THE INCORPORATED OWNERS OF JET FOIL MANSION v. YING KONG CO LTD

LDBM 371/2007

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATIONS

NOS. 371, 372, 373, 374 AND 375 OF 2007

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DECISION ON COSTS

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1.  In these consolidated cases, the incorporated owners (IO), the Applicant, claims against Ying Kong, the Respondent, for management fees in arrears for the period between 2005 and 2007.  After the pleadings and witness statements have been filed, one would have expected the cases to be set down for trial.  But Ying Kong filed a summons seeking to strike out the IO’s claims.  The summons has been amended and adjourned for argument before me.

2.  On 22 January 2009, I handed down my decision (the Decision).  I dismissed the amended summons with costs.  I make an order nisi accordingly and that costs shall be taxed on the District Court scale, if not agreed, with certificate for counsel.

3.  Ying Kong now applies to vary the costs order.  By agreement, parties have obtained directions for filing written submissions for this Tribunal’s ruling on paper.

4.  I do not repeat here the background but it helps if one bears in mind the terms of Ying Kong’s amended summons: see paragraph 4 of the Decision.

5.  Ying Kong argues that notwithstanding the dismissal of its application, it should not be made to bear all the costs of the IO.  The reasons are as follows:

(1)  The Tribunal found that on the materials before the Tribunal, there was basis for Ying Kong’s suspicion that the legal costs at the relevant time were likely to exceed 20% of the 2007 budget and therefore section 20A(2) of the Building Management Ordinance was not complied with by the IO.

(2)  Costs would have been substantially saved if the IO had not maintained that section 20A did not apply and that there had been no non-compliance.  This contributed to substantial costs incurred in filing affidavit evidence and lengthened the hearing.

(3)  Given that Ying Kong had been able to show the likely non-compliance by the IO with section 20A, it would be unjust for it to bear the full amount of the IO’s costs.

(4)  The Tribunal exercised its discretion under section 20A(7) to hold that the non-compliance would only render the appointment of the IO’s solicitors voidable and not void.

(5)  Given that this Tribunal accepted that there was a sound basis for Ying Kong’s suspicion that there was non-compliance with section 20A, whether the appointment of the IO’s solicitors was void or voidable was an exercise of this Tribunal’s exercise that could not have been foreseen.

(6)  The Tribunal further held that given the nature of the summons, it was unnecessary for the Tribunal to make an order under section 20A(7).

(7)  It was not the case of the IO that if there had been non-compliance with section 20A, the summons did not fall within the context of section 20A(2A)(7) such that no remedial order would need to be made under this section.

6.  Ms D Lam for Ying Kong submitted that there should be no order as to costs or alternatively, Ying Kong should only bear 50% of the IO’s costs.  Costs should be in any event, rather than payable forthwith.

7.  Mr D Lam seems to suggest that I found in fact that section 20A(2) applied and that the same had not been complied with by the IO.  I did not.  Notwithstanding my comment that on the materials in hands, I see the basis for Ying Kong’s suspicion that the legal costs at the relevant time was likely to exceed 20% of the 2007 budget and thus section 20A(2) needed to be, but had not been, complied with, I did not actually make finding of fact to that effect.  Instead, I expressed my doubt as to whether I have sufficient to make a finding on the basis of the affidavit evidence (especially when there was substantial factual dispute): see paragraph 19 of the Decision.

8.  Mr D Lam argued that costs had been unnecessarily occasioned and the hearing was unnecessarily prolonged by the IO’s contest in respect of whether there had been non-compliance with section 20A.  I do not agree.  To begin with, these were factual allegations made by Ying Kong in support of its application that the IO had to deal with.  At the end, as said above, I did not actually make finding of facts against the IO in this respect.

9.  I did not have to make such finding because, as Mr K Lam submitted, it would turn out to be irrelevant and unnecessary.  The reasons became apparent when I proceeded to consider Ying Kong’s amended summons even assuming that section 20A(2) in fact applied but had not been complied with by the IO: see paragraph 20 of the Decision.  My consideration of the appointment of the IO’s solicitors, remained premised on the assumption, not the finding, that section 20A applied and had not been complied with by the IO.

10.  On the basis of the same assumption, I found that the appointment could not be void but at most voidable.  I arrived at this conclusion primarily on the basis of sections 20A(5) and (6): see paragraphs 21-24 of the Decision.  Indeed I was asked to consider the circumstances listed under section 20A(7).  Indeed I did so and came to the same conclusion that the appointment of the IO’s solicitors could not be void and could at most be voidable.  However, contrary to Mr D Lam’s suggestion, I was not exercising the discretion under that subsection to make any order that the appointment was void or voidable as such.  In fact, I considered section 20A(7) further in the subsequent part of the Decision.

11.  Therefore I do not see the relevance of the suggestion that Ying Kong could not have foreseen whether the Tribunal would exercise its discretion to order that the appointment was void or voidable.

12.  As my conclusion is that the appointment of the IO’s solicitors could not be void, Ying Kong’s application under paragraphs 1 (whether for striking out or stay) under grounds (a) or (b), 1A and 2 of the amended summons were bound to fail: see paragraphs 26-32 of the Decision.

13.  Then it came to the last part of the Decision concerning effectively sections 20A(7) and (8) in relation to paragraph 1B of the amended summons.  References to section 20A(2A)(7) in paragraphs 35 and 38 of the Decision are obvious typographical errors.  It should be section 20A(7).  According to Mr D Lam, it was not argued on behalf of the IO that the summons did not fall within the context of section 20A(7).  I do not agree.  What I said in paragraphs 36 to 37 of the Decision echoed Mr K Lam’s written submission (filed for that hearing) pinpointing that these consolidated cases are not about the IO’s liability to pay its solicitors’ fees or Ying Kong’s liability to contribute to the IO’s such liability to its solicitors.

14.  What matters is the position that Ying Kong chose and adopted in its application.  The position was that as stated in its amended summons which eventually failed.  There is no question of partial success on the part of Ying Kong.  Hence my conclusion that Ying Kong failed on all fronts in its application as per its amended summons: see paragraph 39 of the Decision.

15.  Mr K Lam criticised that Ying Kong’s application for striking out or stay was satellite litigation not serving any useful purpose, as it does not assist the determination of the actual dispute between the parties.  I agree.  Because of this satellite litigation, costs have been wasted and so has been time and in this regard, to be fair, this Tribunal’s decision did not come out as expediently as this Tribunal had expected.

16.  Mr K Lam made lengthy submissions in opposition of the costs order proposed by Mr D Lam.  First, I do not see fit to order costs on an indemnity basis as suggested by Mr K Lam.  But Mr K Lam made it clear that he had no intention of insisting on this.  Secondly, I now make clear that the costs to the IO shall be in any event rather than payable forthwith.  Subject to that, the costs order nisi is absolute.  The absolute costs order shall apply to the costs of and occasioned by this paper application for variation of the costs order nisi as well.