THOUSAND TREASURE INVESTMENT LTD v. PINKTON LTD

DCCJ3540/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3540 OF 2006

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J U D G M E N T

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1.  The plaintiff claims against the defendant for trespass and for an injunction against the defendant, effectively for the recovery of the portion of the land wrongly occupied by the defendant and damages for trespass. 

2.  The defendant counterclaims for a declaration that the plaintiff’s claim is time-barred and for a declaration that the defendant has adversely possessed the said portion of the land against the registered owner of the portion of the land in question. 

3.  The plaintiff is the registered owner and occupier of a property known as Unit 38, Basement, Carson Mansion, 121 Kings Road, Hong Kong (hereinafter referred to as “Unit 38”) upon the purchase of the same on 28 February 2006. 

4.  The defendant is the registered owner and occupier of the property known as Unit 39, Basement, Carson Mansion, 121 Kings Road, Hong Kong (hereinafter referred to as “Unit 39”) since its purchase on 22 February 1992.  The defendant was a tenant of Unit 38, it had occupied both units 38 and 39 for a period of time. There is further a tenancy agreement in writing for the period between August 1995 and end of July 1996. 

Background

5.  Units 39 and 38 are adjacent to each other in the basement floor of Carson Mansion.  The basement and upper floors are also known as Seven Seas Commercial Centre, situated at 121 Kings Road, North Point.  The back of the building exits into Electric Road in North Point.  Units 38 and 39 are located in the middle of the basement floor.  According to the building’s original floor plan, Unit 38 is approximate 1,300 square feet and Unit 39 about 2,700 square feet.  The two units together would form a large area of approximately 4,000 square feet. 

6.  After the plaintiff purchased Unit 38 on 28 February 2006, it discovered that the dividing wall between Units 38 and 39 does not accord with the approved building plan dated 29 September 1979 or with the assignment plan.  The plaintiff therefore obtained a surveyor’s report in October 2006 from Messrs Raymond Chan Surveyors Limited which confirmed that the dividing wall between the two units does not represent the original dividing wall of the two units according to the last approved building plan of 29 September 1979. 

7.  It further found the existing dividing wall to have encroached 2.4 metres into Unit 38, it had allowed Unit 39 to encroach into Unit 38 by 2.4 metres.  As the length of the wall is 14.17 metres (i.e. 46 feet and 6 inches), the existing dividing wall had given Unit 39 14.17 metres x 2.4 metres, a total of 34 square metres of extra area which belonged to Unit 38 (hereinafter referred as the “encroached area”).  The plaintiff is therefore claiming the recovery and damages for the trespass of the encroached area from the defendant. 

8.  The defendant, on the other hand, claims that it is entitled to keep the encroached area under section 7(2) and section 17 of the Limitation Ordinance.  It further seeks a declaration that it had used and occupied the encroached area for over 12 years and is entitled to keep it permanently, i.e., under the principle of adverse possession. 

The Plaintiff’s case

9.  The plaintiff adduced evidence from three independent witnesses.  They are Mr Lit Chun-wah, Madam Chow Yin-yin and Mr Law Wing-kwan.  Mr Lit has been an owner of a unit on the 1st Floor of Carson Mansion since 1991.  He is also a member of the IOC of the Carson Mansion and is familiar with the building and the basement commercial centre.  He claimed that in 1992 to 1993, Units 38 and 39 had no dividing wall and was let out to an electrical appliances and audio visual shop, known as SY Electric and Audiovisual Centre.  There were no walls installed at the shop according to Mr Lit.  When the electric appliance shop closed, a fast food shop or café named MLK (美樂佳) operated at the same Units 38 and 39.  Again, he alleged there were no dividing walls between the two units visible to visitors to the fast food café.

10.  The second witness, Madam Chow Yin-yin, is an estate agent.  She has been operating her own estate agency, King Fung Company at Unit G41 of Carson Mansion since 1983.  She too claimed to be very familiar with the different units in the basement commercial centre both from a professional point of view as well as a fellow owner of a unit in Carson Mansion. 

11.  She also claimed that in 1992 and early 1993, Units 38 and 39 were used as an electric audiovisual appliance shop.  She also said that there was no dividing wall between the two units and visitors can access the shop directly from the basement corridors into the shop as there were no walls at all in the shop.  She also claimed that at night, the shop would use curtain grills along the four sides of the shop enclosing the four corners of the shop.  She further said that a fast food café was opened at the same location after the electric audiovisual shop closed in 1993.  She did not see any dividing walls erected when the two units were used as a fast food café. 

12.  The third witness, Mr Law Wing-kwan, is an East District Board Member.  He claimed he had been working in the area since 1989 and is familiar with the Carson Mansion and the Seven Seas Commercial Centre.  His ward office has been operating at Units 251 and 219 of Carson Mansion since the year 2000.  It was his evidence that he frequented the basement commercial centre and he had visited the electric and video audiovisual appliance centre since the early 1990s.  He also said he had patronised the fast food café that operated there after the electric and video appliance shop closed in late 1993.  He claimed there were no dividing walls between the two units. 

13.  The plaintiff relied on the evidence of the three plaintiff witnesses and the hearsay information from Madam Chow, who claimed that she had obtained the information from Mr Cheng who was a director of Jun Time Limited, the previous owner of Unit 38, that the dividing wall was erected in or about 1995.  She was told by Mr Cheng that when the company repossessed the premises in December 1996 from the defendant, Pinkton Limited, who was a tenant of Unit 38 and owner of Unit 39, there was a wall erected between Units 38 and 39. 

The Defence case

14.  The defendant’s director, Mr George Wong Fuk-wah, gave evidence on behalf of the defendant.  He claimed that the existing dividing wall was there when the defendant purchased Unit 39 on 31 January 1992 (the assignment and the completion of the sale date was in February 1992).  As Unit 38 was sold to Jun Time Limited at about the same time, Mr Wong claimed neither Jun Time Limited nor the defendant knew about the discrepancy between the existing dividing wall and the boundary set out in the approved building plan of September 1979. 

15.  According to Mr Wong, Unit 39 was let to Just Dance Café Limited in December 1993 as a dance studio.  Just Dance Café Limited remained a tenant there up to the present.  He also admitted the premises were rented out and used as a Filipino restaurant on Sundays.  To date, it is still operating as a café on week days.  Mr Wong further admitted that between August 1995 and the end of July 1996, the defendant had been a tenant of Unit 38.  He claimed the existing dividing wall was there all along. 

16.  Mr Wong’s evidence was supported by Madam Hui Man-ha.  Madam Hui admitted to being employed as a full time latin and ballroom dance instructor of the Lifestyle Group which also runs the Just Dance Café dance studio in Carson Mansion.  She alleged that she began patronising the Just Dance Café when it opened for business in December 1993 at the Seven Seas Commercial Centre.  After she became a dance instructor with Lifestyle Group, she has been giving dance lessons at the Seven Seas Commercial Centre dance studio at least once a week.  She claimed there have not been any structural changes since she first visited the Just Dance Café in December 1993.

The Issue

17.  The issue in this action is whether the defendant, Pinkton Company Limited, has successfully established that the present dividing wall was erected for over 12 years before the plaintiff first raised objection to the defendant’s trespass in 2006. 

Findings

18.  It is not disputed by the parties that if the defendant successfully established a continuous occupation without disturbance of the encroached area, consisting of 34 square metres, for over 12 years, under section 7(2) of the Limitation Ordinance, Cap. 347, the plaintiff’s action is time-barred and the defendant’s adverse possession is effective against the plaintiff. 

19.  Section 7(2) stated:

“No action shall be brought by any person to recover any land after the expiration of 12 years from the date of which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person……”

   Section 13(1) stated:

“No right of action to recover land shall be deemed to accrue unless the land is in the possession of the same person in whose favour the period of limitation can run and where, under the foregoing provisions of the Ordinance any such right of action is deemed to accrue on a certain date and no person is in adverse possession on that date, the right of action shall not be deemed to have accrue unless and until adverse possession is taken off the land.”

20. The evidence of the three plaintiff’s witnesses on the appearance of Units 38 and 39 being used as an electric and audiovisual appliance shop is consistent.  All three witnesses agreed the shop ceased its business in late 1993. 

21. On the other hand, Mr Wong, who is a shareholder and director of the defendant is also a director and shareholder of Just Dance Café Limited and Kenny Limited (before its dissolution on 13 December 2002), and the MLK Food Group Limited.  The MLK Food Group Limited’s name was changed to “Babe’s Café, Filipino Cuisine Limited” on 10 May 1994.  Mr Wong also happened to be a major shareholder and director of a company call Show Yield Limited.  Show Yield Limited is the former registered purchaser of Unit 39.  Record at the Land Registry showed Show Yield Limited signed a sale and purchase agreement with the previous owner, Winston & Franklin Limited.  Show Yield Limited subsequently transfered its right to purchase Unit 39 to Pinkton Limited within a month of the signing of the sale and purchase agreement in February 1992.

22. Show Yield Limited is the same company that operated the Show Yield Electric and Audiovisual Appliance Centre at Units 38 and 39 in the year 1992 to 1993.  According to Mr Wong, the dividing wall between Units 38 and 39 was there when the defendant, Pinkton Limited, purchased Unit 39 in February 1992.  This may be so, but after the defendant’s purchase of Unit 39 in February 1992, is it possible that the original dividing wall was removed after Jun Time Limited, the registered owner between February 1992 and 2006, let Unit 38 to the defendant?  The occupation of both units thus enabled the defendant’s tenant Show Yield Limited to operate an open-plan electric and audiovisual appliance shop.

23. Mr Wong denied there were any changes to the floor plan or floor area of Unit 39 since the defendant purchased it.  In his words, “Subject dividing wall was already there as it is now.”  The question therefore is, is it possible that the present dividing wall was erected after the registered owner of Unit 38, Jun Time Limited, took the defendant to the Tenancy Tribunal in 1996 and before recovery of possession at the end of 1996 of Unit 38?  Was it erected before it was handed over and repossessed by June Time?

24. Pages 211 to 216 of the bundle showed Jun Time Limited had taken Pinkton Limited to the Lands Tribunal in August 1996 for recovery of possession and outstanding rental since December 1995.  There was also a High Court Action commenced by the defendant when Pinkton Limited, Jun Time Limited and Kenny Limited brought an action against the incorporated owners committee, the IOC of Carson Mansion in October 1995.  The decision of Rogers J (as he then was) dated 13 October 1995 can be found on pages 207 to 209 of the bundle.  Rogers J referred to Units 38 and 39 being used as a restaurant at the time of the action. 

25. I find the chronology of events prepared by Mr Wong, counsel for the defendant, is very helpful as it set out the dates and ownership of Units 38 and 39, the history and background, including the occupiers and tenants to the two units at different times. 

26. From the evidence adduced, it is clear that Unit 38 together with Unit 39 had been occupied by Show Yield as an electric appliance shop since 15 March 1992.  In early 1993, MLK Food Group Limited took over and operated a café or a fast food shop up to November 1993.  In December 1993, the defendant leased Unit 39 to Just Dance café.

27. It is not disputed that the defendant continued to occupy Unit 38 as a tenant even though it was only in August 1995 that a written Chinese tenancy agreement for one year was signed by the parties.  The rental agreed was $28,000 per month.  The tenancy expired at the end of July 1996.  Jun Time Limited’s action in the Lands Tribunal commenced on 23 August 1996 and evidence showed that recovery of possession was delivered in December 1996.

28. After the repossession of Unit 38, according to Mr Wong, Jun Time Limited had used it as its own office; throughout this period up to 2006, when the plaintiff purchased Unit 38, there was no complaint of trespass of the encroached area.  It is clear that the only one who possesses any personal knowledge and continued to occupy Unit 39 was the defendant, Pinkton Limited.  Mr Wong is still its major shareholder and director and, a director and shareholder of the tenant companies which occupied Unit 39 since February 1992.  His companies had also been a tenant of Unit 38 between March 1992 and December 1996 before possession was recovered by Jun Time Limited.

29. Based on the evidence of the plaintiff’s three independent witnesses, Mr Lit, Madam Chow and Mr Law, all have been long time owners and occupiers of their respective units in Carson Mansion.  And Mr Law is also a District Board member of the district.  I accept their evidence that Units 38 and 39 were used as an electric appliance shop in 1992 and 1993 and that the shop had no dividing walls and it was used as an open planned shop displaying electric appliances, including refrigerators etc.  The original dividing wall must have been removed to make room for the shop to be used as one large display and sale area. 

30. When MLK took over the two units and operated a fast food café there, there may well have been an area used as a kitchen and there may have been a wall to separate the kitchen area from the serving area, required under the health regulations and fire regulations as claimed by Mr Wong.  However, we know nothing about the size of the kitchen and the serving area at the time, it has not been disclosed by the defendant. 

31. If MLK or its subsequent tenant who have been operating the two units as a restaurant and café had applied for a restaurant licence, there must be detailed plans submitted to the Food, Hygiene and Environmental Health Department as well as the Fire Services Department for their approvals.  These plans have not been disclosed in this action.  They would have offered strong supporting evidence in these proceedings.  They would particularly assist the defence case to show the present dividing wall had been there all along, or at least for the continuous period of 12 years and/or that the same dividing wall had been there since 1993 or 1992.  The absence of any such plans cast doubts in the Defence case on the date when the present dividing wall was erected. 

32. The present dividing wall obviously could not be the same wall as the original dividing wall in September 1979 as its present location deviated by 2.4 metres from the approved plan of the basement.  The question therefore is, when was the present dividing wall erected?  Mr Wong claimed he inherited the present dividing wall at the time of purchase in February 1992. 

33. I have found on the evidence before me that the two units were used as an open-plan electric appliance shop in 1992 to 1993 with no dividing wall between the two units.  It follows that the defendant could not have inherited the dividing wall up to the present.  For this reason, I reject Mr Wong’s evidence that the present dividing wall dated from the days of the previous owner, Winston & Franklin Limited.

34. He who asserts must prove.  I find the defendant have failed to produce sufficient evidence to show the present dividing wall has been erected since 1992.  The defendant’s witness, Madam Hui, said she was a patron of the Just Dance Studio since December 1993.  She had later become a dance instructor of the Lifestyle Group connected with the Just Dance Café Limited which runs the dance studio at Unit 39.  She was also previously employed as a receptionist at the Just Dance Café Limited.  She obviously is not an independent witness. 

35. As a customer to the Just Dance café in December 1993, she certainly would not be expected to know where the dividing wall was and whether a particular wall was the dividing wall between Units 38 and 39.  Furthermore, she, in fact, spent most of her time teaching at another dance studio in Kowloon.  It is doubtful if she had any real knowledge of the matter.  I find her evidence to be unreliable.

36. I accept the evidence of the three plaintiff witnesses because they are independent witnesses even though the plaintiff had failed to adduce evidence from Mr Cheng, the director of Jun Time Limited, the former registered owner of Unit 38.  Based on the evidence of Madam Chow that the present dividing wall was most likely erected in 1995, the last year the defendant remained a tenant under the written tenancy agreement signed in Chinese of Unit 38, what Madam Chow was told by Mr Cheng, is consistent with the history of occupation of Unit 38.

37. Further, it is not disputed that the defendant company had rented Unit 38 from Jun Time Limited since 1992.  The law on adverse possession required that it should be an occupation without force, without coercion and without permission.  An adverse possessor does not include a licensee or tenant under a leasehold or someone who had entered by force.  Therefore, under the lease period between Jun Time Limited and the defendant, the period of adverse possession does not run against the landlord.  This period must be excluded. 

38. The time should run from the period after the lease terminated and Jun Time Limited repossessed Unit 38, i.e. some time in 1996. According to the evidence of Madam Chow, the successful recovery of possession by Jun Time Limited from Pinkton Limited after it commenced the action in the Lands Tribunal was in December 1996.  Therefore the period of the defendant’s claim of adverse possession up to 2006 would be a mere 10 years or less.  It falls short of the 12 years required under the Limitation Ordinance.  The 10 years possession of the encroached area would date from the date of the notice from the plaintiff to the defendant, or the date of the writ on 19 July 2006.  The adverse possession period is consequently less than 12 years.

40.       For the aforesaid reasons, I give judgment to the plaintiff and order the defendant to vacate from the encroached area.  I also grant an injunction against the defendant or its servant or agent from entering any part of Unit 38, including the encroached area, without the consent and permission of the plaintiff.  I further allow damages for trespass to be assessed with interest.  I dismiss the defendant’s counterclaim with costs.  Costs shall follow the event, the defendant shall pay the plaintiff’s costs to be taxed if not agreed with certificate for counsel.