THE INCORPORATED OWNERS OF TSUI CHUK GARDEN v. EDENTOWN LTD AND OTHERS

LDBM 87 of 2004

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 87 OF 2004

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DECISION ON THE COSTS ORDER

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Background

1. On 30 August 2004, the Tribunal ordered, inter alia, that “there be costs order nisi that the Applicant do pay to the 1^st Respondent the costs of the review, to be taxed on the District Court Scale if not agreed, with Certificate for Counsel, such order to be made absolute after the expiry of 21 days hereof unless application is made otherwise”.

2. The 1^st Respondent applied on 20 September 2004 to vary the above said costs order to as follows: -

(1)    That the Applicant do pay to the 1^st Respondent the costs of the review filed on 15^th July 2004 (including but not limited to the hearing on 4^th August 2004) and such costs shall not be paid wholly by or directly or indirectly, whether wholly or partly, contributed to by the 1^st Respondent, to be taxed on the District Court Scale if not agreed, with Certificate for Counsel.

(2)    That the Applicant do pay to the 1^st Respondent the costs of and occasioned by this application and such costs shall not be paid wholly by or directly or indirectly, whether wholly or partly, contributed to by the 1^st Respondent, to be taxed on the District Court Scale if not agreed, with Certificate for Counsel.

3. The main grounds of the 1^st Respondent’s application are set out in the Notice of Application, summarized as follows: -

(1)    The Applicant has maintained separate accounts of management income and expenses for the Residential Units, the Commercial Development and the Car Parks as well as a joint account of management income and expenses for the entire Tsui Chuk Garden (i.e., including the Residential Units, the Commercial Development and the Car Parks).  Since the 1^st Respondent owned all of the undivided shares of the Commercial Development, she was therefore solely responsible for contributing to the management income of the Commercial Development.  Therefore, in the event that the Applicant charges the legal costs that it was ordered by the Tribunal to pay to the 1^st Respondent in the account of the Commercial Development, it would be the 1^st Respondent which eventually has to be bear the whole of the said legal costs.  This would lead to a most absurd, illogical and unjust result that it will be the 1^st Respondent which has to pay all the legal costs – i.e., both the costs of itself and that of the Applicant. 

(2)    The 1^st Respondent’s share of management expenses in the entire Tsui Chuk Garden is 4.23%.  Therefore, further or alternative to the arguments in paragraph (1) above, in the event that the Applicant charges the legal costs that it was ordered by the Tribunal to pay to the common account of management income and expenses of the Residential Units, the Commercial Development and the Car Parks, the 1^st Respondent ought not to contribute directly or indirectly the relevant 4.23% of the legal costs that the Applicant was ordered to pay to the 1^st Respondent.

4. The 1^st Respondent’s application was heard on 21 October 2004 during which counsel for both the 1^st Respondent and the Applicant took turn to submit on the matter. 

5. The 1^st Respondent submitted, “it is trite law that in litigation, the losing party is ordered to pay the legal costs of the successful party on the ground that the successful party ought not (to) be dragged into a litigation and, in the event that it succeeds, has to pay its own legal costs.” 

6.In addition to the main ground set out in the Notice of Application, the 1^st Respondent submitted that if the Applicant was allowed to charge the legal costs as management expenses in the separate account of the Commercial Development (for which the 1^st Respondent, being the only owner of the Commercial Development, would be solely responsible), it would encourage the Applicant to commence further legal proceedings against the 1^st Respondent, regardless of whether there would be any merit in such proceedings at all. 

7.The 1^st Respondent submitted that similar arguments would apply, although to a lesser extent, even if the Applicant was allowed to charge the legal costs as management expenses in the common account of Tsui Chuk Garden since the 1^st Respondent still owned about 4.23% of the shares of the entire Tsui Chuk Garden and would therefore have to pay about 4.23% of the expenses in that common account.

8. Finally, the 1^st Respondent submitted that by virtue of Section 17 of the Building Management Ordinance (Cap. 344), the Tribunal did have the power to vary the costs order as sought so that “one or more of the owners of a building is not liable to contribute to a judgment or order made against a corporation”.

9. On the other hand, the Applicant submitted that the original claim filed by the Applicant was concerned with a portion of premises in the Commercial Development of Tsui Chuk Estate.  It would be both logical and reasonable that the legal costs in question should be treated as expenses under the account of the Commercial Development, regardless of whether the 1^st Respondent owned part or all of the shares in the Commercial Development.  The Applicant therefore made the point that “if indeed it is unfair to require the 1^st Respondent to contribute to the costs in question, it would be equally if not more unfair for the residential and car-park owners to contribute to the costs in a claim which do not affect them.” 

10.More importantly, the Applicant submitted that the proportion of contribution to the management expenses of Tsui Chuk Estate, whether under clause 14(e)(ii) or 14(e)(iv) or otherwise of the Deed of Mutual Covenant (“DMC”) should be regulated by all the provisions in the said DMC.  The Applicant simply did not have the authority to vary the manner of apportionment of expenses as set down in the DMC. For the same reason, the Applicant submitted that the Tribunal should not vary the contractual rights of the parties which were specifically laid down in the DMC.  This principle was set out under Section 45(3) of the Building Management Ordinance (Cap. 344) and supported by various case laws.

11. Finally, the Applicant submitted that contrary to the Respondent’s submission, the Tribunal should, at this stage of the proceedings, only be concerned with the question as to which party should be entitled to costs.  Other than that, none of the rules in the Lands Tribunal Rules (Cap. 17 sub. leg.) or in Order 62 of the Rules of High Court (Cap. 4 sub. leg.) gave the Tribunal the power “to go beyond the award to enquire or decide where the money for the payment of the costs come from.”

12. I find that the issue coming before me is quite simple.  I agree with the Applicant that at the end of the review hearing, I was only required by law to decide and answer the question as to which party should be entitled to costs, in both the original hearing and the review.  The other question as to how and where the money should come from (for example, from the common account or from the account for the Commercial Development or from some other accounts of the Applicant) would be entirely beyond the Tribunal’s jurisdiction.

13. It is appropriate at this point to refer to Section 12 of the Lands Tribunal Ordinance (Cap. 17), which reads: -

“(1)    Subject to the provisions of the Ordinance giving the Tribunal jurisdiction in any matter, the Tribunal may award costs to and against any party to any proceedings and may order that those costs be taxed on the basis of any one of the Scales of Costs set out in the First Schedule to the District Court Civil Procedure (Costs) Rules (Cap. 336 sub. leg.) and the Schedules to Order 62 of the Rule of the High Court (Cap. 4 sub. leg.).

(2)    Subject to any rules made by the Chief Justice under Section 10(3), Order 62 of the Rules of the High Court (Cap. 4 sub. leg.) shall apply to the award, taxation and recovery of costs in the Tribunal.”

14.As submitted by the Applicant, it was clearly set out by the rules in the Lands Tribunal Rules or Order 62 of High Court Rules that I do not have the jurisdiction to go beyond the award of costs, i.e., to go further than what I had set out in my order made on 30 August 2004.

15.I further agree with the Applicant that if I agree to vary the costs order in the manner as sought by the 1^st Respondent, it would amount to give an order to force the Applicant to vary the manner of apportionment of expenses as set down in the DMC.  This is obviously wrong, contrary to both the express provision of the Building Management Ordinance (Cap. 344), as follows, and the relevant case laws:

“45(3)    Subject to the provisions of this Ordinance, nothing in this section or the Tenth Schedule shall be construed to vest in the tribunal any jurisdiction other than civil jurisdiction or any jurisdiction to make any order which would, if made, have the effect of rendering void, negativing or substantially varying in whole or in part any contractual or proprietory right enjoyed by any owner or occupier or otherwise referred to in the terms and provisions of an instrument which is registered in the Land Registry including a deed of mutual covenant (if any)”

16. Even assuming that the Tribunal has the power to vary the manner of apportionment of expenses as set down in the DMC, it would obviously be premature to decide on this issue.  If, in due course, the 1^st Respondent, as a party to the DMC, considers that she suffers as a result of the wrongful or illegal action of the Applicant, it is always up to the Respondent to take any action she thinks fit.

17. For the above reasons, I decide to dismiss the 1^st Respondent’s application dated 20 September 2004 to vary the costs order and to grant the following order: -

          Order: -

          (1)    The 1^st Respondent’s application dated 20 September 2004 be dismissed;

          (2)    Costs to the Applicant, to be taxed on the District Court Scale, if not agreed, and with Certificate for Counsel.