THE INCORPORATED OWNERS OF SOUTHORN DEVELOPMENT v. DURRANT SIMON PATRICK MICHAEL

DCMP 2266/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS No. 2266 OF 2012

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REASONS  FOR  DECISION

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1.  This is an appeal of the defendant from the decision of a master by way of his summons dated 6 December 2013 (“Summons”). After hearing the parties yesterday afternoon, I dismissed the Summons and I indicated that my written reasons would be handed down on the following day. This I now do.

Background

2.  I should at the outset give an account of the history of these proceedings. This is essentially a mortgage action commenced by an originating summons dated 6 August 2013 (“OS”). The OS was first heard by a master on 22 August 2013 and was adjourned to 7 November 2013 for substantive arguments with directions for filing evidence given. In the absence of evidence properly adduced by the defendant, Master Yip heard the arguments and gave judgment against the defendant on 7 November 2013. 

3.  The defendant took out the Summons on 6 December 2013 to appeal against the Order of Master Yip and ask for a stay pending his appeal. As pointed out by Mr Cheung appearing for the plaintiff, the Summons was issued 2 days late. Given the fact that the delay is minimal and insignificant in all the circumstances, I allowed the defendant to appeal out of time and I should proceed to consider the substantive merit of the defendant’s appeal, which is in the nature of a rehearing.

4.  The parties first came before me for the purpose of the Summons on 10 December 2013. Noting that the defendant had not yet filed any evidence properly and taking into account the defendant was without legal representation, I decided to grant the defendant indulgence and allow the defendant leave to file evidence so that I could dispose of the parties’ dispute on its merit. Thus, I gave directions to the parties as to the filing of evidence. I also expressly adjourned the hearing of the Summons to the morning of 23 December 2013.

5.  The parties having filed evidence after the said hearing, I expected that they would be ready for arguments at the resumed hearing. However, on 23 December 2013, the defendant did not attend the resumed hearing. In his absence, being satisfied that the defendant was aware of the date of the said hearing, this court treated the defendant’s appeal as abandoned and dismissed the Summons with costs to the plaintiff (summarily assessed at HK$9,000). This court further affirmed the Order of Master Yip with minor amendments, allowing the defendant further time to make payment to the plaintiff to avoid a sale of his property by the plaintiff’s solicitors.

6.  On the very same day, the defendant took out a summons to set aside the order I made in the morning. In his supporting affirmation, the defendant explained that he had made a mistake about the hearing time and he quite inexplicably thought the hearing would be held in the afternoon. On 24 December 2013, the defendant also made an ex-parte application for an extension of time to make payment to the plaintiff under the order made by me on 23 December 2013 (“my Order”).

7.  My Order has not yet been perfected. This court has jurisdiction to set aside my Order and rehear the Summons pursuant to Order 32 rule 5(3), Rules of the District Court (“RDC”). Mr Cheung very sensibly did not oppose the exercise of my discretion in favour of the defendant so that his appeal could be determined on its merit. I therefore set aside my Order save that the defendant remains liable to pay costs to the plaintiff in respect of the hearing on 23 December 2013 summarily assessed at HK$2,000. I allow HK$2,000 for Mr Cheung’s hourly rate and the assessed costs cover the plaintiff’s solicitors’ fee for the 30-minute hearing and their prior preparation work.  For completeness, I should mention that the ex-parte application of the defendant has therefore become academic.

The Plaintiff’s Position

8.  The defendant is the registered owner of a flat (“Property”) located on the 42th floor of Southorn Garden (“Building”), Wanchai, Hong Kong and the plaintiff is the Incorporated Owners of the Building.

9.  The Property is subject to a Deed of Mutual Covenant dated 22 August 1988 registered in the Land Registry (“DMC”). The DMC contains the following provisions which are of particular relevance to these proceedings:

Clause 5(3): In the event of any Owner (save and except F.S.I.) failing to pay any sum payable by him in accordance with the provisions of this Deed or to pay any damages awarded by any court or tribunal for breach of any of the terms or conditions of this Deed within 30 days of the date on which the same become payable, the amount thereof including without limiting the generality of the foregoing, the interest payable thereon as aforesaid, the said collection charge and all other charges and all other costs and expenses which my be incurred in recovering the same shall stand charged on the Share or Shares of the defaulting Owner and the Manager shall be entitled without prejudice to any other remedy under this Deed or otherwise to register a Memorial of such charge in the Land Office and the Companies Registry (if applicable) against the Share or Shares of the defaulting Owner and against such defaulting Owner (if applicable). Such charge shall remain valid and enforceable as hereinafter mentioned notwithstanding that judgment has been obtained for the amount thereof unless and until such judgment has been satisfied.

Clause 5(4): Any charge registered in accordance with the last preceding paragraph shall be enforceable as an equitable charge by action at the suit of the Manager for an Order for sale of the Share or Shares of the defaulting Owner together with the right to hold use and occupy the Unit or Units held therewith and the provisions of sub-clause (2) of this clause 5, shall apply equally to any such action. Any such equitable charge shall rank in priority to any legal or equitable charge given or made by the Owner in respect of such Share or Shares and the Unit or Units held therewith notwithstanding that such other charge shall have been created and registered prior to such equitable charge.

10.  The defendant has refused to pay management fees since March 2010. The plaintiff’s manager, MTR Corporation Limited (“MTR”), commenced a recovery action against the defendant at the Small Claims Tribunal under SCTC 45424/2010.

11.  Eventually, an award in the sum of HK$5,740 plus interest and costs (“Award”) was granted by the Small Claims Tribunal against the defendant on 3 November 2010.

12.  The defendant having refused to satisfy the Award, pursuant to the DMC, the plaintiff relied on the Award to create a Memorandum of Charge dated 20 April 2011 (“MOC”) and caused the same to be registered against the Property in the Land Registry by Memorial No. 11050603280034 on 6 May 2011.

13.  The plaintiff commenced these proceedings against the defendant to enforce the MOC pursuant to the DMC. Up till the date of the OS, the amount charged under the MOC stood at HK$10,154.30.

14.  The market value of the Property as at the date of the OS was assessed at HK$8.4 million according to a valuation report. There are other charges registered against the Property.

15.  The foregoing information is gleaned from the documents exhibited to the affirmation of Choi Kwok Lam filed in support of the OS.  

The defendant’s position

16.  The defendant did not file any evidence to challenge the veracity of such facts. Actually the defendant confirmed at the hearing that he has refused to pay his outstanding management fees and the Award.

17.  The defendant’s contention is, in a nutshell, that he is not liable to pay the plaintiff any management fees under the DMC owing to an assault victimizing him in May 2010. The defendant alleges that a security guard employed by MTR at the lift lobby of the Building assaulted him when he was waiting for a lift. He contends that the plaintiff has failed to fulfill its fiduciary duty owed to him as an owner of the Property under the DMC in addition to its common law duty of care to carry out prompt investigation into the alleged assault and it was only after an year in or about May 2011 that the MTR wrote to the defendant to report to him that a warning was administered on the security guard after his numerous complaints. The defendant says the plaintiff has failed to act in the best interests of all the owners and he claims that he being a westerner in Hong Kong was racially discriminated by the plaintiff. He contends that the plaintiff’s failure to fulfill its obligations under the DMC renders the DMC void. He maintains that the plaintiff does not come to court with clean hands and hence has violated the maxims of equity.

18.  He further says that the security guard is still on duty at the Building and there is no reason why he should pay for the salary of such a person having assaulted him.

19.  At the hearing, the defendant indicated that he was preoccupied with other matters immediately after the alleged assault and so he did not report the matter to the police. He only repeatedly complained to the plaintiff. He said he at a later stage made a report to the authority but he did not have any documentary evidence relating to the alleged report.

20.  As regards the Award, the defendant claims that he was only aware of the proceedings in the Small Awards Tribunal after the Award was served on him by the plaintiff. Be that as it may, he made no attempt to appeal against the Award in the High Court.

21.  Lastly, the defendant asserts that the Property is now worth more than HK$10 million.

Analysis

22.  Even if I accept that there was such an assault, and that the plaintiff was ever in breach of its duty under the DMC (which I do not accept), I cannot agree that the DMC would thereby be rendered void and thus the defendant can be absolved from his duty to pay management fees.

23.  The validity of the Award and hence that of the MOC are beyond question in my judgment. Nothing advanced by the defendant can convince me that the plaintiff should not be entitled to enforce the MOC pursuant to the DMC.

24.  In regard to the alleged assault and the alleged breach of the plaintiff of the DMC and/or other alleged torts committed by the plaintiff, I note that there is no counterclaim mounted by the defendant pursuant to Order 28 rule 7, RDC. In any event, I do not accept that they could, singularly or cumulatively, constitute an equitable set-off against the plaintiff’s claim.

Conclusion and Orders

25.  In the result, I agree with Master Yip that the plaintiff is entitled to the relief set out in the OS. I accordingly dismissed the defendant’s appeal by way of the Summons. I have made an order in terms of the OS with some minor modifications to the effect that the defendant now has a new deadline, i.e. 8 January 2014 to pay the plaintiff all money and interest due and owing to the plaintiff under the MOC and that paragraphs 2 to 5 of the OS relating to the sale of the Property are expressly conditional upon the default of the defendant to make such payment under paragraph 1 thereof.

26.  Costs should follow the event. The defendant is to pay the plaintiff summarily assessed costs of this action HK$9,000. For the avoidance of doubt, this amount does not include the costs of HK$2,000 relating to the hearing of 23 December 2013. In total, the defendant has to pay the plaintiff costs in the amount of HK$11,000.