Greenswood Property Ltd. v. The Incorporated Owners of Kiu Sun Factory Building

CACV002266/2001

CACV 2266/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 2266 OF 2001

(ON APPEAL FROM LDBM NO. 294 OF 2000)

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Coram: Hon Rogers VP and Le Pichon JA in Court

Date of Hearing: 14 June 2002

Date of Handing Down Reasons for Judgment: 21 June 2002

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.This is an appeal from a decision of HH Judge Chow, sitting as the Presiding Officer of the Lands Tribunal, given on 27 August 2001. The application before the judge was that the proceedings in the Lands Tribunal be struck out or stayed as an abuse of process. The judge refused the application and ordered that the costs be borne by the respondent. At the conclusion of the hearing of this appeal, this court allowed the appeal and said that it would give its reasons in writing, which we now do.

Background

2.The dispute in this case arises out of a solicitor's bill of costs which totalled $98,560. The costs which have subsequently been incurred in the dispute over that amount are many times that sum. It can only be a matter of grave concern and regret that this has happened. As was said during the hearing, it is clear from the papers in this case that much of what has happened, which has caused those costs, presents the conduct of those who are responsible in a less than favourable light.

The history

3.In 1999 the applicant was the owner of 14 units in the Kiu Sun Factory Building. On 5 May 1999, the Management Committee of the respondent, the Incorporated Owners of Kiu Sun Factory Building, passed a resolution to the effect that if the Incorporated Owners had to retain lawyers to recover sums owed by defaulting owners the costs involved should be recovered on a full indemnity basis. On 12 August 1999, the respondent, in an owners' meeting, passed a resolution to the effect that the owner of each undivided share would have to contribute HK$10,000 towards the fund for repair works required to be done in relation to orders which had been issued by the Building Authority and the Director of Fire Services. The contribution payments were due on 20 August 1999.

4.Meanwhile, apparently, on 9 June 1999 the applicant had entered into a provisional agreement for the sale and purchase of the 14 units. The formal agreement was dated 14 July 1999. Completion was to take place on 30 August 1999. The arrangement between the applicant and its purchaser was that the purchaser, Honour Lucky Limited would be responsible for the contribution payments. On 12 August 1999 the manager of the factory building informed the applicant's solicitors that the total outstanding in management fees and the repair expenses contribution on the part of the applicant was $161,000. The manager informed Honour Lucky Limited on 19 August 1999 of these amounts but, there is no dispute that Honour Lucky Limited never paid any sum. Indeed, the sale of the applicant's units to them fell through. On 26 August 1999, the respondent instructed its solicitors to register charges in respect of the amounts owing against the 14 units. That they did on 27 August 1999.

5.The amount owing in respect of management fees and repair expenses contributions was eventually paid by the applicant on 16 November 1999 or thereabouts. Issue was, however, taken because the respondent's solicitors had charged the sum of $98,560 in respect of preparation and registration of 14 memoranda relating to the legal charges and for the release. By letter of 16 November 1999, the applicant's solicitors claimed that only one memorandum should have been registered instead of 14. They offered payment of $10,000. That was rejected by the respondent's solicitors and correspondence was exchanged with the applicant's solicitors continuing to argue that one memorandum would have been sufficient. By letter of 29 November 1999, the respondent's solicitors took issue with the arguments raised by the applicant's solicitors but suggested that, to save further unnecessary costs, the bills could be adjudicated by the Law Society or taxed by the court in accordance with the Legal Practitioners Ordinance. They suggested that the amount claimed in costs together with $30,000 as security for costs of the taxation be deposited with the applicant's own solicitors as a stakeholder. That suggestion was rejected. The respondent's solicitors then gave notice on 24 December 1999 that unless the bill was paid proceedings would follow.

6.The response from the applicant was to lodge a complaint with the Law Society. That complaint was threefold:

(a) that the respondent's solicitor had deliberately incurred legal costs for services that were unnecessary, the basis of the complaint was that the applicant had been advised by its solicitors that one memorandum would have had the same effect as 14;

(b) that they had charged costs not in proportion to the skills and time involved and;

(c) that the solicitors had refused to register the releases until after the costs of registration and release had been paid.

7.It is unnecessary to go into the full details of that complaint. It suffices to say that the correspondence was lengthy. The applicant's solicitors took an active and aggressive stance in that correspondence. Eventually on 20 May 2000 the Director of Compliance reported that the Investigation Committee had considered the matter and resolved that the court was the appropriate venue to adjudicate the matters. It was added that should the court make any pertinent observations the applicant could refer the matter to the Law Society and the matter could be reconsidered in the light of any new information. Not surprisingly in view of the way this matter has progressed, the applicant's solicitors, in a letter of 9 June 2000, refused to accept that the Law Society had come to any conclusion.

8.The next step in the history of the matter was an application by the applicant by originating summons HCMP 2833 of 2000 naming the respondent's solicitors firm as the defendant. The relief claimed was that:

"Leave be granted pursuant to section 67 of the Legal Practitioners Ordinance (Cap. 159 of the Laws of Hong Kong) for the taxing of a bill chargeable on the Plaintiff by the Defendant for the legal costs and disbursements incurred in preparing and registering memoranda of charge and release against the title of 14 properties all owned by the Plaintiff as listed in the Defendant's letter to the Plaintiff dated 27 August 1999 ..."

It is pertinent at this stage to set out section 67 of the Legal Practitioners Ordinance:

"67. Taxation of bills on application of party chargeable or solicitor or foreign lawyer

(1) On the application, made within 1 month of the delivery of a solicitor's bill or a foreign lawyer's bill, of the party chargeable therewith the Court shall, without requiring any sum to be paid into court, order that the bill shall be taxed and that no action shall be commenced thereon until the taxation is completed.

(2) If no such application is made with in the period mentioned in subsection (1), then, on the application of the solicitor or the foreign lawyer or of the party chargeable with the bill, the Court may, upon such terms, if any, as it thinks fit (not being terms as to the costs of the taxation), order-

(a) that the bill shall be taxed;

(b) that, until the taxation is completed, no action shall be commenced on the bill, and any action already commenced be stayed:

Provided that-

(i) if 12 months have expired from the delivery of the bill, or if the bill has been paid, or if a verdict has been obtained or a writ of inquiry executed in an action for the recovery of the costs covered thereby, no order shall be made on the application of the party chargeable with the bill except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the taxation as the Court may think fit;

(ii) if the bill has been paid, no order under this subsection shall be made where the application for the order is made after the expiration of 12 months from the date of payment of the bill."

9.By an order which was made on 15 June 2000 but appears to be dated 12 June 2000, the Acting Registrar ordered that the originating summons be adjourned to a date to be fixed for argument to determine the basis of taxation. Shortly thereafter the respondent's solicitors sought to recover the costs incurred as a result of the complaint to the Law Society, which complaint the Law Society had declined to entertain. In July 2000, the Incorporated Owners held a meeting at which the resolution of 5 May 1999 was confirmed.

10.On 12 September 2000 that the applicant commenced the present proceedings, namely, an application before the Lands Tribunal. The relief claimed in the application was as follows:

(1) a declaration that the Respondent should forthwith discharge or cause the discharge of the Memoranda of Charges; failing which the Registrar of the High Court can exercise his power to execute any documents on behalf of the Respondent to effect the discharge of the Memoranda of Charges;

(2) a declaration that the resolution of 5 May 1999 was ultra vires and/or invalid;

(3) a declaration that the resolution of 14 July 2000 was ultra vires and/or invalid;

(4) a declaration that the legal costs of $95,620 were not legal costs properly and/or reasonably incurred by the incorporated owners;

(5) a declaration that the applicant is not liable to pay the incorporated owners the said sum of costs and;

(6) alternatively, a declaration that the Applicant is only liable to pay its proportional share of the costs of $95,620.

11.For completeness it might be noted that the figures referred to in the Lands Tribunal proceedings do not appear to include the costs relating to the release. The application which has resulted in this appeal was taken out on 3 October 2000. The judge below gave his decision on 27 August 2001. Following that, on 4 September 2001, Master Ho ordered a stay of the taxation proceedings.

12.It can also be mentioned that on 27 September 2000, the respondent together with its solicitors, as plaintiffs, issued an originating summons HCMP 5020 of 2000 naming the applicant, as defendants, seeking taxation of their costs in relation to the complaint to the Law Society. Whether or not those costs are recoverable is a matter which can be decided on that originating summons, irrespective of whether the two matters are consolidated.

13.As has already been indicated the lengths to which these proceedings have now extended are unacceptable. Mr Bunting SC, on behalf of the applicant, has suggested that the matter is a matter of case management. To some extent, he is correct. It is, in my view, past the time when the court should step in to safeguard its own procedure. One is reminded of what Lord Diplock said at the outset of his speech in Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at page 536, that there is an:

"inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people. The circumstances in which abuse of process can arise are very varied; those which give rise to the instant appeal must surely be unique. It would, in my view, be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power."

14.The dispute between the parties is in relation to the costs of registration and release of the legal charge. The applicant first made a complaint of professional misconduct against the solicitors. The basis and underlying reason for that complaint was that the applicant was required to pay $98,560 in costs.

15.Mr Bunting urged this court to ignore the fact that his client had initiated a complaint to the Law Society. There can be no doubt that he had good reason to approach the matter in that way. Nevertheless the history of how this matter has arrived at this court is difficult to ignore. If it was indeed the applicant's intention to challenge the amount of the solicitors' bill then making a complaint of professional misconduct is hardly the way to go about that. A complaint of professional misconduct is one thing. A taxation of a solicitors' bill leading to a reduction is quite a different matter with different issues and consequences. It is difficult to read the correspondence in relation to the complaint without coming to the conclusion that the complaint had been driven by animosity. The complaint itself is expressed to have been made with advice from the applicant's solicitors; it has the hallmarks of having been drafted by someone with some knowledge of the law and the legal profession. After the initial letter of complaint, which was seemingly from the applicant itself, all subsequent correspondence came from its solicitors. At least one of the complaints, that relating to the preparation of 14 memoranda in lieu of 1, was unarguably unsustainable on any footing. How it could be suggested that one legal charge could cover 14 units is baffling. The applicant's solicitors' refusal to accept that the Law Society's refusal to proceed with the complaint is the final act in a series of communications which demonstrated an unmistakeable bias.

16.More than that, the inclusion of 2 of the matters of complaint to the Law Society by the applicant can only be indicative that the applicant considered that it was the party responsible for settling the solicitors' bill. On the face of the matter the solicitors had been instructed by the Incorporated Owners. In those circumstances the only reason that the applicant could complain to the Law Society in respect of excessive work and overcharging would be if it were to be the party responsible for paying the bill. That indeed it was. The complaint to the Law Society was in reality a tacit admission of this.

17.After that, the applicant commenced the HCMP 2833 of 2000 for taxation of the costs. It could only have done that on the basis that it was chargeable in relation to those costs. The word chargeable is, in my view, clear. With due respect to the judge below, I cannot see that it means anything other than a person who can be required to pay that amount. If a person is not chargeable with the relevant costs he has no locus to commence proceedings under section 67 of the Legal Practitioners Ordinance. Hence only a person who concedes that he is chargeable can commence those proceedings.

18.The commencement of the Lands Tribunal proceedings, insofar as they are directed to seeking an order that the applicant is not chargeable with the costs, was thus a clear abuse. It was contrary to the stand that the applicant had been taking for a year whilst costs mounted. Insofar as the quantum of costs is concerned, it is likewise an abuse to have commenced the proceedings in the Lands Tribunal. More especially that is so, because a taxation before the taxing master is clearly the appropriate forum for consideration of quantum of the solicitors' bills.

19.Insofar as there is a challenge to the validity of the resolutions, that is done on the basis that the resolutions required the payment of the solicitor's bills on an indemnity basis. As was pointed out by Mr Wong, on behalf of the respondent, in the context of non-litigious taxation there is no difference between an indemnity basis and a solicitor and own client basis and if there were any difficulty in the matter the respondent is quite content to have the matter considered on the basis of a solicitor and own client taxation.

20.As regards any claim that the legal charge should have been released upon payment of the outstanding management fees and repair fund contributions without the payment of the costs of registration and release of the legal charges the law on the matter is, in my view, clear. A person entitled to register a legal charge has a basic entitlement to recover the costs, charges and expenses incurred in relation to that charge. That must include both registering it and discharging it. In relation to that reference may be had to works such as Fisher and Lightwood's Law of Mortgage, 11th Edition, Chapter 36. Whereas Mr Bunting suggested that this was a matter which should be decided by the Lands Tribunal he could offer no authority for the proposition that these sums should not be paid prior to discharge of the legal charge. The argument that the deed of mutual covenant contains provisions that the legal costs incurred by the incorporated owners and their manager in relation to carrying out their duties should be rateably borne by the owners of the property, in my view does not even begin to have any validity. Clearly those legal costs are costs which are irrecoverable from any party who has caused them to be incurred.

21.In those circumstances the proceedings in the Lands Tribunal should clearly have been stayed. Had that been done, the taxation proceedings would have been allowed to continue. The sooner the matter is clarified in the taxation proceedings, the sooner the disputes between the parties can be resolved.

English version of judgments

22.One further matter requires mention. In this case the judgment in the Lands Tribunal was given in Chinese. At some stage a translation of the judgment was presented to the court interpreter with a request that it should be certified. It should be made clear that judgments are not ordinary documents which the parties should translate. If a judgment has been given in Chinese and an English version is required because an appeal will not be heard before a bilingual court, the listing clerk in the Court of Appeal should be notified that the judgement is in Chinese so that the court may prepare an English version of the judgment. The listing clerk can then draw the matter to the attention of the judge who can call for the assistance of the court translators if required. Nevertheless, it is essential, whether the English version is prepared by the judge himself or with assistance, that in any event the judge approves the English version of the judgment.

Hon Le Pichon JA:

23.I agree.

Representation:

Mr Brian C W Wong, instructed by Messrs Van Langenberg & Lau, for the Respondent/Appellant

Mr Michael Bunting SC and Mr Thomas Au, instructed by Messrs F Zimmern & Co., for the Applicant/Respondent