THE INCORPORATED OWNERS OF SHATIN NEW TOWN v. YEUNG KUI

CACV 45/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 45 OF 2009

(ON APPEAL FROM LDBM NO. 339 OF 2007)

----------------------

----------------------

----------------------

D E C I S I ON

----------------------

Hon Cheung JA :

Variation of costs order

1. This Court allowed the applicant’s appeal and ordered

costs of the appeal and below against the respondent on a provisional basis.

2. The respondent applied to vary the costs order.  He argued that each party should bear its own costs because the applicant had unreasonably refused to resolve the dispute by mediation.

3. Both parties have lodged written submissions on this application and I make this decision based on their written submissions.

Proposal to mediate

4. The respondent had on 16 October 2008 asked the Land Tribunal (‘the Tribunal’) to consider whether it would direct the parties to proceed to mediation.  The hearing before the Tribunal was scheduled to be heard on 2 and 3 December 2008.

5. The applicant in response to the Tribunal’s inquiry stated that it was not prepared to participate in the mediation.  The reasons are set out in its solicitors’ letter of 3 November 2008.

‘ Before and during the course of the above application, the parties did on several occasions explore the chance of the settlement through the mediation of third parties.  However, no agreement could be reached between the parties.

Seeing the differences of the parties, our client takes the view that any mediation may not resolve the disputes between the parties but further delay the adjudication of the above application. For the information of the Honourable Tribunal, the original trial date scheduled for 9th October 2007 was adjourned due to the Respondent’s last minutes appointment of the legal representation.  If mediation between the parties is to be held at this late stage, it is highly likely that the trial scheduled for 2nd and 3rd December 2008 will further be adjourned.

As this application concerns the interpretation of Deed of Mutual Covenants, it is certainly in the collective interest of the co-owners to resolve dispute sooner.’ 

6. In view of the applicant’s response the Tribunal did not direct mediation.

Practice Direction

7. According to the ‘Practice Direction on Pilot Scheme for Building Management Cases’, parties are encouraged to resolve their disputes by alternative means such as mediation and the unreasonable failure by the parties to make a good faith attempt to mediate will be taken into account by the Tribunal in deciding on costs.  However, if a party has a reasonable explanation for non-participation, he shall not suffer any adverse costs order.  In determining whether a party has acted unreasonably in refusing to proceed with mediation or other alternative dispute resolution mechanism, the Tribunal shall take into account all relevant circumstances.

My view

8. While I share the desire that parties should make all possible attempts to resolve their disputes by alternative means such as mediation, this is a case which ultimately involves a decision on law concerning the correct interpretation of the terms of the Deed of Mutual Covenant (‘DMC’).  Bearing in mind that the applicant has a responsibility in applying the DMC correctly, I do not consider that its refusal to take part in the mediation should be visited with an order that it could not recoup the costs below.  In any event, the applicant’s counsel had immediately before the commencement of the hearing below proposed to the respondent’s counsel to settle the proceedings on the terms that the respondent should pay up the outstanding management fee (without interest) and the costs that had been already awarded in favour of the applicant (but not the costs of the whole proceedings in respect of which there would be no order leaving it to the parties to bear their own costs).  The costs then awarded to the respondent were of modest amounts.

9. The offer was turned down by the respondent’s counsel who apparently put forward a different proposal.  In my view the respondent cannot now justifiably complain when the outcome of the appeal was not in his favour.

10. Likewise the respondent should consider his chance of success realistically in the light of the applicant’s appeal.  The applicant had to come to this Court in order to reverse the decision below.  I do not see why the applicant should not be entitled to the costs of the appeal.

Conclusion

11. Accordingly the costs order is maintained and the application to vary is refused.

Hon Stone J :

12. I agree.

Hon Lunn J :

13. For the reasons given by Cheung JA, I agree that the provisional order as to costs (paragraph 52 of his judgment) is to be affirmed.