HOLIDAY RESORTS (MANAGEMENT) CO. LTD. v. CHONG LAP FU GEORGE AND OTHERS

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS.4978, 17643, 20857 OF 1998 AND
9502 AND 9516 OF 2000

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HCA4978/1998

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(Consolidated)

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J U D G M E N T

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1. The defendants in these consolidated actions apply by way of summons for an order that the consolidated actions be dismissed on the ground that the appointment of the plaintiff as agent of the owners of the estate, the Sea Ranch has been terminated on 10 December 1999 and therefore the plaintiff has no longer any locus standi to bring and/or continue these consolidated actions against the defendants.

2. An alternative order is sought to stay the proceedings until the final determination of the disputes between the parties in HCMP1530/1998. I have today given judgment in that case so this order is, in any event, no longer necessary.

3. These actions arise out of disputes between two factions of the owners of apartments at Sea Ranch, a housing development on Lantau Island. Other litigation is in progress.

4. The background is as follows. In about 1979, Holiday Resorts (HK) Ltd was incorporated by the developer, John D Hutchison & Co. Ltd, for the purpose of selling the apartments there. In 1979, Holiday Resorts (Management) Co. Ltd was incorporated for the purpose of providing management services to the apartment owners and the Sea Ranch estate and Holiday Resorts (Transport) Ltd was incorporated to provide a ferry service between Sea Ranch and Hong Kong Island. A Deed of Mutual Conditions ("DMC") was executed on 31 July 1979 by Holiday Resorts (HK) Ltd as vendor, the plaintiff as manager and an apartment purchaser.

5. The development did not make money, and the original developer sold out to the existing apartment owners for a nominal sum. A holding company, Holiday Resorts Holding Ltd, was incorporated in about 1984 to hold shares in the existing companies. The directors of the holding and subsidiary companies were all apartment owners.

6. The Incorporated Owners of the Sea Ranch ("IO"), the defendant in HCA 4978 of 1998, was set up in about 1980. For a long time, the directors of the plaintiff and the members of the Management Committee of the IO were common. However that changed in 1996 and the disputes between the two factions thereafter arose. There was a struggle for management control.

7. By a letter dated 1 September 1999, the IO purported to terminate the plaintiff's management of Sea Ranch as from 10 December 1999 under paragraph 7 of the 7th Schedule of the Building Management Ordinance, Cap.344. I am advised that this is being challenged by Holiday Resorts (HK) Ltd in HCA19084/1999, though at the same time it seems not to be in dispute that the plaintiff ceased to function as the manager of Sea Ranch.

8. In HCA4978/1998, the plaintiff seeks an injunction against the IO interfering in the relationship between it as manager and the individual owners, and damages for interfering with contracts of the plaintiff and the owners. It is based on allegations that the IO induced the owners to pay management fees to it when they should have been paying them to the plaintiff. The other consolidated actions started in the Lands Tribunal in 1998. In them the plaintiff is suing individual owners for management and other charges under the DMC. The claims relate to periods before 10 December 1999.

9. The defendants apply for me to dismiss the actions on the ground of termination of the agency. It is argued that the actions are founded on the plaintiff's right to collect management fees under the DMC which it had to do as agent of the owners. It is no longer the agent and so has no authority to continue. The cause of action is vested in the new management company.

10. The plaintiff now says that it is suing not as agent but in its own right because the plaintiff had to make advances to cover the deficits in the expenses incurred for the management and ferry services of Sea Ranch. In effect it paid for the services for which it now seeks repayment from the owners. It also seeks to recover its own remuneration which was included in the monthly management fees and ferry service charges.

11. The defendant's reply is of course that this is not pleaded. Indeed it is not. Mr Lau for the plaintiff says that it need not be, because the original applications to the Lands Tribunal do not have the status of pleadings, but in any event has applied orally to amend the various applications to cover the situation by adding, where appropriate, the words "and shares of management deficit" and a paragraph "Further or alternatively, claim for reimbursement of expenses the claimant had advanced to defray expenses incurred in the management of Sea Ranch". In any event, he says there is no surprise to the defendants; the plaintiff's position has been clear since the affirmation of Diana Leung was filed on 5 June 2000 and all the accounts show that the plaintiff was operating on the basis of advances and deficits throughout the periods with which we are concerned.

12. Mr Lam for the defendants argues that amendment of this nature, at this stage, is quite inappropriate and would entail the need for further discovery. For the principle, he relies on the old English authority of Hipgrave v. Case (1885), Chancery 356.

13. In this matter, the court has to take a practical approach. In the first place, the question of validity of termination of agency has yet to be tried in another court. In the second place, if these actions are dismissed and it is then found that the plaintiff has no locus standi here but that its right to sue has vested in the new manager, then it will be for that new manager to raise all the actions afresh but account to the plaintiff, from what it recovers, for whatever is still owed to the plaintiff; and that would be far too cumbersome. Alternatively, the plaintiff would have to raise the actions afresh and that also would be too cumbersome. In the third place, the world and the law have moved on a long way since 1885 and it is open to a party to amend his pleadings at any time with leave. The plaintiff's amended claim comes as no surprise to the defendant. The accounts clearly show the plaintiff's position. I do not see why the plaintiff should not amend now and proceed against the various defendants for what it says that it is owed in its own right.

14. I will therefore allow the proposed amendments and dismiss the defendants' summons.

Argument on costs

15. Costs be in the cause of the consolidated actions.