開聯工業中心業主立案法團 v. 北豐有限公司

LDBM 95/2013

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 95 OF 2013

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D E C I S I O N

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1.  This is an argument between the parties concerning the question of costs for this application.

Background

2.  The applicant (“IO”) in this case commenced these proceedings by the filing of a Notice of Application on 8 April 2013 (“NOA”) against the respondent, the owner of Flat 5-10, 9^th Floor, Block B of Hoi Luen Industrial Centre (“the Property”) for unauthorised building works in breach of the Deed of Mutual Covenant (“DMC”) and section 34I of the Building Management Ordinance, Cap 344 (“BMO”).

3.  The unauthorised building works (“UBW”) involved are :

(a) Erecting 2 walls on the corridor outside Flat 7 and 8 of 9^th floor of the Building, a common part of the Building; and

(b) Obstruction of the fire exit by installing an iron gate thereat.

4.  The background of this case leading to the issuance of the NOA is not in dispute.

Respondent’s Contention

5.  Mr Hon for the respondent submitted that the respondent had all along indicated its willingness to deal with the UBW and being a layman, seeking professional advice from the Surveyors is reasonable.  There may be a delay in carrying out the remedial work on the part of the respondent, but it is not an inordinate delay.  Being well aware of the fact that the respondent was taking steps to remedy the complaint, the IO had failed to take a more pro-active approach to follow up on the progress and sort out the matter amicably with the respondent before the NOA was being issued. 

6.  It is the respondent’s stance that costs of this application should be to the respondent.

Applicant’s Contention

7.  Mr Yuen for the IO submitted that the stance taken by the respondent in this case was all along uncooperative and a denial of liability, and even included in the NOO allegations of nuisance, defamation, etc against the applicant which had absolutely no bearing in the present case and out of the jurisdiction of the Lands Tribunal.

8.  Irrespective of its alleged willingness of rectifying the UBW in its reply letters, there is no evidence to show that the respondent had taken action before the NOA :

(a) no evidence as to the opinion of the professional persons allegedly engaged by the respondent in respect of the UBW;

(b) failed to update the applicant of the progress of the respondent’s attempt to remedy the UBW despite further demand letter sent on 6 March 2013;

(c) no evidence as to what had been done by the expert allegedly engaged by the respondent;

(d) no action by the respondent to comply with the BO except for an application for extension of time; and

(e) actual remedial work only commenced since 23 January 2015.

9.  The substantive issue in this application is whether the alleged UBW are unauthorized structures and have occupied the common area.  The respondent had undertaken to rectify the UBW so the applicant should be considered the winning party.

10.  In view of the wrongful conducts of the respondent, it is the submission of Mr Yuen that the applicant should be awarded indemnity costs.  The wrongful conducts  include :

(a) raising of irrelevant matters both in the NOO and the witness statements in respect of allegations of nuisance and defamation;

(b) reliance of the Fire Safety Report in the NOO which has no probative value but to confuse, if not mislead, the Tribunal since the subject matter of the Fire Safety Report did not cover the alleged UBW;

(c) asserting in the NOO that the BD will take no action without evidential basis;

(d) asserting compliance with 2 improvement notices of the Labour Department in the NOO without any particulars; and

(e) no explanation as to why it took so long for the respondent to demolish the UBW and the only inference is that the respondent was simply to procrastinate the matter.

11.  The applicant is asking for costs of this application be to the applicant, with certificate for counsel, to be taxed on an indemnity basis at District Court scale. 

Liability

12.  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 High Court applies, with the necessary modifications, to the award, taxation and recovery of costs in the Tribunal.”

13.  Order 62, rule 3(2) 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.

14.  Order 62, rule 5 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; 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.”

15.  I found the applicant should be entitled to costs of this application on the general principle that costs should follow the event.  I accept the contention that the applicant is the winning party in this case even though the application need not go for trial with an undertaking from the respondent.  The applicant is asking for an injunction against the respondent for the removal of the UBW and eventually the respondent agreed and undertook to remove the same which makes an injunction order no longer necessary.  The applicant had in effect achieved its aim through the court proceedings though not by way of a court order.

16.  I also found the respondent should bear the costs of the applicant in this application on consideration of the conduct of the respondent in this litigation.  The respondent’s defence in this case is devoid of merits.  The defence raised in the NOO is either unsubstantiated or irrelevant to the claim in this case.

17.  The contents of the NOO include 2 parts, namely “Grounds” and “Allegations”.  It is alleged under the Grounds that the respondent had the blessing of the committee of the IO that the UBW were acceptable to them and no action would be taken.  Yet there is nothing to such effect being mentioned in the witness statement of the respondent, least to say to substantiate this bare assertion.  In any event, such a line of defence cannot stand in view of the judgment of The Incorporated Owners of Hoi Luen Industrial Center & Anor v Ohashi Chemical Industries (HK) Ltd [1995] 2 HKC 11 that an incorporated owners “could not have granted expressly to … any owner of any unit in the building the right to act in contravention of the deed of mutual covenant” (at 12 C-D).

18.  As for the “Allegations” raised in the NOO, this includes :

“(i) Complaint to Buildings Department;

(ii) Complaint to Fire Department;

(iii) Complaint to Labour Department;

(iv) The unreasonable and unlawful conduct of the applicant; and

(v) Breach of statutory duty and defamation by the applicant.”

19.  Whether the BD will take any action against the respondent or the respondent had already complied with the notices issued by the Fire Services Department and the Labour Department is neither here nor there.  These government departments are not concerned with the enforcement of the DMC/BMO.  This would not affect the applicant’s right in taking enforcement action under the DMC and/or BMO.  This court failed to see how these allegations can be relevant to the application in this case which is alleging a contravention of the DMC and/or BMO.  The unreasonable and unlawful conduct of the applicant as well as the allegation of breach of statutory duty and defamation are utterly irrelevant to this case and in no way a possible defence to the allegation of the IO in this case. 

20.  And the attitude adopted by the respondent in his dealing with the IO before the NOA concerning the UBW also justified a costs order against the respondent.  The applicant had given ample opportunity to the respondent to remedy the UBW before the NOA. However, the conduct of the respondent before the NOA is only paying lip service to the applicant’s request without any intention of remedying the UBW. There is no evidence to show that the respondent had actually engaged professional persons to investigate the UBW as indicated in the reply letter dated 5 October 2012 and 7 December 2012 until January 2013.

21.  Even though the respondent had the report from the Surveyors confirming the UBW, contrary to the indication in its letter dated 14 January 2013, no action had been taken by the respondent to remedy the same until April 2014 (after the NOA had been issued) when the Surveyor wrote to the BD for an extension of time. There is no explanation forthcoming from the respondent as to why there is such a delay and I do not accept that this is not an inordinate delay.  I agree with Mr Yuen that the conduct of the respondent is minded to procrastinate the matter.

22.  And the failure by the respondent to update the IO of the progress of its effort in the remedial work resulting in the NOA being issued is through no fault on the part of the IO.  Mr Hon’s submission that the IO should take a more pro-active attitude is putting the cart before the horse.

Indemnity Basis

23.  The principles governing the award of costs on indemnity basis have been set out by the Court of Final Appeal in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) [2004] 7 HKCFAR 114, at 123-124:

(i) The court has a broad discretion to determine how costs shall be paid and whether indemnity costs should be ordered under Order 62, rule 28(3) and section 52A of the High Court Ordinance, Cap 4.

(ii) 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 (a firm) & Others [1991] 1 HKLR 177 at 182J, per Godfrey J; Sung Foo Kee Ltd v Pak Lik Co (a firm) [1996] 3 HKC 570 at 575C-D).

(iii) 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.

(iv) The courts have emphasized 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”.

(v) 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.

24.  Given my findings at §§16-22 above, I agree with the applicant that the respondent had acted unreasonably in the conduct of this litigation as well as in the circumstances leading to the litigation.  I found this to be special and unusual feature which makes an award of costs on an indemnity basis appropriate.

The Order

25.  It is ordered that the respondent do pay the applicant costs of this application, to be taxed if not agreed on indemnity basis, at District Court scale with certificate for counsel.