SUNBEAM INVESTMENT LTD v. MANNITOP INVESTMENT CO LTD

DCCJ 1985/ 2006

 IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1985 OF 2006

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D E C I S I O N

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1.  By a summons dated 2 June 2007, the Defendant applied for the present action to “be struck out on the ground that the Plaintiff knew or ought to have known that the claim(s) herein are/is outside the jurisdiction of the District Court…(A)lternatively, that such order be made for the furtherance of this action…” By a summons dated 5 June 2007, the Plaintiff applied for the action to be transferred to the Court of First Instance. The 2 summonses were heard together before me. It is clear that the central issue is whether the District Court has jurisdiction over the action. 

2.  I should say a bit about the present case. The Plaintiff is owner of Flat 33B at 3 Kotewall Road, Hong Kong. The Defendant is the owner of the flat immediately above, i.e. Flat 34B, together with the roof (above Flat 34B). Flat 34B also comprises a garden; this garden is directly above the Plaintiff’s premises and is described in the Statement of Claim as the Roof Garden. The Plaintiff’s case is that the Defendant constructed or installed various structures on the Roof Garden, the Flat Roof and the Roof Floor of the Defendant’s premises in or about January 2002 (“the Unauthorised Work”). The Defendant also renovated its premises around June to August 2005 (“the 2005 Renovation Work”). The Plaintiff alleges that the Unauthorised Work and the 2005 Renovation Work constituted breaches of the Deed of Mutual Covenant (“DMC”), nuisance as well as negligence and resulted in damage to the Plaintiff’s premises.

3. In the present action, the Plaintiff claimed:

“	(1)	An order requiring the Defendant to allow full access for inspection of the Defendant’s Premises and the Unauthorised Work by the Plaintiff and the Plaintiff’s duly appointed building surveyor or similar expert for the purposes of ascertaining further the causes of the damage to the Plaintiff’s Premises and preparing a report of the same (“the 1st Relief”);
	(2)	An order requiring the Defendant to remove the Unauthorised Work forthwith (“the 2nd Relief”);
	(3)	An order to make good and reinstate all damage caused by the Unauthorised Work and 2005 Renovation Work (“the 3rd Relief”);
	(4)	Damages for breach of the DMC, loss of enjoyment, nuisance and negligence (“the 4th Relief”)…”

4. The Statement of Claim was issued on 22 April 2006. Acknowledgment of Service of Writ (indicating the Defendant would contest the proceedings) was received by the Court on 28 of the same month. The Defence was filed the following month on 13 May.

5. I note that nowhere in the Statement of Claim is it recited that the claims fall within the jurisdiction of the District Court. I note further that nowhere in the Defence is there mention of the lack of jurisdiction. In fact, parties carried on as if there was jurisdiction in the District Court. For example, parties consented to an Order being made in October 2006 for the Plaintiff to inspect the Defendant’s premises (“October Consent Order”, see Plaintiff’s Bundle A, pages 18 to 20 and 48 to 50). Another example is the Consent Order dated 27 March 2007 (“March Consent Order”, see Defendant’s Hearing Bundle (1), pages A4 to 7) which dealt with, inter alia, the filing and exchange of witness statements. By paragraph 9 of the March Consent Order, the Defendant reserved the right “to strike out the Plaintiff’s Statement of Claim or part(s) thereof.” I am not sure what Defence solicitor/ Counsel had in mind. If what was reserved was the right to challenge the jurisdiction of the District Court, then surely Defence solicitor/ Counsel owed a duty to both the Court and the Defendant to bring forward the point as soon as possible. It makes no sense and it reflects poorly on those representing the Defendant to reserve argument on the point of jurisdiction about 1 year after issuance of the Statement of Claim. By its present summons, Defence insists the case is beyond District Court jurisdiction. Why was the point not brought forward by anyone, whether Plaintiff or Defence, earlier on? I asked Miss Wong (Counsel for the Defendant) whether, given the stance of the Defence on jurisdiction, Defence was saying that all earlier Orders made by the District Court were invalid. I received a nonchalant reply of “yes”. It would seem that this point of jurisdiction came to a fore with the letter dated 4 May 2007 from the Plaintiff’s solicitors to the Defendant’s solicitors (see Defence Hearing Bundle (2), pages C 323 to 324 or 375 to 376). In this letter, the Plaintiff’s solicitors mentioned, inter alia, their concern that the Court might hold the claims for injunctive relief (see paragraph 3 above, the first 3 forms of relief prayed for) to be not within the jurisdiction of the District Court. I will simply say that I am flabbergasted by the way this point of jurisdiction has been handled by both sides.

6. Practice Direction 27 relates to Civil Proceedings in the District Court. Paragraph 1.2 states that “(A)ll writs and originating summonses should contain a plea that the relief sought do fall within the jurisdiction of the District Court, specifying which section(s) of section 32 to 39 of the District Court Ordinance (Cap. 336) do apply to the case.”

The Court in Tong Yi Sang and another v Frederick Fung Lai Yin and others, HCA 2721 of 1993, said that Practice Directions are to be complied with.  The Court in Ip Ming Yeung etc. v Dr. Lo Ni Boon, Peter and others, (2005) 4 HKLRD 301, said that “Practice directions are not rules of law. But they provide a code of practice and procedure that, practitioners and litigants, to the extent that they are aware of them, are expected to observe and adhere to.” 

I think it should have been pleaded that the damages claimed (the 4^th Relief, see paragraph 3 above) were within the jurisdiction of the District Court or that if the amount exceeded that jurisdiction, then the Plaintiff would abandon the excess (Sections 32 and 34 of the District Court Ordinance, Cap.336, “the Ordinance”).

The first 3 forms of relief claimed (see paragraph 3 above) are injunctive in nature. Such relief is dealt with under Section 52 of the Ordinance. The relevant part of Section 52 reads:

“	(1)	The Court shall have jurisdiction to grant and enforce injunctions of whatsoever nature…
		(c)	in all matters affecting immovable property…where the annual rent or the rateable value, determined in accordance with the provisions of the Rating Ordinance (Cap. 116) or the annual value, whichever is the less, of the property does not exceed $240,000…”

Paragraph 1.2 of Practice Direction 27 makes no reference to Section 52 of the Ordinance. I consider, however, that the intention is clear viz. it should be pleaded that the District Court has jurisdiction pursuant to Section 52(1)(c) of the Ordinance.

I mention matters in this paragraph to highlight the importance of complying with Practice Directions. I do not consider, however, that mere non-compliance will be fatal to the claims herein.

7. I think it convenient to focus first on the summons by the Plaintiff to transfer to the Court of First Instance.

8. Mr. Lam, Counsel for the Plaintiff, explained that he asked the case to be transferred because he/ the Plaintiff was not sure whether there was jurisdiction in the District Court. He referred to Sections 41(1) and (2) as well as Section 42 of the Ordinance which read:

“	41.	(1)	The Court shall, either of its own motion or on the application of any party, order that an action or proceeding be transferred to the Court of First Instance where an action or proceeding commenced in the Court, not being a counterclaim, is outside the jurisdiction of the Court but is within the jurisdiction of the Court of First Instance.
		(2)	The Court may, if it thinks fit, instead of ordering that the action or proceeding be transferred, order it be struck out where, on the application of a defendant, it appears to the Court that the plaintiff or, if more than one, one of the plaintiffs knew or ought to have known that the Court had no jurisdiction…
	42.	The Court may, either of its own motion or on the application of any party, order the transfer to the Court of First Instance of all or part of any action or proceeding within the jurisdiction of the Court.”
		(Court means the District Court)

9. Mr. Lam submitted that only the 1^st Relief, 2^nd Relief and 3^rd Relief are relevant to the jurisdiction point. I disagree. The 4^th Relief, the claim for damages, also has a bearing on jurisdiction. This depends on the amount involved (see Sections 32 and 34 of the Ordinance. See also paragraph 6 above). Parties have, however, only based their arguments on the injunctive relief claimed. I will therefore proceed on the basis that there is no dispute that the claim for damages is within District Court jurisdiction.

10. Mr. Lam submitted that the 1^st Relief is no longer a live issue. This was because the 1^st Relief had already been obtained or dealt with by the October Consent Order. I accept this. I cannot see myself, for example, transferring the claim for the 1^st Relief to the Court of First Instance. It has already been dealt with. What is the point of so transferring it? There is also no point in striking it out – all that is required is to note that it has already been dealt with and that it is a mere apparition of the past.

11. As far as the 2^nd Relief and 3^rd Relief are concerned, Mr. Lam said that the latter “does not require anything to be done within the Defendant’s premises; it requires the Defendant to make good the damage in the Plaintiff’s premises. Hence, only (the 2^nd Relief) requires work to be done in the Defendant’s premises” (see Plaintiff’s Skeleton Argument paragraph 2.2 (d)). Mr. Lam then went on to concentrate on the 2^nd Relief. I would have thought that the 3^rd Relief was also concerned with asking the Court to grant an injunction affecting immovable property i.e. the Plaintiff’s premises. The Court must therefore be satisfied that “the annual rent or the rateable value, determined in accordance with the provisions of the Rating Ordinance (Cap. 116) or the annual value, whichever is the less, of the property does not exceed $240,000…” (Section 52 of the Ordinance. See also paragraph 6 above). I will most certainly not speculate on the annual rent, rateable value or annual value of the Plaintiff’s premises (or that part of the Plaintiff’s premises requiring reinstatement, assuming it is only that part that is relevant in determining jurisdiction. See further paragraph 17 below). There is nothing before me to indicate that the District Court has jurisdiction to grant the 3^rd Relief. For this reason, I strike out the claim for the 3^rd Relief.

12. I turn now to look at the 2^nd Relief. This is in relation to the Unauthorised Work which comprises: a) installations on the Roof Garden, b) installations on the Flat Roof and c) a shed on the Roof Top (described as such in the Plaintiff’s Skeleton Argument, paragraph 2.3 but described as Roof Floor in the Statement of Claim. See also paragraph 2 above). This shed has already been removed (Defence Hearing Bundle (1), pages B11 and 20). Mr. Lam indicated that the Plaintiff would not pursue its claim in relation to installations on the Flat Roof. I will accept Counsel’s word on this. Therefore, Mr. Lam submitted, that the only Unauthorised Work pertinent to the jurisdiction point is that of installations on the Roof Garden (see Plaintiff’s Skeleton Argument, paragraph 2.3).  I accept this.

13. As explained earlier (see paragraph 8 above), the Plaintiff asks the case to be transferred on the basis that it is not sure whether the District Court has jurisdiction (by reason of matters stated in paragraphs 9 to 12 above, we are now concerned solely with the 3^rd Relief and then only in relation to installations on the Roof Garden). Why was the case commenced in the District Court in the first place? Why the present doubt/ uncertainty about jurisdiction? Answers to these questions can be found in paragraphs 2.6 to 2.10 of the Plaintiff’s Skeleton Argument which read:

“	2.6	The question is about the proper construction of section 52(1)(c). In Lau Chun Wing Rod v The Incorporated Owners of Po On Building, DCCJ762/2004 (14/8/2006), Deputy District Judge K W Wong held in § 128, p51, of the Judgment that:
		‘	…I consider that the “immovable property” in respect of which an injunction or a declaration is granted refers to the rooftop of the Po On Building in the present case i.e. the part of the building affected, and not the entire Po On Building.” (emphasis added)
	2.7	Relying on this judgment, the Plaintiff’s solicitors have all along taken the view that since “the part of the Defendant’s premises” which would be affected by the injunction sought would only be that part of the Defendant’s premises on which the unauthorised structure is located (but not the whole unit), and bearing in mind the size of the structure, there is no reasonable possibility that that rateable value of that part of the premises would exceed $240,000.
	2.8	In a conference with counsel…on 4/5/2007, the Plaintiff’s attention was drawn to the case of Hung Tung Shing and Wong Kwan Ching v The Incorporated Owners of Kwong Sang Hong Building Block B and another, DCCJ3013/2001 (24/4/2002). In that case, it was argued that the only immovable property affected was the floor slab between 12th and 13th Floor, and the external wall of the Building, Deputy J R. Yu disagreed and held in §13, p5 of his judgment that:
		‘	13.	I do not agree that is correct. If we are talking about the external wall of the Building, it cannot be right that it has no annual value, even when no shares has been allotted. Further, according to the draft order, work has to be done in Flats 13 H and I, Flats 12 H and I. 4 units of the Building are affected by the injunction sought. While works are being carried out on the floor slab and the external wall, the workers would be going into these units. The right to use and enjoy these premises must be affected. Hence I rule that the property being affected by the injunction sought are the 4 units. The Plaintiffs have not produced any evidence on the rateable value of these units. I cannot determine if I have jurisdiction. With the evidence in front of me, the Plaintiffs have not satisfied me that I have jurisdiction to give the injunction sought.’
	2.9	Hence, one possible argument is that the property affected by the injunction sought would include the whole of the Defendant’s unit… the rateable value of the Defendant’s premises is HK$1,186,800.00, which exceeds HK$240,000…
	2.10	There is no Court of Appeal decision on the proper construction of section 52(1)(c). And the District Court decisions mentioned above are not even binding on another District Judge…
	2.11	In the circumstances, the Plaintiff agreed that it would be unwise to take the risk that this Court may dismiss the claim for injunction on the grounds that it lacks jurisdiction…”

14.  The words uttered by the Court in the Lau Chun Wing Rod (supra) and referred to in paragraph 2.6 of the Plaintiff’s Skeleton Argument must be read in the context of that case.

Flush water pipes were embedded in certain parts of the rooftop of Po On Building. The plaintiff sought injunctive relief and damages alleging that water had leaked into his premises from the embedded pipes. On the 7^th day of trial, solicitor for the plaintiff suddenly awoke to the fact that he had not pleaded the rateable value of the roof. He said, however, that he had evidence to show that the rooftop had a rateable value not exceeding $240,000. Counsel for the defendant contended, inter alia, that the pipes formed part of the entire Po On Building and hence the relevant rateable value should be that of the entire building and not just the roof. It was in view of such contention that the Court uttered the words referred to. The Court went on to find that the annual rent for the entire rooftop was $240,000 and held there was jurisdiction to try the case.

I note that the Court did not sever that part or parts of the rooftop with the embedded pipes to determine jurisdiction. The Court took into account the entire rooftop. I think the plaintiff’s solicitors wrongly interpreted this case and erroneously arrived at the conclusion that it was only “that part of the Defendant’s premises on which the unauthorised structure is located (but not the whole unit)” that was relevant to the jurisdiction of the Court. I would have thought that Lau Chun Wing Rod (case) indicated that it is the entirety of the Defendant’s premises in this case that has to be considered on the jurisdiction point.

15. The decision in Hung Tung Shing and Wong Kwan Ching

(supra) should be read in the light of the special circumstances of that case.

16.  Mr. Lam submitted that there was no need for me to decide whether the District Court had jurisdiction. His argument was that if there was no jurisdiction, I could (and must) transfer the case pursuant to Section 41(1). If there was jurisdiction, I could transfer pursuant to Section 42. I do not agree. The legislative scheme is clearly that the Court has to decide whether it has or has not jurisdiction before proceeding further under Section 41(1) or 42. There is no power to transfer simply because the Court itself is doubtful about jurisdiction. I should add that the doubt or uncertainty of the Plaintiff or its legal representatives is of no bearing at all.

17. My view of Section 52 (1)(c) of the Ordinance is that whenever any part of immovable property is or will be affected by the injunction sought, it is the rateable value or annual rent or annual value of the entirety of that immovable property that will be taken into account. This seems to me the natural meaning of the provision. Furthermore, to hold that only the affected part falls to be considered will result in all sorts of practical difficulties e.g. one has to ascertain the area involved and then somehow work out its rateable value or annual rent or annual value. I do not believe that Legislature ever intended to impose so cumbersome a regimen. It is not in dispute that the rateable value of the Defendant’s premises is $1,186,800 (Defendant’s Hearing Bundle (1) page B27 and Defendant’s Hearing Bundle (2) page C316). I rule that the 2^nd Relief in relation to installations on the Roof Garden is outside the jurisdiction of the District Court. I should mention that there was no argument based on annual rent or annual value. I thus proceeded on the basis that these were irrelevant for present purposes.         

18.  I turn now to consider the summons of the Defendant asking that the action be struck out on the basis that it “appears to the Court that the plaintiff or, if more than one, one of the plaintiffs knew or ought to have known that the Court had no jurisdiction” (Section 41(2) of the Ordinance).

19.  I understood Miss Wong to say that paragraph 8 of the letter dated 12 June 2007 from the Plaintiff’s solicitors to Defence solicitors (Defendant’s Hearing Bundle (2) page D4) indicated that the Plaintiff knew the District Court had no jurisdiction. That paragraph reads as follows:

“

Finally, and most significantly, as pointed out in our correspondence on 8th June 2007, the Defendant has issued a summons to strike out the action and the Plaintiff has issued a summons to transfer the action to the Court of First Instance. Whichever application is successful, this case will not be before this court. The suggestion that it may be if both summonses are refused seems to us to be unrealistic. We respectfully submit that, in the circumstances, nothing further should be done to increase the costs pending disposal of those summonses which have now been fixed for hearing on 4th July 2007.”

(The summonses referred to are those to which this Decision relates.)

20.  I do not share the ingenuity and creativity of Miss Wong. I cannot and do not interpret that paragraph 8 as giving the indication contended for.

21. The bulk of Miss Wong’s submissions really amounted to a diatribe against the way the Plaintiff had been handling the case. Certain instances cited by Miss Wong were:

a)	The forced abortion of an inspection of the Plaintiff’s premises set for 9 February 2007. Representatives of the Defendant had turned up at the Plaintiff’s premises only to be denied entry. This was apparently because solicitors for the Defendant had not formally confirmed arrangements for the inspection (Defendant’s Hearing Bundle (1) pages B1 to 8 and Defendant’s Hearing Bundle (2) pages C5 to C17);
b)	The Plaintiff failed to comply with the March Consent Order to exchange witness statements. This was apparently because the Plaintiff felt it more practical to wait for the outcome of the hearing of the present 2 summonses (and also because the Plaintiff proposed certain amendments to its claim. See Defendant’s Hearing Bundle (2) page D7 paragraphs 5 and 7) and
c)	The Plaintiff’s solicitors wrote to a District Court Judge for an indication as to whether the Court would agree to adjourn a pre-trial review scheduled for 13 June 2007. This was despite an earlier refusal of a Master to adjourn the same (Defendant’s Hearing Bundle (2) pages C451 to 459 and Defendant’s Hearing Bundle (1) page A17).

22.  I understood Miss Wong to mean that the conduct of the Plaintiff showed knowledge on its part that the District Court had no jurisdiction and also that there was justification for the action to be struck out. I will simply say that the approach/ conduct of the Plaintiff may perhaps (and I emphasise the word “perhaps”) be described as gauche and even niggling but I am not convinced that (it appears) “that the plaintiff…knew or ought to have known that the Court had no jurisdiction” or that the case should be struck out (see also paragraph 25 below).

23.  There was no argument before me whether “plaintiff” under Section 41(2) of the Ordinance meant the actual plaintiff (i.e. Sunbeam Investment Limited in this case) or its legal representatives or both. Reference in that Section to “the plaintiff or, if more than one, one of the plaintiffs” suggests concern with the actual plaintiff or plaintiffs. I consider, however, that the wording of Section 41(2) is broad enough to include solicitor and Counsel representing the plaintiff. The following words of Lord Denning MR in Doyle v Olby (Ironmongers) Ltd. (1969) 2 QB 158, 166 should be borne in mind: “We never allow a client to suffer for the mistake of his counsel if we can possibly help it. We will always seek to rectify it as far as we can. We will correct it whenever we are able to do so without injustice to the other side.”  In PT Bank Pembangunan Persero v Tan Eddy Tansil and others (1997) HKLRD 57 Bokhary JA (as he then was) endorsed such words and went to say that he saw no difference between counsel and solicitors.

24.  There is nothing to show that the Plaintiff corporation “knew or ought to have known” there was no jurisdiction in the District Court. In all probabilities, the Plaintiff corporation left the matter for their solicitors to follow up with. As far as the Plaintiff’s solicitors are concerned, I think they merely misapprehended the jurisdiction point (see also paragraph 13 and 14 above).

25.  Mr. Lam cited cases to show the judicial sentiment to striking out in relation to legislation similar to Section 41(2) of the Ordinance. Those cases indicate that the measure of striking out is regarded as draconian and is reserved for extreme cases. I empathise with such sentiments. I will merely make reference here to Restick v Crickmore (1994) 1 WLR 420 where the English Court of Appeal said at page 427 that “…provided proceedings are started within the time permitted by the statute of limitations, are not frivolous, vexatious or an abuse of the process of the court and disclose a cause of action, they will not as a rule be struck out because of some mistake in procedure on the part of the plaintiff or his advisers. Save where there has been a contumelious disobedience of the court’s order, the draconian sanction of striking out an otherwise properly constituted action, simply to punish the party who has failed to comply with the rules of court, is not part of the court’s function…” The Court of Appeal was reluctant to set any guidelines as to when the power to strike out should be exercised. The Court gave certain examples as when an action was commenced in the wrong court and “was not due to a bona fide mistake, but can be seen as an attempt to harass a defendant, deliberately run up unnecessary costs, be taken in defiance of a warning of the defendants as to the proper venue or where a party, or more likely his solicitor, persistently starts actions in the wrong court…” (see page 428 of judgment. Mr. Lam also referred to the cases of Re NP Engineering and Security Products (1998) 1 BCLC 208, Schmit v Wong (2006) 1WLR 561 and Logan v Millman Holdings Ltd. (in liquidation) (2006) DCR 304; (2005) NZDCR Lexis 79). 

26.  In any event, I see no basis for striking out the Plaintiff’s claim. This is particularly so when the limitation period is not up. On striking out, the Plaintiff can (and will, I am told) simply commence the action afresh in the appropriate court. Resolution of the dispute between the parties will just be delayed and a lot of time and costs will have been wasted. 

27.  I dismiss the Defendant’s summons. The 3^rd Relief has been struck out and the 1^st Relief is there to be ignored. Since the 2^nd Relief (or the remaining part of it) is within the jurisdiction of the Court of First Instance, I am obliged to transfer it to be dealt with there. The 4^th Relief is within the jurisdiction of this Court. However, with the transfer just mentioned, it is only practical that the 4^th Relief be dealt with by the Court of First instance as well. It will be for that Court to give further directions as to the conduct of (what remains of) this case.

28.  The orders I make are as follows:

a)	The Defendant’s summons be dismissed;
b)	The 3rd Relief be struck out from the Statement of Claim and
c)	This case be transferred to the Court of First Instance.

I also make an order nisi that costs of and incidental to the present 2 summonses be costs in the cause with certificate for Counsel.