FUTURE DRAGON LTD v. FU LAM INVESTMENT COMPANY LTD

HCMP 401, 402 & 403/2023
(Heard together)

[2025] HKCFI 1467

HCMP 401/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 401 OF 2023

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AND

HCMP 402/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 402 OF 2023

______________

______________

______________

AND

HCMP 403/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 403 OF 2023

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______________

(Heard together)

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DECISION

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Introduction

1.  This court handed down a decision dated 13 November 2024 (“the Decision”) whereby the applications of the defendants by summonses all dated 22 February 2024 (collectively “the Summonses”) for conversion of the proceedings into writ actions were dismissed.

2.  By summonses all dated 27 November 2024 (“the Leave Summonses”), the defendants apply for leave to appeal against the Decision to the Court of Appeal and to serve their Notices of Appeal annexed to the Leave Summonses (“the NOA”). This court gave directions to the parties to file their respective written submissions for the purpose of paper disposal of the Leave Summonses.

3.  Mr Pang for the defendants has lodged his written submissions and Mr Deng for the plaintiffs has lodged his. This court is thankful for their assistance.

4.  In this decision, this court shall adopt the abbreviations used in the Decision unless otherwise stated. I shall also refer to the Decision for the background facts, which will not be repeated here.

Relevant legal principles

5.  The legal principles governing applications for leave to appeal are well-settled. Section 14AA(4) of the High Court Ordinance, Cap. 4 provides that leave to appeal shall not be granted unless the court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard. A reasonable prospect of success means that the prospect of success is reasonable and more than fanciful, without having to be probable. What is required is a reasonably arguable appeal. Merely showing that an appeal is “arguable” and “not fanciful” is insufficient. Leave to appeal is not lightly granted.

6.  Due to the nature of the Decision, which is essentially a case management decision, the following observations of Kwan JA in Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 (at §31) are apposite:

“Case management decisions are only subject to appeal in rare circumstances. The appellant faces a “very high hurdle” and must show that the judge “has gone clearly wrong and made orders which will clearly involve an injustice or an inability for the trial court to carry out its task”, or if the judge “erred in principle or the order was irrational having regard to the issues that had to be resolved”. It need hardly be emphasised that generally, an appellate court will not interfere with a judge’s exercise of discretion unless the judge has misunderstood the law or the evidence or the exercise of his discretion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible.”

Grounds of appeal

7.  In the NOA, three main grounds are advanced for the defendants.

Ground 1

8.  The first ground concerns my disposal of the Wrongful Inclusion Issue. It is complained that it is plainly wrong for me to find that there is no dispute that lifts, escalators and washrooms in the JA Communal Areas are communal in nature and I conclude that there is no reason why their maintenance costs should not be included in the JOYA Budget and shared by the defendants despite the evidence adduced by the defendants: §28 of the Decision.

9.  Express references are made to paragraphs 18, 23 and 24 of the Affirmation of Leung Kan Lam filed on 2 January 2024 (“Leung’s Affirmation”) to show that there are indeed disputes raised by the defendants.

10.  I shall start at paragraph 17 of Leung’s Affirmation. Mr Leung, consultant of the defendants, points out that Joylane Limited shall not be responsible for the expenses relating to the maintenance of the Restaurant Corridors, i.e. the escalators, lifts and washrooms in the Commercial Development of the Estate. Restaurant Corridor Owner or the First Owner or the Second Owner shall be solely responsible for such expenses.

11.  In paragraph 18 of Leung’s Affirmation, he further avers that the escalators, lifts and washrooms facilities within the Restaurant Corridor are now under the management of Citybase and not the plaintiffs or JLL. The financial budget for managing the commercial common areas of the Estate for the year ended 2021 prepared by Citybase shows that Citybase has already reserved HK$12,889 as the monthly maintenance fees for these facilities.

12.  In paragraph 22 of Leung’s Affirmation, it is averred that the management fees for lifts and escalators at Item No.7 of the management budget of the Ground Floor Joylane Arcade for the year ended 31 December 2017 prepared by JLL should be borne by the Restaurant Corridor Owner or the First Owner and the Second Owner in respect of the First Premises and the Second Premises and their successor(s) in title and not by Joylane Limited and its successors. Thus, Item No. 7 was wrongfully included in the budget. Similarly, the improvement works for washroom facilities at Item No.22 should be borne by the First Owner and the Second Owner and their successor(s) and not by Joylane Limited and its successors. It was also wrongfully included in the budget.

13.  In paragraph 23 of Leung’s Affirmation, it is pointed out that no expense has been allocated for the maintenance fees for lifts and escalators in the management budget for the year ended 31 December 2017 prepared by JLL for First Floor Joylane Arcade.

14.  In paragraph 24 of Leung’s Affirmation, it is alleged that there is no allocation for the maintenance fees for lifts and escalators in the budgets in respect of First Floor Joylane Arcade when such expenses incurred for the benefit of the owners of the Commercial Development of the Estate should be apportioned to the owners of the Commercial Development of the Estate.

15.  In paragraph 29 of Leung’s Affirmation, it is complained that the plaintiffs have not provided to them the underlying contracts for cleaning services and fire services maintenance so that it could be seen whether the plaintiffs in fact engaged one single contractor for different portions of the Estate. If so, justification has to be given for allocation of such expenses to the different portions of the Estate.

16.  In the reply affirmation of Ip Sze Wai, Mr Ip gives a full answer to the allegations of the defendants in respect of Item Nos. 7 and 22 in the JOYA Budget. He confirms that the JOYA Budget does not include any expenses relating to the areas outside the Joylane Arcade. He further confirms that there are some lifts and escalators in the Joylane Arcade and the JOYA Budget has included the expenses of maintenance of such lifts and escalators in the Joylane Arcade.

17.  Mr Ip says that he does not know why the defendants allege that Item Nos. 7 and 22 relate to expenses for the facilities in the Restaurant Corridor.

18.  On the evidence, there is no allegation that there are no lifts, escalators and washrooms in the JA Communal Areas or that they are not communal in nature. At the hearing of the Summonses on 3 October 2024 (“the Hearing”), I heard no submission from Mr Pang that the lifts, escalators and washrooms in the JA Communal Areas are not the Communal Areas within the meaning of Clause 1.1 of the DOAG.

19.  Thus, I am unable to understand why I was wrong to say that there is no dispute that lifts, escalators and washrooms in the JA Communal Areas are communal in nature. Ground 1 of the NOA is baseless and has no merit.

20.  In support of Ground 1 of the NOA, Mr Pang in his written submission refers to a great deal of evidence to substantiate the allegation that Item Nos. 7 and 22 were wrongly included in the JOYA Budget.

21.  To start with, this allegation has little to do with Ground 1. More importantly, this allegation was expressly abandoned by Mr Pang at the Hearing.

22.  It is worthy of note that at the Hearing, Mr Pang confirmed to this court in unequivocal terms (at 10:20:45 a.m.) that the defendants’ complaint was not the wrongful inclusion of such expense in the JOYA Budget, i.e. the Wrongful Inclusion Issue. The complaint was about the allocation of such expenses to the Restaurant Corridor owners and the Joylane owner and its successors including the defendants. This is actually the alternative case of the defendants stated in paragraph 24 of Leung’s Affirmation based on a purely hypothetical situation.

23.  Mr Pang then went on to give an example of the wrongful allocation of such expenses. He submitted that an underlying cleaning contract relating to the washrooms in both the Restaurant Corridor and the Joylane Arcade might cover the services to be provided by 10 cleaning ladies. Some of them might be designated to render cleaning service for those washrooms in the Restaurant Corridor and some of them might be designated to work on washrooms in the Joylane Arcade. He submitted that the demarcation of the expenses between these two different portions of the Estate is subject to disputes and the size of the washrooms could not be the only consideration. Other factors such as usage, foot traffic and how the washrooms were used were relevant. Therefore, Mr Pang submitted that the budget maker had to be cross-examined on how the allocation of such expenses, if any, was carried out.

24.  I dismissed this allocation complaint on the ground that it was not supported by evidence: see §§29 and 30 of the Decision.

25.  It is only in his reply submission that Mr Pang submits that this court was wrong to suggest that the defendants had abandoned the Wrongful Inclusion Issue merely because of my observation that he was unable to answer my queries satisfactorily. Mr Pang further submits that this court should not just rely on the plans annexed to the Sub-DMC which show that there are lifts, escalators and washrooms within the Joylane Arcade and the bare assertions in the Affirmation of Ip Sze Wai.

26.  Mr Pang’s submission is bereft of merit. Firstly, I am positive that he told this court the issue was the wrong allocation of expenses and not the wrong inclusion of expenses. As stated above, his complaint of wrong allocation of expenses was premised upon the fact that there were also lifts, escalators and washrooms within the Joylane Arcade. Mr Pang accepted that the defendants had to pay certain portions of such expenses. I am unable to understand how Mr Pang can now make such an about-face in this application.

27.  Secondly, I do not understand why this court cannot rely on the plans annexed to the Sub-DMC, which indicate the existence of lifts, escalators and washrooms within the Joylane Arcade. There is no dispute about the authenticity of the plans. In the skeleton submissions of Mr Pang lodged for the Hearing (at §45(3)), he merely complained that the plans were indecipherable and that the defendants did not have a chance to respond to the same to verify the matters. I cannot agree with him.

28.  I am of the view that it should not be open to Mr Pang now to revive the Wrongful Inclusion Issue in the intended appeal. The defendants cannot possibly allege any mistake on my part relating to an issue which was abandoned and did not call for my express determination.

Ground 2

29.  Ground 2 is that this court erred in law and/or was plainly wrong in finding that there was no sufficient ground to call for witness for cross-examination by failing to consider the matters in paragraphs 23, 24 and 29 of Leung’s Affirmation and the lack of a breakdown of calculation to show how the plaintiffs have made the budgets in accordance with the relevant provisions of the DMC, the Sub-DMC and the Deed of Allocation as referred to in paragraph 31 of Leung’s Affirmation.

30.  It is further alleged that this court has failed to consider the fact that the summons of the defendants was taken out on 13 December 2024 for specific discovery of a number of documents (“the Discovery Summons”).

31.  Mr Pang in his written submission explains that cross-examination of the plaintiffs’ witnesses is necessary to ascertain whether there was double calculation of the costs for the escalators, lifts and washrooms facilities in the budget for the Corridor Restaurant and the JOYA Budget and the basis for their non-allocation of expenses for some owners notwithstanding the express provisions under the DMC.

32.  These alleged factual issues were not raised by Mr Pang, orally or by way of written submission, at the Hearing.

33.  Nor are these alleged factual issues substantiated by evidence. They cannot be genuine factual issues justifying cross-examinations.

34.  As regards the allegation in paragraph 29 of Leung’s Affirmation, this court has actually dealt with the same: see §34-37 of the Decision. I do not think that I should make any repetition here.

35.  The complaint about the lack of breakdown of calculation was not made orally or by way of written submission at the Hearing. Mr Pang does not make submissions on this in his written submission for the present applications. In any event, I accept Mr Deng’s submission that this complaint alone does not justify conversion of these proceedings into an action begun by writ.

36.  I cannot find any substance in the allegation that I failed to consider the fact that the Discovery Summons was taken. Mr Pang only by way of introduction mentioned in his skeleton submission (at §6) that “the defendants are seeking discovery of certain documents which will most definitely shed light on the basis by which the plaintiffs commenced the actions.” The Discovery Summons was briefly referred to in a footnote. Mr Pang said nothing about the Discovery Summons at the Hearing. He did not ask this court to consider the Discovery Summons at all. I fail to understand how this complaint can now be fairly made.

37.  To my mind, Mr Pang merely puts the cart before the horse. If he is of the view that by the Discovery Summons, the defendants could have found out more grounds to raise factual issues so as to support the Summonses, he should have asked this court to postpone the Hearing pending the determination of the Discovery Summons. Quite on the contrary, the hearing of the Discovery Summons had actually been adjourned pending my determination of the Summonses before the Hearing.

Ground 3

38.  By Ground 3, it is alleged that I erred in law and/or was plainly wrong in finding that there is no need to cross-examine the plaintiffs’ witnesses to explain for the attribution and apportionment of management expenses to determine the Unreasonable Attribution and Apportionment Issue.

39.  I have already explained my view on the Unreasonable Attribution and Apportionment Issue in my decision (§§34-37). I find that it is a non-issue. It follows that it can be resolved without any cross-examination.

Conclusion and order

40.  The NOA is prolix. The written submission in support is not well-organised to facilitate an easy comprehension of the grounds in the NOA. Even new allegations and arguments not covered by the NOA are raised in the written submission. This is frustrating and I refuse to deal with such allegations and arguments.

41.  For the foregoing reasons, I conclude that none of the grounds in the NOA has a reasonable prospect of success. The defendants have not begun to show their ability to overcome the very high hurdle of overturning my case management decision. The Leave Summonses must be dismissed.

42.  There is no reason why costs should not follow the event. I make an order nisi that the defendants should pay the plaintiffs their costs of and occasioned by the Leave Summonses, to be taxed if not agreed.