The Incorporated Owners of Million Fortune Industrial Centre v. Charter Favour Ltd and Another

CACV 428/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 428 OF 2006

(ON APPEAL FROM HCCW NO. 472 OF 2006)

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BETWEEN

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Before:  Hon Tang VP, Stock JA and Lam J in Court

Date of Hearing: 13 March 2007

Date of Judgment: 13 March 2007

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J U D G M E N T

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Hon Tang VP:

1.The petitioner is The Incorporated Owners of Million Fortune Industrial Centre, which is a 26-storey industrial building in Tsuen Wan.  It was built in 1989.

2.By an assignment dated 7 July 1989, One Jikan Development Limited (“Jikan”) was assigned 23 shares of which 15 were allotted to the common parts, 1 to the external wall, and 7 to the lorry parking spaces in the Industrial Centre.

3.The deed of assignment purported to convey to Jikan the 16 shares together with the exclusive right to use the whole of the common parts, namely, to the exclusion of all the co-owners.

4.In Jikan Development Limited & Anor v The Incorporated Owners of Million Fortune Industrial Centre [2003] 6 HKCFAR 446.  Litton NPJ, with the concurrence of the other members of the court, described the purported assignment of the exclusive right to use the whole of the common parts as non-sensical.  He also said that the assignment could never have had that effect.  (See para. 25)

5.However, the 16 shares together with the purported exclusive right to use the common parts and the external walls of the Industrial Centre have been assigned by Jikan to the 1^st respondent (“the Company”).  Notwithstanding the judgment of the Court of Final Appeal, the Company commenced proceedings against the petitioner and various owners of the Industrial Centre, alleging trespass of the common parts by them.  These applications included:

LDBM No.133 of 2003, in which the petitioner was named as the 1^st Respondent and the owner of the 15^th Floor of the building (Po Shing Property Limited) as the 2^nd Respondent.

6.In LDBM 133 of 2003, Deputy Judge M Wong on 7 November 2005 ordered the Company to pay $400,000 into court as security for the petitioner’s costs within 28 days, failing which the application should be dismissed.  The Company was also ordered to pay the costs of the application for security for costs.

7.The Company failed to pay the security, as a result of which the application against the petitioner was dismissed.

8.Earlier in March 2005, the Company had applied for summary judgment against the petitioner which was dismissed by Judge Yung with costs against the Company.  By the consent order dated 20 March 2006, the Company agreed to pay $133,000 as the petitioner’s costs in the summary judgment proceedings in LDBM 133 of 2003.  It is this sum of $133,000 which became the subject of the statutory demand on the Company, on the basis of which the Company was ordered to be wound up by Kwan J.

9.It is not disputed that the Company is unable to pay the sum demanded.

10.Financial Services and Systems Limited, the 2^nd respondent to the winding-up proceedings, is a shareholder and an opposing contributory.  This is the 2^nd respondent’s appeal against the winding-up order.

11.The submissions made by the 2^nd respondent to this court were essentially those which were made to Kwan J and rejected by her.

12.As far as I can understand the 2^nd respondent’s submissions, it seems to be said that the petition to wind up the Company amounted to an abuse of process and an attempt to stifle claims brought by the Company against the petitioner, and various owners in the Industrial Centre.  Thus, it is said in the affirmation in opposition to the petition filed by a Mr Siu See-kong, on behalf of the opposing contributory, that:

“7.     The Company is suing the Petitioner and various owners of Million Fortune Industrial Centre in the Lands Tribunal for, inter alia, trespass of lift lobbies which the Company asserts to be belonging to the Company being owner of the undivided shares relating to the said Common Parts.  There are now shown and produced to me copies of the captioned Applications and Statements of Claims in the said Lands Tribunal cases, all marked ‘SSK-2’.  I respectfully point out that six of the Committee Members (then) out of nine of the Petitioner had been committing trespass against the lift lobbies via the properties which they either own or related; there are now shown and produced to me copies of relevant minutes and documents experiencing the particulars of the Committee Members, marked ‘SSK-3’.  I have not been informed of the current composition of Committee Members of the Petitioner.”

13.Exhibit SSK-2 contains 9 sets of applications and statements of claim in the Lands Tribunal, against the petitioner and individual owners of various floors in the Industrial Centre.

14.The claims are similar.  They appeared to be claims for damages for trespass to various common areas.  The judgment of Litton NPJ quoted above shows that such claims are not viable.  Thus, the suggestion that the Company might be entitled to substantial damages for trespass against the petitioner is unfounded.

15.On the authority of Jikan, it is clear that the Company could not sue in trespass in respect of the common parts of the Industrial Centre, because the Company is not entitled to exclusive possession and any purported assignment of such exclusive right “could never have had that effect”.  So Kwan J’s conclusion in paras. 7 and 8 of her judgment that the Company has no genuine and enforceable cross claim which would result in recovery of an amount exceeding the petitioning debt is unassailable.

16.Insofar as the company’s claim against the individual owners for trespass are concerned, it is said that the question of constructive trust was relevant as well as the allegation that those individual owners had individually arrogated themselves the exclusive rights to use various different common parts to the exclusion of other owners and thus they may be liable as trespassers.  Even if that were so, and I am not saying that it is so, that has nothing to do with the petitioner, and cannot avail the company so far as the petitioner is concerned.

17.The Company is justly indebted to the petitioner in the sum of $133,000.  The Company is insolvent, I can see no reason why Kwan J should not have issued a winding-up order against the Company.

18.I would dismiss the appeal.

Hon Stock JA:

19.For the reasons given by my lord, the Vice-President, I agree that this appeal should be dismissed.

Hon Lam J:

20.I agree that this appeal should be dismissed.

Hon Tang VP:

21.The appeal is dismissed with costs against the 2^nd respondent, such costs to be taxed, if not agreed.

Mr Anthony Lo, instructed by Messrs Ho & Tam, for the Petitioner.

Mr Sui See Chun, instructed by Messrs Kwan & Chow, for the 2^nd Respondent.