THE INCORPORATED OWNERS OF TSUI CHUK GARDEN v. EDENTOWN LTD

cacv 18/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 18 of 2005

(on appeal from LDBM NO. 87 of 2004)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal from an order for costs made by the Lands Tribunal on 11 November 2004 whereby the Lands Tribunal ordered that the 1^st respondent’s application dated 20 September 2004 to vary the Order in respect of costs made by the Lands Tribunal on 30 August 2004 be dismissed.  The application before the Tribunal on that day was that the previous order for costs made in the 1^st respondent’s favour against the applicant should not be paid either wholly or partly or contributed to by the 1^st respondent.  Although the orders sought in this court were in slightly different form, the effect was much the same.  At the conclusion of the hearing of this appeal this appeal was dismissed with reasons to be given in writing.

Background

2.  The applicant corporation is the Incorporated Owners of an estate in Kowloon.  The 1^st respondent is the owner of the entire commercial development including three shops on that estate and the other respondents were the tenants of the shops in question.  There is a Deed of Mutual Covenant (“DMC”) dated 6 October 1989.  The applicant’s complaint to the Lands Tribunal was that there was a considerable amount of what, for want of a better term, might be called discarded material including boxes and other items which were placed outside the shops.  It was said that that not only blocked the emergency exit to the car parks but were unhygienic.

3.  Originally the 1^st respondent took no part in the proceedings other than to have its manager produce a letter.  The Lands Tribunal made an order not only against the other respondents but against the 1^st respondent as well.  Following that there was an application for review by the 1^st respondent.  On that review, the Lands Tribunal came to the conclusion that the 1^st respondent had not permitted or suffered the matters complained of to occur and was, therefore, not liable to have any order made against it.  It was in those circumstances that the Tribunal made an order dismissing the application against the 1^st respondent and ordering the applicant to pay the 1^st respondent’s costs of the review.

4.  Under clause 14 of the DMC the applicant is required to maintain separate accounts for the income and expenses relating to the Residential Units, the Commercial Development, the Car Parks and a joint account of management income and expenses for the whole of the estate.  It is said that the 1^st respondent has reason to believe that the costs and expenses ordered to be paid by the applicant will be entered in the accounts relating to the Commercial Development.  However, this court has not been shown those accounts. 

5.  On this appeal the 1^st respondent seeks a number of orders many of which are in the alternative.  The effect of those orders is similar to the effect of the orders sought on the application for review of the costs order namely that the 1^st respondent should not be liable to contribute wholly or partly whether directly or indirectly to the costs which have been ordered to be paid in its favour.  In the alternative it seeks to limit the contribution which it should make to 4.23%, which is in effect the relative proportion of its undivided share which it owns in the whole of the estate.  It is not clear from the wording of the order sought as to whether the form of order being sought was a declaration or a mandatory form of order: the former declaring the rights of the 1^st respondent as against all the other owners, the latter ordering the applicant to prepare its accounts in a particular form.  Mr Lam, who appeared on behalf of the 1^st respondent, was unable to provide any clear answer to this, although it did seem that he was seeking a mandatory order which could be enforced as any other order, presumably by contempt proceedings.

6.  In my view this matter is covered by the decision of this court in Aberdeen Winner Investment Co. Limited v. Incorporated Owners of Albert House and Another [2004] 3 HKLR 910.  For the same reasons that are explained in paragraph 24 of that judgment, the liability to contribute to the costs in this case is a matter of the internal arrangements amongst the owners of the undivided shares in the estate managed by the Incorporated Owners.  The duties and obligations of the owners of those shares amongst themselves arise under and are governed by the DMC.  Since the individual owners are not themselves parties to these proceedings this court cannot make an order under the order for costs, the effect of which would be to apportion between the individual owners as to how they should pay.  Not only are they not parties to these proceedings, as opposed to the applicant i.e. the Incorporated Owners which is a corporation, but it would entail this court interpreting the DMC and in particular clause 14(e) thereof and deciding whether the application to the Lands Tribunal made by the applicant was for the benefit of all the owners or some of the owners or for Commercial Development.

7.  None of the cases cited by Mr Lam were of any assistance to the 1^st respondent’s case.  They illustrated the point that, although the court would have regard to any pre-existing contractual arrangements between the parties to litigation, the court was not bound by such arrangements, for example, to make an order that the costs should be on an indemnity basis.  Those cases would have no bearing on a situation where, as here, the litigant was a corporation and the order sought is an order that would affect members of the corporation as opposed to the corporation itself.

Hon Le Pichon JA:

8.  I agree.

Hon Cheung JA:

9.  I agree.