KAYWAY INVESTMENT LTD v. FOCUS WINNER LTD AND ANOTHER

HCA 967/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 967 OF 2013

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D E C I S I O N

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Background

1. This is the Plaintiff’s application by summons, pursuant to Order 45 Rule 8 of the Rules of the High Court and the inherent jurisdiction of the court, for leave to enforce the summary judgment which was entered against the Defendants on 30 April 2015 (the “Judgment”).

2. The Plaintiff is the owner of the exterior wall (“Exterior Wall”) of Kaiser Estate 2^nd Phase in Kwun Tong (“the Building”) since 16 February 2012.  The rights and obligations of the co-owners of the Building are governed by a Deed of Mutual Covenant (the “DMC”).  I have found, on a proper construction of the DMC that “Exterior Wall” means the entirety of the external wall enclosing the Building. 

3. The 1^st Defendant is the registered owner of Units J, K and L on the ground floor of the Building (“the Shop”). The 2^nd Defendant is an associated company incorporated in Hong Kong and held by the same sole shareholder, D2 Limited. It operates a jewellery business in the Shop and used to trade under the name of “D2 Jewellery”.  Since the Judgment, it has changed its trading name to “D DRAX 蒂廷珠寶 JEWELLERY”.

4. When the 1^st Defendant acquired the Shop, part of the exterior walls on the ground floor had been removed by its predecessor in title to enable the premises to be used as an open showroom.  What is left of the exterior wall on the ground floor is the existing wall as it now stands and as coloured pink in the plan marked ‘A’ attached to the Amended Defence (“the Existing Wall”).  In reading this decision, it is important to bear in mind that the Existing Wall is part of the Exterior Wall referred to in the Judgment and in the DMC, of which the Plaintiff has the right to exclusive possession.

5. The 2^nd Defendant erected and fixed two signboards on the Existing Wall, one facing Man Yue Street and the other one facing Man Lok Street.  On the basis of the incontrovertible facts and my construction of the DMC, the 2^nd Defendant’s act clearly amounted to trespass. 

6. On 30 April 2015, I allowed the Plaintiff’s application for summary judgment.  I granted the 1^st Defendant conditional leave to defend but entered summary judgment against the 2^nd Defendant. As against the 2^nd Defendant, I made the following order (the “Order”):

(1)   judgment on liability be entered with damages to be assessed;

(2)   removal of the trespassing structure and delivery of vacant possession of the trespassed area to the Plaintiff within three months from the date of the Judgment;

(3)   interim lump sum payment to the Plaintiff in the sum of $24,000 per month from 16 February 2012 until the date of the Judgment, i.e. the sum of $936,000 ($24,000 x 39), within 14 days;

(4)   interim monthly payment in the sum of $24,000 thereafter on the 16^th day of each month until conclusion of the assessment of damages or removal of the trespassing structure whichever the earlier; and

(5)   costs of the application to be taxed if not agreed.

Neither of the defendants appealed.

7. The two signboards, i.e. the trespassing structure, which should have been removed by 30 July 2015, were not removed. The Defendants made the lump sum payment and interim payments up to 15 July 2015.  What took place in the interim was as follows.

8. Hoardings were erected around the trespassing structures in about May 2015 and building works appeared to be in the process of being carried out.  Towards the end of June 2015, the Plaintiff’s solicitors wrote to the 2^nd Defendant’s solicitors to enquire about the progress of the removal work, but the 2^nd Defendant’s solicitors did not respond.

9. On 30 July 2015, the hoardings were still there.  On 21 August 2015, the Plaintiff’s solicitors wrote to the 2^nd Defendant’s solicitors enquiring about the progress.  Again, the 2^nd Defendant’s solicitors did not respond.

10. By the end of September 2015, the hoardings were removed.  The former signboards complained of (the “original signboards”) were removed, but the trespassed area, i.e. the Existing Wall, is covered by two apparently new signboards with the name of “D2 Jewellery” (the “new signboards”).

11. On 15 October 2015, upon the application of the Plaintiff by affirmation, judgment was entered against the 1^st Defendant for failure to comply with condition, i.e. removal of the trespassing structure and making interim payment.

12. On 23 November 2015, the Plaintiff took out the present summons seeking leave to enforce the Judgment against the 2^nd Defendant.

13. In February 2016, the name on the new signboard was changed to “D DRAX 蒂廷珠寶 JEWELLERY”.

 The parties’ case and the issues

14. The Plaintiff does not dispute that the original signboards were removed and replaced by new ones.  The basis of Plaintiff’s application is that the new signboards are attached to the Existing Wall and are still trespassing the Existing Wall.  Alternatively, even if the new signboards are not attached to the Existing Wall, the 2^nd Defendant is still in breach of the Order in not having delivered vacant possession of the Existing Wall to the Plaintiff.

15. The 2^nd Defendant’s case is that the original trespassing structure had been removed.  The trespass ceased and the Order complied with.  The new signboards which have been erected at the same position are not attached to the Existing Wall at all and there is no trespass of the Plaintiff’s property.  Even if trespass or some other tortuous acts have been committed, they would only give rise to some new causes of action.  The Plaintiff cannot enforce the Order on a new trespass or new cause of action.

16. The issues raised by this application are:

(1)  What are the 2^nd Defendant’s obligations, specifically as regards delivery of vacant possession, under the Order?

(2)  Are the new signboards trespassing on the Existing Wall, specifically are they in any way attached to the Existing Wall and how are they secured?

(3)  Has the Order been complied with, specifically has vacant possession of the Existing Wall been delivered to the Plaintiff?

The 2^nd Defendant’s obligation to deliver vacant possession

17. Paragraph 2 of the Order reads:

“The 2^nd Defendant do remove of the trespassing structure and deliver vacant possession of the trespassed area to the Plaintiff within three months from the date of the Judgment;”

18. This particular paragraph of the Order is in simple language which the parties have no difficulties in understanding.  The Plaintiff sought to apply for leave to amend the Summons during the court’s vacation to specifically identify the “trespassing structure” and “the trespassed area” to mean respectively the original signboards and those parts of the Existing Wall to which they were attached.  The application was made during the court’s vacation and without leave. Mr Chain confirms that the 2^nd Defendant has no misunderstanding what these terms mean.  The application is disallowed as being unnecessary and not properly made.  The 2^nd Defendant’s obligation is, first, to remove the original signboards and, second, to deliver vacant possession of the Existing Wall formerly occupied by the original signboards.

19. The parties are in dispute as to the 2^nd Defendant’s obligations in delivering vacant possession under the second limb of the Order.   Mr Vaughan, counsel for the Plaintiff, submits that vacant possession means actual unimpeded physical enjoyment of the land in issue.  Mr Chain, counsel for the 2^nd Defendant, argues that that is a concept under the law of landlord and tenant only which has no application to the parties not under such a relationship.  He submits that once the trespassing structure is removed, vacant possession is delivered.

20. Mr Vaughan referred me to the case of Toho Limited v Ng Sik Yu[1]on the meaning of vacant possession.  That case is very similar to the present one.  The plaintiff was the owner of two shops on the ground floor of a building.  He let part of the external wall consisting of columns and the space in between of 12 feet in length and 1.5 to 1.6 feet in width (referred to in the judgment as the “wall space”, which was in fact a horizontal space bounded on one side by the wall) to the defendant for operating a street stall.  The stall was 12 feet by 3 feet.  Thus part of the stall rested on the leased area and part on government land.  In 1977, the defendant obtained a hawker stall from the Urban Council to operate as a wall stall hawker at that location.  In 2002, he demolished the original stall and erected a new one.  The new one was much smaller, being about 4 feet 5 inches by 2 feet 7 inches and was 2.5 inches away from the wall.   He ceased to pay rent.  The plaintiff’s case was founded on forfeiture and nuisance.  At first instance, the District Court held that vacant possession of the wall space had been delivered by the defendant. 

21. On appeal, the Court of Appeal reversed the judgment of the District Court and held that vacant possession had not been delivered. Cheung JA said that the right to vacant possession means actual unimpeded physical enjoyment of the wall.  The impediment does not mean any impediment but one which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property.  He referred to the authorities and explained the rationale of this principle as follows:

“11. …The right to vacant possession means actual unimpeded physical enjoyment of the wall. The impediment does not mean any impediment but one which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property. This principle is clearly stated in Cumberland Consolidated Holdings, Limited v. Ireland [1946] 1 KB 264 where the English Court of Appeal was dealing with the question of giving vacant possession in a contract of sale of land. At completion there was rubbish (in the form of many sacks of cement which had hardened) in the property which the vendor refused to remove. The court found that vacant possession was not given by the vendor.

12. The right of an owner of a property has as much right to the use and enjoyment of the internal part of his property as the external walls of his property. Again this principle is firmly established in Cobb v. Saxby [1914] 3 KB 822 where Rowlatt J at page 826 held that,

‘He (i.e. the owner) has the right to do anything he likes to the wall, for example to display advertisements upon it, and if these rights are invaded or obstructed, he has, in my opinion, a good cause of action against the person causing the interference with his rights.’

13.   In this case, the wall space let to the defendant is on the external wall of the property. If the defendant is to deliver vacant possession of the wall space let to him then he has to do so in a way which will enable the plaintiff to have unimpeded use of that space. By demolishing the original stall, the defendant would, of course, have provided the plaintiff with unimpeded access and use of the wall space. However, by erecting the new stall in front of the wall space, the defendant in effect prevented the plaintiff from using that part of the external wall of the property. While the new stall is an independent structure away from the exterior wall, the gap in between this stall and the exterior wall is only about 2.5 inches. The plaintiff cannot gain access to the external wall of his property through that thin gap. This thin gap between the wall space and the new stall is meaningless in the context of giving vacant possession. Although the new stall is on government land, it substantially prevents and interferes with the plaintiff’s enjoyment of the right of possession of a substantial part of its property. If the principle on the giving of vacant possession is recognized and applied, then on no account can it be said that vacant possession had been given by the defendant.”

22. Mr Chain makes three observations.  First, he says that the facts of that case are not clear.  With respect, I do not agree. Besides, I do not think those facts which Mr Chain says were unclear could have any bearing on the legal principle set out by the Court of Appeal. 

23. Second, Mr Chain says that defendant in that case was not legally represented and the Court of Appeal did not have the advantage of adversarial submissions.  Be that as it may, I have quoted extensively from the judgment.  It is obvious that the principle was deduced by the Court of Appeal after considering relevant authorities.

24. Third, Mr Chain argues that Toho is a landlord and tenant case and the principle of delivery of vacant possession must be understood in that context and is inapplicable to the present case where the parties are not under such a contractual relationship.  He relies in particular on paragraph 23 of the judgment in Toho where Cheung JA said:

“23. In the present case, we are concerned with whether a tenant has delivered vacant possession of rented premises to his landlord. The question has to be adjudged by the context of this special relationship of the parties and the law governing delivery of vacant possession of a premises. This by itself is distinguishable from the situation in Yu Shu Tung where the defendants were not in any contractual relationship with the landlord. To extend the principle stated in Allen to the present situation is totally inappropriate.”

He argues that by the above dicta Cheung JA specifically confined the principle to the relationship between landlord and tenant and expressly distinguished that case from Yu Shu Tung where the parties were not in any contractual relationship.

25. In the face of such clear dictum, I do not think counsel can argue otherwise.  The landlord gave vacant possession to the tenant to use and enjoy the property during the term of the tenancy, which must necessarily include unimpeded access and physical enjoyment of the property. Thus, when that tenancy expires, the tenant must be under the obligation to return the property with vacant possession in the same condition as he received it, including unimpeded access and physical enjoyment of the property.  A trespasser is different.  He is not engaged in any contractual relationship with the landlord.  He comes and goes.  If he trespassed someone else’s property, so long as he makes good the damage caused and leaves, that must be the end of his obligation.  He has no duty to ensure that the landowner enjoys unimpeded access and physical enjoyment of the property after he has vacated it. 

26. The above is the general position only.  The position is different when a duty to deliver vacant possession is imposed by an order of the court.  The court cannot and will not impose on a defendant trespasser who is not in the relationship of landlord and tenant an obligation which is owed by a tenant to his landlord.  On the other hand, the court will not make any order which is in vain.  The order is made for a purpose.  It must have a meaning, is capable of compliance and must be complied with.  It is usual to impose such a term as to deliver vacant possession against a trespasser so as to ensure that not only he ceases trespassing by leaving the landowner’s property, but that he will clear it up and leave nothing of his behind (which by itself would be trespass).  Not only that, this term is imposed to ensure that the trespasser will not continue his trespass in substance but with a change in form, for example, by removing the trespass from one part of the landowner’s property to another or to replace the trespassing article by another.  The landowner must be restored to the same position as he had been in before the trespass was committed.  The trespasser and the effect of his trespass must be out of the landowner’s property for good.  He may not by removing the trespass specified in the order do any wrongful act, be it trespass or nuisance or anything else wrongful, which would affect the unimpeded enjoyment by the landowner of his land prior to the trespass.  This is what the trespasser has to do to comply with such an order which, under the peculiar circumstances, the court deems it necessary to make.  Other than refraining from his own wrongful act, the trespasser is not required to do anything to ensure the landlord may have unimpeded enjoyment of his property which a tenant may be required to do.  The obligation is a negative one which is not onerous at all.  What the trespasser has to do is just to pack up and go.  Subject to this qualification, I would accept Mr Chain’s argument.  This is a lesser obligation than that imposed by Cheung JA on a trespasser who was previously in a landlord and tenant relationship with the landowner. 

How the new signboards are affixed

27. According to the Plaintiff’s supplemental expert report, the new signboards are attached to the Existing Wall and he identified certain attachment points.  The Defendant’s expert explained that those “attachment points” were loose items and not anchorages.  He exhibited drawings showing how the new signboards were constructed and erected.  As the Plaintiff’s expert admitted he had difficulties making observation without removing the underside panels of the signboards, I accept what the Defendant’s expert said on its face value.  Both experts confirm that the new signboards overhang partly on government land. 

28. According to the Defendant’s expert, each of the signboards consists of an overhanging portion and a vertical portion.  The vertical portion is made of columns resting on a concrete footing on the pavement on government land.  These columns are attached to the underside of the overhanging portion providing vertical support to the signboard.  The overhanging portion consists of a steel frame on which the external panels making up the signboard are affixed.  The main structural component of the steel frame is fixed or attached to the underside of the concrete cantilever providing horizontal support and securing the steel frame in its position.  This concrete cantilever, as Mr Chain confirms, is within the Shop.  Thus the signboard is fixed to a steel frame which is supported by columns resting on government land and secured to the concrete structure of the Shop.  That must necessarily mean that the steel frame or such part or whatever part of it which is secured to the concrete cantilever must have passed through the notional wall (the wall having long been removed) making up part of the Exterior Wall before it could reach the concrete cantilever within the Shop and be secured to it.  

Are the new signboards trespassing structures

29.  On the above analysis, the steel frame or part of it must have passed through the notional wall and trespassed it.  In reply to this observation of mine, Mr Chain argues that the wall had long ceased to exist and that there could not be trespass of a wall.  He refers to the case of Sunbroad Holdings Ltd and Unknown Occupiers[2] in which Tang VP (as he then was) held that just as there could not be a lease of the surface of a wall there could be no adverse possession of such surface.  By extension of that principle, Mr Chain argues, there could not be trespass of the notional wall.

30. I do not think Sunbroad Holdings relevant. A wall is a structure with a horizontal area and vertical surfaces.  The issue in Sunbroad Holdings was about adverse possession of the surface only of a wall.  I do not think that case has decided any principle that there could not be adverse possession or trespass of a wall which has a thickness and horizontal area.  The law has always been, as the Full Court in Leung Kwok Kau v Tam So Wa[3] held, that a corporeal hereditament includes the surface of the earth or some horizontal plane below or above it; and an interest in land could be created over a wall.  In that case, Huggins J said[4]:

“… A corporeal hereditament … has always included an area of the surface of the earth or of some horizontal plane either below, or in a building erected above, the surface of the earth. The area need not be large but it must have some substance. …”

More relevant to our present situation is the dicta of Briggs J in which he expressly held that it is possible to grant a lease of the wall.  He said[5]:

“… It is possible to grant a lease of a wall but that is because a wall is situated on the ground and in effect a lease of a wall is a lease of the ground on which the wall is standing together with the wall itself. However this is not to say that there can be a tenancy of the surface of a wall by itself as was argued in this appeal. I do not think that that is possible. The surface of a wall of its very nature has no depth, it is not standing on any part of the ground: and therefore it cannot in my view be the subject matter of a lease.”

31. When referring to a wall, one does not refer to the surface of the wall only.  The bricks and mortar which make up the wall are real objects and occupy a certain horizontal plane.  Thus, wall means the entire structure occupying a certain horizontal area and its vertical surfaces. While in the present case the bricks of part of the Exterior Wall (i.e. the notional wall) had been removed and the notional wall ceased to exist leaving only the overhanging Existing Wall, that does not mean the interest in land on which that part of the Exterior Wall used to stand has also disappeared.  The soil below and the airspace above never cease to exist.  That interest in land is capable of being trespassed.  It was held in Kelsen v Imperial Tobacco Co (of Great Britain and Ireland), Ltd [6] that it is trespass to invade that portion of the air-space which is requisite for the full use and enjoyment of the land.  Thus, the steel frame or whatever part of it which passed over the airspace formerly occupied by that part of the Exterior Wall (which I earlier referred to as the “notional wall”) must be trespassing the Exterior Wall belonging to the Plaintiff.  With respect to Mr Chain, he has focussed his attention on the wall as no more than brick and mortar which had disappeared and ignored it as an interest in land.

32. The thrust of Mr Chain’s argument is that the new signboards are not attached to the Existing Wall and as there is no direct physical interference of the Plaintiff’s land there could be no trespass.  He refers to the case of Southport Corporation v Esso Petroleum Co. Ltd. and quotes the dicta of Devlin J at first instance[7] and Denning LJ on appeal[8].  I have no disputes with the legal principle stated by their Lordships in that case, but that was a case of oil spillage in the estuary which involved what I would conveniently call, “horizontal trespass”.  It was in that context that their Lordships held that there could be no trespass without direct physical interference.  It was not a case of trespass of air space or “vertical trespass”.  If it were a case of children flying toy drones over the plaintiff’s land, I think their Lordships would have held that was direct physical interference of the plaintiff’s air space and there was trespass.  Thus, the fact that the steel structure does not touch the Existing Wall is wholly irrelevant.  Again, with respect, Mr Chain has wrongly focussed on the Existing Wall or attachment to the Existing Wall and overlooked trespass of the air space over the horizontal plane of the land occupied by that part of the Exterior Wall.  He has also overlooked the distinction between trespassing the surface of the wall (which is a legal impossibility) and trespassing the air space over the horizontal plane of the wall (which is legally and factually possible).

Has the trespassing structure been removed and vacant possession of the trespassed area delivered

33. Another important thrust of Mr Chain’s argument is that the trespassing structure, i.e. the original signboards, had been removed and even if the new signboards are trespassing, the Order had been complied with and if the Plaintiff is not happy with the new signboards, it has to start a new action.  The Plaintiff cannot seek to remove the new signboards pursuant to the Order relating to the original signboards.  The question is whether the Order has been complied with, specifically whether vacant possession of the trespassed area has been delivered, so that it is not open to the Plaintiff to enforce the Order.

34. There is no dispute that the new signboards are new ones.  That must necessarily mean that the old ones had been removed.  But does that necessarily mean that the Order has been complied with?  The Order has to be read and construed as a whole.  The Order was for removal of the trespassing structure and delivery of vacant possession of the trespassed area to the Plaintiff.  The second limb of the Order cannot be ignored as if it does not exist.  On my construction of the Order, these two limbs require the 2^nd Defendant to cease the trespassing act by removing the old signboards and deliver vacant possession of the Existing Wall to the Plaintiff by not doing any wrongful act, trespass or nuisance or otherwise, which would have the effect of preventing the Plaintiff from unimpeded enjoyment of the use of the Existing Wall. 

35. On the fact, in purported compliance with my Order, the 2^nd Defendant erected hoarding around the old signboards and carried out certain building works, the end product of which is a new structure.  For reasons as I have already explained, although the new signboards do not trespass on the Existing Wall, parts of the steel frames are trespassing the notional wall which is part of the Exterior Wall.  Though it may be regarded as a new act of trespass, it is in truth a continuing act of trespass with a change in form only.  The nature of the trespass transformed during the time when the 2^nd Defendant enclosed the Existing Wall with hoarding and carried out building works.  Though the old trespassing structure had been removed, the act of trespass has been continuing with a change in form and had never ceased.  Furthermore, not only is the trespassing still continuing, the offset distances between the steel frames and the Existing Wall range from 15 mm to 30 mm.  This state is caused by the 2^nd Defendant’s deliberate action.  It did not pack up and go.  Instead, it engaged a series of deliberate actions, instructing architect or designers to design and construct new signboards and installing them in front of the Existing Wall with gaps ranging from 15 mm to 30 mm absolutely preventing access, use and enjoyment of the Existing Wall by the Plaintiff.  Even though it has removed the original signboards, it continued the trespass in a different form and has not delivered vacant possession of the Existing Wall to the Plaintiff.  It has deliberately ignored the Order.  The Plaintiff is entitled to enforce the Order to remove the trespass, albeit in a new form, and to regain vacant possession of the Existing Wall.

Conclusion

36. The 2^nd Defendant’s primary position is that the Plaintiff is not entitled to enforce the Order.  But out of caution, Mr Chain submits that if the court is against the 2^nd Defendant, it should give the 2^nd Defendant time to comply and specify the gap between the signboards and the Existing Wall.  I do not think it practicable to specify a permissible gap because any gap providing the Plaintiff reasonable access would result in the signboards trespassing the common area of the Building and government land which they already do.  I appreciate that an order empowering the Plaintiff to remove the new signboards may have draconian effect to the 2^nd Defendant and may cause undue animosity between the parties, making an ultimate settlement which the parties need difficult.  But the 2^nd Defendant had more than a year’s time to comply with the Order.  It does not deserve any more indulgence from this court.  I have long indicated that the proper solution is for the parties to come to terms about the lease of the Existing Wall for the purpose of setting up a proper signage.  However, with the help of its architect or designers and probably its legal team, it chose to play hide and seek with the Plaintiff, if not the court.  It does so by trespassing on government land and creating a hazard to public safety.  The Plaintiff having succeeded in the summary judgment, my Order having been ignored by the 2^nd Defendant, it would be proper to grant leave to the Plaintiff to enforce the Order.  With a view to enable the parties to reach settlement, I give the 2^nd Defendant one more month to either reach settlement with the Plaintiff for a lease of the Existing Wall for setting up the signage or to remove the new signboards and associated structures, or suffer them to be removed by the Plaintiff on the authority of the court’s order.  In view of the 2^nd Defendant’s conduct, I consider it necessary to amend the Order regarding interim payment.

37. Accordingly, I allow the Plaintiff’s summons and make the following order:

(1)   paragraph 4 of my Order dated 30 April 2015 be amended by adding “and delivery of vacant possession of the trespassed area” before the phrase “whichever the earlier”;

(2)   leave be given to the Plaintiff to remove any structure trespassing the trespassed area and the air space over the horizontal area of the Exterior Wall surrounding the Building, including the new signboards and associated structures, after the expiry of 30 days from the day of this order;

(3)   the 2^nd Defendant do pay the Plaintiff such costs and expenses incurred in carrying out the works in paragraph (2) above within 14 days from completion of the works or presentation of demand, whichever the later; and

(4)   the 2^nd Defendant do pay the Plaintiff the costs of incidental to this application on an indemnity basis.

38. I have already indicated my concerns over the 2^nd Defendant’s trespass on and adverse possession over government land and the hazard to public safety created by the new signboards.  The 2^nd Defendant had obviously carried out building works in erecting the new signboards without authority from the Building Authority, let alone permission from the Director of Lands for the use of government land.  I therefore have concerns if the new signboards and associated structure constitute hazard to public safety and if government land is being adversely possessed.  I therefore direct the Plaintiff’s solicitors to inform the Building Authority and the Director of Lands the concerns of this court within 14 days so that the authorities may consider taking such steps as they deem appropriate.  The Plaintiff’s solicitors shall copy such correspondence to this court.

HCA 967/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO. 967 OF 2013

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D E C I S I O N

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Background

1.  This is the Plaintiff’s application for summary judgment for liability against the 1^st and 2^nd Defendants for trespass to part of the exterior wall owned by the Plaintiff with damages to be assessed.  

2.  The Plaintiff is the owner of the exterior wall (“Exterior Wall”) of Kaiser Estate 2^nd Phase in Kwun Tong (“the Building”) since 16 February 2012.  The exact extent of the Plaintiff’s ownership rights in the Exterior Wall is in dispute.

3.  The 1^st Defendant is a company incorporated in Hong Kong and has since 30 June 2009 been the registered owner of Units J, K and L on the ground floor of the Building (“the Shop”).  The 2^nd Defendant is another company incorporated in Hong Kong trading under the name of “D2 Jewellery”.  It operates a jewellery business in the Shop and uses its address as its business address as well as its registered address.  The 1^st and 2^nd Defendants are held by the same sole shareholder, D2 Limited.  Chung Wai Tong Teddy (“Chung”) is a director of both companies.  He and his secretary, Gan Ching Yan (“Gan”) filed affirmations in opposition to the application. 

4.  The Building was presumably developed by Eldex Investment Company Limited (“Eldex”) in about 1979.  On 3 January 1979, Eldex entered into a deed of mutual covenant (“DMC”) as the First Owner with the first purchaser of Unit O on the ground floor as the Second Owner.  Under the Second Schedule of the DMC, the parcel of land on which the Building was built was divided into 5,000 equal undivided shares, of which one share was allotted to the Exterior Wall.  The term ‘Exterior Wall’ is not defined in the DMC.

5.  On 27 August 2004, Eldex sold its interest in the Building including the Exterior Wall to Sky Rich Enterprises Limited (“Sky Rich”).  On 30 June 2009, the 1^st Defendant acquired the Shop from Sky Rich.  According to the 1^st Defendant, when it acquired the Shop, part of the exterior walls on the ground floor had been removed to enable the premises to be used as an open showroom which had been rented to 3D-Gold between December 2001 and April 2008 and then left vacant until they were acquired by the 1^st Defendant.  What is left of the exterior wall on the ground floor is the existing wall as it now stands and as coloured pink in the plan marked ‘A’ attached to the Amended Defence (“the Existing Wall”).  That Existing Wall is, without doubt, part of the Exterior Wall.  The 1^st Defendant would be able to call one of its employees who used to work for 3D-Gold during the material time as a witness.  The evidence that part of the exterior wall had been removed by Eldex leaving only the Existing Wall as it now stands before the sale to Sky Rich and thence to the 1^st Defendant seems to be incontrovertible.

6.  On 16 February 2012, after two successive changes in ownership to Wise Elite Holdings Ltd and then to East Surplus Investment Limited, the Plaintiff acquired ownership of the Exterior Wall at a consideration of $325,000.

7.  The parties are in dispute as to the nature and extent of the Plaintiff’s interest in the Exterior Wall owned by the Plaintiff.  The Plaintiff’s case is that it covers the entirety of the exterior wall of the Building from ground floor to the top floor, whereas the Defendants’ case is that it only covers the exterior wall on the ground floor of the Building, ie the Existing Wall.  The 2^nd Defendant’s further case is that its signboard trespassed part of the exterior wall on the first floor and the Existing Wall on the ground floor.  On that basis, it admits liability for trespass in respect of the area coloured yellow and hatched as shown in the plan marked ‘B’ annexed to its Amended Defence, ie part of the Existing Wall.  The 1^st Defendant denies liability in total.

8.  The issues raised by this application are (1) whether on the true construction of the DMC, the 1^st Defendant is entitled to exclusive possession of the entirety of the exterior wall, including that on the first floor; and (2) whether the 1^st Defendant is liable along with the 2^nd Defendant for trespass as joint tortfeasor.  There appears to be some argument as to whether the 2^nd Defendant could be liable for trespass in respect of part of the Exterior Wall on the ground floor which had ceased to exist.  That is a red herring as the Plaintiff has no evidence of any acts of trespass over any area formerly occupied by that part of the wall which no longer existed.

Meaning of ‘Exterior Wall’ under the DMC

9.  The DMC does not provide a definition for ‘Exterior Wall’.  Mr Lam, counsel for the Plaintiff, argues that it means the entirety of the wall covering the external part of the Building and suggests that one has to ascertain what was assigned to the Plaintiff by reference to the building plans.  These plans were plans approved by the Building Authority showing the east elevation and south elevation of the Building where the act of trespass is committed.  These plans were not incorporated into the DMC.   Neither does the DMC refer to the plans.  I think the building plans bear no reference to the meaning of ‘Exterior Wall’ in the DMC.

10.  Mr Chain, counsel for the Defendants, argues that all owners are co-owners of the whole land and building and to ascertain their rights to exclusive use of any part of the land or building, one looks to the DMC.  I agree with his suggested approach. The meaning of ‘Exterior Wall’ raises a question of construction of the DMC.  The usual rule of construction of documents applies to construction of the DMC.  The meaning of the DMC, rather than the dictionary meaning of the individual words, is to be ascertained by reading the DMC as a whole.  The meaning is that meaning which reading the document as a whole conveys to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.  See: Investors CompensationScheme Ltd and West Bromwich Building Society[1]; and JumboKing Ltd v Faithful Properties Ltd & Ors[2].

11.  Mr Chain referred to the Second Schedule and argues that it is important to note that reference to ‘Exterior Wall’ appears in the second and not the first column.  The Second Schedule allotted the undivided shares to the various parts of the Building.  For what Mr Chain’s argument is worth, part of the Second Schedule is reproduced hereunder:

“The said 5000 equal undivided parts or shares of and in the said premises are allotted and made up in the following manner:

FLOOR	UNIT	SHARES
13th Floor	G	90
	H	46
	J	50
	K	58
	L	55
12th Floor	G	91
	H	56
	J	53
	K	52
	L	57
…	…	…
4th Floor	G	94
	H	56
	J	53
	K	52
	L	57
4th Floor
Flat Roof	J	29
	L	24
…
2nd Floor	G	94
	H	61
	J	96
	K	73
	L	101
2nd Floor
Flat Roof	K	2
1st Floor	G	87
	H
	61
	J	93
	K	77
	L	107
Ground Floor	G	34
	H	34
	J	6
	K	106
	K1	7
	K2	1
	L	8
	M	5
	N	11
	O	6
	Exterior Wall	1
Lower Ground )	72 @ 2 shares	144
Floor/Ground )	(Nos G1-G33 on Ground
Floor Car Park )	Floor & Nos. B1-B39 on
	Lower Ground Floor)
Lorry Park on	4@ 3 shares	13
Ground Floor	(Nos. L1-L4)	_____
		5,000
		====

12.  Mr Chain referred to column 1 of the schedule which contains a description of the various floors of the Building and in the corresponding position in column 2 against each floor in column 1 is listed the various units within that particular floor.  He then submits the fact that ‘Exterior Wall’ is listed under column 2 just below the various units in the ground floor instead of under column 1 suggests that ‘Exterior Wall’ is that exterior wall which forms part of the ground floor.

13.  The visual impact looking at the schedule with the exception of the horizontal rows showing ‘2^nd Floor Flat Roof’ and ‘4^th Floor Flat Roof’ supports Mr Chain’s submission.  But looking at the schedule as a whole including the two horizontal rows I mentioned above, a wholly different picture emerges.   The flat roofs attached to a particular unit on a particular floor are clearly identified in column 1, with the units to which they are attached identified in column 2.  The schedule shows that the ‘Exterior Wall’ is not attached to any particular unit on the ground floor.  It therefore suggests that it refers to the exterior wall of all the floors, ie the entire Building.

14.  As I said, the DMC has to be read and construed as a whole.  The Second Schedule only allotted the shares.  The First Schedule is more important for the purpose of imparting exclusive possession of any particular part of the Building to a co-owner.  The first column in the First Schedule identifies the First Owner and the Second Owner.  The second column lists out the various parts of the Building to which the First Owner or  Second Owner  gives  exclusive  possession  to  the  other.   The second column sets out all the parking spaces, all the units on the floors, all the flat roofs and lastly, the exterior wall, describing it as:

“AND the Exterior Wall of the said Kaiser Estate 2^nd Phase”.

This description puts it beyond all doubts that the ‘Exterior Wall’ is an item on its own, not attached to any unit on any floor or to any particular floor.  It is the entirety of the external wall covering the entire Building.

15.  Mr Chain also referred me to other provisions in the DMC which he argues would support his construction.  In particular, he referred to clause 17(d)(1) which defines “Common Parts”:

“ “Common Parts” means the following parts of the Building and the said premises subject to Clause 17(g) hereof.

1. The entrances, lobbies, staircase, landing, corridors and passages in the said Building and the walls enclosing the same.”

(Emphasis by Mr Chain underlined)

Mr Chain argues that the ‘walls enclosing the same’ effectively means the Exterior Wall which encloses the entire Building.  The Exterior Wall therefore forms the Common Parts of the Building to which the 2^nd Defendant is entitled to use and enjoy along with other co-owners.

16.  Mr Lam argues that by no reading could the words ‘the same’ be construed to mean ‘the Building’.  He submits that ‘the walls’ in that clause means the walls enclosing the entrances, lobbies, staircase, landings, corridors and passages.  I agree with Mr Lam.  This is particularly so because the Exterior Wall was allocated a share under the Second Schedule and its owner was given exclusive possession of it under the First Schedule.  To turn it into Common Parts is inconsistent with the main purpose of the DMC. The submission by Mr Chain, plainly, does not make sense.

17.  Mr Chain also referred to other provisions in the DMC, such as clause 9(d), 9(j), and clause 7(h), 7(m), 7(q) and 10(b) of the Third Schedule attached to the DMC.  These provisions impose restrictions on the use of the Exterior Wall.  Mr Chain argues that most if not all of these provisions will be otiose, unnecessary or meaningless if the whole of the exterior wall belongs to an individual owner.  I do not find it necessary to quote these provisions and construe them.  They may be consistent with Mr Chain’s argument and may suggest that the Exterior Wall forms the Common Parts of the Building.  These are usual provisions in a deed of mutual covenant under which co-owners submit to restrictions in their use and enjoyment of the premises to which they are given exclusive possession for the better enjoyment of their premises and those of the other co-owners as a whole.  For example, it is common for co-owners to submit to restrictions in the use of their premises for certain obnoxious businesses to preserve the value of their premises as a whole.  It is also very common for co-owners to submit to restrictions in the use of their premises or the external wall, whether it is common part or belongs to a particular individual, which may affect the external appearance of the building.  Such provisions are more consistent with restrictions for the better enjoyment of the Building by the co-owners as a whole and preservation and enhancement of its value for the benefit of all the co-owners.  Read as a whole, these provisions do not support Mr Chain’s construction.      

18.  In conclusion, I am satisfied that on a proper construction of the DMC, “Exterior Wall” means the entirety of the external wall enclosing the Building.  This issue of construction is a crisp issue which could be properly disposed of summarily.  The Defendants have put forth all they could have argued by competent counsel.  A full trial is not going to make any difference.  On the facts, the 1^st Defendant has clearly trespassed and is continuing to trespass on the Exterior Wall owned by the Plaintiff, or to use the more precise term as used by Mr Chain, to which the Plaintiff is entitled to exclusive possession under the DMC.  The 2^nd Defendant has partially admitted liability for trespassing part of the Existing Wall.  On my construction of the DMC and on the basis of incontrovertible evidence, it has trespassed and is continuing to trespass on the part of the Exterior Wall outside the first floor.  It is appropriate that summary judgment on liability be entered.

The 1^st Defendant’s liability

19.  The 1^st Defendant’s defence is a bare denial.  At the hearing, it resists the application for summary judgment on the basis of its separate corporate personality.  It relies on paragraphs 9 and 10 of Gan’s 1^st Affirmation filed on behalf the Defendants.  There Gan says:

“9. The Defendants are associate companies and the 1^st Defendant is a property holding company and the owner of the property in question. I crave leave to refer to the land search and the assignment produced.

10. The 1^st Defendant allows the 2^nd Defendant which is a trading company to use the 1^st Defendant’s premises [the Shop].  The 2 signboards are those of, and were put up by the 2^nd Defendant.”

Presumably, the 1^st Defendant is saying that the signboards were installed by the 2^nd Defendant and not by the 1^st Defendant or by the 1^st Defendant allowing the 2^nd Defendant to operate in the Shop.

20.  Mr Chain argues that despite the 1^st and 2^nd Defendants have a common sole shareholder, the two companies are real companies, each having its own function.   The 1^st Defendant is a property holding company and the 2^nd Defendant is a trading company.  The signboards were put up by the 2^nd Defendant for its business purpose.  This was not a joint act with the 1^st Defendant.  The 1^st Defendant is not a joint tortfeasor.  Mr Chain submits, quoting China Ocean Shipping Co v Mitrans Shipping Co Ltd[3], that the use of separate corporate structure to avoid incurring legal obligation is not objectionable.  He argues that this is not an appropriate case for lifting the corporate veil, though there is no plea to do so by the Plaintiff.

21.  Mr Lam argues that such defences are not bona fide.  No plea in the Amended Defence or evidence in the affirmations filed has been proffered as to the basis upon which the 2^nd Defendant was allowed by the 1^st Defendant to enter into possession of the Shop.  There is no evidence of any tenancy agreement, licence agreement or terms of any casual arrangement under which the 2^nd Defendant was allowed to enter into possession of the Shop.  The 1^st Defendant did not give any response to the Plaintiff’s solicitors’ letter before action to disclaim liability or to dissociate itself from the trespass committed by the 2^nd Defendant.  Lastly, Mr Lam argues that since the two companies have the same shareholder and is under the same management, it is a clear sham to evade liability and the corporate veil should be lifted.

22.  The question at this stage is whether there is a credible defence.  It is important to note that the defence is just a bare denial.  Other than asserting that the 1^st Defendant allowed the 2^nd Defendant to use the Shop and that the signboards were put up by the 2^nd Defendant, there is no positive defence.  Even if these assertions are believed, they do not amount to a complete defence without more.  Gan’s affirmation is totally silent as to the terms on which the 2^nd Defendant was allowed to use the Shop.

23.  More importantly, on the undisputed facts of this case and in the absence of a positive defence, or at least in the total absence of the terms on which the 2^nd Defendant was allowed possession of the Shop, some inference that the 1^st Defendant is a joint tortfeasor could be drawn. 

24.  The two companies have a common sole shareholder, common director and company secretary.  They share the same registered office and business address.  In the circumstances, it is difficult to imagine, for example, when Chung authorised the installation of the signboards, he would have said to himself “this is my act as director of the 2^nd Defendant and had nothing to with the 1^st Defendant”.  He could not turn a blind eye to the trespass.  He cannot on the one hand authorise and instruct the installation of the signboard and on the other hand say to himself, “as director of the 1^st Defendant, I know nothing about that”.  

25.  Another important fact is that this is not a case of a shareholder holding two separate companies which has nothing to do with one another.  This is not a case of a person owning a property holding company holding a rental property at one address and owning another retail business operating on another address.  On Gan’s affirmation, these are associate companies.  The 1^st Defendant holds the Shop and allowed the 2^nd Defendant into possession of that Shop to operate a jewellery business.  They must be pursuing common interest in the 2^nd Defendant’s jewellery business for which the signboards were installed.   

26.  On the peculiar facts of this case, even without lifting the corporate veil, the inference that the act of trespass is a joint act of both Defendants could be readily drawn from the fact of common sole shareholder, common director, common registered office, common business address and, most important of all, common interest.

27.  The defence is one of bare denial.  There is no positive defence for me to consider if it is credible.  The facts asserted by Gan are neutral.  They are neither here nor there.  There are no assertions of facts which are material to a good defence for me to consider if they are credible.  There is really no defence.  But as the Plaintiff’s case is based on inference, I would give the 1^st Defendant the benefit of conditional leave to defend upon payment of such damages as are not in dispute and such interim payment until removal of the signboards or determination of the matter against the 1^st Defendant, whichever the earlier.

Conclusion

28.  For the above reasons, I enter judgment against the 2^nd Defendant.  As the trespass has been continuing since 2012, it is appropriate to order interim payment pending final assessment of damages.  The amount of interim payment shall be the monthly rental value as assessed by the Defendants’ own expert, ie $24,000 per month.  Accordingly,  I make the following order against the 2^nd Defendant:

(1) judgment on liability be entered with damages to be assessed;

(2) removal of the trespassing structure and delivery of vacant possession of the trespassed area to the Plaintiff within three months from the date of this judgment;

(3) interim lump sum payment to the Plaintiff in the sum of $24,000 per month from 16 February 2012 until the date of this judgment, ie the sum of $936,000 ($24,000 x 39) within 14 days;

(4) interim monthly payment in the sum of $24,000 thereafter on the 16^th day of each month until conclusion of the assessment of damages or removal of the trespassing structure whichever the earlier; and

(5) costs of this application to be taxed if not agreed.

29.  I grant the 1^st Defendant leave to defend this action on the following conditions:

(1) the 1^st Defendant shall pay or cause to be paid to the Plaintiff interim lump sum payment in the sum of $936,000 mentioned in paragraph 28(3) above within 14 days from the date of this decision;

(2) the 1^st Defendant shall pay or cause to be paid to the Plaintiff interim monthly payment in the sum of $24,000 thereafter on the 16^th day of each month until conclusion of the assessment of damages or removal of the trespassing structure whichever the earlier; and

(3) upon default in compliance with either of the above conditions, judgment be entered against the 1^st Defendant jointly and severally with the 2^nd Defendant in terms of sub-paragraphs (1), (2) and (4) of paragraph 28 above, and in terms of sub-paragraph (3) of paragraph 28 if the interim lump sum payment had not been paid.

I also make an order that the 1^st Defendant shall pay the Plaintiff’s costs of this application, to be taxed if not agreed.