DIAMOND PROPERTY MANAGEMENT CO. LTD. v. FIRST CLASS FASHION CO. LTD. AND OTHERS

IN THE SUPREME COURT OF HONG KONG

SMALL CLAIMS TRIBUNAL APPEAL NO.61 OF 1993

(On Appeal From the Small Claims Tribunal

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REASONS FOR JUDGMENT

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1. This is an appeal from the Small Claims Tribunal pursuant to leave granted on 14 February 1994. The Appellant is the former manager of the building in which the Respondents reside. The Appellant's claims against the Respondents were for "arrears of management fees and shares of management deficit" incurred during the time when the Appellant was the manager of the building. The claims were all dismissed by the learned Adjudicator summarily in the following "Brief Judgment" delivered ex tempore at the hearing:

"Claimant is no longer manager and it could not enforce any rights and obligations under Deed of Mutual Covenant. It should be done by the current manager. Cases be dismissed. All other similar cases are also dismissed. No order as to costs."

2. It is not entirely clear from the notes of proceedings kept by the learned Adjudicator whether a trial was ever held or not. It appears from the record that oral statements were received by the learned Adjudicator from the Appellant and the Respondents prior to his ruling. It further appears that the oral statements were not given on oath or affirmation. After the oral statements, the next occurrence recorded immediately was the "Brief Judgment". The record fails to show that prior to making the ruling, the learned Adjudicator ever told the parties of his intention to consider and rule on a point of law as a preliminary issue. Nor does the record disclose any opportunity being afforded to any party to address the tribunal on this preliminary issue. About 3 weeks after the ex tempore judgment, an application by the Appellant for a review was dismissed on the ground that "no good ground or reason put forward by claimant". However, in his "Reasons for Decision" dated 6 December 1993, the learned Adjudicator referred to the point of law he decided as "the preliminary issue". In the premises, the proceedings are to be treated for the purpose of this appeal as if the claims were dismissed by the learned Adjudicator summarily without a trial after the determination of the preliminary issue.

3. The preliminary issue as framed by the learned Adjudicator in his Reasons is "whether Claimant has the locus standi to pursue these actions after 31st July, 1993"? It is the Appellant's contention that the learned Adjudicator has erred in that the Appellant does have a locus standi in bringing its claims because the common cause of action was founded on debts that were incurred at a time when it was the manager of the building in question, and such debts are recoverable pursuant to clause 4 of the Deed of Mutual Covenants.

4. The facts relevant to the determination of the preliminary issue are not really controversial. The Appellant was appointed the first manager of Wah Fat Mansion on Tung Choi Street, Mongkok, Kowloon by the Deed of Mutual Covenant dated 6 October 1980. The owners subsequently formed their incorporation and terminated the Appellant's position as the manager on 31 July 1991. The finding by the learned Adjudicator that the Appellant only ceased to be the manager as from 1 August 1993 must be an inadvertent error in view of the uncontroversial evidence in this respect. The Appellant commenced its actions against 35 owners of the building in June 1993, when it was no longer their manager. The claims relate to arrears of management fees and/or shares of the deficit for the management expenses allegedly owed by these owners to the Appellant up to the month of July 1991, i.e. during the time when the Appellant was still the manager. The Appellant has ceased to be the manager at the time of the hearing of its claims in August 1993.

5. As part of the "background" to the claims the learned Adjudicator said that "The Owners Incorporated is still challenging the accounts of the Claimant but the Claimant, in these actions, appears to be collecting money from owners for its own accounts". The Appellant says that that is precisely what its claims are all about. It is the Appellant's contention that its claims are for money owed by the owners to it personally. It is the Appellant's case that the management fund established under the Deed of Mutual Covenant pursuant to clause 4(f)(comprising of an amount equivalent to 3 months' contributions deposited by each owner with the manager) from which the expenses of managing the building were to be defrayed had been exhausted. It was then necessary for the manager to advance out of its own pocket funds to meet the management expenses for the building and to subsequently recover such money from the owners in the manner and proportion as provided in the Deed of Mutual Covenant. In the premises, the Appellant submits that these are personal debts due by the owners to it and are recoverable from them pursuant to the Deed of Mutual Covenant. It is therefore immaterial whether the Appellant was still the manager at the time of trial of the actions.

In his reasons, the learned Adjudicator held :

"I hold that Manager is an office established under DMC to be filled by different person. All the duties should be performed by the person for the time being appointed to hold that office. Since Claimant had ceased to be Manager after 31st July 1993, it could not pursue these actions now even though the actions were filed at the time it was still in office. Clause K(i) could not assist Claimant as it only gives the Manager the convenience to sue in its own name while in office."

Though it is of no moment, it should be pointed out that the learned Adjudicator again made an error on the facts in that there is no evidence to suggest that the Appellant was re-appointed to be the manager after 1991 so that it became the manager again at the time of commencement of these actions in 1993. It arises out of the same mistake of the learned Adjudicator that he thought the Appellant has ceased to be the manager in 1993 instead of 1991.

6. It would appear that the learned Adjudicator had failed to appreciate that the claims were for the recovery of money advanced by the Appellant on behalf of the owners to defray management expenses after the management fund had been exhausted. The failure to appreciate that the claims were for a debt due personally to the Appellant, rather than to the management fund that no longer existed, explained the learned Adjudicator's belief that it was necessary to determine the preliminary issue he framed. It is wrong for the learned Adjudicator to proceed to a determination on the issue without giving the opportunity to the Appellant to address him on it. Had he given such an opportunity to the Appellant, he would probably be made aware of the true nature of the claims. He would then realise the real issue to decide first was whether the Appellant's allegation that it had advanced its own funds to defray management expenses because the management fund had already been exhausted is true or otherwise. If they are indeed claims brought by the Appellant as a creditor for his own benefit and not as agent suing on behalf of the management fund, it would not be relevant whether it was still the manager at the time of the trial. If it was the manager at the time such sums were advanced by it out of its own pocket, and if such expenses were properly and necessarily incurred on behalf of the owners, such debts would be recoverable in accordance with the provisions of the Deed of Mutual Covenant irrespective of the subsequent termination of his position as manager. The claims would then be claims by a former manager suing in his own personal capacity as a creditor to recover debts for its own benefit. They would not be claims by an agent, a current manager, suing in its capacity as such agent on behalf of the management fund to replenish dents made in such a fund.

7. As the learned Adjudicator had prematurely assumed the necessity of a determination of the preliminary issue without first taking time to consider whether the claims, or any part thereof, are claims brought by the Appellant in its personal capacity for its own benefit or as agent for the benefit of the management fund, the manner in which he dealt with the claims is erroneous. There is no justification for the learned Adjudicator to assume, without due consideration of the evidence that should be adduced on the issue, that all the claims are claims brought by an agent on behalf of the management fund. Until it has been determined that the claims are actions by the Appellant as agent on behalf of the management fund, it is not necessary for the Appellant to remain a manager at the time of the commencement of these proceedings or at trial to have a locus standi. In the premises, the preliminary issue framed by the learned Adjudicator was misconceived in that the foundation to bring about a necessity for such a determination of the locus standi of the Appellant has not been established yet. The summary dismissal of the Appellant's claims founded on the determination of this preliminary issue cannot be upheld and is hereby set aside. The cases are to be remitted back to the tribunal for trial.

8. The Appellant seeks costs of the appeal against the Respondents. It is most unfortunate that the Respondents should be held liable to pay for the mistake of the learned Adjudicator when none of them have contributed in any way to that mistake. However, as none of them see fit to indicate that he is not supporting the determination of the tribunal, there is no justifiable reason for the court to depart from the well established principle that costs should follow the event. The appeal having been allowed, costs shall follow the event and the Appellant is to have the costs of its appeal against the Respondents.