THE INCORPORATED OWNERS OF AFFLUENCE GARDEN v. GUARDIAN MANAGEMENT SERVICES LTD

HCA 591/2021

[2023] HKCFI 116

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 591 OF 2021

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D E C I S I O N

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Introduction

1.  This is an issue on transfer to the District Court.

2.  The plaintiff (“IO”) claims that the appointment of the Defendant (“Guardian”) as manager of a housing estate by contract had expired by effluxion of time on 15 April 2021. However, Guardian unlawfully remained in the estate and refused to hand over the management of the estate to the new manager. The IO seeks (i) a declaration that the appointment of Guardian had been terminated; (ii) an injunction restraining Guardian from entering the estate and obstructing the new manager from carrying out the latter’s duties; and (iii) damages. There is an interim injunction as sought in the statement of claim granted on 23 April 2021.

3.  Guardian claims that the termination was in breach of provisions of the DMC. It seeks damages including management receivables. The dispute turns on the effect of management meetings and provisions of the DMC.

4.  A Master has given leave to set this case down for trial for 3 days. Before fixing of dates, Guardian raised the argument that this case ought to be transferred to the District Court. The reason was that the claim then amounted to only $39,150 plus $23,700 according to the updated listing questionnaire of the IO dated 28 September 2022, whereas the counterclaim was for damages of about $200,000.

5.  The IO objects to a transfer on the following grounds:

(1)  Lack of formal application from Guardian;

(2)  The burden is on Guardian to show that the District Court has jurisdiction and yet the rateable value of the estate is beyond the jurisdiction of the District Court; and

(3)  Section 43(1) of the District Court Ordinance only permits the Court of First Instance to transfer a claim but not a counterclaim to the District Court.

Lack of formal application from Guardian

6.  This ground of objection has no merits. Section 43(1) permits the Court of First Instance to order a transfer of its own motion. To ensure that trial dates in the Court of First Instance are used only for cases fit for trial here, this Court, of its own motion, invited the parties to address the Court on the question of transfer to the District Court.

Rateable value of estate beyond jurisdiction of the District Court

7.  Mr Wong, counsel for the IO, submits that the claim involves an issue as to whether Guardian had a licence to occupy the building as manager. With respect, there is no plea of licence in the statement of claim. The only issue that may touch and concern land is the IO’s claim for an injunction to restrain Guardian from entering the estate. This relief stands and falls with the validity of termination of the appointment.

8.  Rateable value is determined on the bases of rent reasonably expected to be received: section 7 of the Rating Ordinance, Cap 116. As the IO is in charge of common areas, which are not leased out (and the IO does not claim that it had or would have), there is no rateable value. By Lo & Lo’s letter dated 6 January 2023, the IO confirmed that it was not assessed to rates.

9.  Therefore, even if the injunction can be regarded as an issue that may relate to land, the claim is within the jurisdiction of the District Court. This ground of objection is unsustainable.

10.  Mr Wong, cites the case of Chan Chi Wai v Chan Sau Wah [2016] 4 HKLRD 524, §§25 & 29, Deputy District Judge Vanessa Kwok, for the proposition that it is the rateable value of the whole building that should be taken into account.

11.  With respect, that case involved a wholly different scenario. The parties were 5 brothers who beneficially owned the entire building, each holding a share. It was thus correct for the judge to take into account the rateable value of the whole building. Here, the IO does not have beneficial interest in the estate itself, nor would it have leased out the common area for rent. Chan Chi Wai would not change my decision in §8 above.

Section 43(1) only permits transfer of a claim but not counterclaim

12.  Under section 43 of the District Court Ordinance, Cap 336,

“(1) The Court of First Instance may, either of its own motion or on the application of any party, order the transfer to the Court of all or part of an action or proceeding, other than a counterclaim, which appears to the Court of First Instance likely to be within the jurisdiction of the Court. (emphasis added)

(2) An order may be made under this section at any stage of the proceedings of the motion of the Court of First Instance itself or on the application of any party.

(3) The Court of First Instance is required to make an order under this section unless it is of the opinion that, by reason of the importance or complexity of any issue arising in the action or proceedings, or for any other reason, the action or proceedings ought to remain in the Court of First Instance.”

13.  Under section 44 of the District Court Ordinance,

“(1) The Court of First Instance may, if the parties consent, order the transfer to the Court of all or part of an action or proceedings, including a counterclaim, which is outside the jurisdiction of the Court, but would have been within its jurisdiction except for the monetary limits specified in section 32, 33, 35, 36 or 37.” (emphasis added)

14.  Section 2 of the District Court Ordinance defines “action” as “a civil proceeding commenced by writ of summons”.

15.  Reading sections 2, 43 and 44(1) together, the Court of First Instance may order a transfer of the following “proceedings” to the District Court:

(1)  An action (“main claim”) or part of a main claim that is within the jurisdiction of the District Court: section 43(1);

(2)  A main claim and the counterclaim, both of which being within the jurisdiction of the District Court: section 43(1);

(3)  If the parties consent, a main claim or part of a main claim outside the monetary jurisdiction of the District Court: section 44(1); and

(4)  If the parties consent, only a counterclaim which is outside the monetary jurisdiction of the District Court: section 44(1).

16.  What the Court of First Instance cannot do is to order a transfer (without consent of the parties) of just the counterclaim within the jurisdiction of the District Court, leaving the main claim (within the jurisdiction of the District Court) in the Court of First Instance. This interpretation accords with the legislative intent of the District Court Ordinance, in that cases within its jurisdiction should be tried in the District Court as it would be most cost effective. It makes no sense to prohibit a transfer order just because there is a counterclaim, whether within or outside the jurisdiction of the District Court.

17.  Guardian relies on the case of A v B [2021] HKCFI 77, Au‑Yeung J to show that a counterclaim can be transferred to the District Court. However, transfer of a counterclaim was not in issue in that case. Both sides, represented by very senior counsel, did not see fit to take the point now taken by the IO.

18.  As the Plaintiff has not suggested that the main claim involves any issue of importance or complexity, or for any other reason, its claim ought to be tried by the Court of First Instance, I make an order under section 43 for the whole proceeding, claim and counterclaim, to be transferred to the District Court.

Conclusion

19.  None of the grounds of objection are sustainable. I therefore order the whole proceedings, claim and counterclaim, to be transferred to the District Court.

20.  Since the Plaintiff has unreasonably resisted the transfer, I make an order nisi for the Defendant’s costs to be in the cause. I reserve the question as to costs before the transfer to the trial judge who may consider whether this case should have been commenced in the Court of First Instance in the first place.