CHAN KAI KIT v. THE INCORPORATED OWNERS OF DORMIND NDUSTRIAL BUILDING

LDBM 100/2017
[2018] HKLdT 9

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 100 OF 2017

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D E C I S I O N

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1.  This is the application by both the applicant and the respondent for costs of these proceedings.

Background

2.  The applicant is the registered owner of one of the workshops (“A’s Premises”) at Dormind Industrial Building (“Building”) and the respondent is the Incorporated Owners of the Building (“IO”).

3.  In early 2017, in order to have gas supply in A’s Premises, the applicant engaged Kit Fong Engineering Co. (“Kit Fong”), a registered gas contractor with the Hong Kong Electrical and Mechanical Services Department, to make arrangement and conduct works for the installation of a gas pipe in the Premises to be connected to a main gas pipe which is a common facility of the Building (“Proposed Work”).

4.  On 13 February 2017, the applicant had submitted a written application to the IO (B/74) (“the Application”), together with the quotation and plans detailing the works approved by the Hong Kong and China Gas Company Limited (“HKCG”) (B/75-76) for approval of the IO to conduct the Proposed Work.

5.  On 14 February 2017, the IO replied by endorsing on the Application the following (B/78):

『本法團管理委員會今早緊急會議議決暫不批準上述工程 直至改善該單位門口之衛生及違規放置雜物及搬運貨物引(至) 之污    (積) 問題

三個月後視貴單位之改善情況再作考慮』(“the Decision”).

In a gist, the reason for the Decision is the hygienic concern caused by the placing and delivery of goods at the doorway of A’s Premises.

6.  Upon receipt of the Decision, the applicant had sent the following letters to the IO seeking a reconsideration of the Application but met with no response:

a. letter dated 21 February 2017 (B/51-52) stating the nature of business operated at A’s Premises and the reason for the need of gas supply;

b. letter dated 9 March 2017 (B/53-54) urging for a reply; and

c. letter dated 19 April 2017 (B/56) being a pre-action letter giving the IO an ultimatum of 7 days before legal proceedings to be instituted.

7.  The IO had signed on another copy of the Application granting the approval for the Proposed Work and the approval was dated 17 May 2017 (“the Approval”) (B/58).  There is a dispute as to when the Approval was being served or brought to the attention of the applicant.

8.  On 26 May 2017, the applicant commenced this action.  On 20 June 2017, solicitors for the applicant (“A’s Solicitors”) sent a letter to the IO stating that “(S)ince the commencement of the action, we have not heard from you as to your stance of our client’s Application to conduct the works or your view as to how the action should proceed.  In the circumstances, please reply to us within the next 3 days as to your stance as to our client’s Application, failing which we will proceed to fixing a date for the hearing of this action without further notice” (Exhibit A2).  Again, no reply is forthcoming from the IO.

9.  At the first hearing on 11 August 2017, representative of the IO had indicated to this Tribunal that approval had already been given on 17 May 2017 but the applicant denied ever receiving the same.  Case is then stayed pending parties’ attempt for mediation which turned out to be futile.

10.  On 7 September 2017, the IO re-issued the Approval to the applicant (B/82).  On 11 October 2017, solicitors for the IO (“IO’s Solicitors”) suggested by way of letter that the action should be discontinued and there be no order as to costs (B/62).  In a letter dated 12 October 2017, A’s Solicitors asked for the Notice to Act of IO’s Solicitors (B/63).  On 19 October 2017, A’s Solicitors sent a letter to the IO’s Solicitors and denied ever receiving the Approval before it was re-issued reiterating that “you have never given any notice to our client prior to the commencement of the proceedings.  Your approval dated 7 September 2017 is the first approval given to our client regarding the same matter” (B/65) and counter-offered for the IO to pay compensation for the loss arising from the delay in granting the Approval and to pay costs of the proceedings till then. By a letter dated 27 October 2017 (B/66), A’s Solicitors asked the IO to “confirm that it now approves of our client’s earlier application to conduct some works for the provision of gas” and “once your client’s position is of sufficient clarity, we shall withhold further legal proceedings and write to the court to vacate the hearing date on 6 November 2017 and ask for directions to proceed on the issue of costs”.

11.  At the hearing on 6 November 2017, parties agreed that given the Approval issued, the only outstanding matter in this case is the costs of the action since both parties are asking for costs.  Directions were made for the filing and exchange of evidence in support of the application for costs.  In a letter dated 14 November 2017 (B/84), IO’s Solicitors again suggested a discontinuation of the proceedings with no order as to costs but such proposal was declined by A’s Solicitors in the letter dated 17 November 2017 (Exhibit A1).

12.  Parties had filed their evidence as a result.  The applicant relied on the evidence of himself (B/45-67), Mr Man (representative who signed the sub-tenancy of A’s Premises for and on behalf of Wealthy Boom Investment Limited) (B/33-36), Mr Leung (business partner of Mr Man in Wealthy Boom Investment Limited) (B/29-32) and Mr Kan (worker at A’s Premises) (B/37-40).  The IO relied on the evidence of Mr Mok (secretary of the management committee) (B/68-86).

13.  The applicant’s case is that Mr Mok handed over the Approval to Mr Leung on 30 May 2017 and asked him to convey the same to the applicant.  Since Mr Leung did not know the applicant, he called Mr Man who told him to leave the Approval at A’s Premises so the applicant can go back to pick up the same.  On 31 May 2017, Mr Leung left the Approval at A’s Premises.  Mr Man also told Mr Kan of the arrangement and Mr Kan confirmed that Mr Leung left the Approval with him on 31 May 2017 and Mr Kan called the applicant on 1 June 2017 and told the applicant of the same.  The applicant went to A’s Premises and got the Approval on 2 June 2017.

14.  Mr Mok’s evidence is that since there was no document regarding the safety of the use of town gas and not aware as to the nature of the business conducted at A’s Premises, the IO was concerned with the safety issue and need time to investigate into the matter including consulting the owner of 5th floor to work out the connection of gas supply installation from 5th floor to A’s Premises.  So the Decision was to reflect the safety concern since the area outside A’s Premises is always crowded with or blocked by goods.  It took the IO 3 months to complete the investigation and on 17 May 2017, the management committee decided to approve the Application and Mr Mok signed the Approval.  When he was about to go to A’s Premises to deliver the Approval, Mr Leung, claimed to be one of the tenants of A’s Premises, coincidentally came in to enquire about the outcome of the Application.  Mr Mok told Mr Leung of the Approval and Mr Leung agreed to pass the Approval to the applicant.  Mr Mok then handed over the Approval to Mr Leung.  This was done in the presence of a Mr Ho Ting Yee, the officer-in-charge of the Building.  The IO was surprised to receive the Notice of Application in this case on 26 May 2017.

Applicant’s Case

15.  Mr Law for the applicant relied on 3 grounds in support of the costs application, namely:

a. the applicant is the successful party in this case since the Approval only comes after the institution of these proceedings;

b. merits of IO’s defence in the validity of the meeting on 14 February 2017 and the validity of the service of the Approval is weak and unarguable; and

c. the conduct of the IO both before and after the proceedings, ie failure to reply to the letters sent by A’s Solicitors and change of stance from hygienic concern in the Decision to safety concern in these proceedings.

16.  The respondent contends that the applicant should not institute these proceedings since he should have knowledge of the Approval before the institution of these proceedings.  The IO had never acted unreasonably in the processing of the Application but rather the pursuance of the case by the applicant after 2 June 2017 (the day when the applicant admitted he had actual knowledge of the Approval) is unreasonable.  Under such circumstances, the IO should have costs of these proceedings.

Legal Principles

17.  Section 12(1) and (7) of the Lands Tribunal Ordinance (“LTO”) provides that:

“(1) The costs of and incidental to all proceedings in the Tribunal are in the discretion of the Tribunal, and the Tribunal has full power to determine by whom and to what extent the costs are to be paid.

(7) Notwithstanding subsection (1) and section 12C but subject to subsection (5) and any rules made by the Chief Justice under section 10(3), Order 62 of the Rules of the High Court applies, with the necessary modifications, to the award, taxation and recovery of costs in the Tribunal.”

18.  Order 62, rule 3(2) of the RHC states the general proposition that costs should follow the event, unless in the circumstances of the case some other order should be made as to the whole or any part of the costs.

19.  Order 62, rule 5 of the RHC reads:

“5(1) The court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account -

(aa) the underlying objectives set out in Order 1A, rule 1;

(a) any such offer of contribution as is mentioned in Order 16, rule 10, which is brought to its attention in pursuance of a reserved right to do so;

(b) any payment of money into court and the amount of such payment;

(c) any written offer made under Order 33, rule 4A(2);

(d) any written offer which is expressed to be ‘without prejudice save as to costs’ and which relates to any issue in the proceedings, but the court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22;

(e) the conduct of all the parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful;

(g) any admissible offer to settle made by a party, which is drawn to the court’s attention.

(2) For the purpose of paragraph (1)(e), the conduct of the parties includes -

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

Discussion

20.  The crux of the issue on costs turns on the factual dispute as to when was the Approval served or brought to the attention of the applicant.  The applicant said that he only received the same on 2 June 2017, ie after the commencement of these proceedings, whilst the IO said that it was served on 17 May 2017, before these proceedings were instituted.

21.  Having considered the evidence of both parties and the documentary evidence in support, I find it more likely than not that the Approval was being served before the institution of these proceedings.

22.  I found the evidence of the applicant and his witnesses unbelievable and unreliable and inconsistent with the position of the applicant as reflected in the correspondence before this hearing.  The applicant had all along denied ever receiving the Approval till it was being re-issued in September 2017.  The denial was still maintained by the applicant at the hearing on 11 August 2017 and in the letter sent to the IO dated 19 October 2017 (B/65) in which it is emphasized that the re-issued Approval “is the first approval given”.  This is apparently inconsistent with the evidence adduced by the applicant in the affirmation filed on 19 January 2018 in support of this costs application, ie the Approval was being received by Mr Leung on 30 May 2017 and only reached the applicant by 2 June 2017.  The change of position is inexcusable and shed light on the credibility of the applicant and his witnesses.  On a balance of probability, I find Mr Mok’s evidence more credible and I accept his evidence.

23.  The applicant commented that it is not specified in Mr Mok’s supporting affirmation as to the date on which the Approval was being handed over to Mr Leung.  Even though this may not be apparent from Mr Mok’s affirmation, it is the IO’s case all along that the Approval was given to the applicant on 17 May 2017 and from reading Mr Mok’s affirmation, it must be the evidence of Mr Mok that after he signed on the Approval and about to deliver the same to A’s Premises, he met Mr Leung.

24.  Mr Law for the applicant had tried to argue that the service of the Approval is invalid in the sense that it was not served in line with the requirement in the Deed of Mutual Covenant (“DMC”) and with invalid service, the Approval should be taken as not served or not effective so even if the applicant had actual notice of the Approval, the applicant is still entitled to commence these proceedings.  Yet, Mr Law also agreed that the challenge as to the validity of service and/or validity of the Approval had never been mentioned in any of the correspondence between the parties.  Such invalidity issue cannot be traced even read between the lines of the correspondence or in the witness statement of the applicant and his witnesses.  This cast doubt as to whether this is really in the mind of the applicant before the written submissions of the applicant. 

25.  Even if, taking the applicant’s case to its highest, the service is invalid in the sense that it is not served in line with the requirement under the DMC, and the applicant only received the same on 2 June 2017, the applicant had already had actual notice of the Approval and this is a fact that cannot be ignored and cannot be negated by the invalid service of the Approval.  Yet, the applicant had elected to deny such a fact in the letter dated 20 June 2017, letter dated 6 July 2017, at the first hearing and at the time when the letter dated 19 October 2017 was being issued.  The denial by the applicant is a blatant lie causing the proceedings to drag on from the respective point of time and such behavior of the applicant should not be ignored and tilted against the applicant in the consideration of costs. 

26.  Mr Law for the applicant also tried to argue that since the Approval was being served by a third party and just a one-page document, the applicant is entitled to clarify the same with the IO and get a confirmation as to whether the Application was actually approved.  Again, Mr Law also conceded that the applicant had sought no confirmation from the IO after receiving the Approval.  Such an argument put forward is not supported by any evidence and cannot be accepted as established.

27.  The argument that the Approval was only served on Mr Leung only is neither here nor there.  It is not in dispute that the Approval can eventually reach the applicant even though it was being handed over to Mr Leung and the applicant had actual notice of the same 2 days after Mr Leung got the Approval.  Can’t see how the service on Mr Leung can be faulted as long as actual notice on the part of the applicant can be established.  In any event, Mr Leung is not a stranger to the Application. Though Mr Leung is trying to paint the picture that he had nothing to do with the operation of the business run at A’s Premises, such business is part of Mr Leung’s joint venture with Mr Man and the business run by the joint venture is the end user of the gas supply to A’s Premises.  Mr Leung would not have adopted such an aloof attitude towards the Application itself even if he is not actually involved in the operation of the business at A’s Premises.  I find Mr Leung’s evidence in this regard unconvincing.  I find it’s more probable than not that Mr Leung, being one of the partner in the joint venture which operated the business at A’s Premises, approached the management office to make enquiry as to the progress of the Application and happened to meet Mr Mok and offered to pass the Approval to the applicant.  And as the sub-tenant of A’s Premises and upon being made aware of the Approval, Mr Leung, apart from alerting Mr Man, must have alerted the applicant as well, being the landlord and the one taking out the Application with the IO.

28.  The attack by the applicant on the IO’s change of stance in the Decision and no reply to the letters sent before commencement of these proceedings is also a red herring. Given the findings that the IO had already granted and conveyed the Approval to the applicant before the commencement of these proceedings, and the change of stance is only known to the applicant shortly before this hearing of the argument on costs, I fail to see how these factors can be relevant in the consideration of costs since the applicant should have never instituted these proceedings.

Conclusion

29.  Since the applicant should not have instituted these proceedings in the first place and had tried to conceal the fact that the Approval had already been given before the commencement of these proceedings leading to unnecessary costs being incurred, the respondent should be entitled to have their costs in these proceedings including the argument on costs, with certificate for counsel, to be taxed if not agreed on District Court scale.

Order

30.  Costs of these proceedings including the argument on costs, be to the respondent, with certificate for counsel, to be taxed if not agreed on District Court scale.