WING MING GARMENT FACTORY LTD v. THE INCORPORATED OWNERS OF WING MING INDUSTRIAL CENTRE

LDBM 89/2018

[2018] HKLdT 63

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 89 OF 2018

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DECISION

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1.  The following two interlocutory applications were heard before me on 23 July 2018:

1) The Respondent took out an interlocutory application dated 9 May 2018 seeking the following orders:

(a) The Applicant’s Notice of Application dated 17 April 2018 be struck out;

(b) Further or in the alternative, Sections C4 and C5 of the Notice of Application be struck out and/or the proceedings be stayed on the ground “that they are frivolous, vexatious and/or abuse of process of the court”;

(c) Further or in the alternative, the proceedings be transferred to the Court of First Instance;

(d) Further or in the alternative, an unless order be granted to compel the Applicant to comply with the directions at Clause 15(a) and (b) of the LTPD: BM No. 1/2009 (“the Practice Direction”), failing which the Applicant’s Notice of Application be struck out; and

(e) Further or in the alternative, there be an extension of time for the Respondent to file and serve its Notice of Opposition and to comply with the Practice Direction. (The Applicant indicated at the outset it had no objection to the granting of a time extension for the filing and service of the Notice of Opposition and/or compliance with the Practice Direction.)

2) The Applicant took out a interlocutory application dated 18 July 2018 which sought to have the question of “whether it is necessary for the Applicant to join the members of the Management Committee and/or the Management Committee itself in these proceedings” be determined as a preliminary issue.

BACKGROUND

2.  The building concerned is Wing Ming Industrial Centre located at No. 15 Cheung Yue Street, Lai Chi Kok, Kowloon, Hong Kong (“the Building”). The Applicant was the developer of the Building and sold off most of the premises of the Building, save and except the Basement Floor, Ground Floor and Mezzanine Floor of the Building which the Applicant retained ownership over.  The Respondent is the incorporated owners of the Building (“the IO”).

3.  The parties have been engaged in litigation over building management matters since 1993 and have litigated against each other in a number of different actions, of which HCCT 60/2006 (“the HCCT Case”) is relevant to the present proceedings.

4.  The judgment of the HCCT Case was given on 23 June 2014 by the Hon G Lam J in which injunctions to repair various parts of the Building were ordered against the Applicant and the Respondent respectively (“the HCCT Order”).

5.  In the current proceedings before me, the Applicant filed a Notice of Application in the Lands Tribunal on 17 April 2018 seeking an order for the dissolution of the existing management committee of the Building and for an administrator to be appointed in its place.

6.  The Applicant’s main complaint is that the IO through the management committee (“the Management Committee”) has failed to perform its statutory duties and its duties under the deed of mutual covenant (“DMC”), thereby necessitating the dissolution of the Management Committee.

7.  The Applicant makes a number of allegations that can generally be summarized as follows:

1) The IO through the Management Committee has failed to enforce or effectively enforce the observance of various covenants under the DMC: see sections C1, C2, and C3 of the Notice of Application.

2) The IO through the Management Committee has enforced the DMC against the Applicant but not against other owners: see sections C1, C2, and C3 of the Notice of Application.

3) The IO through the Management Committee has been unable to take appropriate and/or effective steps to comply with the HCCT Order: see section C4 of the Notice of Application.

4) The IO through the Management Committee has acted in such a manner so as to “inhibit, impede and/or obstruct” the Applicant from complying with the HCCT Order: see section C5 of the Notice of Application.

5) The Management Committee has acted fraudulently and/or dishonestly in dealing with the matters relating to the implementation of the HCCT Order: see paragraph 80 of the Notice of Application.

THE RESPONDENT’S APPLICATION TO STRIKE OUT THE NOTICE OF APPLICATION

8.  I summarize the Respondent’s salient submissions on striking out the Notice of Application as follows: 

1) The Applicant has failed to comply with the Practice Direction and hence the Notice of Application should be struck out.

2) The Applicant raises a number of issues in sections C4 and C5 of the Notice of Application which go to the enforcement of the HCCT Order. Such matters should be more properly dealt with by Mr. Justice G Lam in the Court of First Instance.

3) The Applicant makes allegations of fraud and dishonesty against the Management Committee and therefore the Management Committee and/or its members should be made a party to the proceedings. The failure to do so is a procedural irregularity which calls for the Notice of Application to be struck out.

Striking out on the ground of non-compliance with the Practice Direction

9.  The consequences for non-compliance with the automatic directions in paragraph 15 are set out in paragraphs 15(f) – (h). In the event of non-compliance, the Tribunal may give directions on paper. If the parties fail to comply with the directions given by the Tribunal, sanctions such as unless orders may be made on the defaulting party.  The Practice Direction does not envisage, nor provide for, an action or a notice of application be struck out on the first occasion of non-compliance. Furthermore, one of the underlying objectives of the Civil Justice Reform is to “promote a sense of reasonable proportion and procedural economy in the conduct of the proceedings”: see Order 1A rule 1(c), Rules of High Court (Cap 4A). Striking out the Notice of Application on the first occasion of non-compliance with the Practice Direction would not be a sanction proportional to the consequences of default.

10.  Hence despite the Applicant’s failure to comply with the Practice Direction, I do not find this to be a ground for striking out the Notice of Application.

Striking out by reason of non-joinder of the management committee and/or its members

11.  The Respondent does not dispute the IO is a proper party to the proceedings but argues other proper parties (the Management Committee and/or its members) should be joined to the present proceedings.

12.  The test relating to joinder of a new defendant is clearly set out in paragraph 15/6/1, Hong Kong Civil Procedure 2018, Vol. 1, which states:

“Furthermore, on whether a new party should be joined, the test is whether there is a bona fide claim and a proper question to be tried as between the plaintiff and the intended defendant that is necessary or just and convenient for resolution between them as well as between the plaintiff and the defendant in the present proceedings (Pang Kwok Lam v. Schneider Electric Asia Pacific Ltd (unrep., HCPI 90/2010, [2011] H.K.E.C 33); applied in Wong Ieok Hei v. Dr Kwok Kwan Ho (unrep., HCPI 22/2012, [2014] H.K.E.C. 1487).”

13.  The first and foremost question is whether the Management Committee in itself can properly be sued as a party to the proceedings.

14.  The Respondent made extensive submissions on whether the Management Committee can be sued as a separate entity from the IO and has cited three cases[1] in support of their proposition that the Management Committee could be sued as a separate and distinct entity. The cases cited are all decided by HH Judge Chow in which the reasoning in all three cases are the same. Of the three cases cited, Chan Yip Keung and anor v The Incorporated Owners of Belvedere Garden Phase II and anor (unrep., LDBM 54/2002)was considered by HH Judge Chu (as she then was) in the case of The Incorporated Owners of Kwai Wan Industrial Building v Kwai Fung Industrial Ltd and others (unrep., LDBM 208/2002) and expressly not followed.

15.  In the case of The Incorporated Owners of Kwai Wan Industrial Building, HH Judge Chu did not accept a management committee could be sued as a legal entity separate and distinct from the incorporated owners.  She opined that a management committee is an agent of the IO and is appointed to carry out the powers and duties of the IO. Hence she found that a management committee could not be sued in its own capacity and the proper party to be sued was the incorporated owners: see paragraphs 20 – 23 of the judgment. This proposition was upheld by the Court of Appeal in the case of Tung Lo Court (IO) v Tsui Wai Yip [2015] 4 HKLRD 397.

16.  I agree with the proposition and reasoning expounded by HH Judge Chu (as she then was) in The Incorporated Owners of Kwai Wan Industrial Building, and respectfully adopt the same reasoning. I am therefore of the view that in so far as the Management Committee was acting on behalf of the IO in carrying out duties under the Building Management Ordinance (Cap 344) (“the BMO”) and/or the DMC, the Management Committee is an agent of the IO and cannot be sued as an entity separate and distinct from the IO.

17.  The next question to consider is whether the failure to join the individual members of the Management Committee renders the proceedings defective such that the Notice of Application should be struck out. I am of the view it should not for the reasons set out below.

18.  Firstly, Order 15 rule 6(1) of the Rules of High Court (Cap 4A) clearly states that no cause or matter shall be defeated by reason of the misjoinder or non-joinder of any party. The present proceedings are still in the early stages of litigation in which the Notice of Objection has yet to be filed and served. Other than the Notice of Application and documents relating to the present application, no other documents or evidence have been filed. Even if the Applicant has failed to join the proper parties, the Applicant may remedy the defect by applying for leave to join the necessary parties.   

19.  Secondly, I do not accept the individual members of the Management Committee must be joined in the present proceedings by reason of necessity. The Applicant does not seek relief against any individual members of the Management Committee. The only relief sought by the Applicant is an order of dissolution of the Management Committee and an appointment of an administrator in its place. An order to dissolve the Management Committee must be an order binding on the IO.  This is because the responsibility of ensuring the Management Committee is ultimately dissolved rests with the IO. The constitution and dissolution of the Management Committee are normally matters to be decided at an owners’ meeting called by the IO. Since the Applicant does not seek any relief against the individual members of the Management Committee, there is no question to be tried between the Applicant and the individual members of the Management Committee.  

20.  Thirdly, the allegations of fraud and dishonesty are made against the Management Committee as a whole and not against a particular individual. The nature of the allegations made by the Applicant is that the fraud and dishonesty is practised by the Management Committee collectively leading to the “incompetency” of the IO as a whole. The Applicant’s complaint is directed at the IO acting through the Management Committee, not against the individual members of the said committee. Since the Management Committee acts for and on behalf of the IO and the ultimate responsibility of enforcing the DMC rests with the IO, it is for the IO to refute (if they so wish) the allegations made by the Applicant. I agree with Mr. Man that the members of the Management Committee may act as witnesses if they so wish or seek to be joined as a party but there is no specific allegation against a particular member of the committee which requires any or all of the members to be added for the proper disposal of the case. Hence I do not accept that for the just and convenient disposal of the case or by reason of necessity, all or any of the members of the Management Committee must be joined to the present proceedings.

21.  By reason of the reasons set out above, I do not accept the non-joinder of the individual members is a ground for striking out the Notice of Application.

Striking out sections C4 and/or C5 of the Notice of Application and/or the proceedings be stayed on the ground that they are frivolous, vexatious and/or abuse of process of the court

22.  Sections C4 and C5 of the Notice of Application set out the Applicant’s complaints against the IO for not properly carrying out the works ordered by Mr. Justice G Lam in the HCCT Case and the complaint that the Management Committee has hindered the Applicant’s ability to carry out the works ordered against him in the same case.

23.  Mr. Cooney submitted the inclusion of sections C4 and C5 in the Notice of Application is inappropriate as such matters should be dealt with as part of the HCCT Case. Since Mr. Justice G Lam gave the parties liberty to apply on the implementation of the HCCT Order, the Applicant should make the necessary applications before the Court of First Instance. Mr. Cooney submitted it would be less than ideal, if not inappropriate, for this Tribunal to deal with such matters.

24.  With respect, I am unable to accept those submissions. On a proper reading of the Notice of Application, the Applicant is not asking this Tribunal to enforce the HCCT Order. The Applicant’s main complaint is the IO is unable to discharge its duties as a whole. Sections C4 and C5 are two pleaded examples of the IO’s inability to discharge its duties under the BMO and/or DMC. This Tribunal must decide whether or not the complaints against the IO are made out and whether the circumstances warrant a dissolution of the Management Committee. As stated by HH Judge KW Wong in Smart Wealth Asia Pacific Ltd v The Incorporated Owners of Kelly Court (unrep., LDBM 251/2013) at paragraph 12, “. . . in determining whether or not a management committee is to be dissolved, the most important consideration is whether it is able to perform the duties imposed on it by the deed of mutual covenant and comply with the provisions of the BMO.”

25.  The questions to be considered by this Tribunal are entirely different from those considered in the HCCT Case and therefore could not fall within the “liberty to apply” provision of the HCCT Order. Furthermore, there are no proceedings currently instituted in the Court of First Instance relating to the enforcement of the relevant orders made in the HCCT Case. Hence there is no parallel case in the Court of First Instance deciding on the same matters raised in the present case.

26.  By reason of the matters set out above, I do not accept the matters set out in sections C4 and C5, read in the context of the relief sought in the Notice of Application, should be struck out or that the proceedings should be stayed for being frivolous, vexatious or abuse of process of the court.

WHETHER IT IS NECESSARY FOR THE APPLICANT TO JOIN THE MEMBERS OF THE MANAGEMENT COMMITTEE AND/OR THE MANAGEMENT COMMITTEE ITSELF

27.  For reasons set out in paragraphs 19 and 20 hereinabove (of which I shall not repeat), I do not accept it is necessary to join the Management Committee and/or its members to the present proceedings. The answer the preliminary question as posed by the Applicant’s application, the answer is no.

TRANSFER OF PROCEEDINGS TO THE COURT OF FIRST INSTANCE

28.  The fallback position of the Respondent is that if the relief for striking out or for a stay of proceedings is not granted, the Respondent asks to have this case transferred to the Court of First Instance.

29.  S.8A(1) Lands Tribunal Ordinance (“LTO”) states:

“The Tribunal may transfer to the Court of First Instance or the District Court any proceedings instituted before the Tribunal which are within the jurisdiction of the Court of First Instance or the District Court, but which—

(a) are not within the jurisdiction of the Tribunal; or

(b) the Tribunal considers should in the interests of justice be so transferred.” (own emphasis added)

30.  Mr. Man took issue as to whether the proceedings are within the jurisdiction of the Court of First Instance, as required by s.8A(1) LTO. He argued the relief sought under s.31 BMO could not be transferred to the Court of First Instance because the provision stipulates the relief is to be granted by the Lands Tribunal.

31.  The exclusivity of jurisdiction over s.31 BMO has not been specifically decided in any case law. However, Rogers VP in the case of Wong Hing Cheong and anor v Wah E Investment Ltd & anor [2002] 3 HKC 59 had clearly stated at page 68H:

“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 [Building Management 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.”

 (See also Findlay J’s judgment in Ngan Chor Ying and anor v Year Trend Development Ltd and anor [1995] 1 HKC 605 at 607.)

32.  I am of the view the remedy created in s.31 BMO falls squarely within the situation as described by the Court of Appeal. An order for dissolution of a management committee is a remedy created by statute and there is no equivalent to be found in common law in which the Court of First Instance could grant by way of exercising its equity or inherent jurisdiction. In applying the decision of Wong Hing Cheong, it must naturally follow that the Lands Tribunal is the only proper court to grant such a remedy.

33.  Since the remedy sought is one in which only the Lands Tribunal has jurisdiction to grant, the case should remain in the Lands Tribunal. Hence the Respondent’s application to transfer the proceedings to the Court of First Instance is refused.

34.  Even if I am wrong and the Court of First Instance has concurrent jurisdiction to grant the remedy set out in s.31 BMO, I would still refuse the application for transfer. For reasons already stated hereinabove, the subject matter of the Notice of Application is not a matter that can be dealt with under the HCCT Case. There are allegations made by the Applicant which were not raised in the HCCT Case and therefore any judge hearing the case would have to hear the application afresh. I do not accept the Respondent’s submission that transferring the case to the Court of First Instance will save the parties’ time and costs.

35.  Mr. Cooney in his written submissions further submitted that since the case is complicated it would benefit from a procedure where there are formal pleadings.

36.  I disagree with the submission on two levels. First, I disagree the proceedings are complicated. As I have stated previously, this Tribunal is only required to consider whether the complaints have been made out, and if so, whether the situation justifies a dissolution of the management committee. The Lands Tribunal frequently deals with similar allegations between owners, management committee members and incorporated owners over the non-compliance on the duties set out in the BMO and/or DMC. I fail to see any complicated issues of fact or law involved in this case which renders the Lands Tribunal an inappropriate or a “less than ideal” forum for the adjudication of such matters.

37.  Secondly, I fail to see how the Notice of Application and the Notice of Opposition as compared to formal pleadings are inadequate to set out the issues between the parties. The Notice of Application requires the Applicant to set out the facts relied on, the issues and/or questions of law to be determined, and the relief sought. The matters covered are similar to that of a statement of claim, albeit in a different format. The Applicant’s Notice of Application has been drafted with sufficient particulars so as to adequately inform the Respondent of case that is to be met. If in due course, any party is unclear about the issues involved, necessary applications could be made to the Tribunal. Alternatively, the Tribunal may give appropriate directions at the call-over hearing to clarify any ambiguity in the issues to be litigated. I do not accept the case cannot be litigated efficiently or properly in absence of “formal pleadings”.

38.  Hence even if I was required to consider whether the proceedings should be transferred in the interests of justice pursuant to s.8A(1)(b) LTO, I would still refuse the application for transfer for reasons set out above.

OTHER RELIEF SOUGHT

39.  The remaining matter left to be decided is whether an unless order should be made for the compliance with the automatic directions set out in paragraph 15(a) and (b) of the Practice Direction.

40.  For reasons set out in this Decision, I am of the view the Practice Direction does not envisage draconian sanctions to be adopted on the first occasion of non-compliance. The proper course as set out in paragraph 15(f) of the Practice Direction is to give further case management directions on paper. Hence I refuse the Respondent’s application for an unless order. Instead, I shall give further case management directions on paper in due course.

SUMMARY OF ORDERS

41.  By reason of the matters set out above, I make the following orders:

1) Paragraphs 1 to 4 of the Respondent’s application dated 9 May 2018 be dismissed;

2) Paragraph 5 of the Respondent’s be allowed as follows: Leave to the Respondent to file the Notice of Opposition within 35 days from the date of this order;

3) The answer to the preliminary question as posed in the Applicant’s application dated 18 July 2018 is: No; and

4) Parties shall, within 42 days from the date of this order, lodge with the Tribunal further proposed case management directions for the Tribunal’s approval. If parties are unable to agree on any proposed directions, the Tribunal shall give the necessary directions on paper without an oral hearing.

COSTS

42.  Since I have, in effect, refused the Respondent’s application, save and except the relief for time extension which was never opposed by the Applicant, I see no reason why the Respondent should not pay the Applicant’s costs of the application.

43.  As for the Applicant’s application, Mr. Man explained the Applicant filed the application on the preliminary issue out of precaution in the event the issue was not resolved after the application for striking out was refused. I fail to see how any decision I come to on the application to strike out for non-joinder of parties could have possibly left the issue unresolved. The preliminary issue raised was an issue that would have been canvassed and determined in the Respondent’s application.  Since no extra submissions relating to the preliminary issue and no extra time was spent during the hearing to deal with the Applicant’s application, no costs order will be made in respect of the Applicant’s application.

44.  I therefore make a costs order nisi that the Respondent shall pay the Applicant’s costs of the Respondent’s application dated 9 May 2018 to be summarily assessed with certificate for two counsel and no order as to costs on the Applicant’s application dated 18 July 2018.  Unless any party applies to vary the costs orders within 14 days hereof, the costs orders shall become an order absolute.

45.  I give the following directions in respect of the assessment on costs:

1) Upon the orders nisi becoming absolute, and in the event the amount of costs cannot be agreed between the parties, the Applicant shall prepare a statement of costs in the format of Appendix A of Practice Direction 14.3 which, together with the skeleton arguments, are to be lodged and served on the Respondent;

2) The Respondent shall within 14 days thereafter lodge and serve its statement on the grounds of opposition to the Applicant’s statement of costs;

3) The Applicant shall file and serve its submissions in reply within 14 days thereafter, if any; and

4) Unless otherwise directed by the Tribunal, the Applicant’s costs shall be assessed by way of paper disposal without an oral hearing.

46.  Lastly, I thank Counsel for their able assistance.