MOK LAI CHUN v. EVERWISE INVESTMENT LTD AND ANOTHER

CACV 323/2006 & CACV 420/2006

CACV 323/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 323 OF 2006

(ON APPEAL FROM LDBM 89 OF 2005)

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BETWEEN

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CACV 420/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 420 OF 2006

(ON APPEAL FROM LDBM 89 OF 2005)

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J U D G M E N T

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Hon Tang VP:

1.  Reyes J will give the first judgment.

Hon Reyes J:

I.  INTRODUCTION

2.  This case started out as a simple claim by Ms. Mok to stop water leaking from the flat above into her flat.  Unfortunately, proceedings became convoluted due to misunderstandings of basic legal principles.  Procedural irregularities occurred and much unnecessary cost has been incurred.

3.  The Intervener says that as a result of the irregularities it is faced with adverse orders, even though it has had little or no actual involvement in the matters at issue.  The Intervener further says that it has had no fair opportunity even to present its case.

4.  The Intervener therefore asks that the adverse orders be set aside.

II.  BACKGROUND

5.  In this section, I will summarise the twists and turns of the proceedings and orders which are the subject of this appeal. 

6.  From time to time, I will comment here on the correctness of particular steps or decisions taken.  I hope by such comment to clear away minor issues.  That will enable me in the ensuing section of this Judgment to focus on the major irregularities which have occurred.

7.  I should add that in the writing of this section I have been greatly helped by the Chronology prepared by Ms. Heung Wing Yan (appearing for the Intervener).

A.  Events in 2005

8.  Ms. Mok owns a 3rd floor flat (Premises A) at 15 Cameron Road (the Building) in Kowloon.

9.  On 31 March 2005 she applied in person to the Lands Tribunal for an order that Everwise, the owner of the flat above her (Premises B), stop the water leakage then affecting Premises A.

10.  On 13 June 2005 Ms. Mok, now acting through solicitors (Messrs. Alfred Lam, Keung & Ko (ALKK)), amended her claim to allege nuisance, negligence and breach of the Building’s Deed of Mutual Covenant (DMC).  Ms. Mok’s application sought an order enabling her to enter and inspect Premises B, as well as damages to be assessed.

11.  Ms. Heung queries whether the Lands Tribunal (as opposed to (say) the District Court) had power to entertain Ms. Mok’s claim.

12.  Ms. Mok’s claim is not among the jurisdictional matters listed in Lands Tribunal Ordinance (Cap.17) s.8.  Nor does the claim fit readily among the proceedings assigned to the Lands Tribunal by the Tenth Schedule to the Building Management Ordinance (Cap.344).

13.  It is true that Ms. Mok’s amended application alleges breaches of the DMC.  But, as Ms. Heung points out, read in context, the Tenth Schedule concerns disputes among owners in relation to management of a building.  Although partly dressed up as a claim for breach of a DMC, Ms. Mok’s grievance is in substance a private claim in nuisance or negligence by one owner against another.

14.  Nonetheless, I am loathe to decide this appeal on a technical point of jurisdiction.  The proceedings here give rise to more fundamental difficulties than that which comes from merely starting out in the wrong court.

15.  Accordingly, I shall assume that the Lands Tribunal had power to entertain Ms. Mok’s claim.

16.  On 27 June 2005 Everwise filed a Notice of Opposition to Ms. Mok’s application.

17.  In around August 2005, pursuant to an Order of Judge Yung dated 7 July 2005, Ms. Mok’s expert (Dudley Surveyors) inspected Premises B.  Everwise had previously indicated that it did not wish to appoint its own expert to attend the inspection.

18.  On 21 September 2005 ALKK requested Everwise to carry out repair work on Premises B in accordance with Dudley Surveyor’s report by 3 October. 

19.  On 5 October 2005 Everwise responded that the tenant of Premises B would soon be moving out.  Once the tenant had gone, Everwise said that it would effect and complete repairs before January 2006.

20.  On 5 October 2005 Everwise also entered into a new tenancy agreement with Join Together Travel Limited.  By a collateral agreement executed at the same time, Join Together promised to repair Premises B at Everwise’s expense by 31 January 2006. 

21.  Everwise informed ALKK of its agreement with Join Together by letter dated 6 October 2005.

22.  By Summons dated 17 October 2005 ALKK applied for “final judgment” against Everwise (with damages to be assessed) based on admissions said to be contained in the correspondence just mentioned.  The summons also asked for an order that Everwise repair Premises B in accordance with Dudley’s report by 31 January 2006.

23.  On 4 November 2005, after hearing solicitors for the parties, Judge Yung gave “final judgment” on admissions said to be evidenced by Everwise’s letters of 5 and 6 October 2005. 

24.  As Ms. Heung notes, it is unclear from his 4 November 2005 Order precisely for what Judge Yung gave “final judgment”.  But I shall assume that by his Order Judge Yung meant to find Everwise liable in negligence, nuisance and breach of the DMC, the causes of action identified in Ms. Mok’s application.

25.  On 11 November 2005 Join Together engaged a contractor to carry out repairs to Premises B.

26.  On 17 November 2005 the Intervener agreed to buy Premises B from Fusion Pacific Limited for $2.3 million.  Fusion was the 2nd chargee of Premises B.  The Assignment of Premises B by Fusion to the Intervener was completed on 29 November 2005.  The Assignment (which expressly referred to the Intervener’s registered offices as being in the BVI) was recorded on the Hong Kong Land Register on 17 December 2005.

B.  Events in 2006

27.  On 24 January 2006 ALKK wrote to the 2nd Respondent (Globe Well HK).  Referring to the Assignment and Judge Yung’s 4 November 2005 Order, ALKK requested that Globe Well HK carry out the requisite repair work. 

28.  ALKK’s letter concluded:-

“For the purpose of fairly assessing the damages incurred to our client so far, we also propose that a joint inspection at our client’s flat be arranged.  Kindly let us hear from you as to the date and time convenient to you.”

29.  It is apparent that ALKK regarded Judge Yung’s Order as giving Ms. Mok some sort of in rem right which could be asserted not just against Everwise, but also against Everwise’s successors in title.  This view cannot have been correct.

30.  As a matter of law, Judge Yung’s 4 November 2005 Order could only have given rise to in personam rights against Everwise.  The order only involved a finding of liability against Everwise for tort and breach of the contract evidenced by the DMC.  The order could not have been binding on Globe Well HK or any person other than Everwise.

31.  In any case, even if Judge Yung’s Order created a right in rem, as a matter of fact ALKK had approached the wrong party. 

32.  Globe Well HK (a Hong Kong company) is patently a different entity from the Intervener (a BVI company). 

33.  It is true that the 2 companies have near identical names. This may or may not be coincidental.  The 2 companies may or may not be related.  They may or may not have ultimate overlapping beneficial owners.  But such considerations are irrelevant here.

34.  What is important is that Globe Well HK had not entered into the Assignment with Fusion.  Thus, Globe Well HK held no interest, real or personal, in Premises B.

35.  In late January 2006 Join Together informed the Intervener (as the new owner of Premises B) that the necessary repair work had been completed. 

36.  On 25 January 2006 Messrs. T. C. Lau (TCL) (acting for the Intervener) informed ALKK by letter of the repairs.  TCL identified itself in its letter as having “instructions to act for Globe Well Development Ltd, the updated registered owner of [Premises B]”. 

37.  The Intervener being aware of Judge Yung’s Order (which ALKK had attempted to register), TCL ended its letter with the following 2nd paragraph:-

“We are instructed that the contractor finished the repair work of the said premises.  Therefore we would contact you for a mutual convenient appointment to inspect and test the finished work so as to discharge the relevant Court Order accordingly.  Our client will be available at the following dates 25 to 27-1-2006 and 8 to 18-2-2006.”

38.  On 6 February 2006 Ms. Mok replied to TCL through her new solicitors, Messrs. Gloria Chan & Co. (GCC).  By its letter GCC asserted that:-

“As emerged from paragraph 2 of your said letter, it is not disputed that your client is bound by the Order of HH Judge Yung of 4th November 2005 and has already completed repair work of the above property.”

39.  GCC referred to arrangements for expert testing.  It then wrote:-

“We stress that our client’s permission herein should not be construed as his acceptance of the result of inspection and testing unless and until verified by expert.  Please therefore confirm to us in writing the date and time of the commencement of the inspection and testing and the estimated time involved as soon as possible.

For the avoidance of any doubt, nothing herein shall be construed as waiver of any of our client’s rights under the above action nor be construed as acceptance of discharge on the part of our client in respect of the water leakage from the above property.”

40.  It is apparent that, much as ALKK, GCC believed that Judge Yung’s 4 November 2005 Order ascribing liability to Everwise was binding even on non-parties to the Lands Tribunal proceedings.  As I have pointed out, this belief was wrong in law.

41.  On 23 February 2006 TCL informed GCC that it had no further instructions to act for the Intervener.

42.  On 24 February 2006 GCC wrote to Globe Well HK, referring to correspondence with “your former solicitors [TCL]”.  GCC asked Globe Well HK what it proposed to do about the damages which Judge Yung had ordered to be assessed.

43.  The reference to TCL in GCC’s letter shows that it had assumed that the Intervener and Globe Well HK were one and the same.  This is despite the fact that any perusal of the Assignment registered in the Land Registry (of which GCC was aware) would have indicated to GCC that this assumption was wrong, since the Intervener was there identified as a BVI company. 

44.  On 28 February 2006 GCC applied by summons for Globe Well HK to be joined as a party to the Lands Tribunal proceedings between Ms. Mok and Everwise.  The summons was served on Globe Well HK at its registered address in Wanchai and at Premises B.

45.  By 2 letters dated 1 March 2006 Globe Well HK by its solicitors (Messrs. Chan and Associates) informed GCC that it had no interest in Premises B and had no knowledge of the Lands Tribunal proceedings. 

46.  On 6 March 2006 GCC wrote to TCL seeking information about its former client.  TCL replied on the following day that its former client was not a Hong Kong incorporated company.

47.  By Order dated 13 March 2006, after hearing GCC and in the absence of Everwise and Globe Well HK, Judge Yung joined Globe Well HK as a party to the Lands Tribunal proceedings “to ensure the order of HH Judge Yung of 4th November 2005 be effectually and completely determined”.

48.  On 29 March 2006 GCC unsuccessfully tried to communicate with the Intervener through Messrs. Chong & Yen, the solicitors who handled the Assignment.  The latter, however, had no instructions to act for the Intervener.

49.  On 4 April 2006 GCC wrote to the Intervener at its BVI address.  GCC sought a date to arrange for inspection of the repair work to Premises B.  The letter stated:-

“As mentioned to your predecessor at the meeting of owners’ corporation in around April 2005, it was and is still our client’s intention to rent out her property once the water leakage is stopped.  Your continuous evasion to arrange inspection is definitely increasing the amount of damages which will eventually be borne by your goodself.

If we do not receive your reply within 21 days from the date of this letter, our client shall have no alternative but to seek necessary order from the court for entry and inspection of the captioned premises as well as cost incurred thereby.”

50.  On 18 May 2006 GCC issued a summons for “provisional damages to be assessed” and “damages to be assessed”.  GCC did not apply to join the Intervener to the proceedings, but instead served its summons to “the 2nd Respondent” by post to the Intervener’s BVI address and to Premises B. 

51.  Thus, GCC simply treated Globe Well HK (which had been joined as 2nd Respondent to the proceedings) as equivalent to the Intervener. 

52.  On 29 May 2006, after hearing GCC and in the absence of anyone else, Judge Yung assessed Ms. Mok’s damages at $363,026.60.

53.  On 14 June 2006 GCC applied ex parte “for an order that the beneficial interest of the 2nd Respondent/ Judgment Debtor, Globe Well Development Limited in [Premises B] do stand charged with the payment of the sum of $363,026.60 together with interest thereon”.

54.  On 16 June 2006 Judge Yung imposed a charging order nisi on Premises B along the lines sought by the ex parte application.

55.  On 28 June 2006 Messrs. John Ku & Co (JKC) (acting on behalf of the Intervener) wrote to GCC. JKC stated that the Intervener had “only just received” from its BVI agents a copy of GCC’s summons for provisional damages to be assessed. The proceedings before the Lands Tribunal (JKC noted) had taken the Intervener aback, as it had no prior knowledge of the same.  JKC asked for an explanation.

56.  On 29 June 2006 GCC replied, contending that the Intervener “all along had full knowledge of the ... proceedings as all the court documents were served on the suit premises and to [the Intervener’s] registered office on 19th May 2006”.

57.  GCC further alleged that notice of Judge Yung’s Order of 13 March 2006 joining Globe Well HK had been given to the Intervener through Messrs. Chong & Yen. 

58.  GCC then stated that it fully intended to proceed with the application for a charging order absolute against Premises B.

59.  On 6 July 2006 JKC filed a Notice to Act within the Lands Tribunal proceedings.

60.  On 10 July 2006 JKC applied to be joined as a party to the Lands Tribunal proceedings.  It also asked that the charging order nisi be discharged.

61.  On 17 August 2006 Judge Yung ordered that the charging order on Premises B be made absolute.  He rejected the Intervener’s summons to be joined.  He further ordered that “[t]he 2nd Respondent be declared as Globe Well Development Limited, a company incorporated in British Virgin Islands”.

62.  By an Amended Summons dated 16 October 2006 GCC sought an order that “[t]he 2nd Respondent/ intervener/ owner/ tenant(s)/ sub-tenant(s)/ occupier(s)/ licensee(s)” of Premises B allow Ms. Mok entry to inspect the relevant repair work.  The summons was served on JKC as solicitors for “[t]he 2nd Respondent/ Intervener/ owner of the suit premises, Globe Well Development Limited”.

63.  On 17 October 2006 Judge Yung granted the relief requested by the Amended Summons of 16 October.  Ms. Mok was represented by counsel at the hearing.  The Order records that “Solicitors for the 2nd Respondent/ intervener/ registered owner” of the Premises B were absent.

III.  DISCUSSION

64.  Ms. Heung targets 2 orders in this appeal. 

65.  The first is that whereby the charging order nisi was made absolute. 

66.  The second is that of 17 October 2006 whereby, having previously declared Globe Well HK and the Intervener to be one and the same, Judge Yung in effect ordered that the Intervener allow inspection of Premises B and pay Ms. Mok’s costs.

67.  There is additionally an appeal against Judge Yung’s refusal to allow the Intervener to file affirmation evidence in support of its case against making the charging order absolute.  I will deal with this subsidiary matter at the end of this Judgment.

A.The charging order

68.  In his reasons for granting an order absolute, Judge Yung appears to have reasoned as follows:-

(1)     The Intervener refused to call witnesses to support its contention that it was not Globe Well HK.  This was not being frank with the Court.  This was suspicious.

(2)     The limited affirmation evidence adduced by the Intervener was an attempt by the Intervener to mislead the Court into believing that the Intervener was “a stranger here in Hong Kong”. If the Intervener was truly independent of Globe Well HK, why did they have nearly identical names?

(3)     Given the foregoing, there was no basis to review the damages previously assessed.  There was by the same token no basis to refuse making the charging order absolute.

69.  Judge Yung’s reasoning is untenable.

70.  First, a court can only impose a charging order on property which is beneficially owned by a judgment debtor.  See, for example, Order 50, Rule 1 of the High Court Rules and District Court Rules.

71.  When the charging order (whether nisi or absolute) was sought to be imposed, Everwise (the judgment debtor) had long ceased to be beneficially entitled to Premises B. 

72.  Further, neither the Intervener nor Globe Well HK could be treated as judgment debtors.  This is because neither had previously been found by the Court to be liable to Ms. Mok for anything. 

73.  The Lands Tribunal’s Order of 4 November 2005 holding Everwise liable to Ms. Mok with damages to be assessed only operated as between Everwise and Ms. Mok.  The Order did not bind anyone else.

74.  There being no finding of liability against Globe Well HK or the Intervener, damages could not possibly have been assessed against them.  Insofar as Judge Yung’s Order of 29 May 2006 purported to assess damages against anyone other than Everwise, that Order was wrong.

75.  Therefore, in the present case, one just does not have property belonging to any judgment debtor against which a charge can be imposed.

76.  Second, the 4 November 2005 Order did not create any in rem right exercisable against Premises B. 

77.  A finding of liability in tort (such as negligence or nuisance) is simply a personal right against the person found liable.

78.  It seems to have been suggested to Judge Yung that, the 4 November 2005 Order having (possibly) found Everwise liable for breach of covenants in the DMC, such finding of liability against Everwise somehow ran with the land and bound subsequent owners.

79.  The argument is fallacious. 

80.  Insofar as they touch and concern land, covenants in a DMC may run with the land.  Successive owners are bound by such covenants. 

81.  But that does not mean that a finding of liability against an owner X (to the effect (say) that X has breached a covenant in the DMC) runs with the land. 

82.  Covenants run with the land.  Findings by a court that a particular owner has breached a covenant which runs with the land, do not without more run with the land such as to be binding on future owners.

83.  Third, sometimes, in cases of (say) fraud, the Court can pierce the corporate veil.  One might then treat a company as merely the alter ego of some other entity. 

84.  But here there is no basis to pierce the corporate veil.  There is no evidence that Everwise is the same person as either Globe Well HK or the Intervener and Judge Yung never made such a finding.

85.  Fourth, Judge Yung apparently thought that there was a burden on the Intervener to demonstrate that it was not Globe Well HK.  But why should that be the case?

86.  A BVI company is not a Hong Kong company.  GCC served a Hong Kong company.  That is the long and short of it.  Whether or not the Intervener was a “stranger to Hong Kong” is an irrelevant consideration.

87.  It was for GCC to prove that it had served the Intervener, not the other way around.  It was not for the Intervener to call witnesses to establish a negative.

88.  It follows that the appeal against the imposition of a charging order absolute must succeed.

B.  The Order of 17 October 2006

89.  The Order of 17 October 2006 was based on the Court’s declaration that the 2nd Respondent was the Intervener.

90.  But the Court could not have made such a declaration, whether procedurally or substantially.  

91.  GCC (on behalf of Ms. Mok) purported to serve a Hong Kong company (namely, Globe Well HK) having a Wanchai registered office.  That company is plainly not the Intervener, which is a BVI company with a BVI registered office.

92.  The Court cannot by fiat declare a party to have been and to be someone which it plainly is not.  This is regardless of whether the party and that someone share similar names.

93.  But leave aside the question of identity. 

94.  I would still have difficulty understanding how the Order of 17 October 2006 could have been made, even if its underlying assumption (namely that, Globe Well HK was also the Intervener) were correct.

95.  As I have mentioned, the Order of 4 November 2005 only operated against Everwise personally.  There is no judgment of liability against either Globe Well HK or the Intervener.  In such circumstances, the Court cannot order a person other than Everwise to allow a third party agent to enter Premises B to inspect repair work.

96.  Further, according to Join Together, the offending leak had been repaired by the end of January 2006.  There is no evidence of any nuisance occurring since then, while Premises B have been under the Intervener’s ownership.

97.  Accordingly, there is no basis for the Court to find on the available evidence that the present owner of Premises B (whether identified as Globe Well HK or the Intervener) has so infringed Ms. Mok’s rights that she should be allowed to intrude upon the privacy of the owner.

98.  Join Together’s repair works may or may not have been competently carried out.  If they were not effective, then further nuisance may yet occur.  It will then be open for Ms. Mok to take appropriate action against the new owners of Premises B. There may or may not be justification at that stage for an inspection of Premises B.

99.  Ms. Mok’s lawyers attempted to register the application against Everwise and various orders of Judge Yung in the Land Registry.  They were not successful. 

100.  Even if they had succeeded, the mere act of registration would not have elevated the mere personal rights arising from the Lands Tribunal proceedings into real rights. 

101.  Notice of the attempted registrations would not have turned the Intervener into something less than a full owner.

102.  In short, the Intervener did not become the owner of Premises B subject to some sort of equity or other interest held by Ms. Mok.

103.  There is consequently no answer to the appeal against the Order of 17 October 2006.  That appeal must also succeed.

C.  The application to adduce further evidence

104.  JKC applied to set aside the charging order nisi.  It filed evidence in support.  Ms. Mok through GCC filed rebuttal evidence.

105.  Fairness would normally have dictated that JKC be allowed to file further evidence in reply.

106.  It is not evident why Judge Yung departed from this normal practice. 

107.  In the premises, I think that the judge wrongly exercised his discretion in refusing leave.  Leave should have been granted to the Intervener to file further evidence.

108.  I would consequently allow the appeal against Judge Yung’s refusal.

IV.  CONCLUSION

109.  The Intervener’s appeals succeed. 

110.  The charging order and the Order of 17 October 2006 are set aside.

111.  For completeness, I would also expressly set aside the 17 August 2006 Order declaring Globe Well HK to be the Intervener.

Hon Tang VP:

112.  I agree.

Hon Sakhrani J:

113.  I also agree.