WAN KIN SHING v. THE INCORPORATED OWNERS OF CITY CENTRE BUILDING AND OTHERS

HCA 354/2015

[2018] HKCFI 1719

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 354 OF 2015

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DECISION

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THE APPLICATION

1.  By way of summons, the 2^nd defendant (“D2”), pursuant to Order 15, rule 6(2) of the Rules of the High Court, applies for an order to cease to be a party in these proceedings, and that the proceedings against it be discontinued forthwith and that there should be no order as to costs.

2.  The order requested is tantamount to striking out the plaintiff’s (P’s”) claims against D2.[1]

3.  D2 has also taken out a summons, pursuant to O.18, r.19 RHC, to strike out P’s claim against it.  By consent of the parties, this striking out summons is to be heard together in this hearing as both summonses are to achieve the same result of taking D2 out of this Action.

4.  P opposes both applications and the parties are legally represented.[2]

THE BRIEF FACTS

5.  In this action, P is claiming adverse possession in respect of the Wall Shop located at the address of 12 Stewart Road Side Lane, Wanchai, Hong Kong (“Wall Shop”) so far as such portions of the Wall Shop the defendants are the paper owners.

6.  D2 is the registered owner of Shop F on the ground floor of City Centre Building comprising of 2 equal undivided 166th parts or share of City Centre Building situating at section O, section N R P and subsection 1 of section N of Inland Lot 2756.

7.  P claims against D2 in respect of the area as delineated in the Statement of Claim, which is registered in D2’s name as the owner.  This area of land was allegedly possessed adversely by P because sometime in 1968, the exterior wall of Shop F was moved by the tenant further into Shop F, creating this extended area, which was occupied by P.[3]

8.  However, by a Deed Poll dated 3 January 2018, the D2 divided Shop F into two portions, namely:

(i)  Section B of Section O, the RP of section N and subsection 1 of section N of Inland Lot 2756; and

(ii)  The remaining portion of Section O, the RP of section N and subsection 1 of section N of Inland Lot 2756.

9.  The area under section B of section O, the RP of section N and subsection 1 of section N of Inland Lot No. 2756 is (“the disputed area”).  Under the Deed Poll, no undivided share of the land was allotted to the disputed area.  This Deed Poll was withheld registration by the Land Registry.

10.  By a memorandum of Sale and Purchase dated 3 January 2018 made between D2 as the vendor and Leader Glory Limited (“Leader Glory”) as the purchaser, D2 sold (as beneficial owner) all the estate right title interest property claim and demand whatsoever of the disputed area at the consideration of HK$1 with vacant possession to Leader Glory.

11.  By an Assignment dated 3rd January 2018, D2 assigned the disputed area together with all structures erected thereon (if any) to the Leader Glory.

12.  By another Deed Poll dated 4 April 2018, 1/50 of 2/166 parts of shares of the land, which D2 owned as the registered owner, was allotted to the disputed area.  This 2^nd Deed Poll was registered with the Land Registry.

13.  By another Memorandum dated 4 April 2018, D2 agreed to sell the disputed area to Leader Glory.

14.  By another Assignment dated 4 April 2018, D2 assigned the disputed area to Leader Glory.

D2’S GROUNDS

15.  D2 therefore says that it is no longer the owner of the disputed area. P should discontinue the legal proceedings against it.  Alternatively, P’s claim against it should be struck out.

16.  In paragraph 14 of the 2^nd affidavit of Tse To Chuen, the solicitor acting for D2, it was stated:

“…The 2^nd Defendant no longer has any interest whatsoever in Section B or this action. The Writ of Summons, Statement of Claim or Amended Statement of Claim here were NOT registered in the Land Registry against Shop F or any part thereof as a lis pendens or otherwise….”

17.  Senior Counsel acting for D2 further submits that the reason for D2 to execute the assignment to Leader Glory is to divest itself from P’s claim so that it may deal with Shop F without any hindrance.  The dispute will simply between P and Leader Glory. D2 may even agree to cause Leader Glory to be joined as a party in place of it and the question of costs will be dealt with in the litigation between P and Leader Glory.

P’S GROUNDS OF OPPOSITION

18.  P opposes the application on the following grounds[4]

a)  the beneficial interest of the disputed area has not been passed to Leader Glory since no undivided share had been assigned by D2 to Leader Glory under the 1^st Assignment; (this point has no effect because of the second Deed Poll, which has been registered in the Land Registry.)

b)  it would be unfair to P for D2 to be released from the present legal proceedings without a trial since D2 has never pleaded its case as if it had no interest in the disputed area, the assignment of the disputed area was done after D2’s pleadings and D2 has not amended its Defence;

c)  D2 could not validly assign the disputed area after P had made his claim for adverse possession of the disputed area before the court’s finding of P’s case;

d)  Leader Glory was a corporate vehicle of D2 created for the purpose of defeating P’s claim against D2.

DISCUSSION

Court’s discretion to be exercised

19.  It is within this Court’s discretion whether D2 should be allowed to be released from these proceedings under O.15, r.6(2), RHC.  The question lies upon whether P still has a claim against D2 after D2 had disposed of the disputed area, as D2 alleges it has.

20.  It is quite clear that D2’s attempted disposal of the disputed area under the circumstances below:

a)  P had instituted these legal proceedings against D2 in 2015;

b)  the Amended Statement of Claim was dated 30 October 2015;

c)  the Amended Defence of D2 was dated 12 January 2016;

d)  the Amended Reply to the Amended Defence was dated 11 February 2016;

e)  the Deed Poll, the Memorandum of Sale and Purchase of the disputed area and the Assignment in D2’s second attempt to sell its disputed area to Leader Glory were all dated 4 April 2018; and

f)  D2 admits that the assignment of the disputed area was done in order to make itself stay outside P’s litigation;[5]

Non-registration of the Writ of Summons – effects

21.  D2 argues that P’s Writ of Summons was not registered as a lis pendens with the Land Registry against D2’s property.  It stops short of stating the consequences. One can only infer that it is saying that Leader Glory is therefore not bound by P’s claim under the Land Registration Ordinance (Cap. R8) (“the Ordinance”).

22.  However, the Court of Appeal has held in Si Tou Choi Kam v Wealth Credit Ltd (CACV 167/2017, [2018] HKCA 250, 30 April, 2018) that the Ordinance only affects those interests which are registrable under the Ordinance.  If the interest is non-registrable, priority under the Ordinance has no effect on it. See paragraph 13 & 14.

23.  Adverse possession interest is not registrable under the Ordinance. As such, non-registration of the Writ of Summons is neither here nor there, especially where Leader Glory had notice of P’s claim against D2.  Leader Glory is unable to claim to be a bona fide purchaser under section 3(2) of the Ordinance.

Could D2 validly assign the disputed area after P’s claim?

24.  It seems that D2 was entitled to carve out the disputed area by way of a Deed Poll since it is the registered owner of Shop F. At the end of the day, even if P succeeds against D2, the disputed area has to be carved out. Otherwise, it will affect the whole of Shop F. 

25.  However, P argues that since P had instituted adverse possession against D2, D2 could not validly assign the disputed area to Leader Glory without the court first determining P’s claim, relying upon the principle of relativity of title as discussed in Chan Hau Ling v 劉西& 黃端林, unreported, HCA 1286 of 2012, 22 April 2015. Senior Counsel acting for D2 has not dealt with this legal issue in his written submissions.

26.  P further submits that in the above Court of Appeal case, it was decided that the Declaration will only confirm the possessory title of P back to the date when the limitation period expired.  This means D2’s title had extinguished against P since that date.  P will therefore have no title to assign the disputed area to Leader Glory, it being the trustee holding the disputed area in trust for P.

27.  Senior Counsel for D2 has no argument over the legal position of P if he succeeds in the claim in this action.  But he argues that it does not stop D2 from assigning the disputed area to Leader Glory if Leader Glory agreed to take the disputed areas subject to P’s claim.

28.  However, D2 has two difficulties.  First, in its Amended Defence, it denied being the registered owner of the disputed area.  Second, if what it pleaded is true, it could not carve out the disputed area and assigned it to Leader Glory.

29.  In the circumstances, P is probably right to say that D2 could not validly assign the disputed area to Leader Glory before the final determination of the court of his claim here.

30.  Even D2 has assigned its interest to Leader Glory, the question remains whether P still has any claim against it.  The Court of Final Appeal has held in HKSAR v Lau Kam Ying (2013) 16 HKCFAR 599 at §19 that the unregistered option (the unregistered Writ of Statement of Claim in this case) is not null and void to all intents and purposes, which means that P may have remedies against D2 and/or Leader Glory in this case.

31.  If D2 is released from this action, the matter will be very much complicated because D2’s defences will have to be amended or even replaced by the pleadings of Leader Glory.  D2 has pleaded its case in the Amended Defence already.  There may be issues of facts, such as whether it was the rightful registered owner of the disputed area.

32.  All these issues will be hotly argued in the trial. In the circumstances, D2 should stay in these proceedings.  Whether Leader Glory should be joined in these proceedings and as to who should join it will be for the parties to decide.

33.  I dismiss D2’s both summonses.

COSTS AND ORDER

34.  As to the costs of these two applications, I understand that D2 has not complied with Practice Direction 5.4 in the timely lodging of the written submissions.  Since P succeeds in this hearing, I shall not impose any punishment upon D2 in accordance with Practice Direction 5.4.  I shall only advise the legal representatives to observe the Practice Directions.

35.  Costs should follow the events. P’s costs are assessed summarily under O.62, r.9A, RHC at $120,000 for both summonses, including all costs reserved, to be paid by D2 within 14 days from the date hereof.

CASE MANAGEMENT DIRECTIONS

36.  The Court shall now give the following directions:

a)  the matter is adjourned to 9:30 a.m. on 27 March 2019 for the 1^st Case Management Conference and P shall serve this order on D3;

b)  D2 may, if so advised, take out an application for joining Leader Glory as a party in these proceedings within 14 days from the date hereof;

c)  D2 shall, if so advised, take out an application for leave to amend its Amended Defence within 14 days from the date hereof;

d)  P and D2 shall exchange their expert reports within 56 days from the date hereof;

e)  respective parties’ experts shall within 21 days thereafter hold a without prejudice meeting to work out the joint statement, in which they should set out the issues they agree and those issues in dispute, with the reasons in support of their views;

f)  P and D2 shall exchange their witness statements within 84 days from the date hereof, such evidence shall stand as evidence in chief unless otherwise directed by the trial judge;

g)  the parties herein are to obtain counsel's advice within 28 days thereafter;

h)  all interlocutory applications as may be advised shall be taken out within 14 days thereafter;

i)  costs of this Case Management Conference (30 min) be in the cause.