CHUNG SIU KONG AND OTHERS v. KITTY SO & TONG SOLICITORS (a firm)

HCA643/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 643 OF 2010

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DECISION  ON  COSTS

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1. This was originally the hearing of the Inter-partes summons taken out by the plaintiffs dated 7 May 2010, but as matters have turned out, whatever dispute there was originally between the parties have now been resolved and the plaintiffs are prepared to discontinue its action and to withdraw its summons.  The only matter outstanding is one of costs for which this written Decision deals with.

Background

2. Kai Tak Mansion is a building situated at Nos. 53, 53A, 55 and 55A of Kwun Tong Road.  The building is made up of over 300 units, both commercial and residential.

3. The owners of each of the various units in Kai Tak Mansion (collectively “the Owners”) entered into a Joint Sale Agreement dated 27 March 2009 to sell their respective units in Kai Tak Mansion jointly by way of public tender (“the Joint Sale Agreement”).

4. Under the Joint Sale Agreement :

(a)      eight representatives (including all the six plaintiffs herein) were appointed as the representatives of the Owners in relation to the tender and the subsequent sale of Kai Tak Mansion with the express rights and powers conferred upon them by the Owners therein (“the Representatives”); and

(b)     the defendant was named as the solicitors in relation to the tender process and subsequent sale of Kai Tak Mansion.

5. It was an express term of the Joint Sales Agreement that the rights and powers given to the Representatives could be exercised by any five of them jointly.

6. The defendant was duly appointed as solicitors for the purpose under the Joint Sale Agreement.

7. Pursuant to the Joint Sale Agreement, the title deeds and other documents of title relating to the various units in Kai Tak Mansion were delivered by the Owners to the defendant for the tender and subsequent sale of Kai Tak Mansion.

8. Pursuant to the Joint Sale Agreement, two tender invitations were issued for the sale of Kai Tak Mansion.

9. The second tender application closed at noontime on 31 March 2010, but before it closed, the defendant had received one tender contained in a sealed envelope.

10. However, also before the closing time for the second tender, the Representatives had started negotiations with WSH for a private sale of Kai Tak Mansion.  A condition imposed by WSH for the continuation of such negotiations with the Representatives was for any tender received by the defendant to be returned to the tenderer unopened.

11. The plaintiffs instructed the defendant to comply with that condition imposed by WSH, but the defendant did not comply with those instructions.

12. As a result, the plaintiffs instructed Messrs Anthony Siu & Co. and commenced HCA496/2010 against the defendant demanding the delivery of the unopened tender to the plaintiff.

13. That matter came for hearing before Stone J on 15 April 2010 in the morning.

14. During the lunch adjournment on the same day and while the hearing before Stone J was still continuing, the plaintiffs resolved to terminate the retainer of the defendant under the Joint Sale Agreement and informed the defendant of same by letter dated 15 April 2010.

15. In the afternoon when that hearing continued before Stone J., the court was informed of the resolution by the plaintiffs whereby the defendant’s retainer was terminated during the lunch adjournment.  As a result of such developments, Stone J ordered the return of the unopened tender by the defendant.

16. Consequent upon the termination of the defendant’s retainer under the Joint Sale Agreement, the defendant was asked to return and deliver up the title deeds and other title documents of the Owners.

17. Between 15 April 2010 and 6 May 2010, out of the three hundred odd units of properties in Kai Tak Mansion, only 33 sets of title deeds had been returned by the defendant to Messrs Anthony Siu & Co.

18. The Writ of Summons herein with Statement of Claim endorsed was issued by the plaintiffs on 6 May 2010 seeking a declaration that the defendant holds the unreturned title deeds and other documents of title relating to Kai Tak Mansion on trust for the plaintiffs, an injunction for delivery up of same to the plaintiffs or at their direction forthwith, as well as other consequential reliefs.

19. The Inter partes summons herein was issued the following day, i.e. 7 May, seeking a mandatory interlocutory injunction for delivery up of the unreturned title deeds.

20. After the issue of the Writ, the defendant did continue to deliver at intervals the title deeds concerned.

21. By the time of this hearing, I am informed that the defendant has delivered a total of 278 sets of title deeds to Messrs Anthony Siu & Co. (including the 33 sets delivered before the Writ).

22. It is the defendant’s case that they had never been given at any time the title deeds relating to 12 of the units of Kai Tak Mansion, and that the remaining sets of title deeds should not be delivered to Messrs Anthony Siu & Co. for various reasons, either because in some cases the defendant had been directly approached by the individual owner of the units concerned with instructions not to deliver same to Messrs Anthony Siu & Co. or that in other cases the title deeds should properly delivered to the chargee concerned since the property or unit involved had been mortgaged.

23. The plaintiffs are now content with those title deeds already delivered by the defendant to Messrs Anthony Siu & Co, and has indicated that the on that basis the plaintiffs are prepared to discontinue its action herein and withdraw its Inter partes summons.

The dispute relating to costs

24. The plaintiffs ask for costs of the action and also of the Inter partes summons on an indemnity basis upon the grounds that the conduct of the defendant, being a solicitor and therefore an officer of the court, is so reprehensive in delaying the return of the title deeds and taking its time about it that the condemnation by the court should be reflected in the costs order to be made.

25. On the other hand, the defendant submits that costs of the action and of the summons should be given to the defendant on the basis that the plaintiffs herein have no locus to demand the return of the title deeds of the Owners, other than those of the present plaintiffs.  In other words, the plaintiffs have no proper basis to represent the Owners (other than the plaintiffs themselves) in demanding the return of title deeds.

26. The argument of the defendant runs as follows :

(a)      the plaintiffs, being six of the Representatives appointed under the Joint Sale Agreement have only the right and powers given them by the Joint Sale Agreement;

(b)     such powers are expressly provided for by Clause 4 of the Joint Sale Agreement which only gives the Representatives the powers to do all that is necessary for the tender exercise and the subsequent sale of Kai Tak Mansion should any of the Owners seek to back out of the Joint Sale Agreement and fail to sign or execute the documentation for the sale of their individual unit;

(c)     the Representatives are also empowered to give instructions to the defendant as the solicitor handling the tender exercise and subsequent sale of Kai Tak Mansion pursuant to the Joint Sale Agreement;

(d)     whilst the plaintiffs did have power to terminate the retainer of the defendant pursuant to the Joint Sale Agreement, nothing in the Joint Sale Agreement gave a general power or any power to the plaintiffs, being six of the Representatives appointed thereunder, to deal with or demand the title deeds of the Owners (other than the plaintiffs) even after the termination of the defendant’s retainer; and

(e)      as such the action, in so far as it was a demand for the title deeds outside of those belonging to the six plaintiffs, was misconceived and for which there was no proper basis to found a cause of action by these six plaintiffs as against the defendant.

27. The defendant further explains that when they delivered the 33 sets of title deeds to Messrs Anthony Siu & Co., before the Writ as well as the other title deeds after the issue of the Writ herein, also to Messrs Anthony Siu & Co., that was done not because the defendant had accepted that the plaintiffs have locus to demand same from them, but that in the hearing of HCA496/2010 in the afternoon of 15 April 2010 before Stone J, when the defendant had already been informed of the termination of the defendant’s retainer by the plaintiffs, leading counsel then appearing for the plaintiffs had informed the court that Messrs Anthony Siu & Co., had instructions to act for all the Owners in asking for the return of the title deeds.

28. It was therefore on the basis that such a statement had been made in court that Anthony Siu & Co., was acting for the Owners and that the title deeds were to be returned to Messrs Anthony Siu & Co. by the defendant, that the defendant returned the title deeds to Messrs Anthony Siu & Co., and not because the defendant had ever accepted that the plaintiffs had the locus to demand for the title deeds of the Owners.

29. Indeed it was common ground that at that hearing before Stone J in the afternoon of 15 April, counsel for the defendant had informed the judge that the defendant takes issue with the plaintiff having locus in the matter to demand for the return of the title deeds for the Owners.

30. In response thereto, the plaintiffs submit that their authority to act for the Owners in demanding the return of the title deeds relating to the Owners arise from the authority and the power given to them by the Joint Sale Agreement under which they were appointed the Representatives.

31. A further but subsidiary matter raised by the defendant was that dealing with over 300 sets of title deeds would take considerable amount of time before same could be returned to Messrs Anthony Siu &Co. since the defendant had to effectively check each set of title deeds, prepare a schedule of the number of documents and also check and verify that the contents matched with the schedule prepared before they were in a position to return each set of title deeds.  This procedure had to be repeated for every individual set of title deeds.

Discussion

32. The basis upon which the plaintiff’s claim was founded was pleaded by the plaintiffs to be the Joint Sale Agreement under which they were appointed as being six of the Representatives.

33. Central to the main objection raised by the defendant, namely whether the plaintiffs had locus to make the demand in their claim, must be the power and the rights given to the Representatives by the Joint Sale Agreement.

34. Those powers and rights are embodied and contained in Clause 4 of the Joint Sale Agreement which reads as follows :

“4.     [The eight named representatives including the six plaintiffs herein] be and are hereby appointed as the representatives of the Owners (‘the Representatives’) and any five of the Representatives shall have and only have the following rights and powers to be exercised by any five of them jointly:-

(a)           to discuss with and give instructions to Messrs Kitty So & Tong and the Estate Agent regarding all matters incidental to the Tender;

(b)          to sign and accept the Tender for and on behalf  of the Owners if and when the price equal to or exceed the Reserved Price as stated in Clause 17 hereof and in accordance with the Tender Conditions as stated in Clause 10 hereof;

(c)           to sign and accept an offer for and on behalf of the Owners if a private offer is received from any purchaser at any time prior to the Tender Closing Date provided  that the price of such offer is equal to or exceed the Reserved Price as stated in Clause 17 hereof and the terms are in accordance with the Tender Conditions as stated in Clause 10 hereof upon acceptance of the private offer by the Representatives for and on behalf of the Owners as aforesaid, all the references to the ‘Tender’ in this Agreement shall include the “offer” referred to herein as the context permits;

(d)          if none of the offers to purchase the Building on the Tender received has a tender price equal to or exceeds the Reserved Price to negotiate with any tenderer (after the Closing Date) for an increase of the offer price to a sum equal to or exceeds the Reserved Price;

(e)           to sign the Memorandum of Agreement pursuant to the Tender Conditions and this Agreement and to execute the subsequent assignment pursuant to the Tender Conditions for and on behalf of the Owners who for whatsoever reason fails to execute the same (“the Defaulting Owner”) but without prejudice to the rights of the other parties to claim against the Defaulting Owner for damages as a result of his breach of agreement; and

(f)            to exercise the rights and powers expressly given to the Representatives in this Agreement.”

35. It should also be noted that Clause 5 of the Joint Sale Agreement makes provision for an irrevocable power of attorney to be executed by each of the Owners.  Clause 5 reads as follows :

“5.     For the purpose of Clause 4 above, each of the Owners shall contemporaneously with the execution of this Agreement execute an irrevocable power of attorney in favour of the Representatives in the form hereto annexed and such power of attorney shall after execution be deposited with Messrs Kitty So & Tong and if any Owner shall fail or refuse to sign the Memorandum of Agreement pursuant to the Tender Condition and this Agreement and/or to execute the subsequent Assignment pursuant to the Memorandum of Agreement for whatsoever reason whether by reason of death, mental incapacity or otherwise, Messrs Kitty So and Tong shall be at liberty to release the Power of Attorney given by such Owner to the Representatives for the purpose as stipulated in Clause 4 above.”

36. Looking at the wording of the Power of Attorney in the trial bundle, and coupled with the provisions of Clause 5 of the Joint Sale Agreement, there can be no doubt that the Power of Attorney is limited in scope to the power as provided for by Clause 4 thereof.  Therefore even the general power stated in the Power of Attorney has to be read in this limited scope where it says :

“AND in general to do all other acts and deeds matters and things whatsoever for all or any of the purposes of this deed as amply and effectually to all intents and purposes as the Owner himself could do in his own proper person if this deed had not been made.” (emphasis added)

37. Moreover, it should be noted that under Clause 5 of the Joint Sale Agreement, that Power of Attorney is only to be released by Messrs Kitty So & Tong to be used by the Representatives upon any default by any Owner for the purpose as stipulated in Clause 4 thereof.  This further indicates the limited scope of the irrevocable power encompassed by the Joint Sale Agreement

38. Clause 4 is itself clearly limited to only the express powers and rights provided for in the sub-clauses thereof.  This is clear from the wording of Clause 4 proper where it states that the “Representatives shall have and only have the following rights and powers to …” (emphasis added) and also sub-clause (f) where it provides for the exercise of the rights and powers “expressly given to the Representatives in this Agreement” (emphasis added).

39. The rights and powers expressly given by Clause 4 are limited only to signing and accepting the tender (or offer) on behalf of the Owners, to sign the Memorandum of Agreement pursuant to the tender conditions, and to execute the subsequent assignment pursuant to the tender conditions in the event that any Owner fails to do any of those acts.

40. There is nothing in Clause 4 which strays beyond that limited scope for which those rights and powers are given to the Representatives, nor can that be read or implied into the Joint Sale Agreement since sub-clause (f) clearly refers to “the rights and powers expressly given”.

41. For these reasons, I come to the conclusion that Mr Chain, counsel for the defendant, is correct in submitting that the Joint Sale Agreement does not give the plaintiffs any locus to demand the return of the title deeds for the other Owners beyond those six sets of title deeds which belong to the plaintiffs themselves.

42. In this respect, there is no challenge that the title deeds belonging to the 1^st, 2^nd, 3^rd, 4^th and 6^th plaintiffs were returned to Messrs Anthony Siu & Co. by the defendant on 22 April 2010, but the set of title deeds belonging to the 5^th plaintiff was only returned to Messrs Anthony Siu & Co. by the defendant on 7 May 2010.

43. Accordingly, when the Writ of Summons was issued by the plaintiffs on 6 May 2010, it was only the 5^th plaintiff who would have a cause of action against the defendant.  The other plaintiffs, other than the 5^th plaintiff had no cause of action against the defendant nor did they have any locus under the Joint Sale Agreement to demand for the return of the title deeds on behalf of the other Owners even as the Representatives appointed thereunder.

44. Once this premise is reached, it follows that only the 5^th plaintiff alone is entitled to the costs of this action as well as the costs of the summons against the defendant.  There is, however, no question of indemnity costs being awarded to the 5^th plaintiff since his title deeds were returned by the defendant on the day following the issue of the Writ.  In this respect, I am further of the view that while the defendant could have acted with more diligence since the defendant’s retainer was terminated on 15 April, and some three weeks were taken for them to return the title deeds of the 5^th plaintiff, nevertheless I am unable to say that the conduct of the defendant was so reprehensible that indemnity costs should be ordered against them.  In so saying, I take into account that the defendant had to deal with over 300 sets of title deeds and not just those belonging to the 5^th plaintiff alone.

45. As for the 1^st, 2^nd, 3^rd, 4^th and 6^th plaintiffs, their claim against the defendant was wholly without basis and misconceived.  They will need to bear the costs both for the defendant’s defending the action as well as the Inter partes summons.

46. As for the hearing of the Inter partes summons, by the time of the hearing, even the 5^th plaintiff’s claim had been satisfied by the defendant returning his title deeds on 7 May 2010.  In those circumstances, the costs of the hearing should be to the defendant to be borne by all the plaintiffs.

47. Having been able to decide this dispute on the point of locus, it is not necessary or relevant for me to dwell into the point of delay (apart from what has already been said about delay vis-à-vis the return of the title deeds of the 5^th defendant above) in respect of the return of the title deeds relating to the other Owners.

Order

48. Accordingly, there will be the following orders :

(1)     Leave to the plaintiffs to discontinue the action;

(2)     leave to the plaintiffs to withdraw the Inter partes summons dated 7 May 2010;

(3)     the defendant do pay to the 5^th plaintiff his costs of this action and of the Inter partes summons to be taxed on party and party basis if not agreed;

(4)     the 1^st, 2^nd, 3^rd, 4^th and 6^th plaintiffs do pay the defendant its costs of defending this action and of the Inter partes summons to be taxed on party and party basis if not agreed;

(5)     costs of this hearing be to the defendant to be borne by all plaintiffs to be taxed on party and party basis if not agreed.