THOUSAND TREASURE INVESTMENT LTD v. PINKTON LTD

HCMP 185/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. HCMP 185 OF 2010

(ON AN INTENDED APPEAL FROM DCCJ NO. 3540 OF 2006 )

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BETWEEN

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J U D G M E N T

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Hon Yeung JA (giving the judgment of the Court):

Introduction

1.  The Plaintiff, Thousand Treasure Investment Limited (“Thousand Treasure”) purchased Unit 38 (“Unit 38”) at the basement of Carson Mansion from Jun Time Limited (“Jun Time”) in 2006 and soon thereafter, on 19 July 2006, commenced the present proceedings against the Defendant, Pinkton Limited (“Pinkton”), the owner of the adjacent unit (“Unit 39”), for trespass.

2.  There is no dispute that between Unit 38 and Unit 39, there is a partition wall, which is wrongly positioned according to the building plans and has encroached 2.4 metres (“the encroached area”) into Unit 38. Unit 39 has dispossessed Unit 38 of about 34 square metres.

3.  Pinkton contends that the dispossession took place more than 12 years before Thousand Treasure commenced the present proceedings. Pinkton seeks a declaration that Thousand Treasure’s claim is time-barred and that it has adversely possessed the encroached area.

4.  On 10 September 2009, Judge HC Wong in the District Court found for Thousand Treasure and dismissed Pinkton’s counterclaim.

5.  Pinkton seeks leave to appeal and in accordance with Order 59 Rule 2A(5), we decide to determine the application on the basis of written submissions only.

Thousand Treasure’s Case and Evidence

6.  Thousand Treasure contends that the partition wall was only erected in or about late 1995 when Pinkton was a tenant of Unit 38. The suggestion is that Pinkton only erected the partition wall when it rented Unit 38 between August 1995 and July 1996. Thousand Treasure called three witnesses to support its contention.

7.  Mr Lit Chun Wah, the owner of a unit on the 1^st floor of Carson Mansion since 1991 and a member of the IOC of the Carson Mansion, who was familiar with the area, stated in his witness statement that in 1992 to 1993, Unit 38 and Unit 39 were used as an electrical appliances and audio visual shop known as SY Electric and Audiovisual Centre (“SY Centre”) operated by Show Yield Limited.

8.  Mr Lit said he entered SY Centre on many occasions and did not see any partition wall. According to Mr Lit, after SY Centre closed down, Unit 38 and Unit 39 were taken over by a fast food shop – MLK and when he visited MLK, he did not see any partition wall between the two units.

9.  In cross-examination, it was suggested to Mr Li that since or about February 1992, there was a partition wall between Unit 38 and Unit 39, Mr Lit did not agree.

10.  Madam Chow Yin-yin was the director of King Fung Company (“King Fung”), a estate agency situated at unit G41 of Carson Mansion. Madam Chow said, in her witness statement, that she had worked in the area for over 20 years and knew the area very well. Madam Chow confirmed that Unit 38 and Unit 39 were linked and were used as an audio-visual shop from 1992 to early 1993. She said that Units 38 and 39 were an open-floor plan with no partition wall in between. She also said Units 38 and 39 were later used as a fast food shop and again there was no partition wall.

11.  According to Madam Chow, a director of Jun Time, Mr Cheng had said that the partition wall between Units 38 and 39 was only erected in 1995. Apparently Jun Time rented out Unit 38 to Pinkton under a written agreement between 1995 and 1996 and when Unit 38 was repossessed in December 1996, there was a wall erected between Units 38 and 39.

12.  In cross-examination, it was suggested to Madam Chow that there was a partition wall between Units 38 and 39 in 1992. Madam Chow said the partition wall was only erected in 1995. She also agreed that she did not see the wall, but was told by Mr Cheng that the partition wall had encroached to the left for 8 to 9 feet into Unit 38.

13.  Madam Chow did not retracted from her witness statement that there was no partition wall between Units 38 and 39 when they were occupied by the audio-visual shop and the fast food shop.

14.  Mr Law Wing-kwan was an East District Board Member and had been working in the area since 1989. He said that he frequented the area often and knew the area well. In his witness statement, Mr Law said he remembered clearly that in the early 1990s, Units 38 and 39 were “linked openly” and were used as an audio-visual shop. He said he was inside the shop on many occasions and did not see any partition wall between Unit 38 and Unit 39. Mr Law also said in or about 1993, Units 38 and 39 were still “linked openly” and were used a fast food shop. He said he had patronized the fast food shop and found the two units still “openly linked” and there was no partition wall.

15.  In cross-examination, it was suggested to Mr Law that since February or March 1992, there was already a partition wall between Units 38 and 39. Mr Law did not agree with the suggestion. Mr Law did agree that he had no written record of which companies or when they were in occupation of Units 38 and 39.

Pinkton’s Case and Evidence

16.  In his witness statement, Mr George Wong Fuk-wah, Pinkton’s director, said when Pinkton purchased Unit 39 in early 1992, the partition wall between Units 38 and 39 was already there and there had never been any structural change since. Mr Wong suggested Thousand Treasure’s predecessor, Jun Time had never raised any objection. Mr Wong also said that since late 1993, Pinkton leased out Unit 39 to Just Dance Café Limited as a dancing studio. Just Dance Café remains the tenant of Unit 39 and uses it as a café and restaurant.

17.  Mr Wong admitted that Pinkton occupied Unit 38 as a tenant under a written tenancy agreement between August 1995 and July 1996 at the monthly rent of $28,000. He said that at that time, neither Jun Time nor Pinkton was aware that Unit 39 had encroached upon Unit 38 and that the rent was therefore meant to cover Unit 38 without the encroached area.

18.  In cross-examination, Mr Wong admitted that after Jun Time became the owner, Unit 38 was rented out to various related companies that he was involved, including MLK, Show Yield Limited, Just Dance Café, Kenny Limited, Babe’s Café Filipino Cuisine Limited and Pinkton until 1996 although it was only in August 1995 that a written tenancy agreement was signed. Mr Wong is a shareholder and director of Show Yield Limited, Pinkton, Just Dance Café and MLK. MLK changed its name to Babe’s Café Filipino Cuisine Limited.

19.  Mr Wong denied the suggestion that the partition wall between Units 38 and 39 was only erected in 1995/1996 when he had a dispute with Jun Time over the non-payment of rent, which eventually led to Jun Time recovering possession of Unit 38 in December 1996.

20.  It was not disputed that Jun Time took Pinkton to the Lands Tribunal in August 1996 for recovery of outstanding rental and possession of Unit 38. There was also a High Court Action by Pinkton, Jun Time and Kenny Limited against the IOC of Carson Mansion. Rogers J (as he then was) referred, in the proceedings, to Units 38 and 39 as a restaurant.

21.  Another witness of Pinkton, Madam Hui Man-ha, also said there had never been any structural change to Units 38 and 39 since Just Dance Café opened for business in December 1993.

The Judge’s Findings

22.  The judge pointed out that Mr Wong’s companies had always been tenant(s) of Unit 38 until December 1996 and that Pinkton was the owner of Unit 39, and therefore only the defendant/Mr Wong could possess personal knowledge. However, the judge accepted the evidence of Thousand Treasure’s witnesses that there was never any partition wall between Units 38 and 39 when they were used as SY Centre and a fast food shop.

23.  The judge pointed out the fact that Units 38 and 39 were used as a fast food café and there might well be an area used as a kitchen with a wall separating it from the serving area. However, Pinkton did not disclose the floor plans as required by the relevant regulations in connection with the restaurant licence.

24.  The judge found that Units 38 and 39 were used as an open-plan electric shop in1992 and 1993 with no partition wall in between. The judge rejected Mr Wong’s evidence that Pinkton had inherited the partition wall since 1992. The judge rejected Pinkton’s case that the partition wall had been erected since 1992.

25.  In any event, the judge pointed out that various companies connected to Mr Wong had been tenant(s) of Unit 38 and Jun Time only recovered possession in December 1996. Therefore the period of adverse possession did not start to run against the owner of Unit 38 until December 1996.

26.  The judge dismissed Pinkton’s case, both on facts and on law.

Grounds of Appeal

27.  In his written submissions in support of the leave application, Mr Jason Wong, who was also Pinkton’s counsel at trial, suggests that the only issue was when the partition wall was erected.

28.  Mr Wong suggests that the judge should not have rejected Pinkton’s case that the partition wall had always been there since 1992.

29.  Mr Wong suggests none of Thousand Treasure’s witnesses had any direct knowledge on the matter. He suggested that Mr Lit was unsure when he said in cross-examination that he was unsure when Just Dance Café actually used Unit 38 as a dance studio. Mr Wong submits that Mr Lit was unable to point to a date when the partition wall was actually erected.

30.  Mr Wong points out Madam Chow’s admission that she did not actually see any partition wall and was only told that the wall was erected in 1995.

31.  Mr Wong also points out that when Mr Law Wing-kwun said there was no partition wall between Units 38 and 39, he was confining himself to the period when they were used as a fast food shop. Mr Wong emphasizes that Mr Law did not mention anything about “the state of wall partition as regards Just Dance Café when it went into operation at Unit 39 in December 1993”.

32.  Mr Wong emphasizes that there was no evidence adduced by Thousand Treasure that the partition was only erected in 1995/1996.

33.  Mr Wong suggests that it was Pinkton’s case that there were two separate businesses at Units 38 and 39, yet the judge had misunderstood the case and had wrongly concluded that the partition wall was likely to have been erected in 1995.

34.  Mr Wong further submits that as Thousand Treasure had failed to call Jun Time to give evidence although in a letter from its solicitor, it was stated that the partition wall was only erected in 1995. Mr Wong suggests that an adverse inference should be drawn against Thousand Treasure because of such failure.

35.  Mr Wong suggests that there was no evidence to challenge Pinkton’s case, at least in relation to the suggestion that the partition wall was there after Just Dance Café began business in 1993.

36.  Mr Wong submits that in all the circumstances, Pinkton had discharged the burden of adverse possession of the encroached area for 12 years.

Discussion

37.  It is accepted that Pinkton had the burden to prove adverse possession for 12 years prior to the commencement of the present proceedings, namely 15 July 1994.

38.  The undisputed evidence suggests that one of Mr George Wong’s companies, Show Yield Limited started to rent Unit 38 and together with Unit 39, ran a fast food restaurant until December 1993. Although Pinkton leased out Unit 39 to Dance Café Limited in late 1993, the undisputed evidence also suggests that Units 38 and 39 remained as a café and restaurant under the names of other related companies, MLK and then Babe’s Café Filipino Cuisine Limited.

39.  Pinkton’s only case on adverse possession was that the partition wall was already in existence in 1992. It was not its case that the partition was erected in 1993 or 1994 after Show Yield ceased business.

40.  The evidence of Thousand Treasure’s witnesses was clear. When Units 38 and 39 were operated by Show Yield between 1992 and 1993 and then used as a fast food shop, there was no partition wall between Units 38 and 39.

41.  The witnesses might not be able to tell whether the fast food shop/restaurant was operated by MLK, Babe’s Café Filipino Cuisine or Just Dance Café, they were adamant that it was always an open-floor plan, without any partition between Units 38 and 39.

42.  Indeed, when Units 38 and 39 were used as a retail shop by Show Yield and then as a fast food shop/restaurant by various related companies, it defies common sense to have a partition wall in the position as suggested by Pinkton.

43.  As the judge quite rightly pointed out, when Units 38 and 39 were used as a fast food shop/restaurant, there were bound to be plans required under the restaurant license. The production of those plans would have conclusively settled the disputes in issue, yet Pinkton chose not to produce any of those plans.

44.  In our view, the judge was entitled to accept the evidence of Thousand Treasure’s witnesses whose evidence had completely destroyed Pinkton’s case.

45.  We reject entirely Mr Wong’s written submission on the dispute as to facts.

46.  In any event, we fail to see how Pinkton could have maintained its claim on adverse possession at all.

47.  It is not disputed that between 1992 and 1996, Pinkton/Show Yield/MLK/Just Dance Café /Babe’s Café Filipino Cuisine, all related companies under the control of Mr George Wong, were at one stage or another tenant(s) of Unit 38.

48.  As tenant(s), they occupied Unit 38 lawfully and not as trespasser(s).

49.  The judge was right to conclude that the period of adverse possession did not start to run until after December 1996. Section 7(2) of the Limitation Ordinance therefore has no application.

50.  Mr Wong does not consider it necessary or suitable to address us on this point of law. However, we are firmly of the view that Pinkton’s case on adverse possession is completely misconceived.

51.  Pinkton’s proposed appeal has no reasonable prospect of success and its application for leave to appeal is therefore dismissed with costs.

52.  As Pinkton’s application is totally without merit. We order, under Order 59 Rule 2A(8) of the Rules of the High Court that Pinkton may not, under Rule 2A(7), request the determination to be reconsidered at an oral hearing inter partes.