DISCOVERY BAY SERVICES MANAGEMENT LTD v. HANNON LTD

LDBM 301/2012

THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 301 OF 2012

________________

___________________

DECISION ON COSTS

___________________

1.  On 20 June 2013, I handed down the judgment in this case (“the Judgment”) granting the declarations sought by the applicant (“City Management”). I also made an order nisi that “the costs of and incidental to this application be to City Management to be taxed on District Court scale if not agreed with certificate for counsel”.

2.  This is the application by the respondent (“Hannon”) to vary the order nisi.

3.  By consent, the application is being dealt with on paper.  Both parties have, through their respective counsel, put in written submissions and I have considered them carefully before coming to this decision.

The submissions

4.  Essentially, Hannon is advocating no order as to costs.  Its counsel, Mr Issac Chan, has neatly summarised his submission as follows:

“The Respondent submits that making no order as to costs can better reflect the overall justice in the present case for the following reasons:

(a) The Applicant has abandoned the claim for injunction;

(b) The Applicant has failed on the issue on the validity of proxies executed by individual owners in favour of non-family member…; and

(c) The Applicant had not been reasonable in its conduct leading to the present litigation.”

5.  The primary contention of Mr Kenneth Lam for City Management is that costs should follow the event as City Management has succeeded in getting the declaratory reliefs notwithstanding Hannon’s opposition.  As a fallback, City Management says that it should at the most be deprived of 5% of their costs having regard to the fact that it has succeeded in 4 out of the 6 issues and the time actually spent on the issues.

The law

6.  There is no dispute on the applicable law.

7.  The starting point is section 12(1) of the Lands Tribunal Ordinance (“the Ordinance”) which provides that: “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.”

8.  The Tribunal generally follows the practice and procedure of the Court of First Instance on matters of costs: see section 10(1) of the Ordinance.  Of particular relevance for present purpose are rules 3 and 5 in Order 62 of the Rules of the High Court.

9.  Order 62, rule 3 provides, inter alia, that:

“(1) Subject to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the Court.

(2) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

10.  Costs are within the discretion of the Tribunal.  Since we are dealing with the costs of the application after trial, the starting point is that costs should follow the event unless there are circumstances justifying a departure from the general rule.

11.  Order 62, rule 5 then provides guidance on how the discretion should be exercised:

“(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; and

(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

12.  With respect, I do not find Mr Chan’s submissions convincing.

13.  The thrust of his argument is that City Management had refused to convene another owners’ meeting to deal with the dispute after sufficient number of owners had requested one in pursuance of the Sub-DMC but pushed for adjudication by the Tribunal.  That, according to him, “amounted to a total breach of its obligation under the Sub-DMC” and was unreasonable. 

14.  As I have noted in the Judgment:

(a)   City Management is the manager of Headland Village and enforcer of the Sub-DMC relating to the village.

(b)   There was a genuine dispute on the validity of the owners’ meeting held on 2 August 2012 (“the August meeting”) and its resolutions in terms of the appointment of the 2012/13 Village Owners’ Committee.  The parties herein represented owners on opposing sides of the dispute.

(c)   The dispute centered around 2 main issues: (1) whether the appointment of Mr Wong Fu-Keung by City Management to attend the August meeting was valid (“the appointment issue”); and (2) whether individual owners (as opposed to corporate owners) could send non-family members to attend and vote on their behalf at owners’ meetings (“the representation issue”).  Resolution of these issues required construction of the Sub-DMC and the parties were at a deadlock in that respect.

(d)   Some owners (including Hannon) had requested City Management to convene another owners’ meeting in pursuance of the Sub-DMC to resolve the dispute.

(e)   The Sub-DMC does not prescribe a timeframe for an owners’ meeting to be held after such a request is received and schedule 3 of the Building Management Ordinance does not apply.

(d)   There was a practical need for judicial intervention, for otherwise the same dispute (especially the representation issue) might crop up and plague any future owners’ meetings.

15.  No one has disputed these findings.  If City Management had acceded to the request and proceeded to convene another owners’ meeting, chances are the meeting might end up in dispute like the August meeting.  Even if City Management managed to hold another owners’ meeting, there is no guarantee that any resolution of the meeting would be acceptable to both sides.  This is particularly so because City Management is not bound by any resolution passed at owners’ meetings: see Sub-DMC, Section VIII, Part A, clause 14.

16.  It must be appreciated that prior to the commencement of this case, Hannon had been threatening with legal actions with deadlines.  In a letter dated 7 August 2012 from Hannan’s solicitors to City Management, it was stated that:

“In the above circumstances, we are instructed to demand you, within 7 days from the date of this letter, to notify all Headland Owners that the alleged 2^nd AGM was invalid and the alleged appointment of the Headland VOC members was null and void.  Failing which, our client has no alternative but to institute legal actions in the Courts of Hong Kong against you and the alleged new Headland VOC members and for a declaration that the alleged resolution passed at the 2^nd AGM was null and void.  Further, the alleged new Headland VOC members be restrained from attending any Headland VOC meetings and City Owners’ Committee (“COC”) meetings in their alleged capacity as members of the Headland VOC; otherwise, our client shall apply for an injunction against them to do so.”

And in the letter dated 15 October 2013 accompanying the 78 written requests for another owners’ meeting, Mr Burns (Hannon’s director) expressed that:

“I write on behalf of 78 Owners, representing 30% of the Owners of Headland Village, to request that the Manager convene a Meeting of Village Owners on 3^rd November, 2012, 10:00am at the Discovery Bay Office Centre to conduct the following business:

1) To declare that the resolutions passed at the annual general meeting held on 2 August, 2012, including the purported election of the Village Owners’ Committee (“VOC”), are null and void for failing to comply with the provisions of the Sub-DMC of Headland Village.

2)   Pursuant to Clause 2 of Section VIII of the Sub-DMC of Headland Village, to conduct an election to elect the Chairman, Vice-Chairman and Members of the VOC for the 2012/2013 session.”

17.  In my view, it is important to bear the above background in mind when assessing City Management’s conduct.   

18.  When the case was launched, both the appointment issue and the representation issue were pleaded in the application and there was a prayer for an injunction “to prevent the Respondent from holding any Owners’ meeting on the agenda to invalidate and re-elect the committee members of the said Premises because of the alleged non-compliance of the Sub-DMC on 1st or 8th December 2012”.

19.  The prayer for an injunction was aimed at preserving the status quo until the disposal of the case.  Mr Chan is of course correct when he observes that Hannon (being just an owner) has no power to convene an owners’ meeting and such authority rests with City Management according to the Sub-DMC.  That might have prompted Mr Lam to abandon the injunctive relief at the beginning of the trial.[1]  It would have been unreasonable for City Management to press for an injunction at trial irrespective of the design of the Sub-DMC.

20.  City Management was obliged to plead all the material facts to give the dispute a context when it filed the application and it was necessary to plead both issues.  It is true that City Management has lost the representation issue but Hannon has also lost the appointment issue.  As I have endeavoured to point out in the course of the trial, it is always easy to judge with hindsight.  In my view, City Management’s conduct, both before and after the commencement of this case, was not unreasonable.

21.  The Chief Justice has recently said in Cathay Pacific Airways Limited v Kwan Siu Wa Becky[2]:

“We agree with the appellant’s approach insofar as it ought to be recognized that where discrete issues are raised in an appeal, generally the Court will, as a starting point in determining the question of costs, examine how the parties have succeeded (or failed) on these issues.  The Court will then take an overall view of the matter to arrive at a suitable order.  We use the word “overall” to emphasize that the Court will not generally go into a minute examination of whether each issue and each sub-issue and argument within each issue has been argued successfully or not by the parties.  Usually, an overall view of the justice of the case will serve as the best guide to determine the question of costs.”

22.  It was necessary for me to deal with both issues in order to bring finality to the dispute.  However, it would be difficult to assess if the representation issue is more significant in practical terms (as Mr Chan would have it) or to embark on an examination of the actual time spent on the issues at trial (as advocated by Mr Lam in his fallback position).  In my view, there is no point in making either assessment and “an overall view of the justice of the case will serve as the best guide to determine the question of costs”.

23.  Prior to the implementation of the civil justice reform which brought about the new rules quoted above, the Court of Final Appeal said in relation to the old rules in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114(at para 19) that:

“The fact that proceedings are commenced to vindicate the public interest, more particularly to protect a public asset which is a central element in Hong Kong’s heritage, rather than to assert or enforce some private right or interest, is plainly relevant to the exercise of the discretion. Also relevant is the fact that, but for the commencement of the proceedings by the Society, the public interest in securing compliance with the law would not have prevailed and resulted in the resolution of fundamental legal issues. Likewise relevant are the manifest public importance of the case (the protection of the Harbour) and the Society’s limited finances dependent as they are on public donations.”

24.  The learned editors of the Hong Kong Civil Procedure 2013 have observed that the new rule 5(1)(e) is consistent with the principles discussed in the above-quoted judgment: see Hong Kong Civil Procedure 2013, para 62/5/5.

25.  Of course, the circumstances of this case are very different from the Society for Protection of the Harbour case and no one has applied for indemnity costs here (which is the stare decisis of that case).  Nonetheless, the above quotation serves as a reminder that in appropriate cases the court may look beyond the result and consider if the parties were asserting or enforcing some private right or interest in the proceedings and whether public interest is involved.

26.  In my view, this case is never about private right or interest.  As I have stated above, I do not find City Management unreasonable.  Likewise, Mr Burns (the protagonist for Hannon) was not trying to hold on to his chairmanship of the Village Owners’ Committee either.  Both parties have fought the case amicably with a view to bring about better management of the village. 

27.  I have some sympathy when Mr Chan complains towards the end of his submission that:

“If the Applicant wanted a ‘test case’ for the benefit of future management, there is no reason why the Respondent, as a mere owner, had to bear costs for such a general benefit. It deserves to be repeated that [the representation issue] is the more important point in terms of general benefit, and the Applicant has been wrong on that issue.”

28.  I am satisfied that in the circumstances of this case, I should look beyond the immediate success or failure and be guided by my feel of the overall justice of the case.

Conclusion

29.  For the above reasons, I would set aside the costs order nisi and make no order as to the costs of the application.

30.  As Hannon has not won the argument based on its submissions, I shall make no order as to the costs of this interlocutory application.

31.  Once again, I thank both counsel for their able assistance.