The Incorporated Owners of Potek House v. Ka Ye Catering Management Co Ltd and Another

LDBM 197/2021

[2023] HKLdT 74

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 197 OF 2021

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BETWEEN

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DECISION ON COSTS

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Background

1.The applicant is the Incorporated Owners of Potek House situate at 9 Tsing Fung Street, Causeway Bay, Hong Kong (“the Building”).

2.The 1^st respondent was the tenant of the Ground Floor of the Building (“the Unit”) until September 2022 when it returned vacant possession of the Unit to the 2^nd respondent, who is the registered owner and landlord of the Unit.

3.The present application (“the Application”) was commenced by the applicant against the 1^st respondent on 3 November 2021. The applicant only took out an Interlocutory Application dated 12 January 2022 to apply to add the 2^nd respondent as a party in these proceedings. The order to add the 2^nd respondent as a party was granted on 25 January 2022.

4.The background of the case is that, on 2 February 2018, the applicant resolved to engage Will Power Architects Company Limited as the consultant (“the Consultant”) to inspect the Building and to provide consultation for the repair works (if any) as required under the Mandatory Building Inspection Scheme (“the MBIS”).

5.In May to June 2019, the Consultant engaged Hing Yip Pipeline Service Limited (“Hing Yip”) to conduct a CCTV Survey on the manholes, wells, drainages and pipes located in the Unit and the Ground Floor of the Building and to produce a CCTV survey report.

6.Hing Yip produced a CCTV Survey Report dated 3 June 2019 (“the CCTV Survey Report”) which stated that the manhole located in the Unit (which is denoted as “F1” in the CCTV Survey Report) and the drainages and pipes connecting to it were heavily encrusted, collapse within the F1 manhole was observed and urgent repair was required.

7.The CCTV Survey Report further stated, and the Consultant advised the applicant, that the repair could only be achieved by using open-up method and should be conducted urgently. If not, it would likely cause nuisance to other common areas or affect other owners of the Building since there could be blockage or backflow from the damaged common pipes.

8.The repair works included rebuilding of the F1 manhole and the underground drainage connecting to the F1 manhole as well as replacement of the relevant common drainpipes located in the Unit (collectively as “the Drainage Works”).

9.The dispute between the applicant and the 1^st and 2^nd respondents arose because the applicant as well as its contractor and workers were refused access to the Unit to carry out the Drainage Works in the second half of 2021. Thus, the applicant commenced the Application in order to obtain an order for the applicant to have access to the Unit and to complete the Drainage Works.

10.The 2^nd respondent opposed to the Application and raised various defence. It also counterclaimed against the applicant a sum of $90,850 (“the Counterclaim”) being the cost of replacing some rainwater drainage pipes passing from the roof to the Unit and the connecting drainage pipes (collectively as “the Rainwater Drainage Pipes”).

11.However, the applicant obtained the main relief sought in the Application when the 2^nd respondent granted the applicant and its contractor and workers access to the Unit to carry out the Drainage Works between 17 October 2022 and 21 October 2022.

12.By a consent summons dated 19 April 2023, the applicant applied to discontinue the Application and the 2^nd respondent applied to discontinue the Counterclaim. The consent order was granted on 20 April 2023, and the issues on costs of the Application and the Counterclaim (since the Interlocutory Application dated 12 January 2022 and thereafter) as between the applicant and the 2^nd respondent were ordered to be determined on paper.

13.This is my decision on costs after considering the parties’ respective written submissions and the following evidence filed by the parties:

(1) Affirmation of Choi Wing Yan Josephine dated 11 May 2023 filed on behalf of the applicant;

(2) Affirmation of Ho Kuen Kai dated 11 July 2023 filed on behalf of the 2^nd respondent as the affirmation in opposition; and

(3) Second Affirmation of Choi Wing Yan Josephine dated 26 July 2023 filed on behalf of the applicant as the affirmation in reply.

The legal principles on costs

14.As submitted by the applicant, the Lands Tribunal Ordinance (Cap. 17) (“LTO”) section 12(1) and 12(7) provides that:-

“(1) The costs of and incidental to all proceedings in the Tribunal are in the discretion of the Tribunal, and the Tribunal has full power to determine by whom and to what extent the costs are to be paid.

…

(7) Notwithstanding subsection (1) and section 12C but subject to subsection (5) and any rules made by the Chief Justice under section 10(3), Order 62 of the Rules of the High Court (Cap. 4 sub. Leg. A) applies, with the necessary modifications, to the award, taxation and recovery of costs in the Tribunal.”

15.Thus, costs is in the discretion of the Tribunal and Order 62 of the Rules of the High Court (Cap. 4A) applies to the Lands Tribunal with necessary modifications.

16.In Felan Investment Limited v Sarwin Industries Limited [2018] HKLdT 17, where the applicant and the 1^st respondent in that case had both discontinued their respective claim and counterclaim without a trial of the merit, the Tribunal considered that the usual approach would be for the party withdrawing or discontinuing to pay costs of his opponent unless there is a good reason to order otherwise. The parties agreed to adopt and the Tribunal accepted the “successful party approach” referred to in Famous Marvel Company Limited & Ors v Conversant Group Limited & Ors (unrep., HCA 2153/2009, 29 October 2012), where the Hon Au-Yeung J summarized the guiding principles as follows:

“22. There is no dispute that even if a case is settled except as to costs, the Court still has power to determine which party should be liable for costs. There is no tradition for there to be “no order as to costs” in such a scenario. I am guided by the following principles in deciding costs:

(i) The Court is to decide if the party seeking costs has substantially obtained the reliefs sought in the litigation: Re Chinese United Establishment Ltd, HCCW 291/1994, 5 October 1995, Rogers J (as he then was), approved in CACV 214/1995; Lai Yuet Chun v Super Deluxe International Limited & ors, HCCW 186/2001, 3 June 2003 Kwan J (as she then was).

(ii) At each end of the spectrum there will be cases where it is obvious which side would have won had the substantive issues been fought to a conclusion. In between, the position will, in differing degrees, be less clear. How far the Court will be prepared to look into the previously unresolved substantive issues will depend on the circumstances of the particular case, not least the amount of costs at stake and the conduct of the parties. Brawley v Marcynski (No.1) [2003] 1 WLR 813.

(iii) The Court will first consider if it is in a position to say what the likely outcome after trial would have been. If it is not in a position to do so, the order may well be no order as to costs: Brawley v Marcynski (No.1), at para 18, Longmore LJ; followed in BCT Software Solutions Ltd v C Brewer & Sons Ltd [2004] FSR 150.

(iv) The Court may permit parties to adduce evidence on the question of costs: Ta Tung China & Arts Ltd v Fontana Restaurant Ltd [1999] 1 HKLRD 404; Lai Yuet Chun v Super Deluxe International Limited & ors, at para 12. However, to say that the parties must go to trial in order to resolve any outstanding questions of costs would be contrary to the underlying objectives enshrined in RHC Order 1A rules 1 and 2: Graham M Morley v Kwan Wo Wan & others, HCA 4366/2003, 30 December 2009, Recorder Jat SC.

(v) A broad brush can be taken by referring to all matters already laid before the Court, eg. pleadings, correspondence, witness statements, transcripts of evidence and the terms of the settlement order: c.f. BCT Software Solutions Ltd v C Brewer & Sons Ltd, at para 9; Graham M Morley v Kwan Wo Wan & others.

(vi) The objective is to do justice between the parties without incurring unnecessary Court time and consequently additional cost: Brawley v Marcynski (No.1)”

(Underlines added)

17.Applying those principles identified in Famous Marvel Company Limited, HHJ K W Wong (as he then was) in Felan Investment Limited said the following:

“22. Applying these principles, the starting point is to ask which party has succeeded by substantially obtaining the reliefs sought. Only when it is unclear which side has succeeded then is it necessary for the court to consider the substantive issues. In that event a broad brush approach should be adopted, otherwise it will be contrary to the underlying objectives set out in O.1A r.1&2 RHC. When the court is not in a position to come to a decision, an order directing no costs is appropriate. However, the overall consideration is to do justice between the parties without incurring unnecessary court time and additional costs.”

(Underlines added)

18.The above principles have been applied to the recent Lands Tribunal cases of 陳小華及另十五人對鄭道珍 [2019] HKLdT 54 and 廣豐台業主立案法團 v Nominshare Limited [2022] HKLdT 63.

19.In 陳小華, HHJ Simon Lo considered that the “successful party approach” can be applied separately to the main claim as well as to the counterclaim, and the Tribunal may assess who is the substantial winner in each claim.

20.The 2^nd respondent does not seem to be disputing the above legal principles, and submits that as stated by the editors in Hong Kong Civil Procedure 2023, Vol.1, §21/5/12A, “as to costs, the authorities and principles were collected in Perrine Chamonix Limited v Star League Ltd, HCA 1139/2017”. The legal principles set out in that case by the Deputy High Court Judge William Wong SC are summarized as follows.

21.First, the starting point is that the party seeking to withdraw its action should pay the costs of the other party. The burden of persuading the court to depart from the general rule rests on the party who seeks to withdraw. Good reasons ought to be shown for departure. Examples of good reason include that the dispute has become academic, that a crucial witness has died or has other become unavailable, that the subject matter of the litigation has ceased to exist, or that the defendant has no means to satisfy any judgment which may be awarded against him.

22.Secondly, however, when a party has achieved substantially what he or she sought in the action or application, costs should be awarded to him or her. It is an application of the principle that normally costs should follow the event. The court does not adopt a mechanical approach, but looks into the substance and merits of an application. If, but for a plaintiff’s or an applicant’s application, he or she would not have obtained the relief he or she seeks in a writ of summons or a summons, then he or she is in effect the substantive winner of the case. The fact that a defendant consents to the claims by a plaintiff or an applicant which renders it unnecessary for the plaintiff or the applicant to continue the action or summons should not be a reason for denying the plaintiff or the applicant his or her costs.

23.The learned Deputy High Court Judge also referred to Re Fook Lam Moon Restaurant Limited, unreported, HCMP 438/2010, 8 December 2015 in which To J (as he then was) said:-

“40. To persuade the court to depart from the general rule, the minimum a plaintiff has to do is to show that the discontinuance is for reasons other than an acknowledgment of defeat or likely defeat. The most direct way of proof is to show that he will succeed in a postulated trial. The burden of proof is on the plaintiff and the standard of proof is the usual civil standard. Proof of a prima facie case is not enough. The court has to be satisfied on proper factual basis, whether based on agreed fact or determined fact, that the plaintiff will succeed. Discontinuance under such circumstances is consistent with the underlying objective of Order 1A. It is also beneficial to the defendant in that further costs to be incurred by him leading to nowhere but his eventual defeat are saved. The defendant can have no complaint that he was made to incur costs in an action which he is bound to lose but which the plaintiff chooses not to proceed. If the plaintiff is able to discharge this burden of proof, fairness and justice must require that he be permitted to discontinue his action without costs consequence.”

24.Thirdly, if a plaintiff or an applicant withdraws an action or a summon because the defendant had done something, after the issuance of writ of summons or summons, which renders it unnecessary or academic for the plaintiff or the applicant to proceed with the action or application, the court has a full discretion to award costs to the plaintiff or applicant after taking all the circumstances of the case into consideration.

25.The 2^nd respondent submits that the legal principles set out in Famous Marvel Company Limited, supra, do not contradict with the aforesaid legal principles and thus the legal principles set out in both cases are equally applicable in the present action.

Applying the above legal principles to the present case

26.Applying the above legal principles to the present case, I have no doubt that the applicant is entitled to costs against the 2^nd respondent in both the Application and the Counterclaim.

27.The applicant’s position is as follows:

(1) In respect of the Application, the applicant has substantially obtained the reliefs it sought in the Application, ie the unrestricted access obtained by the applicant and its Contractor and workers to the common facilities and common parts in the Unit to carry out and has completed the Drainage Works. Thus, the Application was rendered academic;

(2) In respect of the Counterclaim, by discontinuing the Counterclaim, the 2^nd respondent essentially gave up the claim of $90,850 as against the applicant for the alleged costs of replacing the Rainwater Drainage Pipes; and

(3) As such,

(a) in respect of the Application, the applicant is entitled to costs since the Applicant is the substantial winner and successful party when the Application was discontinued;

(b) However, in respect of the Counterclaim, the same cannot be said to the 2^nd respondent. The 2^nd respondent gets nothing for discontinuing the Counterclaim and the substantive issue of whether the 2^nd respondent is entitled to make the Counterclaim cannot be said to have been rendered academic by virtue of the fact that the applicant and its Contractor and workers was granted access to the Unit to carry out the Drainage Works. The applicant is also entitled to costs of the Counterclaim because the default position is for the party withdrawing or discontinuing the claim to pay the costs of its opponent and the 2^nd respondent fails to demonstrate there is a good reason to order otherwise.

28.I totally agree with the applicant’s position as aforesaid.

29.In terms of the Application, the main relief sought by the applicant is an order that the applicant and its contractor and workers be granted an unrestricted access to the common facilities and common parts in the Unit for the purpose of carrying out and completing the Drainage Works. It is undisputable that the applicant has obtained substantially the relief it sought when access was granted by the 2^nd respondent and the Drainage Works were completed in October 2022.

30.This could not be done before the Application was commenced, as shown in the pre-litigation correspondence as summarized below:

(1) By a letter dated 4 May 2021, the applicant informed the 2^nd respondent that its contractor would need to enter into the Unit to carry out the Drainage Works;

(2) On 17 May 2021 at around 3 pm, the representative of the Consultant, its contractor, the 2^nd respondent and the 1^st respondent had a meeting in the Unit regarding the details of the Drainage Works;

(3) By a letter dated 9 July 2021, upon further request, the applicant had furnished documents relating to the Drainage Works, including those which had been made available to the 2^nd respondent in the 28 November 2020 meeting regarding the details of the reconstruction and rebuilding of the F1 manholes;

(4) On 2 August 2021, at around 1pm, the representative of the Consultant, its contractor and the representative of the 2^nd respondent had a further meeting to discuss further the details of the Drainage Works;

(5) On 13 August 2021, at around 5pm, the representative of the 2^nd respondent had made further inquiry with the Consultant regarding the status of the F1 manhole and the drainages and pipes connecting to it;

(6) On 18 August 2021, the applicant gave a 20-day notice by a letter of the same date to both the 1st and 2^nd respondents that the contractor and its agents and workmen would enter into the Unit for carrying out the Drainage Works between 6 September 2021 and 18 September 2021;

(7) By a letter dated 18 August 2021, the 1^st respondent insisted that the applicant would need to come up with a resolution regarding the 1^st respondent’s loss of profit and damages occasioned by the Drainage Works and the 1^st respondent also invited the applicant to contact the 2^nd respondent in respect of the Drainage Works;

(8) By a letter dated 18 August 2021, the 2^nd respondent continued to make inquiry with the details of the Drainage Works, further counter-proposed the Trenchless Pipe Repair methods for carrying out the Drainage Works and further requested the applicant to undertake to make good of any damages to the floor covering that might be removed in the course of the Drainage Works;

(9) By a letter dated 1 September 2021, the applicant further informed the 2^nd respondent of the details of the Drainage Works and further pointed out that the Trenchless Pipe Repair method as suggest by the 2^nd respondent would not be feasible in the opinion of the Consultant and its contractor;

(10) By a letter dated 2 September 2021, the 2^nd respondent further suggested a joint site inspection to be carried out with the presence of the representatives of the 1^st and 2^nd respondents, the applicant, the Consultant as well as its contractor;

(11) However, in view of the previous rounds of exchange, communication, discussions and notice, the applicant considered that it would not be necessary and requested in the letter dated 7 September 2021 that the 2^nd respondent shall not further deploy any delaying tactics;

(12) By letters dated 23 September 2021 sent to the 1st and 2^nd respondents respectively, the applicant further clarified scope and duration of the Drainage Works and further gave 28-day notice to the 1^st and 2^nd respondents requesting the entry of the Unit between 23 October 2021 and 6 November 2021 for the purpose of carrying out the said Drainage Works;

(13) However, the 1^st respondent replied on 28 September 2021 that they were willing to cooperate but the applicant must agree that (a) either the applicant or the 2^nd respondent must agree to compensate the 1^st respondent for any loss of profit within the duration of the Drainage Works and (b) the applicant must undertake to bear any costs of reinstallation or repair of the flooring or decorations in the Unit (if any); and

(14) By the letter dated 4 October 2021, the 2^nd respondent simply passed the buck to the 1^st respondent and asked the applicant to arrange negotiation directly with the 1^st respondent in relation to those proposed Drainage Works and request for access”.

31.It is clear to me that the Application was rendered academic just because of the compromise made by the 2^nd respondent, and it justifies a good reason for the Tribunal to depart from the usual approach that the party discontinuing the action shall pay for the costs of the other party.

32.It is also clear that the applicant was the “successful party” when the Application was discontinued, and on this basis, I do not need to consider the substantive issue under the Application and can award costs to the Applicant on this basis alone.

33.However, for completeness sake, if it is necessary for me to consider the substantive issue, I agree with the applicant that it has good merits in commencing the Application.

34.The Building’s Deed of Mutual Covenant (“the DMC”) and the Building Management Ordinance, Cap. 344 (“the BMO”) have the following provisions:

(1) The DMC:

(a) The phrase “maintain” is defined in the DMC to mean:

“Repair, uphold, support, rebuild, overhaul, pave, purge, scour, cleanse, empty, amend, replace, and decorate or such of the foregoing as may be applicable in the circumstances and in the interest of good estate management and ‘maintenance’ shall be construed accordingly.”

(b) By paragraph 1 of Part B of Section II of the DMC, the Manager is empowered to do all such acts and things as may be necessary or requisite for the proper management of the Building and those powers and duties include:

“(b) To put in hand and ensure the satisfactory completion of work necessary to maintain any and every part of the Building and the Common Facilities so as to ensure that the same are maintained in a good, clean and safe condition at all times and for this purpose to employ reputable and competent contractors and workmen and employ such persons as the Manager shall deem fit

…

(j) to keep all the common sewers, drains, watercourses and pipes free and clear from obstructions

(k) to keep all the Common Facilities in good condition and working order

…

(r) to do all things which the Manager shall in its discretion deem necessary or desirable for the purposes of maintaining and improving all facilities and services in or on the Building…”

(c) By paragraph 2 of Section A and by paragraph 1(a) of Section B of the First Schedule of the DMC provides the Manager’s right of access to the Unit upon reasonable notice given:

“(A) EASEMENTS, RIGHTS AND PRIVILEGES THE BENEFIT OF WHICH IS HELD WITH EACH UNIT

…

2. The Owner shall have no right to enter upon a part of the Lot or the Building save as expressly herein provided, it being understood that all work necessary for the maintenance and repair of the Building shall be carried out by the Manager who shall have the right to enter in or upon any part of the Lot and/or the Building for that purpose as herein provided.

(B) EASEMENTS, RIGHTS AND PRIVILEGES SUBJECT TO WHICH EACH UNDIVIDED SHARE OF AND IN THE LOT AND THE BUILDING IS HELD

(a) The Manager shall have full right and privilege at all reasonable times on notice (except in the case of emergency) with or without agents, surveyors, workmen and others to enter into and upon each Unit for the purposes of inspecting, examining and maintaining such Unit or the Building or any part or any parts thereof or any of the Common Facilities therein or any other apparatus and equipment used or any part or parts thereof as part of the amenities thereof and not by any individual Owner for his own purpose or enjoyment”.

(d) By Section A of the Second Schedule of DMC, the owners of the Building covenanted, inter alia, that:

“4. No Owner shall make any structural alterations to any part of the Building owned by him which may damage or affect or interfere with the use and enjoyment of any other part or parts of the Building whether in separate or common occupation nor shall any Owner use, cut, injure, damage, alter or interfere with any part or parts of the Common Areas or any of the Common Facilities or any equipment or apparatus on, in or upon the Lot not being equipment or apparatus for the exclusive use and benefit of any such Owner”.

“9. No Owner shall use or permit or suffer to be done and each Owner shall take all possible steps to prevent his tenants, occupiers or licensees from doing any act, deed, matter or thing which in any way interferes with or affects or which is likely to interfere with or affect…the management and the maintenance of the Building”.

(2) The BMO:

section 40(1) provides

“A member of a management committee and any other person authorized in that behalf by the management committee may, on reasonable notice to the owner or occupier thereof, enter a flat at any reasonable time for the purpose of –

(a) Inspecting, repairing, maintaining or renewing –

(i) any common parts in the flat; or

(ii) any other property in the flat the condition of which does or may affect adversely the common parts or other owners;

(b) abating any hazard or nuisance which does or may adversely affect the common parts or other owners.”

35.In its Notice of Opposition, the 2^nd respondent contended as follows:

(1) The DMC and/or the BMO, upon proper interpretation, imports an implied duty that the applicant shall request its right of access under the DMC and/or the BMO (a) without imposing unreasonable terms and (b) shall be responsible for reinstating each Unit at its own cost to the satisfaction of the registered owner/occupiers after carrying out the maintenance works and (c) shall indemnify all reasonable loss and damage suffered (including the loss of profit and business) by the registered owner/occupiers of each Unit as a result of the repair and maintenance works to the common facilities (“the Implied Terms Argument”).

(2) The 2^nd respondent accused the applicant of acting in breach of the alleged terms by, inter alia, requesting the 1^st respondent to remove any floor covering which would restrict the access to the common facilities when the contractor was to carry out the Drainage Works and refuse to indemnify the 1^st respondent for the costs of reinstatement, the reasonable loss and damage suffered (including the loss of profit and business) and refusing to adopt a flexible timeframe.

(3) Further or alternatively, the 2^nd respondent denied that reasonable notice had been given and further asserted that since the 1^st respondent was the tenant of the 2^nd respondent at the time when the applicant requested to enter into the Unit, the 2^nd respondent contended that the applicant should conduct negotiations directly with the 1^st respondent as the 1^st respondent had the exclusive possession of the Unit and the 2^nd respondent should not be made liable for any unreasonable act on the part of the 1^st respondent (“the Non-Possession Argument”).

36.Applying the above legal principles, I would only need to take a broad-brush approach to determine the likely outcome of the Application if it does proceed to trial. First, I agree with the applicant that reasonable notice must have been given to the 1^st and 2^nd respondents when the request for entry into the Unit for the purpose of carrying out the Drainage Works has been made as early as in May 2021. In any event, the applicant had given a 28-days’ notice in September 2021 to request for access by way of letters sent to the 1^st and 2^nd respondents respectively. In view of the months of discussion predated the September 2021 requests for access, the 28-day notice given must be a reasonable one.

37.Secondly, in respect of the contractual interpretation and the Implied Terms Argument, the general principles on the construction of the DMC were enunciated in 黎偉雄 v 信和物業管理有限公司 [2020] HKCA 448, and it is a very high standard for implying a terms in a contract and DMC. I do not think that the 2^nd respondent would be able to succeed in trial in proving the existence of those implied terms, as the operation of the DMC would not be rendered unworkable in their absence and when the power of entry and repair was only expressly restricted by the condition of “reasonable notices”.

38.Moreover, it would not be within the contemplation of the drafter of the DMC that when the manager was to carry out any duties under the DMC, and when reasonable notice has been given, they would still be liable for any loss of business or profits of the owner or occupier of the unit. Such interpretation would lead to an absurd result, ie the Manager may refrain from doing what is legally required of him in view of the potential and unpredictable loss of profit or business of the owner as a result of the maintenance works.

39.I agree with the applicant that there has been an in-built balance in the DMC and the BMO where reasonable notice is required for the Manager or Management Committee to exercise their power to entry and repair (except in the emergency situation). The reasonable notice requirement would allow the owner or the occupier of the unit to make necessary arrangements so that the repair works can be carried out in an efficient manner for the benefits of the whole building.

40.Further, in respect of issue of removing the floor covering and giving unrestricted access to the applicant to the common drainage that required repair, I accept that even in a deed of mutual covenant that contains indemnification clause (see The Incorporated Owners of Kim Tak Building v Harvest Win Investment Limited, LDBM 198/2002, 23 October 2002), which is not found in the DMC of the present case, the obligation to indemnify is not a pre-condition for the owners’ corporation to properly and legally exercise its right of entry.

41.Thus, in the present case, there is no room for the 1st or 2^nd respondent to argue that the applicant has to give undertaking to indemnify before the 1st or 2^nd respondent can grant any access to the applicant for the Drainage Works. The only pre-condition expressly stated in the DMC is to give reasonable notice.

42.In granting access to the Unit as well as to the common facilities upon which the Drainage Works are to be carried out, it is clear to me that unrestricted access should be given (ie no chattel or objects will be present to block the applicant and its contractors or workers’ access to the common facilities pending repair). Otherwise, the object of granting access will be rendered meaningless.

43.If an occupier of a unit covers the common drainage by using false ceiling or even concrete fillings or block off the common facilities by chattels, it would not be reasonable for the occupier to grant access to the owners’ corporation just to go inside the unit only but not to the very common facility that requires repair. It must be inherent in the obligation to grant access that unrestricted access to the common facilities that required attention is granted as well.

44.In fact, as seen in the obiter of 好順意大廈業主立案法團 對 蔡祖沛及另一人 (LDBM 307/2012, 17 September 2014), the Tribunal, in response to the argument that the repair works to be carried out by the owners’ corporation on the roof would destroy the respondent’s planation, said that the respondent may remove those planation prior to the commencement of the repair works and the need to preserve the planation should not outweigh the need to protect the overall interests of the building.

45.By giving reasonable notice prior to the exercise of entry and repair, it serves to allow sufficient time for the occupier of the unit to make necessary arrangement and to remove any objects blocking the access of the owners’ corporation to the common facilities. Thus, when reasonable notice is given, any obstruction or chattel covering or restricting the access to the very common facility to be repaired shall be removed temporarily during the period of repair.

46.In respect of Non-Possession Argument, I agree with the applicant that even if the 2^nd respondent is not in exclusive possession of the Unit, Clause 9 under the DMC still kicks in. Clause 9 requires the 2^nd respondent to take all possible steps to prevent the 1^st respondent from doing any act, deed, matter or thing which in any way interferes with or affects or which is likely to interfere with or affect the management and the maintenance of the Building. In the present case, it is not disputable that the 1^st respondent, by refusing to grant access, upon reasonable notice, to the applicant clearly hindered the progress of the Building’s repair work and hence affecting the Building’s proper maintenance.

47.I do not agree that the 2^nd respondent had taken all the possible steps to ask the 1^st respondent to comply with the applicant’s request. It is never the 2^nd respondent’s case that under the tenancy agreement entered into between the 1^st and 2^nd respondents (“the Tenancy Agreement”), the 2^nd respondent has no power to request the 1^st respondent to comply with the applicant’s request or to comply with the DMC. It is in fact strange that the 2^nd respondent did not even produce the Tenancy Agreement.

48.Without such evidence, it raises serious doubt as to whether the 2^nd respondent had in fact taken all possible steps (including but not limited to commencement of legal proceedings against the 1^st respondent) within its power to prevent the 1^st respondent from refusing to grant access to the applicant.

49.Further, it is not right for the 2^nd respondent to rely on the content of a without prejudice letter dated 22 October 2021 to support its position. In the absence of the Tenancy Agreement, which set out the duties and obligations of the landlord and tenant, I do not accept that the 2^nd respondent had done all it could to procure access for the applicant.

50.Moreover, none of the authorities relied upon by the 2^nd respondent suggests that before the owners’ corporation or the manager exercising its rights to entry and repair, matters concerning compensation or indemnity should be agreed upon. In other words, none of the authorities relied upon by R2 suggests that there is any implied pre-condition (other than the expressly stipulated condition of “reasonable notice”) for the right of entry and repair.

51.First, the case of The Incorporated Owners of Hiu Kwong Court and Hiu Ming Court v Wong Pok Wa and 福致貿易有限公司 (LDBM 127/2014, 12 October 2015) is not a case concerning the owners’ corporation’s right to request entry and there is no discussion on whether its right to request entry should be premised upon undertaking to be given beforehand.

52.Secondly, the Court of Appeal in Citybase Property Management Limited v Crystal Arm Limited (CACV 6/2007, 10 January 2008) mainly reiterates the general principles in respect of the exercising of reasonable care or making good of any damage when exercising the right to entry and repair. In fact, the Court of Appeal held that:

“17. As was pointed out in the course of argument, the respondent was in no position to request the 3 conditions [Note: the 3 conditions attempted to imposed can be found in 4 of the case, which includes a request for indemnity], which the respondent sought in the letter of 5 October 2005 and persisted in up to trial. Even though indemnity as sought under the third condition would be unnecessary because it would be implied by law and in any case the applicant confirmed that it gave it, the imposition of the conditions would be an attempt to vary the terms which governed the relation between the applicant and the respondent under the DMC. That the respondent was not entitled to demand.”

(Underlines added)

53.As such, the Court of Appeal held in an unequivocal term that the right to entry and repair would not be subject to any pre-condition of giving indemnity beforehand.

54.Further, it must be noted that the scope of indemnity that the 1^st respondent was asking was more than just the reinstatement cost but also the loss of profits and business during the course of the Drainage Works. However, R2 fails to provide any authority to support this contention especially when the Applicant is simply exercising its right under DMC, and has committed no legal wrong in requesting entry and performing its duty to maintain the common facilities.

55.Thus, the 2^nd respondent’s submissions in this regard are just red herrings. The real issue must be whether reasonable notice has been given by the applicant for it to exercise its right of entry and its duty to repair and maintain the common parts and facilities in the Unit. In this regard, the 2^nd respondent has simply no real answer to that.

56.I also fail to see how the 2^nd respondent is able to distinguish the case of The Incorporated Owners of Kim Tak Building, supra, when it is expressly held that an obligation to indemnify (even when there is an express term) is not a pre-condition for the owners’ corporation to properly and legally exercise its right of entry.

57.The 2^nd respondent just fails to establish how those purported terms can be implied to the DMC based on the requirement of necessity instead of just being terms that are good to have. As such, the 2^nd respondent cannot substantiate that any of those purported terms can be implied or imposed as a pre-condition for the applicant to exercise its right of entry.

58.Also, the express requirement as set in the DMC is that the 2^nd respondent shall take all possible steps to prevent its tenant, ie the 1^st respondent, from doing any act, deed, matter or thing which in any way interferes with or affects the management or maintenance of the Building. As such, the 2^nd respondent is required to take all possible steps to procure entry into the Unit for the Applicant. The meaning of “taking all possible steps” is plain and simple. It simply means that the 2^nd respondent is required to take all steps available to and within its power to procure the desired results. The content of the duty of “taking all possible steps” is similar to, if not identical to, the duty of “best endeavour” (see Lewinson on Interpretation of Contracts (7th Ed.) paragraph 16.50).

59.It was held in Okachi (Hong Kong) Co. Ltd v Nominee (Holding) Ltd [2005] 3 HKC 408 that:

“… ‘using best endeavours’ means that the party so undertakes shall take all reasonable steps which a prudent and determined man acting in his own interests and anxious in completing the transaction would have taken. Second-best endeavours will not do. If that person fails to use proper skill and care in going about the task that he undertakes to do with his endeavours, or that he deliberately delays or procrastinate the pursuit of that object, or going about doing it in such a way disregarding the interests of the person to whom he has given his undertaking, he fails in his obligations”

(Underlines added)

60.Thus, it is wrong for the 2^nd respondent to submit that whether the 2^nd respondent had the power to request the 1^st respondent to comply with the applicant’s request or to comply with the DMC under the tenancy is neither here or there. If, which is highly probable, the 2^nd respondent had retained the power in the tenancy agreement to request its tenant to comply with the DMC or any request of entry by the applicant for the purpose of maintaining the common facilities or common parts in the Unit, it must be within the ambit of the duty of “taking all possible steps” for the 2^nd respondent to make use of such power, including but not limited to resorting such matters by way of litigation.

61.The 2^nd respondent cannot simply say that by engaging the 1^st respondent over the correspondence, the 2^nd respondent had discharged its duty to take all possible steps.

62.In the premises, I consider that the likely outcome of the substantive issue of the Application will lean favourably towards the applicant, and the applicant should be awarded with the costs of Application.

63.In respect of the Counterclaim, it is clear to me that upon discontinuance, the 2^nd respondent does not obtain the very relief it sought in the Notice of Opposition, ie the sum of $90,850.

64.The burden clearly lies with the 2^nd respondent to prove what good reason it had for the Tribunal to depart from the usual approach that the discontinuing party shall pay the costs of the other party. The issue of the Counterclaim cannot be said to have rendered academic by virtue of the grant of access to the applicant by the 2^nd respondent in October 2022.

65.The 2^nd respondent’s positions can be summarized as follows:-

(1) The maintenance works carried out by the 2^nd respondent’s own contractor had fixed the leakage problem and replaced the drainage pipes (which include a section of the rainwater drainage pipes which was scheduled to be replaced under the Drainage Works); and

(2) The 2^nd respondent asserted that since the rainwater drainage pipe has been replaced by the 2^nd respondent, the applicant no longer need to pay the same to its contractor and as such the applicant would be required to pay the 2^nd respondent instead.

66.The 2^nd respondent’s contentions are wholly unfounded. First, the applicant did not give any approval or consent to the 2^nd respondent to make alteration to the common facilities in the Unit. The 2^nd respondent was in fact in breach of the DMC in interfering with the common part of the Building.

67.Also, whether the sum of $90,850 is a reasonable one or not still remains an area of dispute. It cannot be assumed that the cost so incurred or the quotation received by the 2^nd respondent must be a reasonable and not an exaggerated one.

68.Further, the applicant’s contractor is charging the applicant on a lump sum basis, and any difference of the construction site or the number of items required would not affect the lump sum payable. As such, it is simply unreasonable for the 2^nd respondent not to allow the applicant to enter into the Unit to carry out the Drainage Works when all along the applicant was prepared and ready to carry out its duty under the DMC and the BMO. The cost incurred by the 2^nd respondent is clearly unnecessary.

69.I am therefore of the view that the 2^nd respondent fails to establish a good reason to depart from the usual approach on costs.

70.The 2^nd respondent should therefore be liable to pay costs of the Counterclaim to the applicant.

Conclusion

71.In the premises, it is my decision that the applicant is entitled to costs of the Application and of the Counterclaim against the 2^nd respondent.

72.By virtue of Clauses 3 and 6 of Part E of Section II of the DMC, the costs should be awarded to the applicant on the “solicitor and own client” basis.

73.I therefore order that the 2^nd respondent do pay the applicant costs of the Application and of the Counterclaim with certificate for counsel to be taxed on District Court Scale and on “solicitor and own Client” basis, if not agreed.

Mr Kin Lau, instructed by Messrs Cheng & Co, for the applicant

Mr Victor Chiu, instructed by Messrs Kitty So & Tong, for the 2^nd respondent