THE INCORPORATED OWNERS OF GO WAH MANSION v. HONGKONG HARDWARE SUPPLIER LTD

DCCJ277/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 277 OF 2008

D E C I S I O N

1.  There are two summonses before the court today.  The first summons was lodged by the Defendant on 27 February 2008 for a stay of all further proceedings of this action.  The application was made under section 6 of the Arbitration Ordinance, Cap.341.  The second summons is the Plaintiff’s summons of 30 June 2008 asking for Order 14 summary judgment of the Plaintiff’s claim against the Defendant.

2.  At an earlier hearing of the Defendant’s summons for a stay on 9 May 2008, I adjourned the hearing for the parties to prepare submissions on the jurisdiction of the District Court on issues involving building management matters which section 45 of the Building Management Ordinance specified should be dealt with by the Lands Tribunal.

3.  I am grateful to Miss Kan and Mr Ng to have done the research and prepared a submission on the issue.  Both Miss Kan and Mr Ng relied on Roger VP’s judgment in the case of Wong Hing Cheong & Anor v Wah E Investment Limited & Anor [2002] 2 HKLRD 175 where, at page 184 H to J, the learned judge held the following:

“In those circumstances it appears to me to be simply untenable that the provisions of section 45(1) and the Tenth Schedule, when taken together, can be interpreted as giving exclusive jurisdiction to the Lands Tribunal in respect of matters falling within the Tenth Schedule.  I see no basis for construing, as it would appear on one reading at least, that Mayo J considered was possible, the Tenth Schedule in a restricted way.  The only thing that can be said, as has been said by Findlay J, is that if there is a right or remedy which arises out of the Ordinance alone, the only tribunal which would have jurisdiction in respect of that right or remedy would be the Lands Tribunal.  Save in that very restricted sense, I can see no basis for holding that the Lands Tribunal has exclusive jurisdiction in respect of matters falling within the Tenth Schedule of the Ordinance.”

4.  I am satisfied that the dictum of Rogers VP settled the issue of jurisdiction of this court in dealing with building management matters involving Deeds of Mutual Covenant.

Background

5.  The Plaintiff’s claim against the Defendant is for recovery of charges incurred in respect of renovation work done to the building.  The Plaintiff’s claim is made under the DMC where all owners agreed to share the charges for management of the building, renovation work and other expenses involving building management.  The Defendant is one of the registered owners of certain units in the building.

6.  The unit for which the Plaintiff claims against the Defendant for renovation charges is the unit used as a transformer room for the whole building.  The Defendant claims that no management fees had ever been levied following an agreement between the Defendant and the IOC that no charges would be apportioned in respect of the three shares allotted to the transformer room, even though the Defendant was its registered owner, because the transformer room is occupied by equipment and plants of the Hong Kong Electric Company for the purposes of the whole building.  Therefore, the Defendant’s defence is based on an agreement with the IOC.

7.  Miss Kan, on the other hand, claims that the IOC has a right conferred under the DMC and the Building Management Ordinance to levy charges against all the owners of the units in the building and therefore the Defendant being the registered owner of the transformer room for which three shares have been allotted is strictly liable for the payment.

8.  Mr Ng, counsel for the Defendant, however, relies on clause 17 of the DMC, which is the arbitration clause, and it states:

“All disputes in question which shall hereafter arise between the parties hereto touching these presents or the construction or adjudication thereof of whether these presents are still subsisting or not or touching any account or calculation to be made hereunder or as to any act deed or omission by any of the parties hereto or to any other matters in any way relating to these presents or the rights duties or liabilities of any person hereunder shall be referred to a single arbitrator in the case the parties agreed upon one otherwise to two arbitrators one to be appointed by each party to the difference and their umpire in accordance with and subject to the provisions of Arbitration Ordinance 1963 and the decision of the arbitrator arbitrators or umpire as the case may be on any of the matters and things aforesaid shall be final and absolutely binding upon all parties herein.”

9.  Mr Ng submits that the Plaintiff’s claim being disputed by the Defendant should go to arbitration under clause 17 of the DMC.  He refers to paragraph 21 to 24 of the decision of Ma J (as he then was) in the case of Gatwick Engineers Limited v Pilecon Engineering Limited, HCA558/2002, a decision on 28 August 2002.

10.  I am satisfied that this claim is a dispute described by the arbitration clause, clause 17 of the DMC.  I am not convinced that the Plaintiff’s claim is a strict liability so described by Miss Kan.

11.  The Defendant clearly has a good defence as revealed in the affirmation filed on the Defendant’s behalf.  There is no admission whatsoever of liability or quantum, therefore, nothing resembling an open or shut case because of the clear issues of disputes raised by the Defendant.

12.  In any event, as Ma J (as he then was) held at paragraph 23.3 of his judgment in Gatwick Engineers:

“The existence or non-existence of a dispute or a difference as envisaged under the relevant arbitration agreement between the parties is crucial to the granting of a stay.  For this purpose, a dispute will exist unless there has been a clear and unequivocal admission not only of liability but also quantum:  (See Lewis Dreyfus v Bonarich International (Group) Limited [1997] 3 HKC 597; Tai Hing Cotton Mill Limited v Glencore Grain Rotterdam BV [1996] 1 HKC 363 at 375 A to B)

In the absence of admissions as to both these aspects, a mere denial of liability or of the quantum claimed, even in circumstances where no defence exists, will be sufficient to found a dispute for the purposes of section 6 of the Ordinance (and Article 8 of UNCITRAL Model Law).  Thus, finding out whether a dispute (as defined in this way) exists is the only exercise that the court carries out in a stay application (apart of course from construing the arbitration agreement to discover its full ambit): it does not involve itself in evaluating the merits of the claim.”

13.  For the aforesaid reason, the matter is very clear.  The court today needs only to determine whether there is a dispute between the parties.  As the Plaintiff disputes the applicability of the arbitration clause, it is clear from the background of the facts, supported by the Defendant’s affirmation, that there is indeed a dispute as to whether there was an agreement between the parties that for the transformer room no charges would be levied, whether it be managements fees or renovation charges, because the transformer room was used for the whole of the building rather than the exclusive use of the Defendant.

14.  As the parties have clearly agreed to go to arbitration to resolve disputes under the DMC under clause 17, these proceedings should therefore be stayed for the arbitration to take place.

15.  I will therefore allow the Defendant’s application.

16.  So far as the Plaintiff’s Order 14 application is concerned, as these proceedings are now stayed, no further application should be made or should be proceeded with.

17.  I therefore dismiss the Plaintiff’s application under the summons of 30 June 2008.

18.  I do not see any reason why costs should not follow the event and therefore I will grant costs to the Defendant to be borne by the Plaintiff, to be taxed if not agreed.

(Discussion re costs)

19.  I further grant costs of the action to date to be borne by the Plaintiff to pay to the Defendant, to be taxed if not agreed, with certificate for counsel.