WHOLE LIGHT INDUSTRIES LTD v. THE INCORPORATED OWNERS OF BELLA VISTA AND ANOTHER

HCA 681/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 681 OF 2014

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D E C I S I O N

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1. There are two applications before me this morning, both brought by the plaintiff. One is an application by summons dated 14 April 2014 for the continuation of an ex parte injunction obtained by the plaintiff before Louis Chan J on 11 April 2014. The other is an application for summary judgment by summons dated 22 May 2014.

2. Because of recent developments, it had become unnecessary to rule on the actual summonses themselves. However, I shall still briefly describe the background facts so as to lay the groundwork for the matters that I am required to rule upon.

3. The plaintiff is a limited company which is the registered owner of House 30 in a development known as Bella Vista in Sai Kung (“the Development”).  The 1st defendant is the incorporated owners of the Development and the 2nd defendant is the management company.  A bauhinia tree (“the Tree”) had stood in the common area in front of House 30 for more than 25 years.  Photographic evidence showed that its height far exceeded the height of House 30.  By a resolution made on 3 November 2009, the 1st defendant resolved that the 2nd defendant should be required to trim or prune the trees in front of all houses in the Development so that (among other things) the treetop would not exceed the height of the rooftop of the respective house. This has been referred to in the papers as “the Purported Standard”. 

4. If the Purported Standard had been applied to the Tree, it would have resulted in the cutting away or removal of a portion of the crown of the Tree, otherwise known as topping.  In fact, quite a substantial portion of the Tree would have to be removed.  The land on which the Development stood is held under New Grant Number 6286 dated 26 February 1982.  Special Condition 40 of the New Grant reads as follows:

“No trees growing on the lot or adjacent thereto shall be interfered with or removed without the prior written consent of the Secretary for the New Territories who may, in granting consent, impose such conditions as to replanting as he may deem appropriate.”

5. The 1st defendant and the 2nd defendant are subject to a Deed of Mutual Covenant dated 26 February 1982 (“the DMC”). Covenant 4 of section IV of the DMC provided, among other things, as follows:

“No owner shall permit or suffer to be done any act or thing in contravention of the terms and conditions in the new grant.”

6. The plaintiff’s case is that implementation of the Purported Standard would constitute a breach of Covenant 4 because it would be an interference with the Tree. 

7. A number of issues were raised by the defendant by way of affirmation evidence.  First, the plaintiff has no locus standi to complain; second, topping of the tree did not constitute interference; third, in any event, the case has become academic because, way back in July 2012, the defendants have already abandoned the Purported Standard and instead relied on the advice of two experts in handling trees in the Development.  Also, on 31 October 2012, at about 6 pm, Mr Tony Cheng and Mr Vincent Lo of the defendants had communicated such abandonment to Mr Suen Kar-chun of the plaintiff outside House 30.

8. This morning, I was informed by Mr Liu Man-kin, for the plaintiff, that the parties had been able to agree on certain terms and undertakings and a copy of those terms and undertakings has been handed up to me.  I was told that the parties are in agreement as to the undertaking and also as to paragraphs 1 to 3 of the substantive part of the order and I make an order in terms.  Those terms are as follows:

“AND UPON each of the Defendants undertaking that it shall not, whether by itself, its servants or agents or otherwise, implement and/or enforce paragraph 1 of the resolution passed in the 1st Defendant’s Management Committee’s meeting held on 3 November 2009, ie, “樹木頂端不應高於該單位的天面 高度” (translated as “the treetop should not exceed the height of the rooftop of the respective unit”) and/or act in breach of Covenant 4 of Section IV of the DMC of Bella Vista and Special Condition 40 of the New Grant No 6286 dated 26 February 1979 in any manner (“the Defendants’ Undertaking”).

IT IS HEREBY ORDERED that:

1.   All further proceedings herein be stayed except for the purpose of enforcing the Defendants’ Undertaking and the terms of the Order herein.

2.   There be liberty to apply.

3.   The interlocutory injunction granted by the Honourable Mr Justice L Chan on 11 April 2014 be discharged.”

9. As in many of these cases, the parties cannot agree on the issue of costs.  This is the subject matter of paragraphs 4 to 5 of the draft order and I am now required to deal with it. 

10. Costs are in my discretion.  Although the parties have come to terms on the substantive part of the summons, one matter that would weigh heavily in the exercise of my discretion is whether or not the plaintiff was justified in seeking some pre‑judgment and interlocutory injunctive relief in the first place.  This brings me to consider the merits of the underlying application in considering the exercise of discretion in ordering costs. 

11. In the defendants’ skeleton argument, they had indicated that they were prepared to assume, without conceding, that the plaintiff had locus standi in bringing the action.  Therefore, I will say no more about this issue of locus.

12. In relation to the issue of whether topping of the Tree amounted to interference, I am of the view that whatever nice issues may arise on the facts of some other cases, or in relation to some other tree, or in relation to some other ways of cutting or trimming a tree, to apply the Purported Standard to the Tree outside House 30 would clearly be interference with the Tree and the contrary is unarguable.  The Tree is much taller than House 30 and to apply the Purported Standard to the Tree would involve far, far more than just cutting off a few leaves; it will remove a substantial portion of the crown.  To carry the Purported Standard into effect would therefore involve a breach of the relevant provisions of the New Grant and the DMC.

13. In relation to the issue of whether or not the Purported Standard had been abandoned, the important issue is not whether the defendants had decided, within themselves, to abandon the Purported Standard and adopt the view of the experts.  The crux of the plaintiff’s claim lies in the threat and the external indication that the Purported Standard would be implemented.  Therefore, the important issue is whether the plaintiff had been informed by the defendants that the Purported Standard would no longer be enforced or relied upon.

14. On this, I am of the view that the defendants’ suggestion that the plaintiff had been informed by the defendants in October 2012 is inherently incredible and does not give rise to any triable issue.  First, by numerous notices both before and after the date of the alleged oral notification, the defendants referred to the trimming or cutting of trees in accordance with a resolution passed by the 1st defendant (which would have included the Purported Standard).  There was no indication that the Purported Standard has been abandoned.  Second, the first time when the oral conversation was mentioned was in Tony Cheng’s second affirmation made on 12 June 2014 at paragraph 12.  Prior to this, there was no hint or mention of such oral notification, whether by way of inter-partes correspondence or by way of affirmation filed by the defendant.  There is no explanation as to why it was not raised any earlier.  Mr Suen Senior has denied this on oath by affidavit dated 3 July 2014.

15. I am fully aware of the fact that the court should not engage in a mini-trial on affidavit in an Order 14 application but, on the other hand, affidavit evidence must reach a particular threshold as to inherent credibility before it can raise triable issues.  On the facts of this case, having regard to the contemporaneous evidence and the manner and lateness in which the allegations of oral notification have been raised, I am of the view that the suggestion of an oral notification of abandonment is incapable of belief and is practically moonshine.

16. On the merits, therefore, if the matter had proceeded to a full-blown Order 14 hearing, I would have granted judgment. As far as the merits are concerned, therefore, they are in the plaintiff’s favour.

17. I now consider other discretionary matters that had been pressed upon me.  Mr Kenneth Lam, for the defendants, argued that the defendants had tried to negotiate a settlement with the plaintiff but the plaintiff had persisted in bringing the matter to a full-blown hearing.  Documents did show that the defendants had, by letter dated 13 May 2014, put forward an offer containing an undertaking.  Leaving aside issues concerning the wording of a substantive undertaking (which, as I see, do not pose any insurmountable difficulties) the sticking point is costs because the defendants wanted to seek costs against the plaintiff. 

18. By letter dated 15 May 2014, the plaintiff counter-offered certain terms.  Again, the sticking point is costs because the plaintiff wanted to seek costs against the defendants. 

19. It is therefore not a case where the plaintiff can be said to be blindly pressing the case to court, come what may, in a hot-headed manner.  While the defendants have no doubt done their part in trying to secure a settlement, in the absence of a settlement being concluded, the plaintiff, being the applicant to both summonses, had little option but to bring the case to a hearing. 

20. Mr Lam also submitted that, even then, the plaintiff need not have argued the declaratory relief in full as sought in the Order 14 summons because that was plainly academic, given the defendants’ indication of their position as to abandonment in their affidavit.  However, the content of the declaration sought by the plaintiff is simply the natural consequences of granting summary judgment.  It is not as if the pursuit of the relief of declaration had caused one to go off on a tangent and to argue some unrelated matters.  I am therefore not satisfied that the pursuit of declaratory relief had materially contributed to any wastage of extra costs.

21. Lastly, Mr Lam argued that there had been material non-disclosure in the application for the initial ex-parte injunction in that the plaintiff had not disclosed to Louis Chan J the terms of a Chinese letter dated 8 March 2014 where the plaintiff had indicated that it did not object to appropriate trimming of trees and that, had this letter been disclosed to Louis Chan J, the judge might not have granted the initial ex-parte order in such wide terms as to prohibit cutting down or reduction of height or the size of the crown which, according to Mr Lam, went far beyond simply prohibiting the implementation of the Purported Standard.  Mr Lam also complained of the need to proceed ex parte in the original application.

22. As to the issue of material non-disclosure, I am satisfied that while it would have been better for the letter of 8 March to have been expressly drawn to Louis Chan J’s attention, I do not think that it had amounted to culpable material non-disclosure.  The battle lines are quite clearly drawn and the context is quite clear, that the act complained of or objected to is the implementation of the Purported Standard.  It was not realistically suggested that the defendants had actually wanted to trim off some leaves which would have fallen within the wide wording of the ex-parte order but which would not be an implementation of the Purported Standard.  It is not being realistically suggested that the defendants had been prohibited or inhibited from trimming off leaves.  In any case, if the defendants had really wanted to do anything short of implementing the Purported Standard but felt constrained by the ostensibly wide terms of the ex-parte order, they could have come back to the court for variation, but the fact is that they had not.

23. As to the need to proceed ex parte, that was something that had initially puzzled me; however, having been taken through the correspondence, I accept that there was some urgency in the matter because the tree-cutting exercise was scheduled to take place on 11 April and attempts to secure an undertaking from the defendants had not produced any result before the plaintiff’s legal team had marched off to court to obtain the ex-parte order.  Although the order was made ex parte and applied for ex parte, the defendants were informed of it beforehand.  Anyway, no suggestion was made that it would or could have made any difference as to the substantive order made, whether or not the matter had proceeded ex parte or inter partes.  No attempt has been made to set aside the ex-parte order on the ground that it ought not to have been made at all. 

24. I am not in any way encouraging the practice of proceeding ex parte on notice (which, on one view, is an attempt to have the best of both worlds), but on the facts of this case, the plaintiff’s conduct in the ex-parte application is not such as to persuade me to take it into account as a factor against it.

25. At one point, I was considering whether I could and should take into account the fact that this is a dispute between an incorporated owner and an estate owner and that there seemed to be a lot of undercurrent concerning the management of the estate and that any adverse order of costs made in favour of one party against some other party could well be perceived as unnecessarily inflaming a sour relationship between the parties. At the end of the day, I am satisfied that it would not be correct for me to take this into account because I am not fully acquainted with the facts and I must not engage in any guesswork.

26. I would therefore, in the exercise of my discretion, accede to the plaintiff’s application for costs.

27. The plaintiff also sought indemnity costs.  I have a wide discretion which is not constrained by any rigid pigeonholes except that any such order for indemnity costs must be appropriate.  While the lack of merits of a party’s case is a relevant factor which could, in an appropriate case, lead to an indemnity costs order, I am not satisfied that this case falls within that sort of category of cases and therefore I would just order party and party taxation.

28. Therefore, in relation to paragraph 4 of the plaintiff’s draft order, I would make an order in terms, save and except that I would not order indemnity basis.  Therefore, I would delete the words “on indemnity basis” and I would replace them by the words “on a party and party basis”.

29. Paragraph 5 of the plaintiff’s draft order asks for a certificate for two counsel for the ex-parte application because Mr Liu appeared with Miss Patricia Lam on that application.  While I have no doubt that Miss Lam had been of assistance to Mr Liu, I do not think this is a suitable case for certificate for two counsel and therefore I would refuse paragraph 5.

30. I must leave my judgment by echoing what his Honour Judge Lam, as he then was, had said in the case of Tsang Yuen Ling v The Incorporated Owners of Siu Lung Court, unreported, LDBM 199/2001, dated 18 September 2001, helpfully referred to me by Mr Kenneth Lam for the defendants, at paragraph 7 of his skeleton argument, and I quote:

“Whilst there would inevitably be differences in opinion amongst members, in the interest of the whole, such differences should be resolved if possible by the quickest and most cost-effective means...”

And then:

“It is understandable that errors would be made from time to time with regard to the affairs of a corporation. So long as the errors was made without any fraudulent or dishonest intent, although one needs to learn from mistakes, it is more important to rectify or remedy the situation in a positive manner...”

I hope that both parties would pay heed to what his Honour had said and which I have just put.

31. Lastly, I thank counsel for the succinct and helpful way of presenting their cases.

(Submission on oral notification)

32. After I had rendered my oral ruling, Mr Liu had very properly referred me to the fact that the alleged oral notification in October had in fact been referred to in a piece of inter-partes correspondence before Mr Cheng’s second affidavit.  That piece of correspondence is a letter written by the defendants’ solicitors dated 13 May where, at page 3 of the letter, the solicitors said: 

“For the record, we are instructed that, in October 2012, our clients, Mr Tony Cheng and Mr Vincent Lo of Guardian Property Management Limited, had told your client, Mr Suen Senior, that the Purported Standard 1 had been abandoned.”

33. This prompted a reply from Haldanes, solicitors acting for the plaintiff, dated 15 May 2014 where, at the second page of the letter, the solicitors put on record that it was the first time the oral notification had been raised and also asked for details such as date, time and place and manner of the communication.  The details were supplied by way of Tony Cheng’s second affirmation.

34. Having regard to this matter, it still did not detract from my conclusions that I had indicated in my ruling orally. The fact remains that the oral notification had not been referred to at any stage prior to the 13 May letter and the point about the lateness of the raising of this point remains the same and it did not detract from my conclusion that, looking at the totality of the contemporaneous documents and the manner and lateness in which this point has been raised, the defendants’ point about oral notification is inherently incapable of belief and is moonshine.