CHOW CHUI CHUI AND OTHERS v. KAFULL INTERNATIONAL LTD AND OTHERS

LDBM 299/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 299 OF 2012

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BETWEEN

LDBM 108/2013

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 108 OF 2013

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BETWEEN

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RULING ON COSTS

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1.  Disputes arose between the former and substituting management committee members (to be referred to as “the Former MC Members” and “the Substituting MC Members” respectively) of the Incorporated Owners of Ka Wing Building (“the IO”).  Two applications have been taken out in the Tribunal, they are namely LDBM 108/2013 (“the 108 Application”) and LDBM 299/2012 (“the 299 Application”).

2.  Originally both applications were commenced in the name of the IO, but the “IO” in the two proceedings are represented by differently constituted management committees, both claimed that they have the right to remain in the office.

3.  Three summonses had been taken out by the parties under these two proceedings.  The summons in LDBM 108/2013 (“the 108 Summons”) was heard by me whilst agreement had been reached concerning the two summonses in LDBM 299/2012 leaving only costs to be argued.  The 108 Summons was eventually dismissed with costs to be adjourned for argument upon conclusion of the two Applications.

4.  The Substituting MC submits that they should be entitled to costs on all 3 summonses to be taxed on indemnity basis.  Mr Wu, on behalf of the Former MC suggests that there should be no order as to costs.

Summonses under LDBM 299/2012

5.  One of the summonses under LDBM 299/2012 was taken out by the Substituting MC Members on 12 August 2013 asking to strike out the 299 Application (“the Summons to Strike Out”); the other was about joinder of parties (“the Joinder Summons”) taken out by the Former MC Members on 27 September 2013 asking individual members of the Former MC be joined as applicants.

6.  By the Summons to Strike Out the Substituting MC Members asked that the 299 Application be struck out as the proceedings should not have been taken out in the name of the IO.  By the Joinder Summons, leave was sought for the Former MC Members to be joined as the 1^st to 6^th Applicants as individual applicants and the IO to remain as a nominal applicant numbered 7. 

7.  At the hearing of the Summonses the Substituting MC Members did not oppose to the Joinder Summons but said that costs should be assessed on indemnity basis.  It also asked for leave to withdraw the Summons to Strike Out subject to costs to be argued as the Joinder Summons was an answer to their contention.  Leave was granted for the Substituting MC Members to withdraw the Summons to Strike Out; and 6 members of the Former MC were ordered to be joined as applicants in the 299 Application.  The 2 Summonses under the 299 Application were therefore disposed of except for the issue on costs.

8.  In support of his contention that not only costs should be awarded, they should be taxed on indemnity basis, Mr Poon submitted that:

(i)	It is trite that where a dispute is essentially among members of the IO, the members should sue and be sued in their own names, and be personally liable for the costs of the proceedings. Having been put on notice of this principle, the applicants in the 299 Applicationrefused to rectify the situation until the Summons to Strike out was issued.
(ii)	The Former MC should be ordered to pay indemnity costs because of their abusive conduct. The following conduct of the Former MC was an abuse of process:
	(a)	Applicaiton was brought by the Former MC Members using the name of the IO.  This was unreasonable and improper;it was vexatious and oppressive conduct to hide behind the IO and sue in the name of IO.  It is neither fair nor reasonable to expect the members of the Substituting MC Members to be required to pay the costs of arguing for the correct position out of their own pockets.
	(b)	The domestic owners are always in the minorityholding in total 70 shares out of 155as compared to the non-domestic owners.It is improper and irresponsible conduct for the Former MC to leave in the middle of the meeting when knowing that they could not win by proper voting.
	(c)	Yet, the Former MC Members deemed it fit to challenge the validity of the resolutions, not in their own names, but in the name of the IO.
	(d)	Chow lied about whether she had declared the Meeting ended when she was giving the witness statement.
	(e)	Withholding properties and documents of the IO causing difficulties for the Substituting MC to function and yet abstained from dealing with the affairs of the IO thus jeopardizing the interest of the IO and the owners.
	(f)	It is extremely unreasonable for C&K to suggest that costs be in the cause which necessitated the rejection by B&M of this suggestion and issued a summons to compel the substitution/addition of parties and the strike out application.

Discussion

9.  In Town Planning Board v. Society for Protection of the Harbour Ltd. (2004) 7 HKCFAR 114 the Court of Final Appeal upheld the decision of Chu J, as she then was, in awarding costs on an indemnity basis.  The principle that “the successful party should show, in order to obtain an order for costs on indemnity basis, that the case has some ‘special or unusual feature’” was confirmed.  The following passages are relevant:

“The nature of the discretion to award costs
12.	Order 62 r.28(3) is to be seen in the context of s.52A of the High Court Ordinance, Cap. 4, which provides that:
	“the Court shall have full power to determine by whom and to what extent the costs are to be paid.”
	The court therefore has a broad discretion to determine how costs shall be paid and whether indemnity costs should be ordered.
Difference between party and party basis and indemnity basis
13.	In the exercise of the court’s discretion, the usual order for costs made in favour of a successful party in litigation is that the party be awarded costs on a party and party basis.  On a taxation of costs on such a basis, O.62 r.28(2) provides that there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed and the burden is on the receiving party to justify his costs.  In contrast, on a taxation on an indemnity basis, O.62 r.28(4A) provides that all costs are to be allowed except insofar as they are of unreasonable amount or have been unreasonably incurred and any doubts are to be resolved in favour of the receiving party.
14.	Having regard to the different statutory tests, an award of indemnity costs, which is a more generous basis, will usually enable the successful party to recover more of his costs than under a party and party award.  In that sense, an award of indemnity costs may be perceived as achieving a fairer result for the successful party in circumstances such as the present and Chu J was not in error in recognising this point.  Nor was she in error in referring to Petrotrade and McPhilemy, since this point was also recognised in those decisions although they were concerned with r.36.21 of the English Civil Procedure Rules.  See McPhilemy at 943F (per Chadwick LJ).
15.	Chu J rightly recognised that the existence of such difference between an indemnity award and a party and party award is not on its own a sufficient basis for awarding indemnity costs.  Indeed, the courts in this jurisdiction have repeatedly emphasised, correctly in our view, that the successful party should show, in order to obtain an order for costs on an indemnity basis, that the case has some “special or unusual feature” (Overseas Trust Bank Ltd v. Coopers and Lybrand [1991] 1 HKLR 177 at 182J, per Godfrey J; Sung Koo Kee Ltd v. Pak Lik Co. (A Firm) at 575C-D).
Grounds for making an order for indemnity costs
16.	The 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.  (Macmillan v. Bishopsgate Investment Trust Ltd, unreported, judgment delivered 10 December 1993 (Millett J); Disney v. Plummer, unreported, judgment delivered 16 November 1987 (English Court of Appeal)). These decisions and the reasoning on which they were based have been endorsed by the Hong Kong Court of Appeal (Sung Foo Kee Ltd v. Pak Lik Co. (A Firm) at 575E-576F, per Godfrey JA; see also Choy Yee Chun v. Bond Star Development [1997] HKLRD 1327 at 1334G-1335I, per Stock J.)
17.	In these and other cases, courts have emphasised the undesirability of attempting to define the circumstances in which orders for indemnity costs are to be made.  It has been said that
	“the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.” (Macmillan v. Bishopsgate Investment Trust Ltd, per Millett J; Sung Foo Kee Ltd v. Pak Lik Co. (A Firm) at 575E-576F, per Godfrey JA; see also Choy Yee Chun v. Bond Star Development Ltd at 1334G-1335I, per Stock J).
18.	Neither statements of principle nor authority provide any support for the Board’s proposition that the attributes of the parties and the character of the proceedings are irrelevant to the exercise of the discretion to award indemnity costs.  In relation to the award of costs generally, it has been accepted, as Chu J pointed out, that while
	“the grounds [upon which costs are awarded] must be connected with the case.  This may extend to any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation, but no further.” (emphasis supplied) (Scherer v. Counting Instruments Ltd [1986] 1 WLR 615 at 621F, per Buckley LJ). There is no reason why this statement does not apply with equal force to the exercise of the discretion to award indemnity costs.”

10.  Such view was reiterated in a recent case Libertarian Investments Limited v Thomas Alexej Hall, unreported, FACV 14/2012, 11 March 2014 at §6:-

“As this Court made clear in Town Planning Board v Society for Protection of the Harbour Ltd (No 2), the usual order for costs in favour of a successful party is an award on a party and party basis.  An order for costs on an indemnity basis is only considered where the case has some “special or unusual feature”.  The Court’s discretion may be exercised in relation to (but is not limited to) cases “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”.  However, such improper conduct generally relates to the conduct of the litigation rather than conduct which constituted the cause or matter giving rise to the litigation.  Thus, even in contempt cases, there is no general rule that indemnity costs should be awarded against the contemnor, the appropriateness of such an order depending on all the circumstances of the case.  It may be important to consider whether the contemnor’s conduct has resulted in a separate penalty which sufficiently expresses the court’s disapproval; in which case, indemnity costs as an additional penalty may not be justified.”

11.  Having considered the reasons set out by Mr Poon in the light of the above passages, I do not find that there is sufficient reason to support the allegation that the conduct of the Former MC Members are so unreasonable that they should bear costs on an indemnity basis.  I am not satisfied that the interlocutory proceedings in the present applications were scandalous or vexatious, or had been initiated or prosecuted maliciously or for an ulterior motive or in an oppressive manner.  The Former MC Members changed their stance and agreed to amend the Pleadings to the effect that the proceedings would be brought in the names of individual Former MC Members.  I do not see any inordinate delay in such course of action taken by the Former MC Members.  I see no special and unusual features in the 229 Application and the Joinder Summons.  No doubt the Former MC Members have to pay costs of and occasioned by the two summonses as the interlocutory proceedings were made necessary by their using the wrong party to sue at the outset, I do not agree that they have to bear costs on indemnity basis.

The 108 Summons

12.  This summons was taken out by the Former MC Members asking that the individual names of the Substituting MC Members or that the IO is the proper party to bring the 108 Application.  After hearing submissions I dismissed the 108 Summons.  I see no reason to depart from the usual order that costs should follow the event.  For same reasons mentioned above, I order that such costs be taxed on party and party basis if not agreed.

Order

13.  I make the order as follows:-