WING MING GARMENT FACTORY LTD v. THE INCORPORATED OWNERS OF WING MING INDUSTRIAL CENTRE

LDBM 89/2018

[2018] HKLdT 88

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 89 OF 2018

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D E C I S I O N

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1.  This is the Respondent’s application for the following:

1) Leave to appeal against my decision dated 17 August 2018 (“the Decision”);

2) A stay of proceedings pending the disposal of the appeal or until further order;

3) There be a general extension of time for the respondent to file a Notice of Opposition, witness statements, relevant documents, expert reports, and a statement of mediation, pending the disposal of the appeal or until further order; and

4) Costs order nisi made on 17 August 2018 be varied.

2.  During August to October 2018, the respondent took out a number of interlocutory applications and amended interlocutory applications seeking leave to appeal. In summary, for the purposes of this decision, the only relevant applications are the interlocutory application dated 31 August 2018 (“the Application”) and the amended interlocutory application dated 3 October 2018 (“the Amended Application”) seeking the orders as set out hereinabove at paragraph 1 and to withdraw the previous applications. Counsel for the applicant did not object to the Amended Application, subject to costs. Costs of the Amended Application was reserved and shall be dealt with in this decision. 

3.  I shall adopt the same abbreviations used in the Decision.

The Law

4.  The background of this case is summarized at paragraphs 2 to 7 of the Decision. I shall not repeat the same.

5.  Section 11AA(6) of the Lands Tribunal Ordinance (Cap 17) provides:

“(6) Leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that—

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

6.  In Ho Yuen Ki Winnie and anor v Ho Hung Sun Stanley and anor, HCMP 1009/2009, (unrep), Le Pichon JA stated at paragraph 16 of the judgment: -

“For leave to be granted, this court must be satisfied that the appeal has ‘reasonable prospects of success’. Merely showing that the appeal is ‘arguable’ and ‘not fanciful’ would not be sufficient. In my view, ‘reasonable prospects’ requires something more and, in that regard, some assistance may be derived from the test applied when setting aside a default judgment.”

7.  In KNM v HTF, HCMP 288/2011, (unrep), Hartmann JJA and Fok JJA stated at paragraph 9: -

“The relevant test of whether an appeal has a reasonable prospect of success under section 63A, is whether the applicant for leave can show that he has an arguable case with reasonable chances of success on appeal. A reasonable prospect of success therefore means an appeal with prospects that are more than ‘fanciful’ but which do not need to be shown to be ‘probable”.

Draft Intended Grounds of Appeal

8.  There are 4 intended grounds of appeal raised by the respondent. I set them out as follows:

1) Ground 1: Erred in law as follows:

a) In holding a management committee cannot be sued as an entity separate and distinct from the incorporated owners in an application under s.31 Building Management Ordinance (Cap 344);

b) In holding the failure to join the individual members of the management committee did not render the proceedings defective such that the Notice of Application should be struck out;

c) In holding it was unnecessary to join the management committee and/or its members to the proceedings; and

d) In refusing to stay/dismiss/strike out the proceedings for being incompetent, frivolous, vexatious and/or abuse of process of the court;

2) Ground 2: Erred in law in holding Sections C4, C5, and paragraph 83(4) of the Notice of Application should not be struck out;

3) Ground 3: Erred in law as follows:

a) In holding the Lands Tribunal has exclusive jurisdiction in respect of an application under s.31 Building Management Ordinance (Cap 344); and

b) In holding the present proceedings should not and would not be transferred to the Court of First Instance; and

4) Ground 4: Erred in law in answering the preliminary question as “No”.

Intended Grounds 1 and 4

9.  The matters raised in the draft intended grounds 1 and 4 of the Draft Notice of Appeal have already been canvassed in the Decision. In so far as the issues raised in the Draft Notice of Appeal are dealt with in the Decision, I shall not repeat the same herein.

10.  Mr Cooney for the respondent raised 2 further matters:

1) He submitted the Decision has failed to deal with the case of Leung Ho Sing and others v Shum Yiu Tung and others, (unrep), CACV 108/2006; and

2) There are 2 lines of authority on whether the management committee can be sued as a separate and distinct entity. Due there being conflicting authorities on the same issue, leave to appeal should be granted.

11.  Though I accept I should have set out clearly why I distinguished the case of Leung Ho Sing in arriving at my Decision, I did not find the said authority applicable to the present case.

12.  Mr Cooney submitted the case of Leung Ho Sing stands for the proposition that “in a s.31 BMO application, all members of the management committee must be joined; otherwise the proceedings are not competent”: see paragraph 7 of the respondent’s skeleton submissions. However, I do not find the case to stand for such a general proposition.

13.  I am of the view that on a proper reading of the judgment of Leung Ho Sing, the Court of Appeal did not lay down, as a general rule, the incorporated owners andall members of the management committee must be made parties to every s.31 BMO application.

14.  The 6^th applicant in Leung Ho Sing sought, inter alia, an order for the appointment of an administrator, and injunctive relief against the respondents (the office bearers of the management committee) seeking to prohibit them from being re-elected into the new management committee. However, neither the incorporated owners nor the members of the management committee were made parties to those proceedings. In other words, none of the proper parties were made parties to the proceedings. The Court of Appeal simply did not have the any of the proper parties in its presence to make a determination which would be binding on the parties that it should be binding on. It is on this basis the Court of Appeal found the appeal to be incompetent by reason of the non-joinder of proper parties.  

15.  Mr Cooney further submitted the tribunal should examine the first tier decision of Leung Ho Sing (LDBM 153/2005) given by Deputy District Judge M Wong (as he then was) and submitted that the cases cited at first instance stand for the general proposition the management committee members must be added to s.31 BMO application.

16.  Deputy District Judge M Wong (as he then was) cited the authority of Fidelity Realty Ltd v Management Committee of the Incorporated Owners of Hong Chiang Building & Others [2005] 1 HKLRD 309 and Wong Wai Chun v Shing Sau Wan, (unrep), CACV 173 of 2004, in coming to the conclusion that the incorporated owners and all members of the management committee should be made respondents in his case.

17.  I do not find the case of Fidelity Realty Ltd to stand for the general proposition as expounded by Mr Cooney. I noted HH Judge Chan (as he then was) in Fidelity Realty Ltd at paragraph 12 stated the following:

“For the above reasons, it is wrong to name a management committee as a respondent as it is not a legal person which is capable of being sued. If a claim or allegation is being made against a corporation, the corporation should be sued. If it is only a battle between different groups of members of the corporation, the members should be named as parties.” (own emphasis added).

18.  Whether the proper parties are before the tribunal in a s.31 BMO application must turn on the relief sought by the applicant. No doubt, where injunctive relief is sought against the individual members of a management committee, the members must be made parties to the proceedings.

19.  As set out in the Decision, the allegations made by the applicant in the Notice of Application are directed at the “incompetency” of the IO. The allegations made against the management committee are targeted at the IO acting through the management committee as opposed to the individual members of the management committee. In such circumstances, the IO must be the proper party to the proceedings. There being no dispute between the parties that the respondent (the IO) is a proper party to the proceedings and is already a party to the proceedings, I fail to see how the case of Leung Ho Sing is analogous to the present case.

20.  As for the second case of Wong Wai Chun cited by Deputy District Judge M Wong (as he then was), the Court of Appeal in Wong Wai Chun dismissed the appeal because the applicant of that case sued the chairlady of the management committee only. Like the case of Leung Ho Sing, the incorporated owners of the Wong Wai Chun case was not made a party to the proceedings. Since the applicant of the Wong Wai Chun case sought orders from the court that were contrary to the resolutions validly passed by the incorporated owners, it was necessary for the incorporated owners to be a party to the proceedings before the orders sought could have any binding effect and could be effective.

21.  Neither of the 2 cases cited by Deputy District Judge M Wong (as he then was) stood for the proposition that all members of the management committee must be made parties to a s.31 BMO application. In fact, the case of Fidelity Realty Ltd clearly states that if the claim or allegations are made against the IO, the IO is the proper party to be sued.

22.  I have already set out my reasons at paragraph 19 and 20 of the Decision as to why I disagree the members of the management committee were necessary parties to the proceedings (such that their absence would render the proceedings defective). I have already stated that if the members of the management committee wish to testify or wish to be added as a party, that is a different matter altogether. At this present stage of the proceedings, and on a proper reading of the allegations made by the application against the IO, there is no specific allegation of fraud or dishonesty against a specific member of the management committee. If, as the case progresses, there are specific allegations of fraud and dishonesty against a specific member of the management committee, that again would be a different scenario. Given the Notice of Application as it now stands, I fail to see how the respondent’s submissions relating to necessary parties are substantiated.

23.  Since there is at least one proper party to the proceedings before this tribunal, and, unlike Leung Ho Sing, the applicant of the present case does not seek any injunctive relief against the management committee or its members, I found the Leung Ho Sing case to be distinguishable from the present proceedings.  

24.  In respect of Mr Cooney’s submission that there are 2 lines of authority on whether the management committee can be sued as a separate and distinct entity from the incorporated owners, I disagree with Mr Cooney’s reading of the Leung Ho Sing case. Nowhere in the Leung Ho Sing case does the Court of Appeal suggest the management committee itself should be joined as a party. The reference made by Hon Yuen JA in the discussion about joinder was to the members of the management committee. As can be seen at paragraph 12 of the judgment, Hon Yuen JA states:

“Accordingly in the absence of the other members of the Management Committee and the IO, the appeal was not competent.”

25.  I therefore find no reasonable prospects of success in the intended grounds 1 and 4 of the Draft Notice of Appeal and I do not find there to be some other reason in the interests of justice why the appeal should be heard.

Intended Ground 2

26.  At paragraph 26 of his skeleton submissions, Mr Cooney submitted I have failed to address his submissions regarding this tribunal’s capacity and/or competency to determine whether the IO is in breach of the HCCT order when considering whether the IO has hindered the applicant in its performance of the HCCT order. With respect to Mr Cooney’s submissions, I believe I have dealt with such submissions at paragraphs 24 and 25 of the Decision.

27.  I note the application to strike out Section C5 is not being made on the basis the applicant has failed to provide further and better particulars relating to the allegations of dishonesty or fraud. The application to strike out the relevant section is premised on the fact that the Lands Tribunal is not a proper forum to adjudicate the underlying facts.

28.  As I have set out in the Decision, the duty of this tribunal is to consider whether or not the complaints are made out and whether the circumstances warrant a dissolution of the management committee. The applicant does not ask the tribunal to decide whether the HCCT order has been breached or not, and needless to say, the tribunal is not in a position to make any pronouncements relating to the HCCT Order. The applicant mainly complains the IO has failed to effective steps to carry out or ensure compliance with the HCCT Order. This question is different from whether in fact the IO has breached the said Order.

29.  For reasons set out in paragraphs 22 to 26 of the Decision, I did not accept Sections C4 and C5 of the Notice of Application should be struck out. I shall not repeat the same.

30.  Having heard the respondent’s submissions, I find there to be no reasonable prospects of success on the intended ground 2 of the Draft Notice of Appeal.

Intended Ground 3

31.  In addition to the written submissions made on the intended ground 3 of the Draft Notice of Appeal, Mr Cooney submitted since there has not been any decided case law on the scope or extent of the High Court’s jurisdiction in s.31 BMO applications, leave to appeal should be granted and should be heard in the interests of justice.

32.  An appeal only lies against an order made by the court or tribunal not the reasons giving in a decision or judgment: see paragraph 59/0/11 Hong Kong Civil Procedure 2019. The order in which intended ground 3 relates to is the refusal to transfer the case to the Court of First Instance.  

33.  The decision to transfer is an exercise of discretion. Hence the respondent must demonstrate the discretion was exercised under a mistake of law or misapprehension of facts.

34.  I have set out my reasons for refusing to exercise my discretion to transfer the proceedings in the Decision. My refusal of the transfer application was not based solely on my reasoning relating to the Lands Tribunal’s jurisdiction to grant a s.31 BMO remedy. I gave extensive reasons why, even if the Court of First Instance had jurisdiction to grant the same remedy, I would still refuse the transfer.

35.  The respondent relies on the case of Morpol SA v Blue Anchor Line [2017] 3 HKLRD 501 as authority that a court should look to the underlying cause of action in deciding on whether it has jurisdiction. I am of the view the respondent’s reliance on this authority is misconceived. There is no dispute the High Court has concurrent jurisdiction over matters set in the Tenth Schedule of the BMO. The crux of the matter is whether the High Court has concurrent jurisdiction to grant the remedy set out in s.31 BMO.

36.  S.31 BMO states:

“31. Appointment of administrator by the tribunal

(1) The tribunal may, upon application made to it by—

(a) an owner;

(b) a registered mortgagee (if any);

(c) an administrator; or

(d) the Authority or an authorized officer, (Replaced 27 of 1993 s. 25) dissolve the management committee and appoint an administrator, or remove and replace an administrator, as the case may be.

(2) The tribunal may direct that an administrator appointed under subsection (1) shall hold office for an indefinite period or for a fixed period on such terms and conditions as to remuneration or otherwise as it thinks fit, and the remuneration and expenses of the administrator shall be deemed to be part of the expenses of management of the building under this Ordinance.

(Amended 27 of 1993 s. 42)”

37.  Section 2 BMO clearly defines “tribunal” to mean the Lands Tribunal.

38.  It is clear from above, the express wording of the section dictates that the application under s.31 BMO is to be made before the Lands Tribunal. As I have set out in paragraphs 31 to 33 of the Decision, applying the reasoning in the Court of Appeal case Wong Hing Cheong and anor v Wah E Investment Ltd and anor [2002] 3 HKC 59, this is a remedy created by statute and no equivalent is found in common law. Hence even if the High Court had jurisdiction over the subject matter of the complaint, it would not have jurisdiction to grant the remedy set out in s.31 BMO.

39.  Furthermore, I have not heard any submissions from Mr Cooney explaining how, even if I were to transfer the case to the Court of First Instance, Mr Justice G Lam could be seized of this case and decide whether there has been a breach of the HCCT Order when there has not been any application made under the HCCT case in the Court of First Instance.

40.  For reasons set out in the Decision, I did not accept the present proceedings should be transferred, irrespective of whether or not the Court of First Instance had jurisdiction to grant the remedy in s.31 BMO applications. Furthermore, I do not find the lack of previous decided case law in itself to be a reason for granting leave to appeal, in particular, when my refusal is not based wholly on whether the Court of First Instance has jurisdiction over the remedy sought.

41.  I find there to be no reasonable prospects of success on this intended ground of appeal and do not find there to be some other reason in the interests justice why the appeal should be heard.

42.  For reasons set out above I refuse the respondent’s application of leave to appeal against the Decision. Consequently, the application for a stay of the proceedings and a general time extension pending the disposal of the appeal as set out at paragraphs 1(2) and (3) hereinabove are also refused.

Variation of costs order nisi

43.  I have already set out my reasoning regarding the costs. I have not heard any new submissions that warrant a departure from my original ruling.  

44.  Though Mr Cooney takes objection to my observation that no additional time was spent on the applicant’s summons on the preliminary question, Mr Cooney has not pointed out which parts of the hearing were spent solely on the preliminary issue. Nor has Mr Cooney quantified the additional costs or time spent solely on the preliminary issue.  

45.  In respect of the respondent’s application for striking out, I see no reason why costs should not follow the event. I have set out my reasoning in the Decision which I shall not repeat.  

46.  I therefore see no reason why the costs order should be varied. I therefore order the costs nisi be made absolute. 

Costs of respondent’s application dated 3 October 2018

47.  There is no dispute the respondent is liable to pay the costs of the application dated 3 October 2018. The only dispute is on the quantum. I am of the view that since the summons was merely to replace the Draft Notice of Appeal and the applicant did not object to the applications therein, I am only prepared to award $700. Hence I order the respondent to pay the applicant’s costs of the application dated 3 October 2018 summarily assessed at $700, to be paid forthwith.

Summary

48.  For reasons given hereinabove, I dismiss the respondent’s application dated 31 August 2018. I make a costs order nisi that the respondent pay the applicant’s costs of the respondent’s application dated 31 August 2018 to be summarily assessed on a District Court scale with certificate for counsel. Unless any party applies to vary the cost order within 14 days from the date of this Decision, the cost order shall become absolute. Parties shall propose directions on the submission of the bill of costs within 28 days of the costs order being made absolute.