THE INCORPORATED OWNERS OF MORLITE BUILDING v. ASIA CENTURY LTD AND OTHERS

HCMP 1801/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1801 OF 2014

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JUDGMENT
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Background

1.  This is the hearing of an Originating Summons issued by the plaintiff (“the IO”) against four defendants.  It relates to an industrial building in Kwun Tong named Morlite Building (“the Building”).  The four defendants are corporate vehicles used by the same investor to hold undivided shares together with the exclusive right to use and enjoy:

(i) a workshop on the 1^st Floor;

(ii) the whole of 3^rd Floor;

(iii) Workshops A and B on 5^th Floor; and

(iv) “the exclusive right and privilege to hold use occupy and enjoy all those all the staircase heads, all the external walls and other areas that are not intended for common use of the Building to which the First Owner (as original Developer) is entitled under the Deed of Mutual Covenant.” 

2.  Disputes arose between the defendants of the one hand and all other co‑owners of the other.  It is unnecessary to go into details about their disputes which are the subject matter of HCA 1574/2014 (“the Action”).  It is however necessary to set out the events leading to the Action:

(1) According to the IO, the Building was built in 1978 and it all along has a front entrance (“the Disputed Entrance”) facing Hung To Road. The Disputed Entrance is linked up with a corridor (“the Corridor”) which leads to the common facilities of the Building on the Ground Floor including the goods elevator, the management office and the electricity room.  The IO says that the Disputed Entrance and the Corridor are common areas of the Building and are of crucial importance to the Building in that they are:

(i) a major escape route in case of fire outbreaks / emergencies; and

(ii) the sole entrance/exit through which goods are delivered to and collected from the individual units in the Building.

(2) The IO alleges that since the defendants became registered owners of the various units/interests, they attempted to block up the Disputed Entrance and the Corridor by erecting a brick wall.  The IO alleges that the defendants are seeking to harass other owners into selling their units/interests to them.  The blockage resulted in the Fire Services Department issuing a notice dated 26 July 2012 requesting the clearance of the blockage at the Ground Floor exit.

(3) The defendants argue however that the Disputed Entrance is not the front entrance of the Building.  They allege that the Disputed Entrance is a “goods entrance” on the Ground Floor adjacent to the front entrance to the Building.  They say that the front entrance to the Building, which leads to the passenger elevator and the front staircase and provides free access to all floors of the Building, has never been blocked or obstructed.  They say that the Disputed Entrance was created by demolishing part of the external wall on the Ground Floor that faces Hung To Road.  This Disputed Entrance did not appear in the final approved building plan of the Building.  They further say that two goods elevators and a rear staircase are located at the rear side of the Building that faces the back lane.  They provide free access to and from all floors and owners can use them for delivery of goods at all times.  Furthermore, vehicles have free access to the back lane.  The loading and unloading areas of the Building are also situated at the rear side of the Building leading to the back lane.  It is the defendants’ case that by purchasing the 1/10^th undivided shares from the First Owner, the 4^th defendant becomes entitled to the exclusive right to enjoy the external wall.  They describe the Disputed Entrance as a “void” created out of demolition of part of the external wall adjacent to the proper front entrance to the Building.  As for the Corridor, the defendants argue that it consists of two parts: the first part which leads to the exit to the back lane and which leads to the rear staircase is indeed part of the common area; the second part which leads to the Dispute Entrance is not part of the common area.  The defendants argue that they have the exclusive right to use and enjoy the said second part of the Corridor[1].

(4) On 12 September 2012, the 4^th defendant commenced HCA 1658/2012 to assert its rights against all other individual owners (except the 1^st to 3^rd defendants).  The IO was however not made a party.  The 4^th defendant alleged that the other owners of the Building were committing trespassing and prayed for injunctive reliefs.

(5) On 21 February 2013, an owners’ meeting was convened.  Representatives of the defendants attended this meeting and protested against the legality of this meeting.  It can be seen from Resolution 6 that the owners resolved that the IO should apply to join as a third party in HCA 1658/2012.  Resolution 7 then resolved that the IO would participate in legal proceedings to claim back the “emergency exit and/or common part and rely on adverse possession of the external wall”.  It was then further resolved under Resolution 9 that a fund should be raised to cater for legal fees and owner of each undivided share shall contribute $10,000.

(6) On 5 April 2013, a second owners’ meeting was held.  The defendants moved for the cancellation of all resolutions made at the 21 February 2013 owners’ meeting.  The majority of owners voted in favour of confirming the validity of all resolutions passed at the 21 February 2013 owners’ meeting.

(7) Then in or about November 2013, the 4^th defendant discontinued HCA 1658/2012.

(8) On 9 August 2014, the IO instituted the Action against the 4^th defendant herein.  The IO sought two declarations:

(i) that the Disputed Entrance and the Corridor constitute common parts of the Building and the 4^th defendant is not entitled to exclusive possession thereof; and

(ii) that the 4^th defendant’s right to exclusive possession over the external walls of the Building have been extinguished and/or is subject to an easement acquired by the IO.

(9) In the Defence and Counterclaim filed by the 4^th defendant in the Action, the 4^th defendant raised the same arguments as aforesaid and counterclaimed for declarations:

(i) that it is the legal and beneficial owner of the external walls of the Building including the external walls of the Dispute Entrance; and

(ii) that it is the legal and beneficial owner of the second part of the Corridor.

3.  The present Originating Summons was issued by the IO against the four defendants on 24 July 2014.  The IO’s case is that pursuant to the resolutions passed at the owners’ meeting held on 21 February 2013, the 1^st to 3^rd defendants shall each contribute $100,000 to the fund and the 4^th defendant shall contribute $1,000.  Despite repeated requests and demands, the defendants refused to make any payment.  Pursuant to section 19 of the Building Management Ordinance (Cap 344) (“BMO”) and Clauses 14(h) & (i) of the Deed of Mutual Covenants (“DMC”), the IO registered on 21 August 2013 four respective sets of Memorandum of Charge (“the MOCs”) against each of the property owned by the four defendants.  The MOCs were duly registered in the Land Registry.  By the time of the issuance of the Originating Summons, more than 10 months had lapsed and despite repeated requests and demand, the defendants still refused to pay for the indebtedness.  It is also the IO’s case that pursuant to Clause 14(h) of the DMC, the IO is entitled to charge interest at the rate of 1% per month over the indebtedness.  Accordingly, the IO prayed, inter alia, for the following reliefs in the Originating Summons:

(1) an order for sale of the defendants’ interest in the four properties against which the MOCs were respectively registered;

(2) that solicitors for the plaintiff be given conduct of the sale of those properties by appointing CS Auctioneers Limited to sell those properties by way of public auction; and

(3) that the defendants do sign the requisite deeds or documents to effect the sale within 14 days written notice by plaintiff’s solicitors and in the case of non‑compliance, the requisite deeds or documents shall be executed by the Registrar of the High Court pursuant to section 25A of the High Court Ordinance.

4.  Initially, the defendants raised a number of objections in the affirmation of Wong Fung Kuen, a manager of the defendants.  In the Skeleton Arguments filed for the defendants, counsel for the defendants Mr Allen Lam no longer relied on all such grounds.  At the hearing, Mr Lam confirmed that and confined his arguments to the following points:

(1) the indebtednesses were not due and owing under the terms of the DMC upon a proper construction of Clauses 7 and 14(i);

(2) the indebtednesses arose from a resolution of the IO, not under the provisions of the DMC;

(3) the 4^th defendant (whose undivided shares devolves from the First Owner/Developer) is exempted from making any contribution to the expenses for managing the common parts of the Building;

(4) the plaintiff should first obtain a judgment against the defendants before it can register a charge against their respective shares; and

(5) in the circumstances of this case, it is oppressive to make an order of sale.

Construction of the DMC

5.  The DMC contains the following terms:

(1) Recital (5):

“The First Owner and the Second Owner have agreed to enter into this Deed for the purpose of making provisions for the management operation servicing maintenance repair and insurance of the said land and building (all or any of which activities are hereinafter included under the word ‘management’) on the terms and conditions hereinafter mentioned and of defining their respective rights interest and obligations in the said land and the said building in manner hereinafter appearing.”

(2) Clause7:

“All the expenses including but not limited to the following, namely:-

(a) the Crown Rent and all rates and taxes …;

(b) insurance premium …;

(c) the maintenance and repair of the main structure, walls and beams of the said building, the foundation, side walks, exterior scavenging lane, loading and unloading space and main drainage …;

(d) the rebuilding and reinstatement of the said building or any part thereof…;

(e) the cost of cleaning the staircases, passages and common areas;

(f) the cost of disposal of garbage;

(g) the electricity charges for the lighting of and the costs of repairing and maintaining the lighting installation and equipment in the staircase, passage and common areas; and

(h) the cost of maintaining operating repairing and renewing the sewers, drains, walls, water tanks, pumps, pipes, conduits, and all plumbing, fire fighting and other apparatus intended for the general service,

shall be borne and paid by the owners in the proportion to their respective shares in the said land and building for the time being vested in them Provided that the First Owner as the owner of the developer’s share shall be exempted to make contribution to such expenses.”

(3) Clause 8:

“The costs expenses and charges of and incidental to the operating, repairing, maintaining and reinstating the lifts shall be borne and paid by the Owners for the time being of all those portions on the 1^st to 8^th Floors of the said building in the proportion to their respective shares in the said land and building for the time being vested in them Provided that the First owner as the owner of the developer’s share shall be exempted to make contribution to such costs and expenses.”

(4) Clause 14(e):

“Each owner other than the owner of the developer’s share shall deposit with the Manager as security against his liabilities under this Deed the sum of $180.00 for each undivided share …”

(5) Clause 14(f):

“Each owner other than the owner of the developer’s share shall pay to the Manager on account of his share of the costs charges and expenses for or in connection of the management of the said Land and Building the sum of $90.00 per calendar month for each undivided share…”

(6) Clause 14(g):

“If the total contributions payable to the Manager under the last preceding paragraph shall be insufficient to cover all or any of the costs charges and expenses then the owners shall make further contribution towards such expenses in the shares as provided in Clauses 7 and 8 hereof.”

(7) Clause 14(h):

“All amounts which may be or become payable by any owner for the time being of any undivided share … in accordance with the provisions of this Deed and all other expenses incurred in or in connection with recovering or attempting to recover the same shall be recoverable by civil action at the suit of the Manager (and the claim in any such action may include a claim for the legal costs thereof on solicitor-and-client basis of the Manager in such action and the defaulting owner shall in addition to the amount claimed in such action be liable for such costs) and the Manager shall conclusively be deemed to be acting as the agent or agents for and on behalf of all the owners other than the defaulting owner and no owner sued under the provisions of this Deed shall raise or be entitled to raise any defence of want of authority or take objection to the right of the Plaintiff to sue or to recover such amount as may be found to be due.”

(8) Clause 14(i):

“In the event of any owner failing whether willfully or not to pay any sum due and payable by him in accordance with the provisions of this Deed within 30 days of the date on which the same become payable, the amount thereof together with interest thereon at the rate of 1 per cent per month from the date on which the same become payable until actual payment thereof and all costs and expenses which may be incurred in recovering or attempting to recover the same including the legal expenses referred to in sub-paragraph (h) above and in registering the charge hereinafter referred to, shall be charged on the share or shares of the defaulting owner in the said Land and the said Building and the Manager shall be entitled without prejudice to any other remedy or remedies hereunder to register a Memorial of such charge in the Land Office against the share or shares of the defaulting owner. Such charge shall remain valid and enforceable as hereinafter mentioned notwithstanding that judgment has been obtained for the amount thereof provided such judgment has not been satisfied.”

(9) Clause 14(j):

“Any charge registered in accordance with the last preceding sub-paragraph shall be enforceable as an equitable charge by action at the suit of the Manager for an Order for the sale of the share or shares of the defaulting owner…”

(10) Clause 14(k):

“The Manager shall further have the power to commence proceedings for the purpose of enforcing the observance and performance by any owner of any one or more undivided shares in the said Land and Building and any person occupying any part or portion of the said Building or any part or parts thereof under or with the consent of any such owner of the covenants, conditions and provisions of this Deed and of the House Rules made hereunder and of recovering damages for the breach non-observance or non-performance thereof. The provisions of paragraph (h) of this Clause shall apply to all such proceedings.”

6.  Mr Lam argues that the words “all expenses” in Clause 7 must relate to “the management operation servicing maintenance repair and insurance” of the Building as mentioned in Recital (5).  He argues that Clause 7 is the only provision of the DMC whereby individual owners can be asked and demanded to pay and contribute sums of money.  He argues that the payment of $10,000 for each undivided share is for commencing legal proceedings against the 4^th defendant (a) to claim adverse possessory title over all the external walls; and (b) to claim possession of the Corridor.  Mr Lam argues that such claims by the IO cannot possibly be related to “control manage operate maintain and repair the common parts of the Building” because IO’s claim must be premised upon the external walls being the private property of the 4^th defendant which has the sole and exclusive possession of such external walls.  He argues that this is also the premise upon which the IO now seeks an order for sale against the 1/10 undivided share held by the 4^th defendant (together with the sole and exclusive possession of the external walls).  He argues that the IO’s claims involve an assertion of ownership over real property and there is no provision in the DMC empowering the IO to commence legal proceedings to assert legal right over real property owned by another person.  Hence, the defendants were not obliged to make the payments.

7.  Mr Alan Kwong, counsel for the IO argues that the litigations contemplated under the resolution on 21 February 2013 were not confined to the claim for adverse possession.  In fact, an important aspect was to claim that the Disputed Entrance and the Corridor were and are at all material times common parts of the Building.  He submits that the main purpose of defending HCA 1658/2012 and later instigating the Action is to regain control of what the IO asserts as common areas of the Building.  He submits that legal expenses for IO’s contemplated participation in HCA 1658/2012 and the subsequent instigation of the Action are clearly within the meaning of “all expenses” in Clause 7 which are incidental to the control and management of common areas in the Building.  He further submits that the claim for adverse possession is closely related to the “common parts” claim.  It is because the 4^th defendant seeks to reinstate the external wall by erecting a brick wall to block the Disputed Entrance, thereby depriving owners of the use of the Disputed Entrance and the Corridor as common areas for egress and ingress.  This is on the basis that the 4^th defendant claims to have the sole and exclusive enjoyment of all external walls.  The IO therefore also relies on the argument of “adverse possession/easement” over the external walls.

8.  Mr Lam however adopts an austere and technical approach.  He submits that even if IO’s claim for the “common parts” declaration may be related to “control manage operate maintain and repair the common parts of the Building”, IO did not pass separate resolutions for the payment and contribution of expenses for commencing two separate legal proceedings for the “common parts” claim and the “adverse possession/easement” claim.  He submits that the resolution is still invalid.  With respect, I disagree.  In my judgment, in resolving to participate in HCA 1658/2012, the principal objective of the IO was to regain control and management of what the IO considered as common parts of the Building.  It is quite clear from the framing of the 7^th Resolution: “投票議決法團會否以逆權侵佔外牆，及參與收回逃生通道及／或公眾地方的法律訴訟”.  The argument based on adverse possession was considered more of a “means” of achieving the recovery of what the IO considered as common parts of the Building.  After the subsequent discontinuance of HCA 1658/2012 and when the Action was instituted, recovery of the “common parts” remained a major objective.  Furthermore, I accept Mr Kwong’s submission that the two issues are not entirely separate.  I find that the IO’s participation as third party in HCA 1658/2012 and the institution of the Action are both pertaining to its obligation of controlling, maintaining and managing what it considers as common parts of the Building.  Accordingly, legal expenses incurred would fall within the meaning of “all expenses” in Clause 7 of the DMC.  The IO is entitled, under Clause 14(g) to resolve to require each owner to contribute to a fund for the purpose of paying for legal expenses incurred for the said purpose.  In the circumstances, I find that the Resolutions 7 and 9 of the owners’ meeting on 21 February 2013 are valid.  The 1^st to 3^rd defendants’ refusal to pay the contributions constituted a breach of Clause 7 and 14(g) of the DMC.  Furthermore, the contribution (with interest) owing from each of the 1^st to 3^rd defendants was a “sum due and payable by him in accordance with the provisions of this Deed” within the meaning of Clause 14(i) of the DMC.  The case of the 4^th defendant will have to be considered separately hereunder. 

9.  I would also add that in so far as Mr Lam seeks to rely on德昌大廈業主立案法團(炮台街)對唐偉德, CACV 147/98, I am of the view that that case is clearly distinguishable.  In that case, it was common ground that the external wall was not a “common part” of the building.  Hence, the incorporated owners’ attempt to interfere with the use of external wall by the owner of the external wall was held not to constitute “pursuing the common interest of owners”.  In the present case, there is clearly a dispute over whether the Disputed Entrance and the Corridor constitute common parts of the Building.

10.  Having decided on the basis of proper construction of Clause 7 and Clauses 14(g) & (i) of the DMC,  it is strictly speaking not necessary for me to deal with Mr Lam’s second argument that “the indebtednesses arose from a resolution of the IO, not under the provisions of the DMC”.  Since arguments have been ably presented by counsel on both side, I would venture to express my views albeit as obiter.

“Special fund” under BMO

11.  Mr Kwong argues alternatively that even if the contributions from owners resolved under Resolutions 7 and 9 do not fall within Clause 7 of the DMC, they constitute the establishment of a “special fund” pursuant to paragraph 4 of Schedule 7 of BMO.  He relies on section 34E(1) of the BMO which states that “… the provisions in Schedule 7 shall be impliedly incorporated to [every DMC].”  It is also clear under sub‑section (2) that such provisions will prevail over any other provision in the DMC that is inconsistent with them.  Paragraph 4 of Schedule 7 reads:

“4. Special fund

(1) The manager shall establish and maintain a special fund to provide for expenditure of a kind not expect by him to be incurred annually.

(2) If there is a corporation, the corporation shall determine, by a resolution of the owners, the amount to be contributed to the special fund by the owners in any financial year, and the time when those contributions shall be payable.”

12.  Mr Kwong submits that Resolutions 7 and 9 passed at the owners’ meeting were valid under paragraph 4(2) of Schedule 7.  Since this provision has been impliedly incorporated into the DMC, the outstanding contribution from each of the 1^st to 3^rd defendant becomes a “sum due and payable by him in accordance with the provisions of this Deed” within the meaning of Clause 14(i) of the DMC.  Accordingly, the respective charges registered on the interests of 1^st to 3^rd defendants are valid.

13.  Mr Lam argues otherwise.  He submits that raising money for litigation should fall within the ambit of a “contingency fund” under section 20(2) of the BMO.  Since a contingency fund is a creation under the provision of the BMO, it will not be a “sum due and payable by him in accordance with the provisions of this Deed” as provided in Clause 14(i) of the DMC, hence non‑payment would not result in a charge being registered against the interest of the defaulting owner.  Section 20(2) of the BMO reads:

“A corporation may establish and maintain a contingency fund –

(a) to provide for any expenditure of an unexpected or urgent nature; and

(b) to meet any payments of the kind specified in subsection (1) if the fund established thereby is insufficient to meet them.”

14.  Mr Lam then referred me to Chi Kit Co Ltd& anov Lucky Health International Enterprise Ltd (2000) 3 HKCFAR 268 at 277.  I do not find this case of assistance at all.  Litton PJ was simply making very general observation on the fact that under the BMO, the corporation can decide to establish and maintain a contingency fund under section 20(2) to cater for the contingency of possible suits by third parties, eg a visitor injured in the common parts of the building. 

15.  Mr Lam then referred me to J & V Limited v Iss Eastpoint Property Management Ltd & ano, LDBM 242/2009.  In that case, a claimant brought legal proceedings against the incorporated owners.  At an owners’ meeting, a resolution was passed for a sum of $2 million (“Litigation Fund”) to be raised to handle the litigation.  The owners’ meeting did not however resolve as to the details of collection.  It simply left that matter to the Management Committee.  The Management Committee then later resolved to collect from all owners by way of two equal instalments based on the owners’ undivided shares in the building.  The management company then issued demand notes to the applicant for payment.  The applicant denied its liability to pay for the Litigation Fund and argued that under the terms of the DMC, legal expenses should be collected by way of monthly management fees and computed not in accordance with the undivided shares but the proportion specifically stipulated in the DMC.  After a charge was registered against the applicant’s interest, the applicant applied to the Lands Tribunal for the vacation of the charge.  It is to be noted that in that case, the Litigation Fund failed to qualify as a “special fund” under paragraph 4 of Schedule 7 because the procedures stipulated in that paragraph was not complied with, namely, that the owners’ meeting did not resolve “the amount to be contributed to the special fund by the owners in any financial year, and the time when those contributions shall be payable” (see §13 of the judgment).  The learned presiding officer then proceeded to consider whether the Litigation Fund could be valid as a contingency fund under section 20(2) of the BMO.  She concluded that the incorporated owners could rely on section 20(2) for the Litigation Fund to be raised.   Mr Lam relies on this authority as suggesting that in the present case, Resolutions 7 and 9 could only be valid as establishing a “contingency fund”. 

16.  With respect, I do not read the case of J & V Limited as deciding that a litigation fund cannot be raised as a “special fund” under paragraph 4 of Schedule 7.  Speaking for my part, I would have thought that when one speaks of establishing a “contingency fund”, one would be catering for the possibility of some unexpected or urgent events happening in the future.  This is after all the whole idea of a “contingency”.  When a special situation has arisen that calls for gathering of funds to handle it, I would consider it more apt to think in terms of establishing a “special fund” to deal with the situation at hand.  Whether I would agree with the learned presiding officer that the Litigation Fund could be valid pursuant to section 20(2) of the BMO is beside the point.  What the case J & V Limiteddid not decide was whether a litigation fund could be the subject of a “special fund” if the procedural requirements of paragraph 4(2) of Schedule 7 are complied with.  On the plain reading of the provisions, I do not see why not so long as the litigation fund relate to expenditure in the management of the building.  It is axiomatic that such litigation expenditure is not expected to be incurred annually.  In the circumstances, I agree with the submissions of Mr Kwong and reject those of Mr Lam.

The 4^th defendant

17.  Mr Lam relies on the proviso in Clause 7 and submitted that the First Owner was exempted from making contribution to the “expenses”.  Since the 4^th defendant’s 1/10 undivided shares devolved from the First Owner, Mr Lam argues that the 4^th defendant is not obliged to pay the $1,000 contribution.  I can see force in this submission. Mr Kwong relies on the principle of estoppels by convention.  He refers me to First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569 at §79.  He points out that all along, the 4^th defendant had been paying for management fees as demanded.  Mr Lam says there is no evidence as to why the 4^th defendant did so.  It could well be under a mistaken belief or ignorance of the proviso in Clause 7.  He also points out that whilst the 4^th defendant had been willing to pay for ordinary expenses involved in ordinary management of the Building, it is not to assume that it would not assert its right under the said proviso in respect of extraordinary items such as the litigation expenses in this case. On this occasion, I agree with Mr Lam.  The evidence is not sufficient for me to find that there was a shared assumption that the 4^th defendant would not assert its right under the said proviso.  Further, it has not been suggested that the IO had relied upon that alleged assumption to enter into any transaction or legal relationship.  I can see no injustice on the IO when the 4^th defendant chooses to exercise its contractual right under the said proviso.

18.  The irony is: since I have concluded that the contribution to litigation fund falls within the meaning of “expenses” under Clause 7 of the DMC, I have to uphold the 4^th defendant’s entitlement to rely on the exemption in the proviso under Clause 7.  On the other hand, if I were wrong in this construction, I would have held that Resolutions 7 and 9 of the owners’ meeting constituted the establishment of a “special fund”.  If I were to make my determination on this basis, the proviso under Clause 7 would have provided no exemption to the 4^th defendant.  In the end, one cannot blow hot and cold. I therefore conclude that the 4^th defendant is not obliged to pay the $1,000 contribution.  Consequently, the charge registered against the 1/10^th undivided share owned by the 4^th defendant is invalid.  No order for sale should be made in respect of the 4^th defendant. I suggest that the IO do vacate the said charge on its own volition.

The need for judgment prior to registration of charge

19.  This argument of Mr Lam is without merit.  Clause 14(i) clearly stipulated that the non‑payment of “any sum due and payable by him in accordance with the provisions of this Deed within 30 days of the date on which the same became payable” is the triggering event for the right to register a charge.  It is clearly not necessary for the IO to first sue the owner for payment and obtain a judgment against him.  The final sentence of Clause 14(i) puts the matter beyond doubt.  To stipulate that “such charge shall remain valid and enforceable … notwithstanding that judgment has been obtained for the amount thereof…” must be premised upon the ability to register a charge even before legal remedy in form of a judgment could be obtained on the said sum due and payable.

Oppression

20.  Mr Lam argues that the shares and interest held by the 1^st to 3^rd defendants are worth millions of dollars.  The IO’s application for order of sale with a view to pursuing merely $300,000 (plus interest) is wholly disproportional and oppressive.  In the course of the hearing, I asked Mr Kwong whether the IO would be contended to obtain a conditional order for sale, ie, if I were to find in favour of the IO, I would grant 14 days for the defendants to make payment and it is only when they still refuse to pay up that the order for sale shall take effect.  Mr Kwong replied that the IO is more than happy to accept such an arrangement.  In my view, if the order for sale is made upon that basis, there could be no possible oppression on the 1^st to 3^rd defendants. There has not been any suggestion of financial difficulty on their part.  In fact, one can easily see that the defendants put up their stance in these proceedings on a matter of principle.

Conclusion

21.  I therefore order that the 1^st and 3^rd defendants shall each be given 14 days from the date of delivery of this judgment to pay to the IO a sum of $100,000 plus interest at 1% per month from 21 February 2013 to the date of payment.  If the IO does not receive payment from all or any of the three defendants with this time limit, the IO shall be at liberty to enter judgment against the defaulting defendant(s) in terms of prayers 1 to 4 of the Amended Originating Summons (with prayer 1 suitably adjusted with reference only to the defaulting defendant(s)).

Costs

22.  I see no reason to depart from the general rule that costs follow the event.  The IO is the successful party against the 1^st to 3^rd defendants.  The 4^th defendant succeeds against the IO.  I shall make the following orders nisi on costs (to be made absolute if no application for variation is made by any party within 14 days from the date of delivery of judgment):

(i) that the 1^st to 3^rd defendants do pay to the plaintiff costs of the originating summons proceedings, to be taxed on solicitor‑and‑client basis[2], with certificate for counsel for the hearing on 1 September 2015; and

(ii) that the plaintiff do pay to the 4^th defendant costs of the originating summons proceedings, to be taxed on party‑and‑party basis, with certificate for counsel for the hearing on 1 September 2015.