roof Structure and to split the electricity supply meter.

46.  I also refer to an affirmation by Mr Lee Kwok Shun, Toby, a manager of the plaintiff filed on 26 January 2017 for the purpose of arguing costs.  Mr Lee summarized Mr Choi’s case and highlighted the deficiency of the lack of documentary support.  But he said nothing about the CLP Letter and electricity bill.  This is surprising to say the least.  His summary of Mr Choi’s case also made no mention of the statements by Messrs Choi and Chan in their witness statements exchanged in April 2015 that there was an independent electricity metre serving the Roof Structure since 1991.

47.  Mr Lee, however, admitted that as a result of counsel’s advice given in March 2016, the plaintiff made a without prejudice offer on 1 September 2016 to Mr Choi to discontinue the action against him.

48.  However, before Mr Choi had accepted the offer, I, for the purpose of the pre-trial review scheduled on 7 September 2016, gave a direction to the parties requiring them to answer some enquiries I raised in the direction.  My direction was given on the basis that the right to the exclusive occupation of the Roof was not derived from any ownership of any share of the Lot but was merely by a covenant of all owners in the DMC in favour of the plaintiff.  My understanding was based on the allocation of shares and the related units subject to exclusive occupation by the owners as recorded in the control card of the Land Registry.  The letter from the Land Registrar dated 28 September 2016 was not available then.  If the matters recorded in the control card was the result of allocation by a memorandum or schedule of allocation of undivided shares for Wang Fung Building, then the occupation of the Roof was not derived from the ownership of any share of the Lot. 

49.  If my contemplation was right, then it was open to the plaintiff to argue that the exclusive occupation of the Roof by the plaintiff was not an interest in land but a mere licence and hence, ss. 7(2) and 17 of the Limitation Ordinance, Cap. 347 would not have applied. 

50.  After my direction was issued, the plaintiff withdrew the without prejudice offer on the same day. 

51.  However, my contemplation was proved to be wrong as the Land Registrar by his letter dated 28 September 2016 confirmed that there was no memorandum or schedule of allocation of undivided shares for Wang Fung Building.  Hence, the exclusive right to occupy the Roof derived from the plaintiff’s ownership of the 80 undivided shares of the Lot (excluding the two shares for the two rear yards).  Thus the Roof was open to adverse possession pursuant to s. 17 of the Limitation Ordinance.

52.  After the trial started, I explained to counsel again what I have discussed in §§ 46 to 49 above.  Evidence was then called by Mr Choi as he had the burden of proof.  The CLP Letter and electricity bill were then produced after the conclusion of Mr Chan’s evidence. 

Discussion and decision on costs

53.  I do not think the production of the CLP Letter and electricity bill has changed the course of Mr Choi’s case. Nor do I consider that the two documents had strengthened his case so much that it then became overwhelming.  It was already a strong case as shown in the witness statements of Messrs Choi and Chan. 

54.  Mr Choi’s evidence of the existence of the independent electricity metre has always been there.  If there was such a metre, there would also be documents evidencing its existence.  The evidence in the witness statements could not have been the result of a mistaken apprehension of facts by Choi and Chan.  Nor did it appear to be untruthful.  The production of the two documents only served as corroboration of a case that was already strong.

55.  The situation could be shown to beyond doubt by the plaintiff’s solicitors asking for specific discovery of the related documents.  They did not do so either because they were making a gamble that Mr Choi’s solicitors would overlook the documents till the end or they had overlooked the need to ask for them or they had also overlooked the existence of the documents copies of which had already been given to them. 

56.  In any case, there was no material change in Mr Choi’s case when the two documents were produced at the conclusion of Mr Chan’s evidence.  They merely corroborate the evidence that was in the witness statements.  The strength of Mr Choi’s case was not made overwhelming by their disclosure.  I also do not think the plaintiff or its solicitors were surprised by the production of the two documents.  Therefore, the plaintiff was not prejudiced by the late production of the two documents.  Their disclosure during the trial was not the cause of the plaintiff’s concession.  Their non-disclosure until after the evidence of Mr Chan did not cause the plaintiff to incur its costs after Mr Choi’s discovery on 14 February 2015.  The plaintiff only made use of the disclosure as a convenient opportunity to put an end to its opposition to the counterclaim.  In fact, the plaintiff’s offer dated 1 September 2016 shows that it had decided not to oppose the counterclaim on 1 September 2016 long before the commencement of the trial.  It withdrew the offer because its apprehension of the effect of my direction issued on 5 September which eventually did not assist it.

57.  In the premises, I make a usual costs order of the action that will follow the event.  I order the plaintiff to pay Mr Choi the costs of the action which includes the counterclaim.  But I order that there be no order as to costs on the two affirmations made by Mr Leung Wing Hang and that Mr Choi’s solicitors should not charge Mr Choi the costs for making these two affirmations as they provide no assistance to the court on the costs issue.