BAYNARD LTD AND ANOTHER v. SECRETARY FOR JUSTICE

HCA 4073/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4073 OF 2002

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D E C I S I O N

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1.  This is an application for joinder of parties. The plaintiffs wish to join Ms Ma Wai Fong and Mr Chu Hon Chow as the 2nd and 3rd defendants respectively in these proceedings. They are to be joined to represent themselves and all other individual owners of the residential units of a housing development called Hong Kong Gold Coast on Tuen Mun Town Lot 238 (“the Lot”) other than the plaintiffs and one Commercial Ace Limited. Commercial Ace Limited is the assignee from the 1st plaintiff of section C2 of the Lot.

Background

2.  The Lot was granted to the 1st plaintiff by New Grant No. 2607 (“the New Grant”).  It was then carved into a number of sections and sub-sections.  Section A3 was assigned by the 1st plaintiff to the 2nd plaintiff on 22 September 1997. Section A3 was then developed into the Hong Kong Gold Coast Hotel. 

3.  The 1st plaintiff then set out to construct a residential development on the Lot.  The Director of Lands approved the 1st plaintiff’s Master Plans in January 1988 and the 1st plaintiff commenced construction of the development in phases.  The assignment of the 1st residential unit in the development to an individual owner was on 17 August 1990.  The first six phases of the development were completed in about May 1995.  There were all together 2,052 residential units in the six phases.  The 1st plaintiff sold 955 units to individual owners and retained 1,097 units to itself.

4.  In January 1995, the 1st plaintiff applied to the Government to build more gross floor area (“GFA”) on the Lot.  The Government granted the 1st plaintiff a modification letter dated 29 October 1996 permitting the 1st plaintiff to build on the Lot another 27,670 sq. metres GFA of residential accommodation.  That was in consideration of payment by the 1st plaintiff of additional premium at HK$400,710,000 and administrative fees of HK$120,000.  This is the 1996 Modification. 

5.  The Government further granted the 1st plaintiff another modification letter dated 25 February 1997 permitting the 1st plaintiff to build another hotel on the Lot with a GFA of 2,852 sq. metres in consideration of the payment of additional premium of HK$32,630,000 and administrative fees of HK$130,000.  This is the 1997 Modification. 

6.  The plaintiff has paid the premiums and administrative fees under both modifications.  The 1st plaintiff intended to build three additional residential blocks under the 1996 Modification.  In about October 1997, the 1st plaintiff put up some protective hoardings for investigation and construction works in furtherance of 1996 Modification. 

The Hong Kong Gold Coast Owner’s Rights Association

7.  There were however some individual owners of the 955 residential units who were strongly opposed to the proposed works.  Some of them formed the Hong Kong Gold Coast Owner’s Rights Association (“ORA”) to protect the rights of the individual owners.  The ORA claims that the 1996 Modification is invalid.  It argues that the 1st plaintiff had no legal capacity to enter into agreement with the Government to modify the New Grant.  It also claims that the 1996 Modification was granted in breach of the Conditions of the New Grant as it was granted by the Government without consultation of the individual owners and without the consent of all the individual owners.

8.  Apart from the legal reasoning, the ORA also claims that the three proposed residential blocks would block the sea view of some of the residential blocks. 

9.  The ORA also sought assistance from the then Provisional Legislative Council.  The Provisional Legislative Council gave the 1st plaintiff an assurance of possible support for an alternative development proposal.  The 1st plaintiff then stopped work under the 1996 Modification.

10.  An alternative proposal of relocating the three proposed residential blocks to another location was agreed between the 1st plaintiff and the ORA in early January 1988.  However, this proposal was rejected by the Town Planning Board on 5 March 1999.

11.  The plaintiffs then sought senior counsel’s advice on the validity of the two modifications and was advised that they were invalid, because they were issued without the consent of the individual owners.

12.  The 1st plaintiff through its solicitors wrote to the Tuen Mun District Land Officer stating that the 1996 Modification was invalid and the premium should be refunded, but the District Land Officer disagreed.

This action

13.  The plaintiffs then started these proceedings against the Government for declarations that the two modifications are invalid and for repayment of the premium paid or damages.  By way of an alternative relief, the plaintiffs ask the court, in the event that the court denies the relief sought against the Government, to declare that the two modifications are valid and the plaintiffs are lawfully entitled to construct the buildings thereunder.  The plaintiffs have also been advised by leading counsel that a representative of the individual owners should be joined in these proceedings. It is obvious that the Government would not oppose this alternative relief and the real defendants to this relief are the individual owners.

The need to join the individual owners

14.  The Government takes the view that the two modifications are valid and effective.  Many of the individual owners think otherwise.  The plaintiffs brought these proceedings against the Government for determination of the validity of the modifications.  If the plaintiffs should succeed in their claims against the Government, the matter will come to a rest as the plaintiffs will not proceed with the construction works pursuant to the modifications and the individual owners will not feel aggrieved.

15.  However, if the court should declare in these proceedings in favour of the validity of the two modifications, then the declaration would be made without the court hearing the views of the individual owners.  The individual owners may also not be bound by the declaration as they are not parties to these proceedings.  Then there may be the need for another set of proceedings between the plaintiffs and the individual owners for determination of the validity of the two modifications.  It would be a determination by this court of the same question for the second time.  It is, however, very unsatisfactory for the dispute to be resolved twice in this court.  There will be the risk of conflicting judicial decisions.  There will also be a waste of substantial time and costs and the delay of the resolution of the dispute amongst all interested parties.

16.  It is therefore desirable to join the individual owners as parties to this action so that the validity of the two modifications can be decided once and for all and all interested parties will be bound by the result.  This can be done pursuant to O.15 r.4(1) and O.15 r.6(2) of the Rules of the High Court which provide:

“4. Joinder of parties (O. 15, r. 4)

(1) Subject to rule 5(1), two or more persons may be joined together in one action as plaintiffs or as defendants with the leave of the Court or where-

(a) if separate actions were brought by or against each of them, as the case may be, some common question of law or fact would arise in all the actions, and

(b) all rights to relief claimed in the action (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions.

6. Misjoinder and nonjoinder of parties (O. 15, r.6)

(2) Subject to the provision of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application-

(b) order any of the following persons to be added as a party, namely-

(i) any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, or

(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.”

17.  However, it is inconvenient to join all the 955 individual owners as defendants.  Since the individual owners who have taken a stand all say that the two modifications are invalid, they therefore have the same interest in these proceedings.  The court can therefore appoint one or more of them as representative defendants under O.15 r.12 of the Rules of High Court.  O.15 r.12(1) to (3) provide:

“12. Representative proceedings (O. 15, r.12)

(1) Where numerous persons have the same interest in any proceedings, not being such proceedings as are mentioned in rule 13, the proceedings may be begun, and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them.

(2) At any stage of proceedings under this rule the Court may, on the application of the plaintiff, and on such terms, if any, as it thinks fit, appoint any one or more of the defendants or other persons as representing whom the defendants are sued to represent all, or all except one or more, of those persons in the proceedings; and where, in exercise of the power conferred by this paragraph, the Court appoints a person not named as a defendant, it shall make an order under rule 6 adding that person as a defendant.

(3) A judgment or order given in proceedings under this rule shall be binding on all the persons as representing whom the plaintiffs sue or, as the case may be, the defendants are sued, but shall not be enforced against any person not a party to the proceedings except with the leave of the Court.”

The previous attempt to join Ms Ma

18.  At some stage, some of the individual owners also wanted to litigate against the plaintiffs and the Government to invalidate the two modifications and/or stop the proposed developments thereunder.  On 20 July 2007, the ORA convened a meeting which was attended by some 60 individual owners.  The meeting was chaired by Mr Chu Hon Chow.  Of those who were present, 48 voted to appoint Ms Ma Wai Fong as the owners’ representative to commence proceedings for the said purpose. 

19.  The plaintiffs then invited Ms Ma to join these proceedings as a representative defendant for the individual owners.  There were then protracted without prejudice negotiations between the parties from November 2007.  The plaintiffs also agreed to cover Ms Ma reasonable legal costs in these proceedings.

20.  In mid-July 2009, the plaintiffs contributed HK$500,000 to Ms Ma for her to seek independent legal advice on the question of joinder.  Ms Ma then engaged senior and junior counsel and solicitors for advice.  However, she could not come to any conclusion after four months. Her legal costs would also exceed HK$500,000 if she should continue to seek the advice.  The negotiations therefore came to an end without any agreement between the plaintiffs and Ms Ma on joinder. 

21.  The ORA had another meeting on 4 December 2009. It was also chaired by Mr Chu.  Ms Ma declared in the meeting that she wanted to drop out from the matter and would not participate in these proceedings.

22.  On 23 December 2009, the plaintiffs issued a summons to join Ms Ma both in her personal capacity and as a representative of the individual owners. 

Ms Ma’s opposition to be joined

23.  Ms Ma filed an affirmation to oppose the application.  She said she was one of the individual owners who set up the ORA, but the ORA had no legitimate status to represent all the individual owners. She denied the meeting of 20 July 2007 was a meeting of the ORA.  She also denied that the ORA was in a position to deal with the modifications and the development thereunder.

24.  She said an owners’ meeting under the DMC would have the legitimate status to represent all the owners, but the 1st plaintiff has the command of the majority votes of such meeting by reason of its ownership of the shares of the Lot.  That was the reason for the ORA to organise a meeting of all the individual owners.  However, she did not want to be a representative defendant as she had a full-time job which would be disrupted if she should be made a representative defendant. 

25.  She was also worried that if the court should uphold the modifications, she would be criticized by the other individual owners who may even accuse her of being in collusion with the plaintiffs.  She did not know if the plaintiffs would continue financing her legal costs if the matter should go on appeal regardless of who may succeed in the Court of First Instance.  She was also afraid of any suggestion by the plaintiffs of capping the financial support on her legal costs.

26.  She also said she was exhausted both physically and mentally and was unwilling to represent the individual owners.  She finally said that if she should be joined as a representative defendant, she would do nothing to defend the claims by the plaintiffs or the Government.  She would just let the claims proceed by default.  She did not have the time, financial resources and professional knowledge to handle the litigation.

Ms Ma was not joined last time

27.  The Registrar heard the summons on 6 January 2010 and dismissed the part of the application for appointing Ms Ma as a representative defendant.  The Registrar’s grounds were mainly that the appointment was against Ms Ma’s wish and she had indicated that, if appointed, she would let the action go by default.  The Registrar also took the view that the terms of her appointment had not been defined

vis-à-vis the other owners and to appoint her might create difficulty for her in the defence and expose her to personal liability for costs.

The meeting of the individual owners on 9 June 2010

28.  On 2 March 2010, the plaintiffs posted a notice in the lobby of each of the blocks owned by the individual owners stating the plaintiffs’ intention to join both Ms Ma and Mr Chu to represent themselves and all other individual owners.  Letters were also sent to Ms Ma and Mr Chu.  A summons was then issued for joinder of both Ms Ma and Mr Chu as representative defendants.

29.  The plaintiffs also convened a meeting of the individual owners on 9 June 2010 by depositing a notice of meeting into the letter box of each unit.  The purpose of the meeting was for the owners to ventilate their views on the plaintiffs’ application to join Ms Ma and Mr Chu. The individual owners were asked to consider five alternative resolutions.  They were:

“Resolution 1: ‘Ms Ma Wai Fong and Mr Chu Hon Chow be and are hereby appointed to represent the Individual Owners in the Action’, failing which

Resolution: ‘Ms Ma Wai Fong be and is hereby appointed to represent the Individual Owners in the Action’, failing which,

Resolution 3: ‘Mr Chu Hon Chow be and is hereby appointed to represent the Individual Owners in the Action’, failing which,

Resolution 4: ‘Any owner that is appointed by the meeting be and is hereby appointed to represent the Individual Owners in the Action’, and failing which,

Resolution 5:     ‘Individual Owners not to be represented in the Action’.”

30.  The meeting took place as scheduled and lasted for over two hours.  The plaintiffs provided some details of the meeting by the 3rd affirmation of Mr Kwan Po Chuen, Vincent, the General Manager (Legal and Secretarial) of the plaintiffs.  Mr Kwan said that there were 62 individual owners who attended the meeting in person or by proxy including Mr Chu.  Some owners raised some questions which were answered by Mr Kwan himself and one Ms Lee of the plaintiffs’ solicitors. 

31.  One question was about legal costs.  The meeting was told that the plaintiffs would not seek to recover costs from the individual owners even if they should lose the proceedings.  They were also told that the plaintiffs were willing to fund their legal costs as well, subject to the directions and approval of the court.

32.  The owners were also advised that the purpose of joining them as defendants was to enable them to voice their arguments to the court on the two modifications.  The plaintiffs also explained that Ms Ma and Mr Chu were members of the ORA and had the background knowledge and the devotion to oppose the construction of the three additional residential blocks.  The plaintiffs therefore proposed them as representative defendants. However, it was open to the individual owners at the meeting to vote for Resolution 4 and appoint some other individual owners as their representative defendant.

33.  Some individual owners also expressed their views.  Mr Chu told the meeting that he had not been consulted by the plaintiffs beforehand and he was not enthusiastic about the matter.

34.  Another owner suggested to the meeting that they should not join the proceedings so that they would not be bound by any judgment in these proceedings and could oppose the plaintiffs in case the plaintiffs should start to construct the additional blocks.  If, however, they should join the proceedings and lose to the Government, then they could not complain when the plaintiffs put up the new blocks.

35.  There was also an owner who suggested that the plaintiffs should just forgo the premium paid under the two modifications and not to seek a refund.  There would then be no need for these proceedings.

36.  Mr Kwan of the plaintiffs observed in his affirmation that most of the owners at the meeting were unfriendly and skeptical about the motive of the plaintiffs in holding the meeting.  Some owners even behaved in manners that were not conducive to the smooth conduct of the meeting.  Though disruptive manners are not to be commended, the skeptical attitude is understandable because there is the alternative relief in the statement of claim that the court may declare the two modifications valid and the plaintiffs are entitled to construct the additional buildings.  The individual owners feared that if they were joined in these proceedings through a representative defendant and if the court should be in favour of the alternative relief, they would be bound by the court’s decision.  They could then no longer complain if the sea view of some of the residential units should be blocked by the new blocks.

37.  Despite there were five resolutions for the owners to vote on, nobody voted for any of them.  The meeting therefore gave no indication as to whether any representative defendant should be appointed.

The latest stance of the Hong Kong Gold Coast Owner’s Rights Association

38.  After the said meeting, the ORA issued its circular no. 97 dated 6 July 2010.  The circular suggested some principles for the consideration of any individual owner who may want to participate in these proceedings.  But the ORA stated in the circular that it did not have any intention to participate in these proceedings.  The ORA has also set up an official website in the internet to enhance communication with co-owners.  The website avowed the ORA’s resolute intent to fight against the construction of the three proposed residential blocks.

Decision

39.  It is the opposition of some individual owners to the construction works pursuant to the two modifications that eventually led to the institution of these proceedings.  The stance of these owners has remained the same as can be seen in the website of the ORA. 

40.  I have already observed above that it is desirable to join the individual owners as parties in these proceedings.  In so doing, the court will be able to hear the views of all interested parties and then decide the validity of the two modifications once and for all.  Though there is the possibility that the court may uphold the two modifications, which will adversely affect the interests of some of the individual owners, the individual owners cannot shy away from the matter.  They have to take part in this action and to advance their grounds to protect their interests.

41.  Regarding the appointments of Ms Ma and Mr Chu, though they do not wish to be appointed and Ms Ma has spoken against her appointment, there is however no other candidate who appears to be more suitable.  Ms Ma and Mr Chu are familiar with the background of this matter. Ms Ma has also received some legal advice from senior and junior counsel about the matter.

42.  I appreciate that Ms Ma opposes the application for appointment and has said that, if appointed, she would just let the proceedings proceed by default.  Regarding her opposition, I accept the submissions of leading counsel for the plaintiffs that the court has the power to compel an individual to be a representative defendant even against his will (see Wood v McCarthy [1893] 1 QB 775 at 776 and 777 and Hong Kong Kam Lan Koon Ltd v Realray Investments Ltd [2004] 2 HKC 673 at para.19).

43.  Regarding her declared attitude in handling the proceedings if appointed, I think such attitude is regrettable.  She should not choose to fight the modifications on behalf of herself and the other owners just outside the courtroom but refuse to do so in court.  If she is sincere in having the validity of the modifications properly determined, she should channel her efforts from outside the courtroom to within the courtroom.

44.  In any case, Ms Ma and Mr Chu can also be joined as defendants in their personal capacities.  If they should be so joined, they will have to face these proceedings.  Ms Ma will also have to face all her worries including those on legal costs for the first instance trial and on appeal.

45.  The plaintiffs have also given an undertaking to this court that they will not seek costs from Ms Ma and Mr Chu in these proceedings if they should be appointed as representative defendants.

46.  In the premises, I therefore make an order in terms of paragraphs 1 to 7 of the summons as follows:

“1.  Ma Wai Fong and Chu Hon Chow be added as the 2nd and 3rd Defendants respectively in these proceedings and be appointed to represent themselves and the owners of Tuen Mun Town Lot 238 (other than the Plaintiffs and Commercial Ace Limited) (“Individual Owners”).

 2.   The Amended Writ of Summons herein and all subsequent pleadings do stand and be deemed as amended to include Ma Wai Fong as the 2nd Defendant and Chu Hon Chow as the 3rd Defendant and be sued on their own behalf and on behalf of the Individual Owners.

 3.   The 1st and 2nd Plaintiffs do have leave to amend the Amended Writ of Summons and Amended Statement of Claims as per the draft annexed thereto.

 4.   The Defendant as the 1st Defendant do have leave to file and serve a Re-Amended Defence consequential upon the amendments to the Amended Statement of Claims within 28 days from the date hereof.

 5.   Ma Wai Fong as the 2nd Defendant and Chu Hon Chow as the 3rd Defendant do have leave to file and serve a Defence within 28 days from the date hereof.

 6.   The 1st and 2nd Plaintiffs do have leave to file and serve a Reply within 28 days thereafter.

 7.   The costs of the consequential amendments of the Amended Defence of the Defendant be paid by the 1st and 2nd Plaintiffs in any event.”

47.  Though I have appointed Ms Ma and Mr Chu as the 2nd and 3rd defendants respectively to represent themselves and the other individual owners, I also advise all the other individual owners to be vigilant about the progress and development of these proceedings.  If any individual owner should consider that there is any contribution he/she can make to advance the cause of the individual owners, he/she should immediately get in touch with Ms Ma and/or Mr Chu and/or their solicitors.  If any individual owner should consider that he/she is also in a good position to represent the other individual owners in these proceedings, he/she may apply to be joined as a representative defendant and set out the grounds in the application.

48.  Finally, I make a costs order nisi that the costs of this application be in the cause of the plaintiffs and the Government.  Though the Government has taken a neutral stance, this application is no doubt a necessary and important step from the case management angle.  It is a necessary application to properly constitute the parties in the action. But it is not a complicated matter and I only certify it fit for one counsel.