CHAU MEI LEE FRAGRANCE and Another v. NG YEE TIM

IN THE COURT OF APPEAL

1996, No. 97
(Civil)

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J U D G M E N T

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Ching, J.A. :

1. The disputes in this matter arose from differences between one owner and another or others of units in Wing Lee Mansion in Austin Avenue. The building was erected some decades ago but had no Multi-storey Buildings Owners Corporation until 14th October, 1985. It did, however, have a Deed of Mutual Covenant amongst the owners and the developer dated 8th April, 1969, of which clause 17 provided that the 3rd to 11th floors were to be used as private residences while the ground to second floors were to be used for non-domestic purposes. On 1st March, 1974, Ng Yee Tim rented premises in the building and subsequently bought two of the units. He is in the business of manufacturing and selling mannequins and coat hangers and shortly after his first tenancy commenced he partitioned off an open portion of the ground floor, put a roof over it and began to store his goods and his machinery there. This was done without any permission of the other owners. That area was one in the joint possession of each of the owners as a common area. On 20th July, 1993, the Plaintiff acquired one of the units and that is when the trouble started. She was unhappy with the position in the open area of the ground floor. It is not clear who constituted the management committee at that stage although Mr. Ng had been and perhaps was the secretary and treasurer. She was appointed the chairman of the committee but there then followed a period of confusion as to who was in fact the chairman, whether she could act as such through her father and who the members of the committee were. This period of confusion continued during a time in which she began to question the accounts, the appointment of another chairman in her place and the appointment of other members and her increasing insistence that something should be done in relation to the ground floor open area.

2. On 29th January, 1994, she issued her writ in this action. She named Mr. Ng as the 1st Defendant and the Incorporated Owners as the 2nd. In the title to the writ she described herself as "suing on her own behalf and on behalf of the Incorporated Owners of Wing Lee Mansion, No.25 Austin Avenue." Neither the original nor the amended Statement of Claim, however, averred that she was taking action in her own name in an action usually described by the apt American label of a derivative action or that she had to do so because the committee would not. In the original pleading she made the following claims:-

(1) A declaration that the 1st Defendant was in breach of his fiduciary duties in failing to provide true and proper accounts to the 2nd Defendant.

(2) A declaration that the 2nd Defendant was in breach of the Multi-storey Buildings (Owners Incorporation) Ordinance and/or the Building Management Ordinance.

(3) A declaration that the removal of the Plaintiff as Chairman and the appointment of another was unlawful.

(4) An order that the 1st Defendant should supply various accounting documents to her.

(5) Alternatively to (4), an account of all income and expenditure of the management committee of the 2nd Defendant.

(6) An account of the monies of the 2nd Defendant in the hands of the 1st Defendant.

(7) An order for payment by the 1st Defendant to the 2nd Defendant of all sums found to be due on the taking of such an account.

Prayer 7A of the amended Statement of Claim sought an order that the 2nd Defendant should take all necessary action to recover vacant possession of the open area from the 1st Defendant. Prayer 7B sought an order against the 1st Defendant to remove his belongings and the structures from the open area and that he should make good the damage caused by that removal. Prayer 7C was for an injunction restraining the 1st Defendant from entering into or trespassing upon the open area save in the exercise of his non-exclusive right as a tenant in common. Prayer 7D sought damages from him in favour of both Plaintiffs.

3. When the matter came on for trial before Mr. Recorder Ronny Wong, Q.C. a new management committee and chairman had already been appointed in circumstances to which the Plaintiff raised no objection. The new committee agreed that it would cause an audit of the accounts to be made. The prayers in the original Statement of Claim therefore became irrelevant except for paragraph (2) thereof but the Plaintiff stated that she was no longer pursuing any relief against the 2nd Defendant. On the third day of the hearing, no doubt prompted by interventions from the Recorder as to the locus of the Plaintiff, the Plaintiff applied to put in a re-amended Statement of Claim and leave was given for her to do so notwithstanding the objection of the 1st Defendant. Parts of the amendments were at least odd. First, the 2nd Defendant was deleted as a Defendant and was added instead as the 2nd Plaintiff. Secondly, the prayers were amended so that, inter alia, prayer (2) became a prayer on behalf of both Plaintiffs for a declaration that the 2nd Plaintiff had been in breach of the Ordinances named. Prayer 7A became a prayer that the 2nd Plaintiff take all necessary action to recover vacant possession of the open area from the 1st Defendant. These notwithstanding that the 2nd Defendant had become the 2nd Plaintiff. The trial then proceeded but at the end of the evidence the Recorder expressed his doubts as to whether or not he should have allowed the amendments. Final addresses were made on the basis that the amendments had been allowed and made. With the consent of counsel then appearing for the Plaintiff, the Recorder reconsidered the matter saying that he would hear further argument if it became necessary. He then gave his judgment in part of which he decided that he had been wrong to allow the amendments and reversed his order without hearing further argument.

4. However badly the wording of the Statement of Claim was left after what we must describe as slipshod amendments it was crucial to the Plaintiff on the question of locus. Clearly, without locus she would fail no matter what the merits of the action might be. She had launched her action on a derivative basis and, quite apart from the lack of necessary averments, she had to show that she was entitled to do so notwithstanding what was the Multi-storey Buildings (Owners Incorporation) Ordinance, Cap.344, and what is now the Building Management Ordinance, Cap.344. Section 16 of the former provided that where incorporation had occurred,

"..... the rights, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised by ..... the corporation to the exclusion of the owners, and accordingly -

(a) .....

(b) any proceedings in court in respect of any of the common parts of the building may be brought and pursued by ..... the corporation."

In 1993 the Ordinance was amended by the Multi-storey Buildings (Owners Incorporation)(Amendment) Ordinance, No. 27 of 1993, to amend the words "the court" in subparagraph (b) to read "the Tribunal", that being the Lands Tribunal. However, parts of the amendment were not to take effect until notification and by L.N. 318 of 1994 the appointed date in relation to section 16 was 1st June, 1994. The writ in the present case was issued in January, 1994, and whatever arguments there may be as to the Lands Tribunal having exclusive jurisdiction are beside the point. Although subparagraph (b) uses the permissive "may" in relation to the enforcement of the rights of owners, it is quite clear from the opening words of the section that those rights may only be enforced, so far as common areas are concerned, by the corporation for it is explicitly stated that they should be exercised "to the exclusion of the owners". The Ordinance therefore does away with a derivative or minority action. As pleaded in the original and amended Statement of Claim the Plaintiffs action could have and should have been struck out.

5. The first argument addressed to us by Mr. Johnson Lam who appeared before us but not below for the Plaintiff was that, whatever else may be said, the Recorder was wrong not to afford the Plaintiff an opportunity to argue the matter of the re-amendment before it was held against her and he cites the decision of the Privy Council in Hoecheong Products Co., Ltd. v. Cargill Hong Kong, Ltd. (1995) 1 WLR 404. We agree with him. When new matters of significance occur to the Court after final addresses have been made the Court should, generally, ask the parties for further submissions on it. This must be the more so in a situation where the Plaintiff's locus to sue is in question. Secondly, Mr. Johnson Lam drew our attention to the relevant passage in the judgment of the Recorder where, after referring to the history of the re-amendment, he said,

"Whilst the impact of the proposed amendments on the Trespass Claim is not extensive, they are far reaching in relation to the Account Claim and the Appointment Claim. I have already pointed out above the lack of averment in the original statement of claim to support (the Plaintiff's) pursuit of these claims on a derivative basis. If those claims are not derivative claims, the amendments would permit the Incorporated Owners to allege for the first time wrongdoing against (the 1st Defendant). The illogicality of the proposed amendments can be illustrated by paragraph 2 of the new proposed prayer wherein the Incorporated Owners would be claiming against itself a declaration that it failed to comply with various provisions of Cap.344. Whilst it is tempting to confine leave to the Trespass Claim, I am of the view that overall these amendments in furtherance of the alliance came too late. I therefore exercise my discretion to disallow them."

By "the alliance" he was referring to the fact that the 2nd Defendant had consented to be a Plaintiff. One feels considerable sympathy with the Recorder having regard to the unsatisfactory state in which the pleadings were left after the re-amendment was allowed. However, it would not have taken long nor would it have been difficult for further amendments to be made. Amendments should not be refused however late the application is made provided that they are not designed to over-reach and provided that no prejudice is caused to the other side which cannot be cured by costs and an adjournment if necessary. The decision of the Recorder in his final judgment depends mainly upon the lateness of the application and the fact that the amendment would allow the Corporation to allege wrongdoing for the first time. With respect to him we do not see how any prejudice was caused. In essence all that was happening was that a Plaintiff who had been a Defendant was being added for precisely the same cause of action and for the same relief simply because of the provisions of section 16 of the Ordinance. We must conclude that the Recorder was wrong to come to the conclusion to which he came.

6. Much more important, however, is the third objection taken by Mr. Johnson Lam. It is that once leave had been given to amend by the Recorder he was functus officio so far as that amendment was concerned. Therefore, however right his reasons may have been, he had no jurisdiction to recall his own order. Once more we must agree. There are some orders which must be drawn up and perfected and where, until that is done, the Court retains jurisdiction to recall it. This was an order made on an interlocutory application, albeit during the trial and in open Court. Order 42 rule 4(2)(e)(i) read together with rule 4(3)(b) does not require an order giving leave to amend to be drawn up unless the Court directs that to be done. There was no such direction. It follows that when the Recorder purported to reverse his order giving leave in the cause of his final judgment he was without jurisdiction and that reversal was of no effect. The result of this is that the Corporation was in fact added as a Plaintiff by amendment and has remained so thereafter. However, we must say that although we find for the Plaintiff in this respect we would expect that the pleading be suitably amended and we give leave for that to be done.

7. There was no dispute as to the facts so far as the claim in trespass was concerned. The Judge paid a visit to the site and in the course of his judgment he said,

There is no evidence to suggest any complaint or dissatisfaction by the co-owners. My visual inspection indicates that illegal structures are prevalent in Wing Lee Mansion. The situation is not unlike that described in the decision in Cheung Yuet v. The Incorporated Owners of Oriental Gardens (1979) HKLR 536. It is now too late for the co-owners or the Incorporated Owners to complain."

Mr. Johnson Lam complained about this and once more we must agree with him. A site visit is not for the purposes of the Judge absorbing information upon which he then acts without giving the parties a chance to deal with it. No body knows to what structures the Recorder was referring, whether they were in fact "illegal" or whether consent had been given for their erection. Mr. Johnson Lam was prepared to argue that Cheung Yuet (supra) was wrongly decided or, in any event, could not stand in view of subsequent decisions of this Court. We did not hear him on this because we thought it unnecessary. We thought it unnecessary not only because of the matters to which we have referred but because no question of acquiescence in any form had been pleaded by the Defendant who, until trial, was legally represented. The point was simply not open.

8. The final point was whether the claim was statute barred as the Recorder found. He referred to section 7(2) of the Limitation Ordinance, Cap.347 which lays down a limitation period of 12 years for the recovery of land. The trespass could not have begun before 1st March, 1974, but, if it had begun then, the period would have expired on the last day of February, 1986, whereas the writ was not issued until 29th January, 1994. Unfortunately, in ascertaining the limitation period the Recorder referred to the present provisions of the Ordinance which do provide as he said. However, the period of 12 years was substituted for the period of 20 years in 1991 but there were transitional provisions. Section 38A of the Limitation Ordinance provides that the period shall remain as it was before the amendment if the cause of action arose before 1st July, 1991, which this cause of action clearly did. The Recorder was therefore in error in finding that the action was time barred. The limitation period was 20 years.

9. These were the only matters argued before us and the Plaintiff must succeed upon them. We therefore hold that:-

(1) The judgment is null and void insofar as it purported to reverse the order of the Recorder giving leave to amend. In this connection we direct that the re-amended Statement of Claim be further amended to cure the anomalies therein and we give leave for such further amendment. That re-re-amended Statement of Claim should be referred to and attached to our order.

(2) The Plaintiffs are to have orders in the terms of prayers 7B and 7C as they presently appear in the re-amended Statement of Claim save that the time limit for the Defendant to comply with the injunction in prayer 7B shall be 3 months from the date of our order.

(3) The Plaintiffs insist on damages and in law they are entitled to them. Prayer 7D of the re-amended Statement of Claim, however, seeks damages for both Plaintiffs. This action was, in form, a derivative one and we think it would be pointless to make that order. Instead, we order that there is to be an enquiry as to damages to be paid by the 1st Defendant to the 2nd Plaintiff.

The order should be drawn up and submitted to us by the Plaintiff for our approval.

10. There remains the question of costs both here and below. So far as the costs before us are concerned, the Plaintiffs have succeeded and in the usual way we make an order nisi that the 1st Defendant is to pay the costs of the Plaintiffs but limited to one set of costs. As to the costs below, the 1st Plaintiff could not have succeeded without the re-amendment and we make an order nisi that the 1st Defendant is to pay her costs up to the date of that amendment. The 2nd Plaintiff is to have its costs from the 1st Defendant as from that date.