LUCKY GAIN INDUSTRIAL LTD v. THE INCORPORATED OWNERS OF PRISTINE VILLA

DCCJ 3549/2022

[2024] HKDC 277

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3549 OF 2022

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BETWEEN

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DECISION

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A. Introduction

1.  This hearing concerns four applications:

(1) the Plaintiff’s application by summons dated 31 May 2023 for the Defendant to produce for inspection and provide copies of a report compiled by Surveying & Construction Consulting Company (“SCCC”) relating to the water seepage situation in Pristine Villa, Tao Fung Shan, Shatin, New Territories (“Estate”) (version dated 17 September 2016) (“2016 Report”) (“P’s Discovery Summons”);

(2) the Plaintiff’s application by summons dated 10 November 2022 for leave to file the Affidavit of Chan Chung Yin Victor of even date and rely on the same at the hearing of P’s Discovery Summons (“P’s Evidence Summons”);

(3) the Defendant’s application by summons dated 24 November 2023 for leave to file the 1^st Affirmation of Ng Kam Kuen and 1^st Affirmation of Keung Chung Yan (“New Affirmations”) (“D’s Evidence Summons”); and

(4) the Defendant’s application by summons dated 29 November 2023 for leave to file the 2^nd Affirmation of Ng Kam Kuen and 4^th Affirmation of Chan Ying Dik (“D’s 2^nd Evidence Summons”). The purpose of these further affirmations was to make corrections to the deponents’ previous affirmations.

2.  Both parties take the position that the Court no longer needs to order discovery of the 2016 Report. The outstanding issue is one of costs. In this regard the Plaintiff asks for indemnity costs to be paid by the Defendant for P’s Discovery Summons, whereas the Defendant asks that the Plaintiff pays its costs.

3.  As to P’s Evidence Summons, the Defendant does not oppose the same with no order as to costs.

4.  The Plaintiff, on the other hand, opposes D’s Evidence Summons and again asks for costs on an indemnity basis.

B. Relevant Background

5.  The parties’ disputes stem from water seepage problems that affect the Plaintiff’s property located in the Estate.[1]

6.  The Defendant, as Incorporated Owners of the Estate, had instructed SCCC to assess the water seepage situation at the Estate. There is no dispute that SCCC issued a survey report dated 24 June 2015 (“2015 Report”).

7.  The Plaintiff was clearly under the belief that SCCC had been engaged to produce a further report in 2016 (i.e. the 2016 Report). By letter dated 15 August 2022, the Plaintiff’s solicitors sought pre-action discovery of inter alia the 2016 Report from the Defendant. The Plaintiff’s solicitors explained that:

“…we are instructed that in view of the widespread and serious water seepage and leakage problems throughout [the Estate], in or around 2016 to 2017, you have previously employed one “量築工程顧問樓” to produce a surveying report for [the Estate] titled “曉翠山莊樓宇天面狀況及滲漏勘察報告”(“Report”). A summary of the Report was previously provided to our Client as registered owner of the Premises (“Summary”), a copy of which is annexed as “Annex A”.”

8.  The Plaintiff had therefore made known to the Defendant from an early stage that it did not have copy of the 2016 Report, but only a summary thereof (which, for ease of reference, I shall call the “2016 Summary”).

9.  Indeed, the Plaintiff’s solicitors drew attention in the said letter to pages 3 and 16 of the 2016 Summary, which state respectively that “各業戶亦可到會所接待處借閱由顧問編寫的「曉翠山莊樓宇天面狀況及滲漏勘察報告」完整版本” and “歡迎各業主道會所接待處借閱《曉翠山莊樓宇天面狀況及滲漏勘察報告》”.

10.  No reply from the Defendant to the said request for pre-action discovery has been placed before the Court.

11.  The Plaintiff then commenced the present action. In its Statement of Claim, paragraphs 13 and 14, the Plaintiff avers that the Defendant instructed SCCC to compile and release the 2016 Report, and the 2016 Report contains certain observation and recommended solutions to the water seepage problems.

12.  In the Defence, the Defendant admitted both paragraphs 13 and 14 of the Statement of Claim, without any qualification and without disputing the existence of the 2016 Report.

13.  On 22 May 2023, the Plaintiff’s solicitors served a notice under Order 24, r.10(1) of The Rules of the District Court (Cap 336H) on the Defendant’s solicitors asking to inspect and take copy of the 2016 Report “referred to in paragraph 13 of the Defence”.

14.  This was followed by P’s Discovery Summons. In the 2^nd Affirmation of Lau Kuk Hing in support thereof, it was again stated (at paragraph 19) that while the 2016 Summary was given to the Plaintiff as the registered owner of the Property, the full version of the 2016 Report was not provided.

15.  According to the Affirmation of Chan Yin Dik filed in opposition to P’s Discovery Summons, the Defendant’s solicitors had approached the building manager of the Estate, who stated by email on 13 June 2023 that they only had the 2015 Report, and that “it was only part of the Estimated Cost of Renovation of the Whole Estate (Pristine Villa) was updated to 17 September 2016 in the Summary of Surveyor Report by the incorporation on 20 October 2016”.

16.  By letter dated 13 June 2023, the Defendant’s solicitors informed the Plaintiff’s solicitors that “there is no such version dated 17 September 2016 of the report required by you” and “only the estimate of costs had been revised on 17 September 2016”.

17.  Then, by letter dated 19 June 2023, the Defendant’s solicitors said they would provide the Plaintiff for discovery purpose with a copy of the 2015 Report (with redactions purportedly to protect privacy). This was done via a subsequent letter dated 20 June 2023, in which the Defendant’s solicitors stated that the 2016 Report requested under P’s Discovery Summons “does not exist”.

18.  The same messages were repeated in the Defendant’s solicitors’ letter dated 21 June 2023.

19.  The Plaintiff’s solicitors reverted by letter dated 23 June 2023, indicating their disagreement and their instruction that “there is in fact such a report [i.e. the 2016 Report] and you also acknowledge its existence in your Defence”. The Plaintiff’s solicitors further stated that “if the report is not currently in your possession, custody or power, please let us know. We will then attempt to obtain the report from other parties that may have a copy”.

20.  By letter dated 26 June 2023, the Defendant’s solicitors indicated the Defendant’s willingness to amend the Defence to “[put its] case more clearly” and “avoid unnecessary dispute between the parties”. They also claimed the Defendant had perceived the reference to the 2016 Report in the Statement of Claim to mean the 2016 Summary, and that the Defendant only became aware of which report the Plaintiff was requesting from the 2^nd Affirmation of Lau Kuk Hing.

21.  By letter dated 28 June 2023, the Plaintiff’s solicitors objected to the Defendant’s redaction of the 2015 Report. By letter dated 19 July 2023, the Defendant’s solicitors delivered a colour copy of the 2015 Report without redaction, and asserted that P’s Discovery Summons “has been totally resolved” save the issue of costs.

22.  Then, on 11 August 2023, the Plaintiff filed the Affidavit of Wong Chin Pang Joseph (“Mr. Wong”) in support of P’s Discovery Summons. Mr. Wong was Chairman of the Defendant’s Management Committee (“MC”). On his evidence, the Defendant commissioned the 2016 Report during his second tenure as Chairman.

23.  At paragraph 5 of Mr. Wong’s Affidavit, he said:

“Importantly, I also wish to state clearly that I have in my possession an electronic copy of the 2016 Report. I am willing and able to supply it to this Honourable Court and the parties to assist with the present litigation, provided that the Defendant authorizes me to do so.”

24.  At paragraphs 22 and 23, Mr. Wong further explained that:

“To the extent that the Defendant suggests the 2016 Report does not exist, I hereby reiterate unequivocally that there is an electronic copy of the 2016 Report in my possession. The 2016 Report referred to in the pleadings filed herein exists.

However, given the ongoing litigation between the Plaintiff and the Defendant, and that I only obtained the electronic copy of the 2016 Report in my capacity as the Chairman of the MC, it remains uncertain whether the Defendant would consent to my disclosure of the full 2016 Report.”

25.  Mr. Wong exhibited to his Affidavit a copy of the cover page and table of contents of the 2016 Report to illustrate that it is materially different from the 2015 Report.

26.  Following Mr. Wong’s Affidavit, the Plaintiff’s solicitors wrote on 11 August 2023 to seek the Defendant’s consent for Mr. Wong to release the 2016 Report to the Plaintiff in full immediately. The was followed by a chaser from the Plaintiff’s solicitors on 31 August 2023 and a holding reply from the Defendant’s solicitors dated 3 September 2023.

27.  Then, by letter dated 6 October 2023, the Defendant’s solicitors asked the Plaintiff to provide a true copy of the 2015 Report and 2016 Report “as a matter of [the Plaintiff’s] duty for continuous discovery”.

28.  By another letter of even date, the Defendant’s solicitors referred to Mr. Wong’s Affidavit and asked the Plaintiff for a “true and full copy of the 2017 Report”. The request was said to be made “[w]ithout admission of liability that anyone who was acting for Our Client the Incorporated Owners of [the Estate] or the management company has actually received or possessed the 2017 Report”. The references to the “2017 Report” were likely to be typos and should refer instead to the 2016 Report.

29.  By letter dated 13 October 2023, the Plaintiff’s solicitors queried the logic behind the Defendant’s request for the 2015 Report, when the same was disclosed by the Defendant.

30.  By letter dated 16 October 2023, the Plaintiff’s solicitors sought confirmation that the Defendant consents to Mr. Wong releasing the 2016 Report to them, adding that “[y]ou may of course maintain that neither your client or [sic] management company have never [sic] received the Report before”.

31.  By letter dated 19 October 2023, the Plaintiff’s solicitors proposed that parties write to SCCC to clarify whether the 2016 Report did exist and if so to whom it was sent (if at all), and enclosed a draft joint letter to such effect.

32.  By a further letter of even date, the Plaintiff’s solicitors referred to their letter dated 16 October 2023 and stated that “unless we have a reply from you in response to our letter before the close of business tomorrow, we shall deem that you have given your consent to Mr. Wong releasing the report dated 17^th September 2016 to us”.

33.  The Defendant’s solicitors reverted on the next day stating that they were still taking instructions and that “nothing in this letter shall be deemed that our client has given consent to (1) the draft joint letter enclosed with the said letters; and (2) Mr. Wong to releasing the report dated 17^th September 2016 to you”.

34.  The Plaintiff’s solicitors expressed discontent with the Defendant’s approach to the matter in their letter dated 24 October 2023. They contended inter alia that the Defendant has custody, care and control of the 2016 Report “because one copy of it was in the hands of your client’s former chairman Mr. Wong. And he was asking for your permission to disclose it to us and to the Court”.

35.  On the same day, the Plaintiff’s solicitors made the following proposals to the Defendant’s solicitors:

“As you do not consent to [Mr. Wong] disclosing the 2016 Report to us so that we can provide a copy of that to you, we propose you to direct Mr. Wong to send you the 2016 report to you directly.

While this is ongoing, we shall also write to the former consultant with a view to assist the Court.”

36.  By letter dated 24 October 2023, the Defendant’s solicitors said they would “keep [their] stance as stated in [their] previous letter dated 6 October 2023” and, on such basis, asked for a copy of the “2017 Report”. Again the reference to the “2017 Report” should be a mistake.

37.  On 26 October 2023, the Plaintiff’s solicitors reiterated that they would write to SCCC for further information to assist the Court. They so did by letter to SCCC on the same date.

38.  Then, by letter dated 2 November 2023, the Defendant’s solicitors stated that they were instructed to give consent to Mr. Wong releasing “the alleged Report dated 17 September 2016” provided that the Plaintiff’s solicitors would provide the same to the Defendant’s solicitors on or before 9 November 2023. It was also stated that the said consent does not “constitute admission of any liability on the part of our client, anyone who was acting for our client (including members of the management committee) and/or the management committee has received or possessed the 2016 Report”.

39.  By letter dated 7 November 2023, the Plaintiff’s solicitors sent a colour copy of the 2016 Report to the Defendant’s solicitors.

40.  The Plaintiff took out P’s Evidence Summons on 10 November 2023 for leave to file the Affidavit of Chan Chung Yin Victor, which exhibits the inter-partes correspondence (most of which I have set out in the foregoing paragraphs). As noted above the Defendant does not oppose this summons

41.  On the other hand, the Defendant took out D’s Evidence Summons and D’s 2^nd Evidence Summons respectively on 24 and 29 November 2023. The New Affirmations which the Defendant seek to adduce depose to various purported factual details regarding the compilation of reports by SCCC and the MC’s work. They also contain allegations against the Plaintiff and/or Mr. Wong, such as that “the Plaintiff must have perused and kept a copy of [the Alleged 2016 Full Report] before the statement of truth could be given”[2], and that “the Plaintiff is working together with [Mr. Wong] in this respect and can have access to the Alleged 2016 Full Report at all material times…the Plaintiff is just trying to ambush us, knowing that the Alleged 2016 Full Report was not kept by the Defendant nor Hong Yip”.[3]

C. P’s Discovery Summons

42.  As noted above, both parties accept that a discovery order is unnecessary now that the 2016 Report is available to the Plaintiff.

43.  I have nevertheless set out the background in some detail above because it would be relevant to deciding which party should get costs and on what scale.

44.  I accept the Plaintiff’s submission that even where the application for reliefs in a summons were withdrawn, the Court may still exercise its discretion to award costs to the applicant if it (1) obtained substantially what it sought in the application; and (2) would not have obtained the same but for the application. This also applies where the withdrawal was necessitated by the respondent’s conduct after the issuance of the application which renders the application unnecessary: Zhang Qiandong v 寧波市美悅商貿有限公司 [2020] HKCFI 394 paragraphs 13-14 (G Lam J, as he then was); Perrine Chamonix Ltd v Star League Ltd & Anor (HCA 1139/2017, 13 September 2017) paragraphs 23-28 (DHCJ William Wong SC, as he then was).

45.  As to indemnity costs:

(1) In certain circumstances, costs may be awarded on a more generous than usual basis of taxation to achieve a fairer result.

(2) It is for the receiving party to show that the case has some special or unusual feature.

(3) Courts have rejected the proposition that an award of indemnity costs will only be made where a case has been brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party.

(4) The discretion to order a more generous than usual basis of taxation is not to be fettered or circumscribed beyond the requirement that such taxation be ordered only when it is appropriate to do so.

(5) What constitute appropriate circumstances to award indemnity costs must be fact-sensitive. The conduct of the party against whom indemnity costs are sought is cogently relevant. Thus, where the proceedings in question should never have been brought or defended but the party nevertheless unreasonably and unjustifiably persisted, he may well be visited with indemnity costs.

(6) In this regard, the threshold is high. The paying party’s conduct must be “unreasonable to a high degree”, and not merely wrong in hindsight.

See Commissioner of Inland Revenue v Poon Cho Ming, John (2020) 23 HKCFAR 74 paragraph 4 (Bokhary NPJ); Huge Dragon Corp Ltd v Lung Mun Oasis [2014] 3 HKLRD 286 paragraphs 12-13 (Poon J, as he then was); Heung Wing Yan v Hangway Housing Management Ltd v Ors (HCPI 347/2012, 14 February 2017) (DHCJ Marlene Ng, as she then was).

46.  I consider that the Plaintiff should get the costs of P’s Discovery Summons. It has now obtained the 2016 Report, and only obtained it after the Defendant gave its consent on 2 November 2023 (see paragraphs 38-39 above). This was almost 5 months after P’s Discovery Summons was issued and 3 months after Mr Wong’s Affidavit was filed.

47.  I do not accept the contention that the Plaintiff must at all material times have had access to the 2016 Report without having to take out P’s Discovery Summons. This is a serious allegation (to the effect that both the Plaintiff and Mr Wong were lying to the Court), which the Defendant has no credible basis to support.

48.  To the contrary, the Plaintiff had made clear even before commencing this action that it did not have the 2016 Report and only had the 2016 Summary (see paragraphs 7-10 above).

49.  While the Plaintiff was subsequently in contact with Mr Wong and filed his Affidavit in support of P’s Discovery Summons, I do not find it incredible or unreasonable that Mr Wong should seek the Defendant’s consent before releasing the 2016 Report to the Plaintiff. The reasons for this course, as set out in Mr Wong’s Affidavit (see paragraphs 23-24 above), are eminently reasonable.

50.  This is not in my view contradicted by the act of exhibiting a copy of the cover page and table of contents of the 2016 Report to Mr Wong’s Affidavit (see paragraph 25 above). As the existence of the 2016 Report was so hotly disputed by the Defendant, one can see why the Plaintiff had found it necessary to adduce proof (rather than just have Mr Wong assert) that the 2016 Report (1) exists and (2) is materially different from the 2015 Report.

51.  On whether to award costs to the Plaintiff on an indemnity basis, my considerations are as follows.

52.  For the period between P’s Discovery Summons and Wong’s Affidavit, while I find the Defendant’s conduct confusing (maintaining, on the one hand, the non-existence of the 2016 Report but, on the other hand, leaving unamended its Defence which admits to having instructed SCCC to compile and release the 2016 Report), I do not consider it unreasonable to a high degree.

53.  However, after the filing of Mr Wong’s Affidavit, the Defendant’s conduct does strike the Court as being seriously unreasonable and unjustifiable.

(1) I fail to see why the Defendant persisted in refusing consent to Mr Wong’s release of the 2016 Report (see paragraphs 26-36 above). I do not understand the Defendant to be disputing the relevance of the report to this action. When Mr Wong deposed on affidavit that he would release the report with the Defendant’s consent, the Defendant must know the report was within its power, and has a duty to give discovery of it.

(2) At the very least, as the Plaintiff suggested, the Defendant could have directed Mr Wong to send the 2016 Report to itself first. This would have allowed the Defendant to perform any verification it might deem necessary.

(3) Besides, it was open to the Defendant to give consent while maintaining that neither it nor the MC had ever received the 2016 Report before. This was again suggested by the Plaintiff.

(4) Indeed, had the Defendant believed the Plaintiff to have always had access to the 2016 Report through Mr Wong, it would make no logical sense for the Defendant to withhold consent anyway.

(5) Yet the Defendant took none of these steps to resolve the issue. It further declined the Plaintiff’s proposal for parties to write jointly to SCCC to seek clarification.

(6) It was only almost 3 months after Wong’s Affidavit was filed that the Defendant, without explaining its change of stance, consented to the release of the report. The consent was given without admission of liability or its having prior receipt of the 2016 Report. But the Defendant could have given the same qualified consent much earlier.

(7) In this regard, I have considered the New Affirmations which the Defendant seeks to adduce on a de bene esse basis. They do not offer any reasonable explanation for the Defendant’s delay in giving consent.

(8) Had the Defendant acted more reasonably, this hearing would very likely have been unnecessary. I find the Defendant’s conduct not conducive to the underlying objectives of the Civil Justice Reform.

54.  In the circumstances, it is only just and fair that the Plaintiff should be awarded the costs of P’s Discovery Summons, on a party and party basis up to the filing of Wong’s Affidavit on 11 August 2023 and on an indemnity basis thereafter.

D. D’s Evidence Summons and 2^nd Evidence Summons

55.  As indicated above, I have read on a de bene esse basis the Defendant’s New Affirmations.

56.  I do not consider the New Affirmations useful for the purpose of this hearing. To the contrary, they contain various details and allegations against the Plaintiff and/or Mr Wong which the Defendant either has no cogent basis to support, or cannot expect the Court to be able to resolve at an interlocutory hearing and without giving the Plaintiff a fair opportunity to respond. Some of the factual contentions (such as compilation of reports by SCCC, the MC’s work, and how the deponents did not possess the 2016 Report) hardly call for resolution at this juncture anyway, especially when the Defendant already reserved its position of not having received the 2016 Report before.

57.  The Defendant argues that the New Affirmations are nevertheless useful because it would have to adduce evidence on these matters for the action anyway. Whether these matters are indeed relevant for the trial of this action is not to be determined at this hearing. In any event, parties have yet to file witness statements for trial. If and to the extent that any matter is considered relevant, the proper forum to ventilate the same should be the witness statements.

58.  In the circumstances, I find the Defendant’s attempt to file the New Affirmations unhelpful and unreasonable to a high degree, and warrants dismissal with an order for indemnity costs.

59.  As regards D’s 2^nd Evidence Summons, as its purpose is to file short affirmations correcting typing mistakes in the deponents’ previous affirmations, I am minded to allow the summons with no order as to costs.

E. Summary Assessment and Disposition

60.  Parties have invited the Court to summarily assess costs and filed their respective statements of costs and submissions after the hearing for this purpose.

61.  For the reasons set out above, and having considered the Plaintiff’s statements of costs (on P’s Discovery Summons and D’s New Evidence Summons) and the Defendant’s submissions on them and taking a broad brush approach to the assessment of costs, I order as follows:

(1) Costs of and occasioned by P’s Discovery Summons (including all costs reserved) be payable by the Defendant to the Plaintiff forthwith, on a party and party basis up to the filing of Wong’s Affidavit on 11 August 2023 and on an indemnity basis thereafter, with certificate for counsel, summarily assessed at HK$178,320.

(2) D’s Evidence Summons be dismissed.

(3) Costs of and occasioned by D’s Evidence Summons be payable by the Defendant to the Plaintiff forthwith on an indemnity basis, with certificate for counsel, summarily assessed at HK$62,460.

(4) Leave be granted to the Plaintiff to adduce the 2^nd Affidavit of Chan Chung Yin Victor (and the exhibits thereto), with no order as to the costs of and occasioned by P’s Evidence Summons.

(5) D’s 2^nd Evidence Summons be allowed, with no order as to costs.

62.  I thank counsel for their assistance.