THE INCORPORATED OWNERS OF HOI TO COURT v. CHINLUCK PROPERTIES LTD

HCA6171/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6171 OF 1997

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REASONS FOR DECISION

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1.  By summons filed on 23 June 2006, the plaintiff applied to enforce paragraphs 1, 5 and 7 of the Schedule to a Tomlin Order dated 15 December 1999 made by consent of the plaintiff and the defendant.  After hearing counsel, I allowed the application.  My reasons appear below.

Background leading to the application

2.  The plaintiff is the Incorporated Owners of the building called Hoi To Court situate at 275 Gloucester Road, Hong Kong.  The defendant is the registered owner of the roof of the building.

3.  The plaintiff commenced proceedings against the defendant in 1996, claiming that a house-like structure and an illuminating advertisement signboard erected at the roof constituted breaches of the deed of mutual covenants.  The defendant defended the claim on a number of grounds, including waiver, delay and limitation.  The matter was transferred to the Lands Tribunal and in1997 transferred back to the High Court and became the present action.

4.  Subsequently, the parties agreed to compromise the action.  As a result, the Tomlin Order dated 15 December 1999 was filed into court by consent.

The Tomlin Order

5.  The Tomlin adopted the usual form of a qualified stay with a liberty to apply provision. 

6.  The Schedule to the Order recorded the terms agreed between the parties.  For the present application, only paragraphs 1, 5 and 7 are relevant.  In gist, the defendant agreed under paragraph 1 to carry out on or before 30 April 2000 and at its own expenses, the works listed out in Appendix 1 of the Order.  Under paragraph 5, the defendant agreed to pay a monthly fee of $20,000 to the plaintiff as management funds until such time when the advertisement signboard was demolished.  The defendant further agreed under paragraph 7 to take out an insurance policy to insure the plaintiff against risks of liability to third party caused by the advertisement signboard for the amount of not less than $25 million.

The plaintiff’s summons

7.  It is the plaintiff’s case that the defendant had failed to perform paragraphs 1, 5 and 7 of the Schedule.  Accordingly, the plaintiff issued a summons on 23 June 2006 to enforce these paragraphs.

8.  On 15 August 2006, the defendant filed the affirmation of Huang Kemin (“Huang’s affirmation”) to oppose the application.  Huang’s affirmation raised the defence of delay and limitation.  Specifically, it said that the Tomlin Order was made more than six years ago, so that if the plaintiff were to enforce the contract underlying the Order by way of separate action, it would be statute-barred.  It was said that the plaintiff was guilty of inordinate and inexcusable delay in enforcing the terms of the agreement.  Huang’s affirmation also alleged that the plaintiff had unreasonably refused to discuss or co-operate with the defendant in relation to the works in Appendix 1 of the Order.  As to the public liability insurance, Huang’s affirmation claimed that the defendant had already procured policies with a total maximum coverage of $25 million to be issued.

9.  On 18 August 2006, the plaintiff filed the second affirmation of Luke Chi (“Chi’s 2^nd affirmation”) to deal with the various points raised in Huang’s affirmation.  Chi’s 2^nd affirmation referred to several letters written by the plaintiff’s solicitors in July 2000, July 2002 and May 2006, demanding compliance with the terms in the Schedule to the Order.  It also referred to two letters written by the defendant to the plaintiff dated 8 November 2002 and 22 May 2003, proposing to renovate the ground floor lobby of the building and to pay a reduced monthly fee of $10,000, while requesting the plaintiff to agree to the letting out of the roof as advertising space.  Chi’s 2^nd affirmation said that on each occasion, the proposal and request were rejected by the plaintiff.  As for the public liability insurance policies, Chi’s 2^nd affirmation pointed out that the plaintiff had requested for copies of them, but the defendant was unable to produce them.

The defendant’s application for adjournment

10.  At the hearing on 24 August 2006, Miss Chak for the defendant applied to adjourn the summons so as to enable the defendant’s solicitors to obtain instructions on Chi’s 2^nd affirmation.  In particular, Miss Chak submitted, on the basis of the letters disclosed in Chi’s 2^nd affirmation, there must have been negotiations and discussions between the parties subsequent to the Tomlin Order and it was possible that they had agreed to a variation of the terms in the Schedule.  It was said that because the people in charge of the defendant were in the Mainland, time was needed to take instructions from them, including Mr Huang, on these matters.

11.  I refused the adjournment and I gave oral reasons for the decision.   To recap, I do not agree that the reference to Order 46 rule 2 of Rules of the High Court is apt.  The plaintiff’s summons has nothing to do with execution of judgment or order.  It was issued pursuant to the “liberty to apply” provision in the Tomlin Order itself.  The terms in the Schedule do not form part of a court order.  No application to enforce or execute a judgment or order is engaged.

12.  Secondly, although Chi’s 2^nd affirmation was filed on 18 August 2006, six days before the hearing, the plaintiff cannot be said to have delayed or acted unfairly.  The fact is the defendant had been ordered to file its affirmation in opposition within 21 days from 29 June 2006, but only filed Huang’s affirmation on 15 August 2006.  Until it had sight of Huang’s affirmation, the plaintiff could not have foreseen the defence or grounds of opposition.  The plaintiff had in fact acted swiftly in producing Chi’s 2^nd affirmation in a matter of three days, with another few days to go before the hearing.  There was no satisfactory explanation as to why instructions could not be taken from the responsible people in the defendant in the period preceding the hearing.

13.  Thirdly, while some of the letters referred to in Chi’s 2^nd affirmation originated from the plaintiff’s solicitors, the two crucial letters relied by the plaintiff, including the one dated 22 May 2003, were written by the defendant.  They are most relevant to the defendant’s delay and limitation arguments raised in Huang’s affirmation, and the defendant ought to have disclosed them on its own volition.  To say the least, the defendant could not have been taken by surprise.         

14.  Fourthly, as far as the stated purposes of the adjournment are concerned, whether there were subsequent discussions or negotiations is irrelevant to the issues in the present application.  As to the suggestion that the parties might have agreed to vary the terms in the Schedule, this is entirely speculative.  It would be inexplicable for the defendant not to have raised it by way of opposition if indeed the terms were varied by agreement.  The adjournment does not serve any useful purposes.

The application to enforce the terms in the Schedule

(1) The relevant principles

15.   As note above, the plaintiff’s summons is to enforce the terms embodied in the Schedule to a Tomlin Order pursuant to the “liberty to apply” provision in the Order.  There is no need for the plaintiff to commence a new action to make the application: see Reyes J’s decision on the point in Luk Por v. Chau Kim Hung (unreported) HCA 10369/1997, 8 October 2003, at paras.9-11.

16.  Where, as in this case, a ground of opposition is raised, the court should decide whether the ground is arguable but the burden is no higher than that in a summary judgment application: Chan Yiu Sing Peter v. Lam Yat Wah [1990] 2 HKLR 92, 95I-96B.

(2) The defendant’s objection

17.  On this application, two questions fall to be considered. They are: (1) whether the defendant has been shown to have breached the terms in the Schedule, and (2) whether the objections to the application are arguable.

18.  Dealing with the first question of proof of breach, it would appear that the defendant does not dispute that it had not carried out the works listed in Appendix 1.  The various letters from the plaintiff’s solicitors reminding the defendant of its obligations under the Schedule go a long way to refute the defendant’s assertion that the plaintiff had not responded to its work plan or proposal, or that the plaintiff showed no interest in pursuing the matter.  In fact, the plaintiff had at its own costs caused the renovation work in paragraph 3 of Appendix 1 to be done.  Hence it no longer seeks to enforce by the present application, the agreement insofar as it relates to paragraph 3 of Appendix 1 of the Order.

19.  In respect of the $20,000 monthly fee, there is no evidence that it had been paid.  On the contrary, the defendant’s letters indicated there was no payment.  

20.  As for public insurance policies, the defendant has not been able to produce copies of them or evidence of their issuance.  It should be noted that the defendant is required by paragraph 7 of the Schedule to produce to the plaintiff upon request copies of the policy or receipts for the premium payments.     

21.  In short, the evidence available before the court does show that the defendant had not performed paragraphs 1, 5 and 7 of the Schedule to the Order.

22.  I turn next to the question of whether the grounds of opposition are arguable.  The principal objection of the defendant is that the plaintiff is guilty of inordinate and inexcusable delay.  However, as Mr Lam submitted, delay simpliciter does not give rise to an arguable defence in an action for equitable remedy, including specific performance: Ng Kee v. Attorney General [1977] HKLR 583, 590-591.   The defendant must additionally demonstrate that the plaintiff had by conduct or representation unequivocally abandoned its rights so as to amount to a waiver: Large Land Investment Ltd v. Chueng Siu Kwai [2003] 1 HKLRD 313, 318H.  Alternatively under the doctrine of laches, the defendant has to demonstrate that the delay has occasioned prejudice to it so that it is inequitable for the plaintiff to enforce its rights: see Ng Kee v. Attorney General, supra, at 591. 

23.  As far as waiver is concerned, the evidence is far from supporting a clear and unequivocal abandonment of rights.  Even accepting the defendant’s assertion that the plaintiff failed to respond to the request to discuss the works to be done and had adopted an approach of “we shall see later”, this is not indicative of the plaintiff waiving or abandoning its rights under the Schedule.  There is, on the other hand, clear evidence that the plaintiff had through its solicitors demanded the defendant to perform its obligations under the Schedule.  This is indicative of the plaintiff’s intention to adhere to and enforce the terms agreed upon. 

24.  Additionally, the letters written by the defendant do not support its case that it was under a belief or impression that the plaintiff had abandoned the matter.  The evidence adduced falls short of supporting a case of waiver.

25.  As to laches, the defendant has not shown what prejudice it has suffered as a result of the alleged delay on the plaintiff’s part such that it would be inequitable to allow the plaintiff to enforce the terms in the Schedule.

26.  The objection based on delay is therefore unarguable.

27.  As to the limitation defence, it is true that the part of the plaintiff’s summons seeking payment of the accrued monthly fee, the claim is in the nature of a debt claim.  In this regard it is subject to the six years limitation under section 4(1)(a) of Limitation Ordinance, cap. 347.   However, the defendant’s letter dated 22 May 2003 in stating that it was unable to carry out its promises made in the past (including the monthly payment of $20,000), constitutes an acknowledgement of the debt.  Although it was marked “without prejudice”, the letter is admissible for the purpose of evidencing an acknowledgement of the debt represented by the unpaid accrued monthly fee: Bradford & Bingley plc v. Rashid [2006] 1WLR 2066, 2072-3 and 2079-80, 2089-91.  The limitation defence is thus unarguable.

28.  Even if the enforcement of the accrued claim is statute-barred, the application to enforce the future payment of monthly fee is not.

29.  In short, none of the grounds of opposition raised by the defendant has been shown to be arguable.

Conclusion

30.  For the above reasons, the plaintiff’s application should be allowed.

31.  Mr Lam had in his written submissions helpfully proposed the exact terms to be ordered.  He had also proposed allowing longer periods for compliance by the defendant and the calculations of the interest on the outstanding monthly fees as well as the interest rate. 

32.  Having heard Mr Lam and Miss Chak, I order that:

(1) The time for carrying the works under paragraphs 1 and 2 of Appendix 1 in compliance with paragraph 1 of the Schedule be on or before 23 December 2006 or such other period as the parties may agree;

(2) The amount of accrued monthly fees under paragraph 5 of the Schedule should be $1,760,000 together with interest at judgment rate from 4 May 2006 to full payment; and

(3) The time for complying with paragraph 7 of the Schedule is one month from the date of the decision or such other period as the parties may agree.

33.  Applying the normal rule of costs follow event, the defendant is ordered to pay the plaintiff the costs of the application to be taxed if not agreed.