ADDITECH LTD v. TAI CHEUNG MANAGEMENT CO LTD

LDBM 224/2018

[2019] HKLdT 46

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 224 OF 2018

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Written Reasons for Decision

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1.  After hearing the submissions made by the parties’ Counsel, I delivered the reasons for my decision orally pursuant to rule 28 (1) of the Land Tribunal Rules (“LTR”). As the respondent applies leave to appeal against my decision, I now record my oral decision into writing pursuant to rule 28 (2) LTR as follows.

2.  As set out in the margin of the summons filed 3 December 2018, the respondent relies on rule 4(1) of the Lands Tribunal Ordinance (“LTO”) to apply for striking out the following paragraphs of the applicant’s Notice of Application:

(i)  Section D, para. 4 and 5 – The applicant’s claim for damages to be assessed and interest;

(ii)  Section E, para. 38 to 42 – Particulars concerning damages.

3.  To start with, I believe it should be LTR instead of LTO which should be relied on.  Nonetheless, I fail to see the relevancy of rule 4(1) of LTR, which concerns interlocutory procedure but not striking out application.  In any event, I accept that the Lands Tribunal do have the jurisdiction to strike out the Notice of Application or Notice of Opposition[1].

4.  Mr Chan for the respondent submitted that the applicant fails to disclose reasonable cause of action/application.

5.  Parties’ counsel have no dispute that the legal principles for striking out of pleadings are well settled.  I do not think that I need to repeat here. In short, striking out should only be done in plain and obvious cases or in the clearest cases as said in Great Source Enterprise’s case.

6.  The brief background of the case is that the applicant is the registered owner of 1/F to 8/F plus some other additional areas (“the applicant’s Property”) in Peninsula Square (“the Building”).

7.  The respondent is a party to the Deed of Mutual Covenant and Management Agreement (“DMC”) and the Manager of the Building appointed under Clause 9(A) thereof. 

8.  The applicant intends to carry out the following works:-

(i)  re-arrangement of the location of the car parking spaces within some of the floors in the Building owned by the applicant; and

(ii)  conversion of a part of 8/F of the Building from car parking purposes into office use (“the Works”).

9.  For the purpose of this striking out application, I am entitled and have to take the applicant’s case to the highest, which is not disputed by Mr Chan for the respondent.  Hence, I have to assume that the Works affect the applicant’s Property only and will be carried out within the area of the applicant’s Property as pleaded by the applicant in its Notice of Application. No common parts and facilities of the Building will be affected.  The applicant has obtained all necessary approvals from the relevant authorities and government departments, including the Building Authority under the Buildings Ordinance, Cap 123 and Lands Department under the Government lease of the lot upon which the Building is erected, for carrying out the Works.

10.  According to Clause 5 of the DMC and Clause 3 of the Second Schedule thereto, it is not in dispute that since the Works involve alteration of some parts and/or floors of the Building, no matter whether such alteration is a structural alteration or not, the applicant is obliged to obtain the respondent’s consent to carry out the Works.

11.  Pursuant to Clause 9(B)(35) of the DMC, the respondent is responsible for granting the consent and it has the full and unrestricted authority to do so.  In my view, the main issue in dispute is whether the respondent is in breach of its duty under the DMC, in particular Clauses 9(A)(d) and 9(B)(35), to process the applicant’s application for such consent.

12.  Mr Chan for the respondent argued that even if the respondent is in breach of the DMC, just like breach of contract, the applicant is not entitled to claim loss and damages against the respondent.  He relied heavily on many authorities decided in other jurisdictions but none of them decided by HK courts.  With due respect, I totally disagree.  I am of the view that if the respondent is found to unreasonably refuse to grant the necessary consent, subject to strict proof of damages and mitigation by the applicant, the applicant must be entitled to claim loss.  Prima facie, the applicant did suffer from loss of rental as alleged.  Even if no actual loss can be proved after trial, the Tribunal may still award nominal damage against the respondent for breach of DMC, just like breach of contract.

13.  In 383HK Ltd v IO of Tak Bo Building [2017] 4 HKC 142, the plaintiff claimed for damages for breach of the DMC by the defendant IO. Although Deputy High Court Judge Burrell found in favour of the defendant IO but for the sake of completeness, made some findings which would have formed the basis of the calculation of damages had the plaintiff been successful in its claims.

14.  The plaintiff appealed to the Court of Appeal against the judgment of Deputy Judge Burrell.  In paragraph 16 of its judgment at p.566, the Court of Appeal said that:-

“16. The deputy judge also considered a number of other matters which no longer featured in this appeal, including the assessment of damages (in case the plaintiff was successful) for the refusal of the installation of pipes back in 2010. For all those reasons that he gave in his judgment, the deputy judge dismissed the plaintiff’s action and gave judgment to the defendant for a very minor counterclaim.” [Emphasis added]

15.  In my view, this is a clear and binding authority on the Tribunal which affirms that the incorporated owners is liable for damages suffered by an owner of the building if such an owner can prove the breach on the part of the incorporated owners or manager and actual loss suffered.  As agreed by Mr Chan, the issue whether the respondent is in breach of the DMC must be a mixed question of facts and law, which cannot be determined summarily on paper without trial.

16.  I also consider that most of the authorities cited by the respondent, which mainly relates to the landlord and tenant dispute, are irrelevant to the point at all insofar as the present proceedings are concerned, in particular the applicant’s claim for damages in a breach of DMC case.  In short, Mr Chan for the respondent simply fails to cite a direct binding HK authority to support his submission.

17.  Furthermore, as said in para 14 of judgment of Great Source Enterprise’s case, there is a more fundamental reason why the Notice of Application should not be stuck out is the informal nature of the Lands Tribunal proceedings pursuant to s10(5) of LTO.

18.  In the circumstances, I am not satisfied that it is a plain and obvious case to strike out the applicant’s claims for damages due to breach of DMC by the respondent.  I have no doubt to conclude that the respondent’s application be dismissed.

(discussion on costs)

19.  No reason why costs shall not follow event, I order that costs of the application be paid by the respondent to the applicant forthwith with certificate for Counsel.

20.  As to the question whether such costs be taxed at District or High Court scale, I note that the respondent engaged 2 counsel, Mr Chan and Mr Fan and their instructing is claiming $5,800 per hour in his statement of costs. Mr Chan also accepted that this striking out application involves very complicated legal issues, which I agree.  Thus, High Court scale should be allowed.

21.  The applicant claims costs of $298,808, which are summarily assessed at $242,308.