URBAN PROPERTY MANAGEMENT LTD AND ANOTHER v. TSANG WING LAM

   DCMP 2185/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2185 OF 2004

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D E C I S I O N

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Introduction

1.  The Plaintiffs obtained an order for sale of the Defendant’s property (“the Property”) in enforcement of a Memorandum of Charge (“MOC”) for outstanding management fees owed by the Defendant. H.H. Judge H.C. Wong, who gave the said order for sale on 4 August 2006, also awarded the costs of the proceedings to the Plaintiffs, to be taxed if not agreed.

2.  The said costs of the Plaintiffs were taxed at a hearing before Master Lai on 27 May 2008 at HK$411,012.00 and the allocatur thereof was issued on 2 July 2008. Subsequently, the Plaintiffs obtained a charging order against the Property in respect of the taxed costs. The charging order was made absolute on 27 August 2009. Having failed to persuade the Masters to set aside the charging order and the allocatur, the Defendant appeals before me against the decisions of the Masters.

3.  To put the matters into context, I should go a little backward to the events happened after the order of Judge Wong. Pursuant to the order of the learned Judge, the Plaintiffs took possession of the Property with the assistance of the bailiff on 16 October 2007. However, the Defendant has somehow regained possession of the Property on 18 October 2007.

4.  The effect of the above is that the MOC was being executed and the Plaintiffs were precluded from relying on it further to secure any sums owed by the Defendant to them. As such, the Defendant had succeeded in obtaining an order for the release of the Property from the security constituted by the MOC before H.H. Judge Leung. In his Decision dated 3 November 2009[1], the learned Judge set out in details the long history of this action, including the events leading to the recovery of possession of the Property by the Defendant. I do not propose to repeat here the same.

Defendant’s arguments

5.  The Defendant basically argued that his liability to pay costs pursuant to Judge Wong’s order was extinguished upon the execution of the MOC. He submitted that as the costs of the proceedings formed part of the amount secured by the MOC, the court should not allow the creation of another charge against the same property in respect of the same debt.

6.  Ironically, at the hearing before Judge Leung on the Defendant’s application to release the Property from security, the Plaintiffs put forward similar arguments. In rejecting the Plaintiffs’ arguments, the learned Judge had this to say[2]:

“33.  It was argued on behalf of the Plaintiffs that costs of these proceedings are secured by the MOC.  Therefore the release should be refused.  For the following reasons, I do not agree with the Plaintiffs.

34.  The notice under clause 6(f) is supposed to be served in the event of an owner failing to pay any sum due and payable by the owner within 7 days “from the date on which such sum becomes payable”.  The notice served pursuant to clause 6(f)(i) is supposed to specify such sum due by then.  According to clauses 6(e) and 6(f)(i), costs of the action are separate and distinct from the expenses in or in connection with the recovery or attempt to recover the amount due.  However, by the time of the notice constituting the MOC subsequently registered pursuant to clause 6(f)(iii) came into existence, no civil action has been brought pursuant to clause 6(e), let alone these proceedings which were commenced in 2004.  No legal costs of any civil action was due or payable by the time of the notice constituting the MOC.

35.    To be in line with these provisions of the DMC, the “further moneys that may be due” under the MOC could not be any amount than that specified.  [The Defendant] was deemed by clause 6(f)(ii) to have agreed to a charge for the amount specified in the notice together with interest.  This did not include the legal costs to be incurred in these proceedings.

36.  I note paragraph 5 of the 4/8/06 Order which sets out the manner in which the proceeds of sale of the Property, if sold, should be distributed.  Paragraph 5(d) refers to all other expenses incurred in or in connection with the recovering or attempting to recover the sums secured by the MOC.  For reasons discussed above, they do not refer to the costs of these proceedings commenced pursuant to clause 6(e) of the DMC.

37.  Liability for costs at any stage of these proceedings arises upon the court’s order.  That is when the same becomes payable.  Costs of these proceedings were dealt with in paragraphs 7 and 9 of the 4/8/06 Order.  [The Defendant] became liable to pay such costs as a result of such order, and notalready secured by the MOC.”

7.  I concur with the learned Judge on his reasoning and respectfully adopt the same in this Decision. I do not intend to duplicate the relevant provisions of the DMC or MOC here as the same can also be found in the Decision of the learned Judge.

8.  The fact that the Defendant has satisfied the debt secured by the MOC, or that the MOC has been executed, or that the Property has been released from the security constituted by the MOC, can have no bearing on his liability to pay costs pursuant to Judge Wong’s order. Such liability to pay costs is a separate and distinct liability to the one secured by the MOC and there is no reason why a fresh charging order cannot be imposed in respect of it.

9.  The Defendant submits that as the Plaintiffs failed to include the costs of the proceedings awarded by Judge Wong as part of the money secured by the MOC, they are then not entitled to claim against him such costs. As mentioned hereinabove, the Defendant’s liability to pay such costs is a separate and distinct liability. The Defendant has given no basis whatsoever to support his submission.

10.  Apart from the above main arguments, the Defendant raised the following points:

(a)  The taxing Master should not continue the taxation hearing in his absence;

(b)  The amount of the taxed costs is in any event excessive; and

(c)  The Plaintiffs had on 10/7/2007 by way of a letter to the Defendant agreed that the said costs be in the amount of HK$3,000.

11.  At the hearing, I asked the Defendant under what procedure he applied before the Master to set aside the Allocatur. The Defendant indicated that he was relying on O.32, r.6 of the Rules of the District Court.

12.  On the morning of the taxation hearing before Master Lai, the Defendant said he told the learned Master that he feels uncomfortable and left the courtroom at around 11:10 am. At that time several items of the bill of costs have been taxed already. According to the Defendant, he intended to return in 10 to 20 minutes and went to wait inside his private car. However, as his condition was very bad, he was unable to go back until 1:00 pm. When he arrived at the courtroom, he learnt that the hearing was finished.

13.  Directions have been given for filing of list of objections before the taxation hearing. However, the Defendant did not file any. When I asked whether there is any particular item in the bill of costs that he is objecting to, the Defendant mentioned a few.

14.  The Defendant submitted that as he was not present at the time, the decision made by the learned Master at the hearing was “an order made ex parte” and therefore under O.32, r.6, the Court may set it aside.

15.  This is misconceived. The Defendant appeared at the taxation hearing and advanced arguments before the Court. The fact that he chose to leave at the middle of the hearing does not make the hearing an ex parte hearing or render any order made therein an ex parte order. O.32, r.6 is simply not applicable in the situation.

16.  The only possible provision for the Defendant to rely on to apply before a Master is O.62, r. 33 for review of taxation. As the relevant bill of costs was filed before 2^nd April 2009, the old rule applies which provides, inter alia, that:

“(1)  Any party to any taxation proceedings who is dissatisfied with the allowance or disallowance in whole or in part of any item be a taxing master, or with the amount allowed by a taxing master in respect of any item, may apply to the taxing master to review his decision in respect of that item.

(2)  An application under this rule for review of a taxing master’s decision in respect of any item may be made at any time within 14 days after that decision or such shorter period as may be fixed by the taxing master.

Provided that no application under this rule for review of a decision in respect of any item may be made after the signing of the taxing master’s certificate dealing finally with that item.

(3)  Every applicant for review under this rule must at the time of making his application deliver to the taxing master objections in writing specifying by a list the items or parts of items the allowance or disallowance of which or the amount allowed in respect of which, is objected to and stating concisely the nature and grounds of the objection in each case, and must deliver a copy of the objections to each other party (if any) who attended on the taxation of those items or to whom the taxing master directs that a copy of the objections shall be delivered.”

17.  The Defendant’s application was made on 30^th October 2009, that is to say, more than 2 years and 5 months from the date of the taxation hearing. The time prescribed for reviewing the decisions was 14 days and there was no reasonable explanation from the Defendant to justify the inordinate delay.

18.  Even if the application was made within time, the Defendant had failed to specify the items objected to and the grounds of objection thereof as required under sub-rule (3).

19.  In any event, the Defendant did not see fit to file any list of objection as directed for the purpose of the taxation hearing. I do not see any unfairness in the learned Master’s decision to continue the taxation hearing in the Defendant’s absence given also that it was the Defendant who chose to leave the courtroom.

20.  Regarding the letter from the Plaintiffs’ solicitors dated 10/7/2007, the figure of HK$3,000 referred to by the Defendant was described as “Costs of Memorandum of Charge” in the letter. There is nothing in the letter close to suggesting that the Plaintiffs offered to settle the costs of the proceedings awarded by Judge Wong in such an amount. The amount of costs taxed by Master Lai was HK$411,012.00. It would be unrealistic to expect that the Plaintiffs would offer HK$3,000 for settlement.

21.  The learned Master was perfectly right to dismiss the Defendant’s application to set aside the Allocatur. There is also no reason to set aside or discharge the charging order in respect of the outstanding costs awarded by Judge Wong.

22.  The Defendant’s applications to appeal against the Masters’ decisions are accordingly refused.

23.  I can see no reason why costs should not follow the event and I make an order nisi that costs of these applications be to the Plaintiffs to be taxed if not agreed. This order nisi shall become absolute after 14 days from the date of handing down of this judgment.