Foremost Hill Ltd v. Li Hon Bank of China (Hong Kong) Ltd
Read the full judgment text of HCA 2555/2013 on BabelCite. This High Court CFI judgment was delivered on 5 April 2017.
1. The plaintiff commenced this action in December 2013, claiming in effect that it has acquired title to the subject area (as defined in para 3 below). The claim is denied by the 2 nd defendant (“ D2 ”), which counterclaims against the plaintiff in trespass over the subject area.
Cited by 1 case
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HCA 2555/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE HIGH COURT ACTION NO 2555 OF 2013 ____________
____________ Before: Hon Chung J in Court Dates of Hearing: 28 November and 2 December 2016 Date of Judgment: 5 April 2017 ________________ J U D G M E N T ________________ INTRODUCTION 1.The plaintiff commenced this action in December 2013, claiming in effect that it has acquired title to the subject area (as defined in para 3 below). The claim is denied by the 2nd defendant (“D2”), which counterclaims against the plaintiff in trespass over the subject area. BACKGROUND 2.The plaintiff is the registered owner of a shop (known as Shop 4) in a building located in Shamshuipo (respectively “the plaintiff’s shop” and “the subject building”). D2, which is a licensed bank, became the mortgagee bank of another shop (known as Shop 6) (“D1’s shop”) effectively since January 1981. The said two shops are next to each other. When looked at from above, their relative positions form a shape resembling the letter “L”. 3.Sometime earlier (before January 1981 according to the plaintiff), the rear portion of D1’s shop was somehow “severed”; the partition wall dividing the two shops was somehow “moved” and part of the rear of D1’s shop was physically included as part of the rear of the plaintiff’s shop (the plaintiff became its owner since January 1997 (but a Mr Lun (see para 5(1) below) and other occupiers were related to the plaintiff)). That portion will be called “the subject area” below (see also para 1 above). MAIN ISSUES 4.The issues raised by D2 can be broadly categorized as:
5.The following witnesses testified at trial:
(a) Factual issue 6.D2’s main criticism is the plaintiff’s pleaded case is different from the testimony given:
7.Based on the above, D2 submits that:
D2 invites the court to place weight and rely on the plans attached to the assignment documents of both the plaintiff’s shop and D1’s shop, contending that they were prepared by qualified professionals. The boundaries of D1’s shop were properly delineated in those documents. 8.D2 also argues that, because Lun was the vendor referred to in the assignment of the plaintiff’s shop in 1990, Lun should be taken to have represented that the attached plan was accurate. The same point is made against Lun and Tam when they signed the assignment in 1997 for the plaintiff. 9.With respect, for the reasons set out below, I disagree with D2 (especially with regard to para 7(a) above). 10.First, as the plaintiff correctly points out, its case is supported by documentary evidence:
The plaintiff also relies on part of D1’s shop (its front portion) having earlier been used as a transformer room as a possible explanation for the subject area being included as part of the plaintiff’s shop. This is however too speculative for any evidential weight to be properly placed. 11.I also reject D2’s contention that the said demands were issued without knowledge of the actual physical condition at the plaintiff’s shop (including the subject area). The letter 15 December 2015 shows that this should not be the case; the issuing department was quite clear about how the plaintiff’s shop was partitioned. 12.Secondly, the differences pointed out in para 6 above are relatively trivial and must have been caused by inaccuracies or mistakes in recollection due to the long time lapse between the narrated matters and the trial. Briefly, the differences pertain to:
These inaccuracies or mistakes over details do not impact significantly on the plaintiff witnesses’ reliability or credibility regarding the approximate length of occupation of the subject area. 13.As regards para 7(b) to (c) above, I disagree with D2’s submission that the subject area was occupied at different times by different individuals without reference to each other, or without the permission or consent of the others. Because of the relationship of the occupants (Lun and Tam were long acquaintances, and there were similar members for the shareholding and directorship of the various corporate owners), the proper inference is that their occupation of the subject area was with the permission or consent of the other occupants. There is no basis for suggesting, for example, that other (or complete) strangers would be able to gain access to the subject area during those periods. 14.In the premises, in disagreement with para 7(d) above, I find that Lun and Tam have at various time had exclusive possession of the subject area; during different periods from at least 1990, they have done so (i) on their own, or (ii) jointly with the others, or (iii) continuously by taking over from the others. This applies a fortiori to their exclusion of the “paper” owner(s) of the subject area from the subject area, including D1. 15.It is not common Hong Kong conveyancing practice for real properties to be professionally surveyed for the purpose of sale and purchase. There is no evidence (or indeed any proper basis) for concluding that a different practice has been adopted in relation to the plaintiff’s shop and D1’s shop. For this reason, I find that the plans attached to the related assignments to be more for identification purposes, than as evidence for concluding that they necessarily reflect the actual (or on-site) boundaries of the properties concerned (see para 7 above). 16.Similarly, it is not common Hong Kong conveyancing practice for vendors or purchasers to physically check the said plans against the related properties. Likewise, there is no proper basis for suggesting otherwise in the case of the plaintiff, Lun or Tam. In the absence of actual knowledge of what the said plans show, the argument that Lun, Tam or the plaintiff has made any representation (or bound by some kind of estoppel) is unfounded (see para 8 above). 17.Understandably, Liu has no personal knowledge of the actual events which took place at the subject building during the material time period. No weight will be placed on his testimony in this regard. 18.I will therefore make findings of fact in the plaintiff’s favour (see para 13 and 14 above). (b) Legal issue 19.D2’s main argument is based on the trite legal proposition that, in order for a tenant-in-common to establish adverse possession against another tenant-in-common, there must be an act of ouster by the former against the latter. D2 argues that there has not been sufficient ouster in this action (“the co-ownership argument”). 20.Further, D2 relies on the parts of the deed mutual covenant conferring on each co-owner the right to the exclusive use, occupation and enjoyment of his own unit(s) (“the DMC argument”). 21.In relation to the co-ownership argument, D2 argues that there is no evidence that the incorporated owners of the subject building, and the other co-owners, have all been ousted by the plaintiff. 22.This argument has no merit. The subject area was originally part of D1’s shop (and never formed part of the common parts of the subject building). Neither the deed of mutual covenant nor the general law has conferred any title to the incorporated owners over the subject area. There is no suggestion the incorporated owners have asserted any exclusive rights over the subject area. The same observations apply to the other co-owners of the subject building (except the defendants). 23.As regards D1/D2, the subject area has been separated from D1’s shop by a concrete wall, and (as observed in the letter dated 15 December 2015) has formed part of the plaintiff’s shop. The plaintiff’s shop has been used by Lun, Tam (and their associates) in such state. The defendants have not asserted their title or other rights over the subject area until after this action has commenced. 24.D2’s (ancillary) point that the subject area was not “an exclusive unit” is likewise unsound for the reasons given above. D2 has not clarified the meaning of “an exclusive unit”. Presumably, it refers to a unit in the subject building as constructed by the developer. If such a unit can be adversely possessed as a matter of law, there is no valid reason, whether as a matter of logic or principle, why part(s) of such a unit cannot be adversely possessed, provided the part(s) so possessed is/are sufficiently well defined and the act of ouster is adequately demonstrated. 25.The DMC argument raises the point of whether, realistically, there can ever be adverse possession among the co-owners of a multi-storey building. The parties have not referred to any judicial decisions directly on the point. The decision which involves a claim grounded on the enforcement of a deed of mutual covenant is Incorporated Owners of Man Hong Apartments v Kwong Yuk Ching and Others [2001] 3 HKC 116. 26.It is probably better to approach this dispute starting from basic premise. A deed for mutual covenant can normally be enforced:
27.The time limitation period prescribed by the Limitation Ordinance (Cap 347) for the recovery of land is governed by s 7(2) (a period of 12 years) while that for an action founded on contract or tort is governed by s 4(1)(a) (a period of 6 years). 28.Subject to D2’s co-ownership argument (and the alleged insufficient evidence of an act of ouster) (para 19 above), the time prescribed by ss 4(1)(a) and 7(2), Cap 347 have expired when this action was commenced. 29.D2 relies on a number of judicial decisions in support of its argument that it can rely on the deed of mutual covenant to resist the plaintiff’s claim. 30.Insofar as that argument rests on contract, it fails because of s 4(1)(a), Cap 347. 31.Insofar as that argument rests on an enforcement of the relevant covenants in the deed of mutual covenant, it should be analyzed as follows. Many of the provisions usually found in a deed of mutual covenant are in the nature of covenants “running with the land”. As such, they are normally equitable rights (also provided for in s 41(2), Conveyancing and Property Ordinance (Cap 219)): the Man Hong Apartments decision, pp 122 and 123-4. 32.While a claim for equitable relief is not barred by Cap 347 (s 4(7)), such a claim is subject to the equitable doctrine of laches. Thus, in the Man Hong Apartments decision, it was observed:
The court then continued in the Man Hong Apartments decision:
33.The Man Hong Apartments decision was not a claim between co-owners. It concerned one co-owner encroaching upon a portion of the passageway near to a shop in a multi-storey building. The incorporated owners relied on the terms of the deed of mutual covenant to seek an injunction to stop the encroachment. It was in such context the court found that the incorporated owners’ claim had not been time-barred. 34.Re Nisbet and Potts’ Contract (referred to in the Man Hong Apartments decision) involved a restrictive covenant prohibiting the erection of buildings. After observing that the right was an equitable right (p 402), the court decided that a squatter, who was not a purchaser for value without notice, should take the land subject to the covenant (p 404). The question of delay did not arise because there has not been any breach (or threat of breach) until the defendant there acquired title of the land with the intention to build on it. 35.The defendants were in a good position to find out, if they had wanted to, the correct boundaries of D1’s shop (and the plaintiff’s shop) because of the plans attached to the assignments which were referred to in this action (para 7 above). 36.Further, because the subject building has been resumed by the Urban Renewal Authority (“the URA”) for redevelopment purpose, the parties’ real interest lies practically with the amount of compensation payable for the ownership of their respective shops. Any prejudice which either party may suffer is monetary in nature. Because of the failure to take timeous action (para 35 above), D2’s prejudice is very much a misfortune of its own (or D1’s) creation. 37.Insofar as it may be necessary to do so (see para 1, 20, 23, 27 and 35 above), I also agree with the plaintiff that, in any event, D2’s defence and counterclaim is in truth in the nature of an action to recover land (where s 7(2), Cap 347 is engaged). 38.Finally, D2 complains that the plaintiff has failed to adduce clear evidence regarding the measurements, position and extent of the subject area. Relying on the decision in The Port of London Authority v Tower Bridge Yacht and Boat Co Ltd [2013] EWHC 3084 (Ch), para 273-4, D2 submits that relief should be refused for this reason. 39.The Port of London Authority decision concerned properties which have allegedly been used as “ancient moorings” (moorings which have been used since before 1857). The moorings were said to be either fixing mechanisms rooted in the riverbed (of the Thames), or rings fixed to a wall on the riverbank. In such factual context, one can readily understand why the court described the title claimed as:
The court also referred to Thomas W Ward Ltd v Alexander Bruce (Grays) Ltd [1959] 2 Ll Rep 472, 478 where the property claimed was:
Based on the above, the court in Port of London Authority refused the declaratory relief sought on the procedural ground that the claimant could not point out the property allegedly adversely possessed. 40.Nothing in this action resembles the descriptions quoted above. The subject area has been well defined (or was capable of being well defined). It is by no means “very small defined areas” (as that phrase was used in the Port of London Authority decision). 41.Further, the parties disclosed at the pre-trial review hearing that proceeding for assessing the compensations payable by the URA is still pending in the Lands Tribunal. It is conceivable that any dispute regarding the exact size of the subject area (and therefore the amount of related compensation payable) will be looked into there. 42.There is therefore no substance in D2’s submissions regarding the alleged imprecision. CONCLUSION 43.Judgment is entered in the plaintiff’s favour as claimed. D2’s counterclaim is dismissed (if it were necessary to do so, I would have agreed with the plaintiff and refused D2’s application in effect for a “split trial”). OTHER MATTERS 44.The parties’ written submissions also mentioned various other points. These have not been expressly set out or dealt with above. This is so only because of the need to balance between the length of the judgment and its comprehension. It does not mean those other points are thought to be irrelevant (or have been overlooked). To avoid doubt, those other points have also been considered. COSTS ORDER 45.The parties agree that costs of this action should follow the event. There will accordingly be a costs order that the costs of this action are to be paid by the defendants to the plaintiff, to be taxed if not agreed.
Mr Vincent Lung, instructed by Wong & Co, for the plaintiff The 1st defendant was not represented and did not appear Mr Anthony Chan, instructed by K W Ng & Co, for the 2nd defendant |
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