THE INCORPORATED OWNERS OF NIN FUNG BUILDING, HOMANTIN v. OVER AND ABOVE LTD

HCA 9371/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9371 OF 1998

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D E C I S I O N

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1.  This is an application by the plaintiff for an adjournment of the trial of the counterclaim and for directions to inspect the defendant’s premises and to file and serve an expert report on the cause of blockage of the drains that serve the defendant’s premises.

2.  The plaintiff is the incorporated owners of a building and the defendant owns 24% of the shares of the building and the lot on which it stands together with the exclusive right to occupy Shop B on the ground floor and the 1st and 2nd floors.

3.  The action started with a claim by the plaintiff for contributions by the defendant at about $200,000, being the defendant’s alleged share of the costs and expenses for renovation and repair of the building and for changing the electricity meters and devices.  The defendant resisted the claim on various grounds, including the validity of the appointment of the managing committee, the validity of the resolutions that required payment of the contributions, and the correctness of the calculation of the amounts allegedly due.

4.  The defendant also has a counterclaim for damages for blockage to the drains and the flooding as a result thereof.  The amount of damages counterclaimed is about $5.4 million.

5.  The plaintiff’s claim was lodged on 10 June 1998 and the defendant’s defence and counterclaim was lodged on 7 July 1998.  The action did not move very swiftly.  It went to sleep in mid-December 1999 and woke up in mid-December 2000.  It then went to sleep again in late February 2001 and did not wake up until January 2004. 

6.  For some reason, the plaintiff ceased to be legally represented from 15 October 2004 onwards.  The defendant applied on 18 November 2005 to set the case down for trial.  The trial was fixed to commence on 18 September 2006 with an estimate of four days. 

7.  There was a pre-trial review before Waung J on 31 July 2006.  The plaintiff was absent.  The defendant through counsel told Waung J that even if the plaintiff should fail to show up at the trial, the defendant would still proceed with the counterclaim at the trial.  Waung J then strongly advised the defendant through counsel that in such case, the defendant should give notice of the trial to all the owners of the building.  Despite the strong advice from Waung J on 31 July 2006, the notices were only given on Friday, 15 September 2006. 

8.  When the trial commenced on Monday, 18 September 2006 before Deputy Judge Longley, 11 owners turned up.  They applied to be joined as the 2nd plaintiffs and sought to have the action stayed for two months so that they could prepare for the trial.  Their application was dismissed with costs.  The plaintiff’s claim was then dismissed with costs and the defendant’s counterclaim adjourned to a date to be fixed before a bilingual judge and in consultation with counsel’s diary with one day reserved.

9.  The trial of the counterclaim was duly fixed to take place on 20 November 2006.  On 2 November 2006, the plaintiff became legally represented again.  It applied on 8 November 2006 for the trial of the counterclaim to be vacated, for directions that its surveyors and solicitors be allowed to inspect the defendant’s shop to consider the cause of leakage and to file an expert report on it.  The application is supported by an affirmation of its solicitor, Mr Yuen. 

10.  Mr Yuen said that the plaintiff’s previous managing committee had been crippled.  Hence, the plaintiff was not legally represented since mid-October 2004.  However, after the trial on 18 September 2006, the other owners of the building began to organise themselves.  They intended to appoint an administrator or to form a new management committee to represent the plaintiff to contest the counterclaim.  They had on 23 and 25 September 2006, through their solicitors, requested the defendant not to fix a trial date for the counterclaim as they were trying to dissolve the then management committee and to appoint administrators to manage the building, but the defendant did not respond to these letters at all.  The new trial date was fixed despite such request from the owners.

11.  Mr Yuen’s affirmation further shows that some 24 out of 38 owners had met at the end of September 2006.  An application was then made on 11 October to the Lands Tribunal to dissolve the allegedly defunct managing committee and to appoint administrators.  An order was duly made by His Honour Judge Yung on 2 November 2006 in terms of the application.  The plaintiff’s present solicitors then filed a notice to act on the same day.

12.  The first ground of the plaintiff’s application is that the present solicitors could only have been appointed after the order of the Lands Tribunal was made.  It was only after the appointment that the solicitors could have started working on the counterclaim, and there was not enough time to prepare for the trial scheduled to take place on 20 November.  The second ground is that the owners had on 23 and 25 September already told the defendant’s solicitors that they were going to appoint administrators and requested the defendant’s solicitors not to fix a trial date for the counterclaim.  Thirdly, the plaintiff says that the one day period reserved would not be enough for the trial of the counterclaim.

13.  The defendant opposes the application.  One Mr Tsang has filed an affirmation in support of the opposition.  He disagreed that the management committee had been crippled.  He produced a number of notices and minutes of meetings of the managing committee to show that the committee was aware of this action and was in action, but all these notices and minutes were dated before and in early December 2004.  Mr Tsang did not produce any document to show that the managing committee was still in action from mid-December 2004 onwards.  His exhibits also showed that the chairman, deputy chairman, secretary, deputy secretary and one ordinary member of the committee had all resigned in October and November 2004 leaving four ordinary members behind.  The defendant submitted that there were still sufficient members to form a quorum of three in a meeting of the committee as required by the Building Management Ordinance.

14.  Be that as it may, on the evidence, the managing committee did not seem to have met or done anything since mid-December 2004.  The collection of management fees and issuing of receipts for the fees are not evidence of the activity of the committee.

15.  Mr Tsang also said that notice had been posted up to notify the owners about this action and the counterclaim and the owners were aware of them.  Despite what Mr Yuen had been instructed by the owners, it is obvious that the owners knew about the existence of this action and the counterclaim.  Their management committee had been allegedly crippled, but they did not then have enough public spirit to instil vigour into the committee and to cause the committee to conduct this action properly.  They just ignored the action and minded their own businesses only.  It was only when they received the notices sent to them individually on Monday, 15 September that they were alerted to the seriousness of the situation.  Since then, they have behaved in a much more responsible manner.  However, little sympathy should be accorded to them as they should have exhibited more public spirit earlier on to care for their common affairs.

16.  Nevertheless, there are other factors which would support their application.  If the defendant should have wholeheartedly abided by the advice of Waung J and notified all the owners about this action by early August 2006, the owners should have organised themselves about one and a half months earlier.  In that event, they would have sufficient time to prepare for the trial of the counterclaim on 20 November.  The defendant’s notice to the owners dated 15 September was simply too late.  The defendant’s failure to faithfully abide by Waung J’s advice is a contributing cause to the short time available for the plaintiff to prepare for this trial.

17.  Secondly, the one-day fixed for the trial is only sufficient if the plaintiff should continue to be absent from the trial.  But once the plaintiff is legally represented, one day would not be sufficient for the trial.  The defendant will be calling one factual witness, one expert witness on the cause of leakage, and one valuer on rental value of the premises to be supported by comparables.

18.  I do not think the examination and cross-examination of all three witnesses can be properly completed within one day, not to mention the opening and final submissions and the need to deal with a bundle of documents of about 100 pages.

19.  Furthermore, the defendant is disputing the validity of the appointment of the administrators by the Lands Tribunal and may apply to set aside the order of the tribunal.

20.  However, strictly speaking, I should give effect to the Lands Tribunal’s order and ignore the defendant’s challenge unless and until the Tribunal’s order is altered.  Nevertheless, the defendant has repeatedly urged me to take this challenge on board in considering the plaintiff’s application.  I therefore consider that if I should vacate the trial on 20 November, the defendant would have a proper opportunity to make this challenge on the appointment of administrators and have this dispute resolved before the resumption of the trial.

21.  The defendant has urged me to consider the prejudice to it if I should vacate the trial as its factual witness, Mr Tsang, is already 70 years old and his memory is fading.  On fading of memory, Mr Tsang has already made a witness statement.  Counsel referred to certain matters and said that he may be cross-examined on at the trial.  I think Mr Tsang can be enquired about these matters now and his response be recorded in writing.  This can avoid or reduce to a very large extent the prejudice that may be caused by fading memory.

22.  On the question of prejudice by delay, judging by the previous dormancy of this action for about four years, I do not think this is a prejudice that cannot be compensated with costs.

23.  For the above reasons, I allow the plaintiff’s application.  I vacate the trial date of 20 November 2006.  I direct that the defendant do provide access to the plaintiff’s solicitors and surveyors for them to attend Shop B on the ground floor of the building at a time convenient to the defendant and its tenant for the purpose of inspecting the drainage pipes that serve or relate to this shop. 

24.  I further extend the time for the plaintiff to file an expert report on the cause of leakage of such drainage pipes to 28 days after the inspection.

25.  I also grant leave to the defendant to file and serve an expert report in reply within 28 days from the receipt of the plaintiff’s expert report.

Discussion re costs

26.  The plaintiff is seeking indulgence.  Its members are responsible for the plaintiff having gone into its present position.  I do not think it right for them to have costs of the application or of the vacating of the trial.  On the other hand, the defendant’s failure to abide by Waung J’s advice has contributed to the need of this application.  The defendant should also not have ignored the letters of 23 and 25 September from the owners’ solicitors.  If both sides should have behaved reasonably and exhibited the usual courtesy towards each other, this application might not have been necessary.

27.  The defendant should also be aware that the one-day reserved would not be enough for a contested trial.  It should have consented to the application or should have constructively responded to the owners’ request not to fix date made on 23 and 25 September.

28.  In the light of all these, the parties are in pari delicto.  I therefore make no order as to costs for this application and for the vacating of the trial.