GOODWELL PROPERTY MANAGEMENT LIMITED v. BASESMART DEVELOPMENT LIMITED AND ANOTHER

1988, No. A6310

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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D E C I S I O N

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1. Although I have already disposed of the application which gave rise to this decision, I have put the reasons in writing because of their significance.

2. The Plaintiff is the manager of a block of flats and was so appointed under a Deed of Mutual Covenant and Management Agreement dated 20th February 1988 (the Deed). The 1st Defendant is the registered owner and the 2nd Defendant is the tenant of one of the flats in the block. By its Statement of Claim, the Plaintiff alleged that the Defendants were in breach of a covenant contained in the Deed and in the prayer sought an order restraining the Defendants and (inter alia) -

"(iv)    Costs of this action on a full indemnity basis pursuant to Clause 3 of sub-section E of Section IV of the said Deed."

3. On 23rd November 1980, I made an order by consent that the Defendants be 'restrained and that the Defendants pay the Plaintiff's costs on a full indemnity basis to be taxed if not agreed.

4. On 9th December 1988, in AJ 153 of 1988, I ruled that upon a true construction of Section 52A of the Supreme Court Ordinance and 0. 62 r. 2 & 28 R.S.C., a court has no power to award costs between parties other than on a party and party or common fund basis.

5. In due course, the Plaintiff obtained an appointment to tax its bill of costs. Upon she appointment, the Taxing Master, because of my decision in AJ 153 of 1988, referred the order to me for clarification as to the basis upon which the costs should be taxed.

6. Clause 3 of the Deed referred to in the Statement of Claim reads as follows -

"All amounts which become payable by any owner of the Building in accordance with the provisions of this Deed together with interest thereon as aforesaid and the said collection charge and all damages claimed for breach of any of the provisions of this Deed of Mutual Covenant and all other expenses incurred in or in connection with recovering or attempting to recover the same shall be recoverable by civil action at the suit of the Manager (and the claim in any such action may include a claim for the solicitor and own client costs of the Manager in such action and the defaulting Owner shall in addition to the amount claimed in such action be liable for such costs)....."

7. It was the Plaintiff's contention that the order which I made by consent was simply a confirmation by the parties of their agreement in relation to the building and its management. The court should enforce the parties' agreement. The case is therefore distinguishable from AJ 153 of 1988.

8. The Defendants contended that in accordance with my decision in the other action I had no power to award costs on an indemnity or solicitor and own client basis.

9. I have no doubt, and I so ruled when I heard this application, that this case is distinguishable. There is, it seems to me, a difference between a court awarding costs in an action in which the parties had not made previous provision for legal proceedings and making an order, as in this case, which does no more than recognise a pre-existing agreement between the parties. If it were otherwise, the result would be that the legislation to which I have referred in relation to costs places a restriction upon the ability of parties freely to contract between themselves. I do not believe that to have been the intention of the legislation nor do I find that to have been its effect.

10. Accordingly, I rule that where a party seeks to recover costs in accordance with a pre-existing agreement as to such costs the court is not precluded from ordering those costs whatever basis they may be on.