THE INCORPORATED OWNERS OF KADOORIE AVENUE MANSION v. RISING DRAGON INTERNATIONAL LTD

LDBM 201/2013

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 201 OF 2013

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D E C I S I O N

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1.  On 16 October 2013, I heard the argument on the respondent’s summons to stay the proceedings in this case pending the final determination of LDBM 202/2013. I handed down my decision on 1 November 2013 dismissing the summons (“the Decision”). I further made an order nisi that there be no order as to the costs of that summons.

2.  There are now two applications before the court:

(1) the respondent’s application for leave to appeal; and

(2) the applicant’s application to vary the costs order nisi.

The application for leave to appeal

3.  The law applicable to the leave application is trite:

(a) A party may only appeal to the Court of Appeal against a judgment, order or decision of the Lands Tribunal on the ground that such judgment, order or decision is erroneous on point of law: section 11(2) of the Lands Tribunal Ordinance (“LTO”).

(b) No appeal may be made under section 11(2) unless leave to appeal has been granted by the Lands Tribunal or the Court of Appeal: section 11AA(1) of the LTO.

(c) Leave to appeal shall not be granted unless the court is satisfied that either (i) the appeal has a reasonable prospect of success; or (ii) there is some other reason in the interests of justice why the appeal should be heard: section 11AA(6) of the LTO.

4.  It appears that the respondent is invoking the “some other reason” limb here.  According to its counsel (Patrick Chong):

“… section 20A of the BMO [ie the Building Management Ordinance] is not very well drafted and it is very confusion. On the one hand, it provides that it is mandatory for the IO to comply with the section while on the other hand it provides that the contract shall not be void by reason that it does not comply with the tendering requirement. Faced with such situation, can a co-owner restrain the IO (in the present case, to stay the IO’s proceedings) to carry on the contract/retainer when the IO is knowingly in breach of section 20A?

…

How should the court reconcile subsection (1) and subsection (3) and what, if any, remedy should be granted when: (a) the IO had been warned about the requirement under section 20A(1); and (b) the contract has just been entered into and still at its infancy stage.  It is submitted that the above question is of general importance and merits the Court of Appeal to give some guidance.”

5.  Mr Chong complains that:

“When an IO is clearly acting in breach of section 20A, prima facie, it is submitted that the court MUST as part of its duty give effect to the law. If the court does not even enforce the section, it will only send a very wrong message to the general public that this section need not be complied with. It is submitted that this cannot be right.”

6.  And he poses the following “questions of law” for the Court of Appeal:

(a) “The Respondent invites the Court of Appeal to give guiding principles as to how the court or tribunal should exercise its discretion for applications for stay of proceedings in a case like the present where the Incorporated Owners have knowingly not complied with the mandatory requirement and statutory duty under section 20A of the Building Management Ordinance, Cap 344.”

(b) “In the circumstances, whether the Tribunal in the present case erred in exercising its discretion in refusing to grant a stay of the present proceedings.”

7.  I begin the discussion by observing that there is certain degree of inconsistency in Mr Chong’s approach.  On the one hand, he submits that the tribunal “must” grant a stay to enforce section 20A.  On the other hand, the questions he drafted presuppose the existence of a discretion for he invites the Court of Appeal to give guidance on how the discretion should be exercised.

8.  In my view, Mr Chong has not fully appreciated the arguments advanced by his leader (Anthony Houghton, SC) on 16 October 2013 in support of the respondent’s summons.

9.  At the hearing, Mr Houghton recognised that the substantive issues in this case and that in LDBM 202/2013 are different (see §22 of the Decision).  He conceded that the question of whether the applicant was in breach of section 20A and what should flow from such non-compliance should be determined in LDBM 202/2013 (see §11 of the Decision).  Although he had suggested at the early part of his oral submission that the result of LDBM 202/2013 might affect the validity of the proceedings in this case, he later clarified that the main plank of his submission is on case management (see §16 of the Decision).  The focus of the argument was therefore on case management and the application was dealt with on that basis (see §§20-22 of the Decision).

10.  Given the way the respondent argued its application, it was not necessary for me to deal with the interworking of the subsections in section 20A (see §4 above).  I only outlined the effect of section 20A (without deciding anything) to put the argument in context (see §§11-15 of the Decision).  I considered the application in the best light of the respondent but, even so, I did not find any reason, legal or procedural, to impose a stay.

11.  Insofar as Mr Chong is now suggesting that I had no discretion but to grant a stay (see §5 above), he is advancing a new ground not previously argued by his leader.  But he can present no authority in support of his proposition.  His suggestion runs contrary to what is provided in Order 1B of the Rules of the High Court in terms of the case management power of the court and must be rejected (see §20 of the Decision).

12.  Insofar as Mr Chong accepts that the power to stay proceedings is discretionary and the Decision is a testament of how I exercised the discretion in the circumstances of this case, it behooves on him to identify any error of law that warrants an appeal. There is no point in crying foul without identifying the error (see §6(b) above). 

13.  In any event, the Decision is essentially a case management decision.  It has been pointed out that the Court of Appeal is generally reluctant to interfere with judges on matters of case management: see Hong Kong Civil Procedure 2014, §25/1A/14.  And general guidance on how the court should exercise its case management power is already in place in terms of Order 1A.  I do not think there is any legitimacy in troubling the Court of Appeal with the questions posed by Mr Chong.

14.  Before leaving this matter, I should disabuse the suggestion that I have failed to pay sufficient regard to section 20A in the Decision.  I did refer to the judgment of the Court of Appeal in Wong Tak Keung Stanley to remind everyone that compliance with section 20A is mandatory and a statutory duty on the part of every owners’ corporation (see §35 of the Decision).  I do not think anyone properly reading the Decision would get the “wrong message” suggested by Mr Chong.  It is absurd to equate the refusal to stay the proceedings in the circumstances of this case with a general refusal to enforce the section.

15.  For these reasons, the respondent’s application for leave to appeal is dismissed.

The application to vary the costs order nisi

16.  In paragraph 36 of the Decision, I said that:

“I am entitled to take into account the conduct of the parties when it comes to costs: see Order 62, rule 5. The present application is premised on the applicant’s non-compliance which is not disputed for the purpose of the argument. I make a costs order nisi that there be no order as to the costs of the summons.”

17.  I made the point in the preceding paragraph that Mr Tsu (the solicitor representing the applicant) had been unable to explain why the applicant had failed to comply with section 20A in the first place.

18.  I also criticised both parties for not informing the court earlier of the fact that the applicant had convened an extraordinary meeting of the owners on 12 September 2013 and the resolutions passed at that meeting (see §25-34 of the Decision).

19.  For the purpose of his application to vary the costs order nisi, Mr Tsu has come back to:

(a) argue that section 20A should not apply as “the costs of [engaging C&T] was estimated at not more than $20,000 at the time”; and

(b) justify the applicant’s decision to withhold the meeting on 12 September 2013 and the resolutions from the court.

20.  He suggests that he only agreed on 16 October 2013 to proceed with the argument on the basis that the applicant had failed to comply with section 20A “at the suggestion of this Tribunal” which was “intended to save costs time and trouble of this Tribunal”.  He further argues that:

“The effect of the costs order nisi would effectively penalize the Applicant alone, leaving the Respondent not having to pay for its unsuccessful application. The summons was taken out by the Respondent and costs should follow the event.”

21.  Insofar as the applicant is now suggesting that section 20A should not apply, that was not its stance on 16 October 2013. 

22.  As I have noted in paragraph 7 of the Decision, the respondent had referred to the minutes of the applicant’s management committee in which Mr Tsu was reported to have said:

“… it was justified to take legal proceedings, and the cost would be under HK$400,000. If IO won the lawsuit, the cost would absorbed by the other side, and 90%-100% cost would receive normally. Moreover, the legal proceedings could be stop anytime if the relative owner agreed to remove antennas.”

23.  The applicant’s chairman had responded by suggesting that one of the considerations for engaging C&T was that:

“… the legal costs of not more than HK$20,000 quoted by C&T for the preparation, filing and service of the initial application to the Lands Tribunal for the commencement of the resolved legal proceedings was considered very reasonable.”

24.  On 16 October 2013, I dealt with the argument on the basis that there had been non-compliance on the part of the applicant.  That approach was partly dictated by the state of the evidence before me and partly by election of the parties (see §33 of the Decision).  Having made his election then, it is wrong for Mr Tsu now to blame it on the tribunal.  He represented the applicant at the hearing and he alone should be responsible for the shape and size of the argument advanced on behalf of his client.  If he had considered it necessary to insist that section 20A should not apply, he should have said so.

25.  In any event, I do not see how the stance adopted by Mr Tsu at the hearing could have prejudiced his client.  In my view, the arguments put forward by the respondent in support of the stay application could only be fully tested by taking the respondent’s case to the highest.  And I have made it clear that in so doing, I was not deciding anything (see §11 of the Decision).

26.  The costs of and incidental to all proceedings in the tribunal are in the general discretion of the tribunal: section 12(1) of the LTO.

27.  Although the applicant has successfully resisted the stay application, it did not succeed on the submissions of Mr Tsu.  As I recall, Mr Tsu was quite unable to cope with the points advanced by Mr Houghton and had to ask for a short adjournment to recuperate and to reorganise his thoughts.

28.  The stay application was an interlocutory application.  The principle that costs normally follow the event is no longer the prescribed usual order after the implementation of the civil justice reform but is just an option: see Order 62, r 3(2A) of the Rules of the High Court and Hong Kong Civil Procedure 2014, §62/3/3B. 

29.  It is wrong for Mr Tsu to view the costs order nisi as a penalty to the applicant alone as the respondent will also have to bear its own costs.

30.  I am entitled, under Order 62, rule 5, to take into account the conduct of the parties when it comes to costs, even conduct before the proceedings.  The stay application was premised on the applicant’s non-compliance with section 20A, which was conceded for the purposes of the argument. 

31.  In my view, Mr Tsu has still failed to come up with any credible explanation.  His latest suggestion that section 20A should not apply in the first place does not sit comfortably with the evidence before me.  If he were right, then the applicant’s chairman would not have to consider calling for an owners’ meeting to resolve to engage C&T (see §8 of the Decision) and it would not be necessary for the applicant to hold the meeting on 12 September 2013 (see §29 of the Decision).  All these prima facie inconsistencies will be fully explored in the context of LDBM 202/2013.  Insofar as he is suggesting that the engagement of C&T can be broken down into different stages with different value for each stage to avoid the operation of section 20A, this would be a matter for the court to consider in LDBM 202/2013 (see section 20A(7)(d)).

32.  And I find it surprising that Mr Tsu would come back to justify his initial failure to update the court with the important development in this case.  I repeat what I said in paragraphs 25-34 of the Decision.  The fact that a general meeting has been convened to consider the engagement of C&T is a factor affecting the result of LDBM 202/2013 (see section 20A(7)(b)) and would be relevant for the purposes of the stay application.

33.  There is no merit in the application and I confirm the costs order nisi.

Conclusion

34.  For the above reasons, I dismiss both summonses.

35.  The parties have failed their respective application.  The time and effort spent on each application is more or less the same.  In the circumstances, I shall make no order as to the costs of both summonses.