莫炎熙 v. 香港房屋委員會

CACV 147/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 147 OF 2015

(ON APPEAL FROM LDBM NO. 256 of 2013)

___________________________

___________________________

__________________

JUDGMENT
__________________

Hon Lam VP (giving the Judgment of the Court):

1.  Tin Chung Court is a development in Tin Shui Wai by the Hong Kong Housing Authority [“HKHA”] under the Home OwnershipScheme. Ithas 15 residential blocks. Construction works were completed in 1999 and the units were sold in 1999 with a scheduled completion date of 7 March 2000. Apart from units in Blocks F, G, H, J, K and L, the sales of the units were duly completed. Because of the discovery of piling problems relating to Blocks K and L, the sales of units in these two blocks were cancelled. After some further foundation strengthening works, Blocks K and L became fit for occupation and completion certificates for those units were eventually issued in November 2008. Completion for the sales of the units in Blocks F, G, H and J was delayed due to the discovery of piling problems at Blocks K and L. After they were examined again and found to be structurally safe, completion certificates were issued in April 2001.

2.  Upon the sale of the units, the first purchasers and HKHA entered into a Deed of Mutual Covenant dated 28 December 1999 [“the DMC”] providing for the management of the estate.  As usual, one of the obligations of the owners of the units set out in the DMC is to pay management fees.  Under the DMC, HKHA assumed the obligation to manage the estate.

3.  Due to the piling problems in relation to Blocks K and L and the delay in completion of Blocks F to J, there were periods of time no management fee was collected in respect of those blocks when the sales of units in those blocks could not be completed [“the uncompleted units”]. Apparently HKHA took the view that it had no liability to pay such management fees so long as the relevant certificates for completion had not yet been issued.

4.  On 12 September 2013, the Applicant acting in person issued an application in the Lands Tribunal in the present case.  In that application, he asked the Tribunal to determine the question whether HKHA should pay management fees according to the DMC and the Building Management Ordinance [“BMO”] for the uncompleted units even though they were not occupied.  He did not set out the relief he claimed.  Instead he complained about HKHA’s failure to pay management fees according to the DMC and the BMO.

5.  HKHA disputed liability to pay the management fees for the uncompleted units and the matter came before Deputy Judge Tracy Chan [“the Judge”] on 26 March 2014.  At that hearing, the Judge gave a direction that she would only deal with the legal issue if HKHA was liable to pay at that hearing whilst the question relating to calculation of arrears (including the commencement date for such calculation) would be adjourned to a later hearing. 

6.  Due to the informality adopted in the proceedings, and that the directions were given by the Judge on her own motion at the hearing, there was no formal document (whether by way of sealed copy of order or summons) identifying the issues to be dealt with at the different hearings.  The terms of the so-called split trial had to be worked out by reference to the transcript[1].

7.  With respect, this is not satisfactory and as shall be seen below, the omission to clearly identify the issues to be resolved at the different stages of the proceedings gave rise to misunderstanding and confusion which led to the present appeal.  We take this opportunity to remind lawyers who seek and judges who make order for the determination of some issues before other issues in one set of proceedings to pay careful attention to the need to identify such issues clearly and precisely to avoid any confusion and misunderstanding.  This is important whether the proceedings are conducted formally in courts or informally in tribunals. 

8.  At different stages, the Judge and counsel described the first hearing as a liability hearing and the judgment of 8 July 2014 in respect of that hearing a liability judgment.  They described the second hearing (which took place on 18 November 2014) and the second judgment (handed down on 9 December 2014) as quantum hearing and quantum judgment.  Again with respect, we find those descriptions misleading and again they partly give rise to the problems which we have to resolve in this appeal.

9.  What actually happened was that at the hearing on 26 March 2014 the focus of the parties and the Judge was on the question of construction of the DMC.  It was accepted by HKHA that whether it ought to pay management fees for the uncompleted units depends on the proper construction of Clause 6(a) of the DMC.  All the arguments canvassed at the hearing related to that issue.  It is clear from what the Judge said at the hearing[2] that she did not regard the question as to when the arrears should start to be calculated as within the purview of the first hearing.

10.  To be fair to the Judge, she was not aware that HKHA intended to run a limitation defence at that stage.  HKHA did not plead such defence in the Notice of Opposition filed on 5 November 2013. Most of the paragraphs in that document (which was prepared by Senior Counsel) dealt with the payment obligations under the DMC (and its construction) and s 34G of the BMO.  At the end, there is only one paragraph which reserved generally “the right to object to any item or amount of management charges which are not properly covered by Clause 6(a) or section 34G of the BMO”.  That is not a plea of a limitation defence.

11.  Therefore, the Judge cannot be blamed for not giving a clear direction at the hearing of 26 March 2014 as to whether the limitation defence would be dealt with at that hearing or later.  Mr Mok SC (who appeared before the Judge on 26 March 2014) told us at that hearing he focused on the construction issue as he thought that the scope of the hearing was that issue only.  He accepted he had not informed the Judge at that hearing that HKHA intended to run a limitation defence. 

12.  The Judge handed down her judgment on the construction issue on 8 July 2014.  She held in favour of the Applicant on the construction of Clause 6(a).  There is no appeal against this holding. 

13.  Further, at paragraph 40 of the judgment, she said:

“ … The respondent [viz HKHA] should therefore be liable to pay the management expenses relating to those shares pursuant to the First Schedule starting from December 1999. Having failed to do so, the respondent has acted contrary to this sub-section [viz s34G(1) of the BMO].”

14.  In this appeal, HKHA challenged this part of the judgment.  The formal judgment was filed on 30 September 2014.  It contains this paragraph:

“ IT IS ADJUDGED THAT the Respondent be liable to pay the management expenses relating to those shares pursuant to the First Schedule starting from December 1999.”

15.  Since the application of the Applicant was only made on 12 September 2013, if the limitation defence was valid, the arrears that could be enforced should start from 12 September 2001[3].  In the course of the appeal, we queried why HKHA’s solicitors prepared the formal judgment in these terms when their client still wished to pursue the limitation defence. Mr Mok, after taking instructions from his solicitor, informed us that the draft judgment was not in these terms and it was upon the insistence of the court that the judgment was perfected in such manner.  Though there is no formal evidence before us, we have no reason not to believe what Mr Mok told us based on instructions from his solicitor who is an officer of the court. 

16.  With respect, we take the view that the perfected order caused further confusion.  In our judgment, in the wake of that demand from the court, the proper course that HKHA should have taken was to seek a hearing before the court (and if necessary attended by counsel) to explain to the court why the wordings suggested by the court were inappropriate as it fell outside the scope of the matter determined at the hearing of 26 March 2014.  That would have drawn attention to the Judge as well as the other party what HKHA understood to be the proper scope of the March hearing and what should be the scope for the forthcoming hearing (which the Judge regarded as assessment of quantum). 

17.  Even though the Judge might or might not accept the position of HKHA, depending on the outcome, HKHA might then decide whether it should appeal against that decision there and then.  It was not right for the solicitors of HKHA to draw up and seal the formal judgment without advancing submissions to the Judge as to why the order should not be so worded. 

18.  We take this opportunity to remind solicitors who are responsible for preparing and sealing of formal orders and judgments to ensure that the wordings of these documents accurately reflect what were properly decided by the court.  These are important documents which form part of the court records.  Whilst we do not encourage vexatious disagreements on the wordings of the formal order or judgment, it is important to ensure that that document only contains matters decided by the court within the scope of the particular hearing or trial.  Consequential matters could be addressed in the formal order if they are properly within the scope of the hearing (see Lam Chi Tat Anthony v Kam Yee Wai Andrew (No 2) [2013] 2 HKLRD 1085), but matters falling outside the scope of the hearing should not appear in the formal order or judgment.

19.  As it happened, the Judge somehow regarded that the only outstanding question was quantum.  But what was to be scope of the so-called quantum hearing was not entirely clear.  At the direction hearing on 28 August 2014, the solicitor for HKHA brought up the issue that there was no monetary claim in the application and the calculation presented by the Applicant was not clearly explained and that he did not have the locus to represent the other owners of the estate.  The Judge remarked that she could grant leave to the Applicant to put in a monetary claim at that stage and she did not consider it right to impose the burden of summoning a meeting of all the owners on the Applicant.  Eventually, the Judge agreed to reserve the point for further arguments and gave time to HKHA to work out their case on the figures. 

20.  In the affirmation of Jim Yuk Kuen filed on 25 September 2014 on behalf of the HKHA, the limitation point was raised at paragraph 4 contending that the calculation should not go back to any time prior to October 2001 because of the 12-year limitation period.  The affirmation also set out HKHA’s other disputes with the Applicant on the calculation of the arrears.

21.  At another direction hearing on 6 November 2014, the Judge raised query regarding whether limitation period should be pleaded as the Applicant needed to respond to it.  After some exchanges with the solicitor for HKHA and the Applicant, the Judge directed the Applicant to file his responding document by 11 November 2014.  The Applicant duly filed his response attached to an affirmation of 10 November 2014, paragraph 2 of which advanced a case based on s26(1)(b) and (c) of the Limitation Ordinance.

22.  It should be noted that the Judge did not regard the issue of limitation as having been subsumed in the scope of the first hearing.  Nor did the Judge refer back to the formal judgment as perfected on 30 September 2014 as barring HKHA from raising the point.

23.  HKHA filed affirmation in reply on 17 November 2014 which answered the Applicant’s case on s26(1)(b) and (c) of the Limitation Ordinance.

24.  The Judge heard the second part of the hearing on 18 November 2014, at which arguments and evidence on limitation were presented to the Tribunal.  It appeared that the Judge revived her query about whether HKHA could rely on the limitation point at such late stage at the hearing and heard submissions from counsel for HKHA on that question[4]. 

25.  On 9 December 2014, the Judge handed down her judgment.  She held that HKHA was barred from relying on the limitation defence because it had not pleaded the same in the Notice of Opposition.  On that basis, she proceeded to determine the amount that HKHA should pay by way of arrears starting from December 1999 (in the total sum of $45,073,812.31) with interest. 

26.  HKHA sought a review of the decision to preclude it from relying on the limitation defence.  After reading the application by the HKHA and affirmation of the Applicant in reply, the Judge dismissed the application for review on 7 January 2015.  She set out her reasons in a written decision on 7 January 2015.

27.  HKHA sought leave to appeal and the Judge refused leave on 8 May 2015.  Leave was subsequently granted by Lam VP on 17 June 2015. 

28.  From the reasons set out in the written judgment of 9 December 2014 and the written decision of 7 Jan 2015, the Judge held that HKHA was barred from relying on the limitation defence because of the following:

(a) HKHA did not plead the limitation defence in the Notice of Opposition in accordance with Order 18 Rule 8 of the Rules of the High Court;

(b) Section 10(5)(a) of the Lands Tribunal Ordinance [“LTO”] and the direction No.4 given by the President of the Lands Tribunal on 1 July 1986 could not override the requirement of Order 18 Rule 8;

(c) The Applicant had adequately set out his case though there was no monetary claim in his Notice of Application.  HKHA should have been aware that the Applicant sought payment of the arrears of the management fees by HKHA as from the effective date of the DMC.  There was no injustice in the court making a determination of this request;

(d) In the first judgment, the Tribunal decided that arrears should start to run from December 1999 against the background that HKHA did not raise the limitation defence. HKHA should not have left the limitation issue to the second hearing as it was a question of liability instead of quantum.  That would be unfair and against the direction given in the first hearing for the determinate of liability; and

(e) There was no basis for the exercise of discretion to allow the limitation defence to be raised when it had not been pleaded in the Notice of Opposition.   

29.  The Tribunal certainly has discretion to decide whether a point not set out in Notice of Opposition could be relied upon at the trial.  It is a case management discretion which this court will not intervene unless the Tribunal has gone clearly wrong in the exercise of that discretion.  The high threshold for such intervention is well settled, see Li Xiao Yun v China Gas Holdings Ltd HCMP 466 of 2013, 11 March 2013; 厦門新景地集團有限公司v Eton Properties HCMP 13 of 2012, 14 Feb 2012, paragraph 9; Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 paragraph 31.  At the same time, the discretion must be exercised judicially and if the Tribunal made an error of law or misapprehended any relevant matter, this court can intervene.

30.  In the present case, with respect, we are of the view that the Judge had gone clearly wrong in barring HKHA from relying on the limitation defence for the following reasons:

(a) The Judge erred in holding that Section 10(5)(a) of the LTO (read together with direction No.4 of 1 July 1986) could not override the requirement of Order 18 Rule 8.  It must depend on the circumstances of the case and the court must do what is just between the parties.  Order 18 Rule 8 does not apply directly to proceedings in the Tribunal.  Whilst it could be applied by analogy in appropriate cases by reason of Section 10(1), the Tribunal must also have regard to Section 10(5)(a) and direction No.4;

(b) The Judge erred in her apprehension of the scope of the first hearing.  The only issue that was argued and could have properly been determined at the first hearing was the construction issue on which submissions were canvassed.  She was perhaps misled by counsel’s use of the expression “liability” in the course of the hearing. However, she herself made it clear to the parties at that hearing that the question of commencement date for the calculation of arrears would be decided later.  Though limitation defence was not an issue in her mind at that stage, that intimation on her part supported Mr Mok SC’s belief that that hearing only focused on the construction issue and he could leave the limitation issue to be dealt with later.  As we mentioned above, the imprecision in defining the issues to be determined at different stages was a cause of the problems which led to this appeal;

(c) Unfortunately, the Judge’s misapprehension was entrenched by the way in which the formal judgment was drawn up.  In our view, that formal judgment did not properly reflect what could have been determined at that stage.  Solicitors for HKHA should bear responsibility for having an inappropriately worded formal judgment sealed without raising the problem with the Judge;

(d) On proper understanding as to the scope of the first hearing, the Judge could not properly determine the commencement date for the calculation of arrears in her judgment of 8 July 2014 as the issue had not been argued before her and HKHA had not agreed that the construction issue could determine that question;

(e) In substance (irrespective of the labels given to it by the Judge), the second hearing should be a continuation of the trial and as a matter of law it was not too late for HKHA to raise the limitation defence in the affirmation filed in September 2014.  Having given directions for the relevant case and evidence on the limitation defence presented by both parties before the court, in accordance with the spirit of Section 10(5)(a) and direction No.4, there was no good reason why the failure to plead the limitation defence in the Notice of Opposition  should continue to preclude HKHA from relying on that defence at the hearing of 18 November 2014.  If the Judge took the view that the Notice of Opposition should plead the limitation issue, she could have invited HKHA to consider amending the same when she gave directions for filing of evidence on the limitation issue at the direction hearing of 6 November 2014; and

(f) The Judge had not identified any prejudice suffered by the Applicant and her conclusion to the contrary at para 9 of the judgment of 9 December 2014, with respect, did not really address the point.

31.  Because of these errors, we must set aside the Judge’s decision and exercise the discretion afresh.  In the circumstances of the present case, in light of what has been said in the above paragraphs, we consider it appropriate to permit HKHA to rely on the limitation defence based on the materials already presented before the court at the hearing on 18 November 2014.

32.  We would allow the appeal, set aside the order of 9 December 2014 and set aside the reference in the formal judgment of 8 July 2014 to the commencement date for the payment of management expenses (viz by deleting the phrase “starting from December 1999”)  from the second paragraph in that formal judgment.  We remit the question of limitation back to the Judge for determination on the merits. It is a matter for the Judge to consider whether she needs to hear the parties further before she could reach a determination based on what she had heard at the hearing of 18 November 2014.  In that regard, HKHA should seek directions from the Judge within 14 days from the handing down of this judgment.

33.  It should be apparent from what we said that HKHA (or its lawyers) should bear some responsibility for this appeal and it is not due to the fault of the Applicant.  Mr Mok quite properly accepted on behalf of HKHA that he could not seek costs in this appeal.  In the circumstances, we make no order as to costs in this appeal. 

34.  As indicated at the hearing, a judicial clerk shall liaise with the Applicant to arrange for a session to provide oral translation of this judgment to him in Chinese in the court building after the handing down of this judgment.