THOUSAND TREASURE INVESTMENT LTD v. PINKTON LTD

DCCJ 3540/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3540 OF 2006

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DECISION

1.  This is the Defendant’s application to set aside the judgment entered against it on 3.1.2007.

2.  On 19^th July, 2006 the Plaintiff instituted the present action, and on 3.1.2007 default judgment was entered against the Defendant.  On 25.1.2007 the Defendant took out the present summons to set aside the judgment.

Background

3.  The Plaintiff is the registered owner of the land known as Unit 38, Basement, Carson Mansion, No. 121 King’s Road, Hong Kong (“Unit 38”) after its acquisition of this unit in early 2006, whereas the Defendant is the registered owner and occupier of Unit 39, Basement, Carson Mansion, No. 121 King’s Road, Hong Kong (“Unit 39”) since 1992, and in 1995 it was also a tenant of Unit 38.  So in 1995 the Defendant was the occupier of both units.

Service of documents

4.  The Plaintiff says that the service of the writ was effected at the registered office of the Defendant on 21.7.2006 by leaving the same at the Defendant’s registered address located at Room 1322, 13^th Floor, HITEC, Trademark Drive, Kowloon Bay, Kowloon.  But the Defendant says that the documents were never received.  The writ was only discovered by Miss Kitty Wong (one of the Defendant’s directors) on 17.1.2007 at Unit 39.  The Defendant submits that there is insufficient material to cast doubt on the credibility of the Defendant on its lack of notice of proceedings.

5.  According to the Plaintiff, on 19.12.2006, the summons for default judgment and supporting affirmation were served on the Defendant by leaving the same at the Defendant’s registered address.  The Defendant says that it has not received the  documents.  The same documents were served on the Defendant by delivering the same to Unit 39.  These documents were acknowledged by the tenant of Unit 39.  The Defendant says that it came to know about the existence of these documents on 17.1.2007.  So the Plaintiff did serve the documents at Unit 39.  That being the case, the Plaintiff must also have served the writ of summons and the statement of claim on the Defendant.  The purpose of serving the said documents on Unit 39 is to let the Defendant know the existence of these proceedings.  It cannot be imagined that the Plaintiff only served these documents on Unite 39, but not at the registered address of the Defendant.

6.  The Defendant’s allegation is not that the Plaintiff failed to serve these documents on the Defendant at its registered address.  Its allegation is that it did not receive the same.  This allegation, even if true, is not proof that the Plaintiff did not serve the documents on the Defendant at its registered address.

7.  In the premises I am satisfied that the judgment entered is a regular judgment.

Merit of proposed defence

8.  The Plaintiff alleges that  there was no dividing wall between Unit 38 and Unit 39, but in 1995, upon possession of Unit 38, the Defendant erected a dividing wall to separate the 2 units.  But instead of being erected along the boundary between the units, the dividing wall was erected along a line wall inside Unit 38, at a distance of about 8 feet from the boundary between the 2 units (“the encroached area”).  The essence of the proposed defence is that the Defendant has been in adverse possession of the encroached area for more than 12 years before the commencement of this action, and by reason of sections 7(2) and 17 of the Limitation Ordinance, the title of the former registered owner (Jun Time Limited) over the encroached area was extinguished before the assignment.  Hence the Plaintiff has no title over the encroached area and its claim is liable to be struck out for disclosing no reasonable cause of action.  The fundamental element to be considered by this court is: when was the dividing wall built?

9.  The Defendant adduced evidence to prove that when it purchased Unit 39, the dividing wall had already been in existence.  In her affirmation, Kitty Wong Sui Wa (the Defendant’s director) said,

“	2.	At all material times the Defendant was, and still is, the registered owner of Unit 39 On Basement, Carson Mansion, No. 121 King’s Road, Hong Kong (“Unit 39”).  In fact it was purchased on 22 February 1992.  Unit 38, which is adjacent to Unit 39, was formerly owned by Jun Time Limited in 24 February 1992.  Unit 38 was then purchased by the Plaintiff on 28 February 2006.  There is now produced and shown to me marked “KW – 1” copies of the land search record of the said premises.
	3.	When the Defendant purchased Unit 39, the wall partitions were already at such positions as at present.  No change to their positions has ever been made.  In about December 1993 Unit 39 was leased to a Just Dance Café Ltd (“Tenant”) who had decorated and used the premises as a dancing studio.  The lease was renewable every 2 years and was so renewed until the present.  As for the current lease it is about to expire by December 2007.”

10.  There is simply no evidence adduced by the Plaintiff to refute this piece of evidence.  So from 1992 to 2004 for a period of 12 years the encroached area was possessed by the Defendant, through its tenant.  The Plaintiff only purchased Unit 38 on 28.2.2006.  So if the Defendant is able to prove that prior to 28.2.2006 it had adverse possession of the encroached area, then the title of the former registered owner Jun Time Limited over the encroached area was extinguished before its assignment of Unit 38  to the Plaintiff.

11.  The Plaintiff submits that it is undisputed that on 24.2.1992, the Defendant sold Unit 38 to Jun Time Limited, and from 2.1992 to 1995, Show Yield Limited rented Unit 38.  From 1995 to 1996, the Defendant rented Unit 38.  Based on such undisputed facts, the defence is bound to fail, as lacking the intention on adverse possession.

12.  It further submits that by reference to Unit 38, all parties (including the Defendant and Jun Time Limited) must mean the Unit 38 as depicted by the plan on P.239.  In such circumstances, by referring to Unit 38 in the tenancy agreement between Jun Time and the Defendant, the parties must mean the Unit of 38 as shown in the plan annexed to the assignment of Unit 38.  But if the Defendant’s allegation that on 24.2.1992 the dividing wall had already encroached on Unit 38 is true, then on 24.2.1992 (Jun Time Limited being the then registered owner of Unit 38) part of the area of Unit 38 had in fact been encroached upon.  Is it the intention of Jun Time Limited to let the actual area of Unit 38 to the Defendant, not knowing that part of its area had been encroached upon?  The real intention of the parties in these circumstances has to be ascertained through trial. 

13.  The Plaintiff submits that there is no evidence to suggest that the Defendant was to rent Unit 38 as then partitioned from Unit 39 by the partition wall.  This is not correct.  In August 1995, the Defendant rented Unit 38.  By then the dividing wall had been in existence.  So when it rented Unit 38, the area rented was in fact a lesser area of Unit 38 (Unit 38 without the encroached area).

14.  The Plaintiff further submits that “Even if the Defendant alleges that in the tenancy agreement on 38, the Defendant referred to the part of Unit 38 as partitioned from Unit 39 in 1995, the clear evidence from Jun Time is that June Time (the landlord) referred to the one shown in the plan P.98.”  But if the Defendant’s allegation is true, the dividing wall has been in existence since 1992, then what Jun Time Limited leased to the Defendant is unit 38 (without the encroached area).  So it was leasing to the Defendant a smaller area lesser than it had intended.

15.  The Plaintiff submits that in such circumstances there can be no adverse possession as it will be ridiculous to rely on a party’s own fault to found adverse possession.  The Plaintiff’s submission cannot stand, as it has failed to take into consideration the evidence of the Defendant that the dividing wall has been in existence since 1992.  This piece of evidence is not rebutted.

16.  The Plaintiff also relies on the operation of the presumption on encroachment.  I do not find it helpful to support the Plaintiff’s case.

17.  I find that the Defendant has shown that it has a real prospect of success in its proposed defence.  I therefore set aside the judgment entered on 3.1.2007.  The Defendant be at liberty to defend the action, and to file and serve its defence within 14 days from today.

Costs

18.  I make an order nisi, to be made absolute in 14 days’ time, that the costs of this application be costs in the cause of this action, to be taxed, if not agreed.