CHUNG SIU KONG AND OTHERS v. KITTY SO & TONG SOLICITORS (a firm)

HCA 496/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 496 OF 2010

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BETWEEN

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DECISION ON COSTS

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The application for injunctive relief

1.  On 12 and 15 April 2010 this court, sitting in its capacity as Duty Judge, heard a summons, ex parte on notice, wherein the plaintiffs, which brought suit in their capacity as six of eight duly appointed representatives of the Owners of Kai Tak Mansion, against the defendant solicitors firm for urgent injunctive relief.

2.  The background details of the dispute are relatively brief.

3.  The Owners of the building, numbering some 302, had entered into a Joint Sale Agreement to effect the sale of Kai Tak Mansion by way of public tender, and the Owners’ representatives had been given rights and powers to give instructions to the defendant firm regarding all matters incidental to the tender.

4.  Clause 4(a) of the Agreement gave the power to the representatives to discuss with and to give instructions to the defendant regarding all matters incidental to the tender.

5.  I was informed that 302 of some 328 owners of Kai Tak Mansion had signed onto the Joint Sale Agreement, and each of the owners had executed an irrevocable Power of Attorney in favour of the elected representatives.

6.  One of the terms of the Joint Sale Agreement permitted the representatives to accept a private offer for the building at any time prior to the tender closing date if the offer reached the reserve price of $1.5 billion, and was otherwise in accordance with the terms of the tender.

7.  There is no need for immediate purposes to depose to greater detail; suffice to say that a private offer was received from an entity known as WSH Ltd to purchase at the sum of $1.5 billion, and that by 31 March 2003, the closing date for tenders, only one tender had been received.

8.  However, by this time it had been realized that there was a latent defect in the title of Owners to be conveyed through the tender, and thus there would be no point for the representatives of owners to purport to accept any such tender because there was no legal way in which the sale could be completed.

9.  Accordingly, the owners’ representatives concentrated on the private offer by WSH Ltd, the latter specifically having requested, as a negotiating condition, that the existing ‑ and only ‑ tender not be opened.

10.  Accordingly the plaintiffs decided not to open the tender, and to request its return unopened from the defendant firm (which held the document), a decision which was communicated to the defendant on 31 March 2010, and repeated in a written resolution of the representatives, acting through the six plaintiffs, dated 10 April 2010, and sent to the defendant on the following day.

11.  Nevertheless the defendant firm declined to act on the instructions as thus given by the representatives, and indicated that they intended to accede to the request of some individual owners to open the sole existing tender, insisting that it was the right of those owners so to request.

12.  Hence this application for injunctive relief came before this court on an urgent basis, two hearings taking place, on Monday 12 April and Thursday 15 April 2010, with leading and junior counsel (Mr Alan Leong SC and Mr Alfred Cheng) representing the plaintiffs, and senior junior counsel (Mr Benjamin Chain) representing the defendant solicitors’ firm.

13.  In a nutshell, Mr Leong SC was asking for an Order of this court that the tender in question, which had been stipulated by the private offeror be not opened, should be returned unopened by the defendant firm to the plaintiffs.

Resolution of the dispute

14.  Upon the defendant’s undertaking that, absent agreement of the plaintiffs, the defendant would not open the tender until further order, the initial hearing was adjourned for argument three days later.

15.  However, the essential bone of contention between the parties, namely whether the plaintiffs legitimately could demand from the defendant the return of the tender unopened, was an issue which remained undecided by the court.

16.  That which actually happened was the termination of the retainer of the defendant firm to act as the solicitors for all owners who were signatories to the Agreement signed on 27 March 2009 in relation to the joint sale of No’s 53, 53A, 55, and 55A of Kai Tak Mansions, and as a consequence of such termination the court ordered that the defendant forthwith do deliver up the tender submitted by the sole tenderer regarding the sale of Kai Tak Mansions; in fact, on this order being made the tender was handed over in court by the defendant’s representatives to those acting for the plaintiff.

17.  The matter in issue thus having been resolved, absent substantive decision on the legal merit of the respective substantive arguments concerning the obligation of the defendant firm to return the tender unopened, the sole question remaining was that of the costs of the action and of the application.

18.  In this regard the court ordered that the costs issue be determined after receiving written submissions from either side.

Written costs’ submissions

19.  Consequent upon such order, the court received written submissions on behalf of the defendants under cover of a letter from the defendant firm, Kitty So & Tong, dated 27 April 2010, and from the plaintiff under cover of a letter dated 28 April 2010 from those instructing counsel for the plaintiffs, Anthony Siu & Co.

20.  By consent between the parties, further submissions in response were received from both sides, in each event under cover of a letter dated 30 April 2010.

21.  The respective positions as taken by the parties were not unexpected.  The plaintiffs say that costs should follow the event in that they had achieved what they wanted, and had there not been an application to court for return of the tender, the defendant firm still would have refused to give it up.

22.  The defendant firm disagrees.  The defendant maintains that the firm represented not just the elected representatives, but all 302 owners, and that when there were differences between the owners (with a minority wishing to open the tender) the defendant firm could not act on the desire that it be that the private offer be accepted ‑ and the tender returned unopened as had been requested ‑ without the sanction of the majority unless the representatives were acting within the scope of their authority under the Joint Sale Agreement.  Hence the defendant firm asked for its costs, maintaining that its stance was not unreasonable in the prevailing circumstances.

Decision on Costs 

23.  The court has reflected on this issue.

24.  Sadly, it appears that the resolution of this dispute which seemed to have been achieved ‑ with the tender document itself being handed over from defendant to plaintiffs in the face of the court ‑ is not yet over.

25.  In this connection I have had drawn to my attention a further dispute, in HCA 643 of 2010, which involved an alleged delay by the defendant in the return of title deeds, and which in turn appears to have been resolved prior to the hearing of the relevant summons, but which is the subject of a written decision as to costs rendered by Suffiad J dated 14 May 2010.

26.  In this latter context, this court now has received a letter from the defendant firm, Kitty So & Tong, requesting a transcript as to that which occurred before this court on the afternoon of 15 April 2010.

27.  So, putting it at its lowest there is obviously a degree of bad feeling/lack of co-operation ongoing between these parties.

28.  For my part I was at a loss to understand why, in the particular case with which this court directly was concerned, and wherein counsel of experience were involved on both sides, that at the hearing on 15 April 2010 it had taken the suggestion of the court itself that the solicitors for the plaintiff ‑ who apparently represented all but one of the owners of the building involved – should move to resolve the then-existing dispute as to the return of the unopened tender by the simple (and obvious) device of termination of the defendant firm’s retainer.

29.  This in fact was what occurred, and was a course which Mr Chain, for the defendant firm, termed the ‘Alternative Course’; he made it clear that whilst the defendant accepted that its retainer had been validly terminated ‑ which in turn led to the handing over of the unopened tender ‑ he maintained that whilst the retainer had remained in place in the circumstances the defendant firm legitimately had required a direction from all owners as to how to deal with the tender, and not merely instructions in this regard from the appointed owners’ representatives.

30.  In the event, the merit of this substantive issue was not argued out, since the dispute otherwise practically had been resolved.  In fact, Mr Chain went so far as to say that, notwithstanding the potential for legal argument on the facts as they stood, he was at a loss to understand why the so-called ‘Alternative approach’ in terms of termination of the retainer had not been adopted at the outset, thus saving costs all round, and that accordingly there had been no necessity for the plaintiffs to issue proceedings and to come to court for ex parte on notice injunctive relief.

31.  For his part Mr Leong SC maintained that for all practical purposes in the present case the representatives were the owners, and that the defendant’s argument distinguishing between termination of the retainer on the one hand and the representatives’ instructions as to the return of the unopened tender on the other constituted a distinction without a difference, and a self-serving one at that.

32.  After due consideration, and after weighing all the arguments, both oral and written, I have come to the conclusion that at bottom all this was much ado about relatively little, and that had the defendant firm been in any real doubt about its position in declining, as instructed, to return the tender unopened, it easily could have sought a direction from the court and thus, in effect, ‘covered its back’.

33.  In the event this course did not materialize, there has eventuated a first class inter partes row – which in truth did not require a great deal of ingenuity to settle – for which someone must pay, in part at least.

34.  Accordingly, in all the circumstances and in the exercise of my discretion, in my judgment an appropriate order for costs should be that the plaintiffs do have 50% of the costs of this application for injunctive relief ‑ which, as earlier noted, extended over two hearing days.

35.  I so order.

36.  Such costs are to be taxed if not agreed.  I decline to make an order certifying the matter as fit for 2 counsel.