北角中心大廈業主立案法團 v. 威邦物業管理服務有限公司

LDBM 100/2023

[2024] HKLdT 36

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 100 OF 2023

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BETWEEN

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DECISION

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INTRODUCTION

1.This is an action for recovery of unpaid management fees. The Applicant (“IO”) commenced the present action against the Respondent (“Wellpoint”), at first in Wellpoint’s own capacity as the manager (“Plaza Manager”) of the “New Trend Plaza” (“Plaza”), and after amendment of the Notice of Application, as the representative representing all the owners (“Plaza Owners”) “as defined in the Sub-Deed of Mutual Covenant dated 12 May 1994 (“Sub-DMC”), registered in the Lands Registry by memorial no UB6037119 and re-registered by memorial no UB6205188. The relationship between the parties involved in this case will be elaborated further below.

2.Before me, there are two summonses for determination:-

(1) the summons filed by Wellpoint on 25 September 2023 (“Striking-out Summons”) pursuant to Order 18 rule 19 of the Rules of the High Court (Cap 4A, Sub Leg) (“RHC”) and under the inherent jurisdiction of the Court, for striking out the Notice of Application filed by IO on 25 July 2023 as amended on 4 September 2023 (“ANOA”), and for the present action to be dismissed with costs;

and

(2) the summons filed by IO on 8 November 2023 (“Representative Summons”) pursuant to Order 15 rule 12 RHC, for appointing Wellpoint as the representative respondent representing all the Plaza Owners in the present proceedings and costs.

3.In essence, the two summonses are both sides of the same question: whether Wellpoint is properly joined as a representative representing all the Plaza Owners in the present proceedings.

4.IO contends that the answer must be “yes”, by reason of Wellpoint having:- (1) extensive powers and duties to represent the Plaza Owners as the Plaza Manager under the Sub-DMC; and (2) actual collection of some (if not all) of the management fees (payable to IO) from the Plaza Owners, which makes Wellpoint a trustee of the Plaza Owners in respect of such collected management fees (“Collected Fees”).

5.Wellpoint disagrees. It argues that it is just engaged by the Plaza Owners (not IO) as the Plaza Manager for the Plaza. It has no contractual relationship with IO and is not liable to pay any management fees to IO. When the IO amended its Notice of Application for changing the capacity of the Wellpoint from being sued in its own name to that of a “representative” on behalf of the Plaza Owners, IO must have realized that it has no cause of action against Wellpoint and accordingly, tried to cover up its mistake by starting this unjustified representative action through the backdoor. Wellpoint is therefore obliged to take out the Striking-out Summons instead of filing Notice of Opposition.

6.At the hearing, IO confirms that it has no claim against Wellpoint in its own capacity. Mr Cheng, Counsel for IO, fairly concedes that as the ANOA now stands, if this Tribunal takes the view that Wellpoint should not be sued as a representative on behalf of the Plaza Owners, the ANOA discloses no reasonable cause of action against Wellpoint and is liable to be struck out.

7.Mr Chan (together with Mr Cheung), Counsel for Wellpoint, confirms that for the purpose of the Striking-out Summons, Wellpoint only relies on the sole ground that the ANOA discloses no reasonable cause of action and therefore will not refer to any affidavit for the purpose of the Striking-out Summons.

8.It might be noteworthy that given the ANOA now stands, no leave is indeed required for IO to appoint Wellpoint as the representative respondent, but leave is required for continuation of the representative proceedings under Order 15 rule 12(1) RHC. I should also add that the description as to the Plaza Owners being represented by Wellpoint in the title of this action is not in order. It appears to have covered all the owners of the Plaza since the registration of the Sub-DMC on 12 May 1994 whereas the period in question in this case only concerns the period since March 2018. Be that as it may, I am prepared to consider the two summonses despite such irregularities, which are remediable.

BACKGROUND

9.The following background facts are undisputed or indisputable.

10.IO is the Incorporated Owners of the North Point Centre (“Estate”). The Estate is situated at Nos. 278-288 Kings Road, North Point, Hong Kong. It consists of three multi-storey buildings with residential units and three floors of commercial units. The Plaza is situated at part of the three floors of commercial units. The owners of the Estate are subject to a Deed of Mutual Covenant dated 9 August 1974 (the “DMC”).

11.The background as to how the Plaza came about can be summarized as follows. By the Assignment dated 5 November 1992, All Wide Investments Limited (“All Wide”) acquired some 353 out of the total 3,708 equal undivided shares of the Estate, representing (1) Shops G5B and G5C on the ground floor; (2) the whole of the first and second floors; and (3) the lobby on the ground, first and second floors including the lifts installed thereat and the machine room on the third Floor (collectively, “Plaza Premises”).

12.Thereafter, by a Memorandum of Re-Allocation of Undivided Shares dated 30 March 1993, All Wide subdivided and re-allocated the 353 undivided shares of the Plaza Premises into 186 individual sub-units (the “Plaza Sub-Units”). On 12 May 1994, All Wide and the first purchaser of one of the Plaza Sub-Units entered into the Sub-DMC in respect of the Plaza to regulate the rights, interests and obligations of the Plaza Owners.

13.All Wide eventually sold out all the 186 Plaza Sub-Units to various different purchasers. According to the list compiled by the IO, the Plaza Sub-Units are currently owned by 99 different registered Plaza Owners.

14.By the service agreement dated 31 July 2018, Wellpoint was engaged by the Plaza Owners through the owners’ committee of the Plaza Owners (“Plaza Committee”) to provide building management service for the Plaza. Since then, the said agreement has been renewed in substantially the same terms in the following years (collectively, “Service Agreements”). As a result, Wellpoint has been the Plaza Manager since 1 Aug 2018.

15.In the past, the predecessor Plaza Manager had the practice of paying the management fees under the DMC (“Management Fees”) to IO on behalf of the Plaza Owners. Such practice ceased upon the appointment of Wellpoint. In the circumstances, IO commenced the present action against Wellpoint for the outstanding Management Fees allegedly payable by the Plaza Owners to IO for the period of March 2018 to July 2023 in the total sum of HK$1,539,260 together with the accruing Management Fees (“Alleged Outstanding Fees”).

16.In January 2024, the Plaza Committee formally notified Wellpoint in writing that it would not fund Wellpoint in defending the present proceedings and Wellpoint would have to conduct the present proceedings on its own and at its own costs. It also warned Wellpoint not to release the Collected Fees to IO without its written consent.

LEGAL PRINCIPLES

STRIKING OUT

17.The principles governing striking out applications are well-settled which can be succinctly set out as follows:-

a. It is only in plain and obvious cases that the Court should exercise its summary powers to strike out any pleading. The claim must be obviously unsustainable, the pleadings must be unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court: Hong Kong Civil Procedure 2024 Vol 1 §18/19/4.

b. No evidence shall be admissible on an application for striking out of any pleading on the ground that it discloses no reasonable cause of action: Order 18 rule 19(2) of RHC.

REPRESENTATIVE PROCEEDINGS

18.Representative actions are governed by Order 15 rule 12 RHC, which provides that:-

(1) Where numerous persons have the same interest in any proceedings, not being such proceedings as are mentioned in rule 13, the proceedings may be begun, and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them.

19.The legal principles in relation to representative proceedings have been recently reviewed by the Learned Deputy High Court Judge Herbert Au-Yeung in Sir Elly Kadoorie & Sons Ltd v Bradley [2023] 3 HKLRD 587, making reference to the UK case of Lloyd v Google LLC [2022] AC 1217, at §11 as follows:-

(1) The phrase “same interest” is to be interpreted purposively in light of the underlying objectives and the rationale for the representative procedure. The premise for a representative action is that claims are capable of being brought by (or against) a number of people which raise a common issue (or issues): hence the potential and motivation for a judgment which binds them all. The purpose of requiring the representative to have the same interest in the claim as the persons represented is to ensure that the representative can be relied on to conduct the litigation in a way, which will effectively promote and protect the interests of all the members of the represented class. Therefore, it is not possible where there is a conflict of interest between class members, in that an argument which would advance the cause of some would prejudice the position of others: [71];

(2) However, a distinction needs to be drawn between cases where there are conflicting interests between class members and cases where there are merely divergent interests, in that an issue arises or may well arise in relation to the claims of (or against) some class members but not others. So long as advancing the case of class members affected by the issue would not prejudice the position of others, there is no reason in principle why all should not be represented by the same person: [72];

(3) Where the same interest requirement is satisfied, the court has a discretion whether to allow a claim to proceed as a representative action. The court must in exercising its discretion seek to give effect to the underlying objective of dealing with cases justly and at proportionate cost. Many of the considerations specifically included in that objective such as ensuring that the parties are on an equal footing, saving expense, dealing with the case in ways which are proportionate to the amount of money involved, ensuring that the case is dealt with expeditiously and fairly, and allotting to it an appropriate share of the court’s resources while taking into account the need to allot resources to other cases – are likely to militate in favour of allowing a claim, where practicable, to be continued as a representative action rather than leaving members of the class to pursue claims individually: [75];

(4) While it is plainly desirable that the class of persons represented should be clearly defined, the adequacy of the definition is a matter which goes to the court’s discretion in deciding whether it is just and convenient to allow the claim to be continued on a representative basis rather than being a precondition for the application of the rule. There is a general principle that membership of the class should not depend on the outcome of the litigation. Beyond that, whether or to what extent any practical difficulties in identifying the members of the class are material must depend on the nature and object of the proceedings: [78];

(5) The ability to act as a representative under the rule does not depend on the consent of the persons represented but only on community of interest between them. There is ordinarily no need for a member of the represented class to take any positive step, or even to be aware of the existence of the action, in order to be bound by the result: [77].

20.With these principles in mind, I now turn to consider the parties’ arguments. In light of the parties’ proposition that the determination of the Representative Summons might in effect dispose of the Striking-out Summons. I should start with IO’s grounds of application of the Representative Summons.

IO’S CLAIM

21.The IO’s claim under the ANOA can be summarized as follows.

22.Under Clause 4(f) of the DMC, all owners of the Estate shall pay the Management Fees, being the various costs, charges and expenses relating to the management of the Estate, in the proportions as mentioned in Clause 4(h) of the DMC. The Plaza Owners, as co-owners of the Plaza Premises, which in turn are parts of the Estate comprising 353 of the 3,708 undivided shares of the Estate, are liable to pay the Management Fees.

23.The liability of the Plaza Owners to pay the Management Fees is also explicitly recognized in Clause 3(1) of Part III of the Sub-DMC, which provides that each of the Plaza Owners shall pay in respect of the Plaza Sub-Units owned by such owner a due proportion of the “Management Expenses” (as defined at Part I of the Sub-DMC as essentially being the Management Fees).

24.Prior to the appointment of Wellpoint as the Plaza Manager in 2018, for the purposes of collecting the Management Fees payable by the Plaza Owners, IO would issue demand notes to the predecessor Plaza Manager, which would then pay the Management Fees as collected from the Plaza Owners to IO in one lump sum. However, Wellpoint has failed to pay any Management Fees to IO since its appointment. The Alleged Outstanding Fees remain unsettled.

25.According to the financial documents prepared by Wellpoint for the Plaza Owners, Wellpoint has collected a considerable amount of the Management Fees, and pursuant to Clause 7(3) of Part III of the Sub-DMC, such funds are held by Wellpoint as trustee for and on behalf of the Plaza Owners.

26.In the circumstances, IO seeks an order that the Plaza Owners are in arrears as to the Alleged Outstanding Fees. It also seeks an order that Wellpoint, as the representative of the Plaza Owners and the trustee in whom the Collected Fees are vested, shall pay the Collected Fees to IO.

IO’S GROUNDS OF APPLICATION

WELLPOINT’S POWER

27.IO accepts that it has no cause of action against Wellpoint in its own capacity for IO is not a party to the Sub-DMC or the Service Agreements. It however argues that Wellpoint is the appropriate representative for and on behalf of all the Plaza Owners because of Wellpoint’s extensive power to act for the Plaza Owners under the Sub-DMC and its possession of the Collected Fees.

28.Regarding Wellpoint’s power, IO contends that the Sub-DMC has conferred extensive powers and duties to Wellpoint to act on behalf of the Plaza Owners to conduct legal proceedings and to deal with the IO. It refers to the following clauses of the Sub-DMC and says that:

a. by Clause 1(b) of Part III of the Sub-DMC, each Plaza Owner appoints the Plaza Manager “irrevocably as attorney to enforce the provisions of [the Sub-DMC] and the [DMC] so far as the same relate to or affect the [Plaza]”.

b. Clause 1(c) of Part III of the Sub-DMC provides that “The [Plaza Manager] shall be deemed to be acting collectively for all the [Plaza Owners] (other than for any [Plaza Owner] in default or against whom any action is brought) but not for the Owners individually”.

c. Clause 2(1) of Part III of the Sub-DMC sets out the powers and duties of the Plaza Manager, namely, that it shall “be responsible for and shall have full and unrestricted authority to do all such acts and things as may be reasonably necessary or requisite for the proper management of the [Plaza] but without prejudice to the generality of the foregoing, the full power and authority” to do the following:-

“(a) to demand, collect and receive all amounts payable by the [Plaza Owners] under the provisions of [the Sub-DMC] and to pay and discharge out of the moneys so collected all outgoings relating to the management of the [Plaza] or otherwise incurred by the [Plaza Manager] hereunder;

……

(p) to appoint solicitors where necessary with authority to accept service on behalf of all the [Plaza Owners] of all legal proceedings relating to the [Plaza] or any part thereof…..;

……

(v) to commence, conduct, carry on and defend legal and other proceedings relating to the [Plaza] or the management thereof in the name of the Plaza Manager;

(w) to enforce the due observance and performance by the [Plaza Owners]… of the terms and conditions of the [DMC] [the Sub-DMC] … and to take action in respect of any breach thereof including the commencement, conduct and defence of legal proceedings …..;

……

(bb) to pay and discharge out of the moneys collected hereunder all outgoings relating to the management of the [Plaza] or incurred by the Plaza Manager in connection therewith and the Plaza Manager’s Remuneration under [the Sub-DMC];

……

(dd) whenever not inconsistent with the provisions of the [DMC] and/or [the Sub-DMC], to represent the [Plaza Owners] in all dealings with the Manager under the [DMC] in relation to the management of the [Plaza];

……

(ff) to represent the [Plaza Owners] in all dealings with and matters concerning the Manager of the Building under the [DMC]”.

(collectively, “Sub-DMC Clauses”)

WELLPOINT AS TRUSTEE

29.IO also contends that as Wellpoint is in possession of the Collected Fees, Wellpoint is the trustee of the Plaza Owners pursuant to Clauses 7(3) of Part III of the Sub-DMC and Recitals (戊) and (己) of the Service Agreement of 2021. It is therefore convenient to join Wellpoint as the representative of the Plaza Owners so that an order can be granted to compel Wellpoint to pay out the Collected Fees to settle the Alleged Outstanding Fees.

30.IO refers to Clause 3(1) of Part III of the Sub-DMC to illustrate that the “Aggregate Management Expenses” which the Plaza Owners have paid to Wellpoint as Plaza Manager should include in it the Management Fees. It also makes reference to some financial documents prepared by Wellpoint for proof of Wellpoint having collected some Management Fees from the Plaza Owners [1].

31.On such basis, IO asserts that Wellpoint is holding the Collected Fees, which IO is claiming, as a trustee on behalf of the Plaza Owners. It will be illogical for IO to claim for further payment of the Management Fees from the Plaza Owners, who in all likelihood would have already paid most if not all of their due share of the Management Fees to WellPoint. It therefore argues that Wellpoint is the most suitable representative Respondent for the present proceedings.

AN ANALOGY

32.Much reliance has been placed on the case of TND Group Ltd v Lau Chiang Chu Vivien [2010] 5 HKLRD 330 by IO to contend that:-

a. the facts of that case are similar to the present case. In that, a marketing company claimed against an unincorporated association, ABF, for unpaid service fees. It sought to join two key officers (referred as Lau and Leung) of ABF as the representative defendants of all the members of ABF.

b. Lau and Leung were not themselves members of ABF. They therefore argued that they did not have the same contractual liability or defence as the members of ABF, such that they did not have the same interest in the proceedings and should not be made the representative defendants.

c. such argument was rejected. HH Judge Mimmie Chan (as Her Ladyship then was) held the view that there was no justification to adopt a more rigid approach when applying Order 15 rule 12(1) and in the interpretation of the “same interest” requirement. It is sufficient to show that there is some matter of commonality and that the representative defendants and the represented persons have a community of interest in the determination of any substantial question of law or fact that arises in the proceedings. Due regard should be given to the underlying objectives of the RHC to promote procedural economy and fairness.

33.Based on the TND case, Mr Cheng draws the analogy to the present case and argues that :-

a. even though Wellpoint is not itself liable to pay Management Fees to IO, the Sub-DMC Clauses provide Wellpoint with the power and duty to represent the Plaza Owners in legal proceedings and dealing with IO. The Service Agreements also empowers WellPoint to conduct legal proceedings on behalf of the Plaza Owners. Hence, Wellpoint would have an interest in the determination of the issue in dispute in the present case.

b. being a professional company, it is hard to imagine that Wellpoint, acting as the representative of the Plaza Owners in this action, would act in breach of its express duties and not to raise any defences or counterclaims which the Plaza Owners (on their instructions) may have against the IO’s claim.

VIABLE ALTERNATIVES

34.On the question of viable alternatives, IO argues that it is not viable to sue all the Plaza Owners as they are numerous (IO alleges to be 99 individual Plaza Owners, holding 186 Plaza Sub-Units) and the proceedings would be unmanageable if all were named. Moreover, there is no way for the IO, as opposed to Wellpoint, to ascertain the individual Plaza Owners who are in default as to their payment.

35.Besides, IO also argues that it is not a viable alternative to sue one or more of the individual owners as representative respondents. It refers to the case of Ng Hing Yau v City Noble Developments Ltd (HCA 430/2017, unreported, 16 November 2017) to assert that where extensive powers have been delegated to Wellpoint as Plaza Manager, including the authority to defend legal proceedings, it is the Plaza Manager, and not individual owners, who is the more appropriate person to represent the Plaza Owners.

DISCUSSION

36.Both parties have no disagreement to the aforesaid legal principles. The starting point is the representative rule is an exception to the general rule that all persons materially interested in the subject matter of a suit should be made parties to it, to ensure that the rights of all persons interested are settled by a single judgment of the court. The representative rule should be treated as a flexible tool of convenience but the importance of administration of justice should not be compromised.

COMMON INTEREST

NOT A MEMBER OF THE CLASS

37.In determining whether the Representative Summons should be allowed, it is crucial to consider if the essential “same interest” requirement is satisfied. In gist, whether Wellpoint and all the Plaza Owners have a common interest, a common grievance and that the relief is in its nature beneficial to them all: HKCP 2024 Vol 1 §15/12/2. I should first examine the cause of action, and what is the precise class of potential respondents who are represented by Wellpoint for the purpose of imposing liability on them if judgment is given for IO: HKCP 2024 Vol 1 §15/12/24.

38.The IO’s claim is a contractual claim against each of the Plaza Owners for their respective breach of the DMC in failing to pay their respective shares of the Alleged Outstanding Fees.

39.Wellpoint is neither one of the Plaza Owners nor a party to the DMC, and thus is not liable for the payment of the Alleged Outstanding Fees. In parallel, IO is not a party to the Sub-DMC or the Service Agreements and has no right to enforce them as against Wellpoint.

40.The fact remains that IO has no cause of action against Wellpoint. Wellpoint is not a member of the class as Plaza Owners to be sued. Nor would it have any defence to the IO’s claim, not to mention any common defence with other Plaza Owners. Wellpoint naturally would not share the same motivation with the Plaza Owners in defending this action. The potential judgment does not bind it. As the ANOA now stands, IO’s enforcement of the DMC against each Plaza Owner for his/ her personal liability to pay his/ her share of the Alleged Outstanding Fees does not really concern Wellpoint.

WELLPOINT’S POWER

41.As to IO’s suggestion that the Sub-DMC Clauses have empowered and obliged Wellpoint to defend legal proceedings for the Plaza Owners, I am not convinced. First, as Counsel for Wellpoint submit, the representative capacity to be sued cannot be conferred by private contracts and, whether the Sub-DMC or the Service Agreements have authorized and/or obligated Wellpoint to defend legal proceedings on behalf of the Plaza Owners is irrelevant.

42.Second, IO, who is not a party to the Sub-DMC and/or the Service Agreements, has no right to enforce them against Wellpoint for want of privity of contract. Any reliance by IO on them should only be considered as to whether the conditions of Order 15 rule 12 have been satisfied.

43.Third, none of the Sub-DMC Clauses actually empowers Wellpoint to represent the Plaza Owners in defending legal proceedings against each of them personally for personal breach of contractual duty to pay the Management Fees. Those clauses only provide Wellpoint with power to conduct proceedings and appoint solicitors in proceedings relating to the Plaza and the management of it, which is different from undertaking to be a representative to the legal proceedings for breach of personal contractual duty to pay fees against each Plaza Owner personally.

44.Fourth, the following clauses of the Sub-DMC, which were not mentioned by IO, indeed have stipulated that Wellpoint is not allowed to conduct and defend proceedings on behalf of the Plaza Owners without the authorization and instruction of the Plaza Committee/ Plaza Owners:-

a. Clause 2(1)(w) of Part III of the Sub-DMC only empowers Wellpoint to conduct legal proceedings to enforce the due observance and performance of the terms of the DMC and Sub-DMC with the consent and authorization of the Plaza Owners.

b. Clause 2(1)(v) of Part III of the Sub-DMC only provides the power and duty for Wellpoint to conduct and defend legal proceedings “in the name of the Plaza Manager” but not for and on behalf of any owners.

c. Clause 1(10) of Part IV of the Sub-DMC stipulates that the function of the Plaza Committee includes giving “instructions to the Plaza Manager with which the Plaza Manager as far as reasonably practicable shall comply with regard to the exercise by the Plaza Manager of any power or discretion vested in the Plaza Manager under Clause 2(1) of Part III [of the Sub-DMC]”.

Therefore, even if Wellpoint is in any way empowered to defend legal proceedings on behalf of the Plaza Owners, such power cannot be exercised without or contrary to the instructions from the Plaza Committee/ Plaza Owners.

45.Coupled with Clause 3.3(a) and (b) of the Service Agreements, which explicitly require Wellpoint to obtain authorization and/or written approval from the Plaza Committee before conducting legal actions or appointing solicitors or barristers, the fact that Wellpoint is merely provided with restricted power is obvious. Its authority, power or duty to defend legal proceedings for and on behalf of the Plaza Owners and/or appointing solicitors or barristers are not unfettered as IO seeks to portray, but subject to the consent and instruction of the Plaza Owners/ Plaza Committee.

46.Thus analyzed, it is difficult to see how the Sub-DMC and Service Agreements give rise to an unfettered power and duty for Wellpoint to represent all the Plaza Owners to defend the present proceedings against each of them personally for non-payment of Management Fees as IO suggests.

CONFLICT OF INTEREST

47.I should not lose sight of the fact that Wellpoint’s power and duty under the Sub-DMC aims at enforcement of the Sub-DMC. It runs counter to the nature and purpose of the present representative proceedings, in that Wellpoint is asked not to enforce, but to defend the enforcement of the Sub-DMC (which covers collection of the Management Fees as suggested by IO). Wellpoint’s embarrassing position is further complicated by the fact that while IO’s claim targets at all the Plaza Owners, it appears that Wellpoint has not collected the entire Management Fees from all of the Plaza Owners. In particular, IO’s claim also covers the accruing Management Fees.

48.Consequently, Wellpoint will be placed in a self-contradictory position. It faces the dilemma of discharging its duty under Clause 3(1) of Part III of the Sub-DMC to collect Management Fees from the Plaza Owners or to defend the IO’s claim for them. The two duties are potentially contradicted to each other. The problem might be aggravated in light of the numerous Plaza Owners, who might have all sorts of different defences. It is difficult to see how Wellpoint would be able to reconcile the dichotomy, not to mention to properly protect the interest of the Plaza Owners and to defend for them.

49.The possibility that the representative proceedings would in effect prejudice Wellpoint’s performance of the Service Agreements and the Sub-DMC should be avoided. The existence of a potential conflict of interest between the Plaza Owners and Wellpoint makes it inappropriate to make a representative order: Calm Ocean Shipping SA v Win Goal Trading Ltd (HCAJ 118/2015, unreported, 21 May 2020) at §34.

INDIVIDUAL CLAIM

50.At the hearing, I raise the concern that given Wellpoint’s power and authority to conduct legal proceedings for the Plaza Owners are limited to those for the purposes of performance of the Service Agreements and enforcement of the Sub-DMC, they might not stretch to cover defending personal contractual claim commenced by a third party against individual owners. In particular, Clause 1(c) of Part III of the Sub-DMC does not assist IO’s claim, instead, it disproves its contention. Such clause actually deems Wellpoint to be acting collectively for all the Plaza Owners but specifically excludes those who are in default of the terms of Sub-DMC (which cover the collection of Management Fees as suggested by IO), those against whom any action is brought, as well as explicitly states not to act for the Plaza Owners individually.

51.Even though Mr Cheng seeks to argue that the IO’s claim for payment of the Alleged Outstanding Fees is a collective claim against all the Plaza Owners jointly as a whole, who are jointly liable to pay the Alleged Outstanding Fees, I am not persuaded. In my view, such argument ignores the terms of the charging provisions, namely, Clauses 4(f) and 4(h) of the DMC.

52.Truly, all the Plaza Owners are obliged to pay the Management Fees attributable to their part of the land under the DMC whatever the Sub-DMC may say, and they are liable to pay individually and jointly. However, under Clause 4(h) of the DMC, the shares of the Management Fees in the proportion to the amount to be paid by each of the owners who respectively owns Shop G5 on the Ground Floor; the whole First Floor, the whole Second Floor; and other parts of the Plaza Premises are individually and separately set out. The combined effect of Clauses 4(f) and 4(h) of the DMC stipulates that each owner shall only pay his own shares of the Management Fees in the proportion to the amount as set out in Clause 4(h).

53.Hence, it is not right to say that all the Plaza Owners are jointly liable to pay the entire Management Fees of the whole Plaza Premises in one single lump sum as a whole without due regard to the proportion to the share as separately set out in Clause 4(h) of the DMC. The fact that the Plaza Premises has been sub-divided to a number of Plaza Sub-Units only make some of the owners of the Plaza Sub-Units jointly liable to the shares of the units from which their sub-units divided according to Clause 4(h).

54.For reason of matters set out above, I do not take the view that Wellpoint and the Plaza Owners share any common interests or common grievances or that Wellpoint will be benefitted by the determination of the present action. Absent any motivation for a judgment which binds them all, and, in view of Wellpoint’s restricted power and the existence of the potential conflict of interest, I am not convinced that Wellpoint can be relied on to defend the IO’s claim which will effectively promote and protect the interests of all the Plaza Owners. IO’s application is bound to fail.

EXERCISE OF DISCRETION

55.For completeness sake, I now turn to consider even on the assumption that the same interest requirement is satisfied (which I do not so find for reasons set out above), the court still has a discretion whether to allow a claim to proceed as a representative action. I also remind myself of the importance of giving effect to the underlying objective of dealing with cases with fairness and procedural economy.

56.Undoubtedly, a person may be compelled to act as a representative defendant even against its wish, but the reluctance of the representative to act in such capacity and the objection of the represented persons would be the relevant factors in the court’s exercise of its discretion. In particular, it is not appropriate to compel a person to act as a representative defendant against its wish when there is a viable alternative relief: Calm Ocean Shipping SA (supra) at §§40-49.

57.In the present proceedings, none of the Plaza Owners has given any consent or authorization to Wellpoint to act for them. Rather, the Plaza Committee has formally notified Wellpoint in writing that it would not support or fund Wellpoint in defending the present proceedings and Wellpoint is required to conduct the proceedings on its own and at its own costs.

58.Absent any instructions, co-operation or financial support from the Plaza Owners/ the Plaza Committee, Wellpoint has no authority or right to act for the Plaza Owners in the present proceedings under the Sub-DMC or the Service Agreements. Nor has it any solid instruction or information from the Plaza Owners to defend for them, bearing in mind Wellpoint itself is not a member of the class and itself has no defence to raise.

59.Realistically, Wellpoint would be placed in an embarrassing situation. On the one hand, Wellpoint, being the Plaza Manager under the Sub-DMC and the Service Agreements, owes a contractual duty to the Plaza Owners to act only according to their instructions. On the other hand, a duty is forced upon it to defend the case reluctantly for the Plaza Owners, who object to such representative arrangement and explicitly would not support it. Given Wellpoint is not itself a member of the Plaza Owners, it would not be able to properly defend the present proceedings for itself has no defence and without the support of the Plaza Owners.

60.Besides, the relationship between Wellpoint and the Plaza Owners is essentially one of commercial contract. Wellpoint is plainly a service provider engaged in providing building management service for service fees on a yearly basis. Viewed in this light, it is unfair to burden a service provider with an obligation to fund, at its own cost, a litigation, which it is not personally liable.

61.I indeed have also considered if the burden of costs could be released by the court’s power to order a non-party (which might include the represented persons) to pay the costs of the proceedings. However, given the Plaza Owners are numerous and their defences and interests might be at variance, it is difficult to envisage circumstances in which it could be just to order the represented persons to contribute to costs incurred in the representative proceedings, which the representative itself is not a member of the class and the represented persons expressly did not authorize.

62.In further consideration of the duties, which might be imposed on Wellpoint might include an obligation to ascertain all the relevant Plaza Owners throughout the years; to inform each of them of these proceedings; to take instructions and relevant documents from them (including the outgoing owners); to conduct the proceedings etc, the representative proceedings might incur unnecessary costs and delay. It might also tainted with embarrassment and hostility, not only between IO and Wellpoint, but also Wellpoint and the Plaza Owners. Besides, the fact that the Service Agreements are to be renewed on a yearly basis will add further uncertainty and complication to the smooth continuation of the representative proceedings.

63.IO’s complaint that it would not be able to ascertain which Plaza Owners are actually in default of payment does not advance its case any further. Suffice it to say that it has managed to compile the full list of the Plaza Owners it says it intends to claim according to the records of the Land Registry. Given its pleaded case that none of the Plaza Owners has paid the Alleged Outstanding Fees to it and that it is not a party to the Sub-DMC, the question of who has paid the Management Fees to Wellpoint is a matter between Wellpoint and the Plaza Owners, which appears not to be a matter affecting the liability between IO and the Plaza Owners under the DMC.

64.All matters considered, I do not take the view that a building management service provider should have been forced upon it by IO, a third party, such an onerous duty that which is merely, in this context, for IO’s convenience, when the final determination of the present proceedings only goes to the personal contractual obligations to pay between IO and the Plaza Owners personally, and, the eventual decision does not bind Wellpoint. It is not just or convenient to join Wellpoint as a representative respondent in this case.

THE ANALOGY

65.I share the view with Counsel for Wellpoint that none of the authorities relied upon by IO lends any support to its case. The Ng Hing Yau case (supra) was cited by IO for the proposition that a building management manager, and not individual owners, is the more appropriate person to represent the owners of a shopping arcade. However, the rationale of that case should not be taken out of context.

66.That case concerns two owners seeking to sue as representative plaintiffs on behalf of all other owners of a shopping arcade without their consent regarding the use of the external walls of the arcade. The view of the Learned Master Elaine Liu was expressed in the circumstances that the manager “has the power to represent all the owners in matters and dealings touching or concerning the Arcade as a whole, and to bring proceedings on matters touching or concerning the Arcade as a whole.” according to the sub-deed of mutual covenant concerned in that case (§48 of the Decision); that the use of the external walls fell into the scope of such power, and that “If the majority of the owners of the Arcade want to pursue this action, they can pass a resolution to require the Manager to represent them in the action.” (§49 of the Decision).

67.It is only in such context that the Learned Master considered the manager to be the more appropriate person to represent the owners of the arcade to deal with that action, which was an action concerning the arcade as a whole. By a proper reading of the Decision, it indeed states that a viable alternative for the owners to pursue the action is to pass a resolution to instruct the manager to be the representative.

68.I am not of the view that that case has laid down any legal principle to the effect that a building management service provider is the appropriate representative for all legal proceedings concerning the owners, without due regard to the defined scope of its power, the nature of the claim, the attitude of the owners and the manager or whether a resolution has been passed to authorize the representative arrangement.

69.Besides, I fail to see how the TND case (supra) could lend any support to IO, which concerns a rather different factual scenario from the present case. In that case,

a. the parties to be represented were the local and overseas members of an unincorporated association, ABF, which was an international governing body of the sport of tenpin bowling;

b. the two named representatives were (i) Lau, the Honorary Life President of ABF and the President of ABF from 1996 to 2004, who was the signatory of the agreement concerned, and a director of a corporate member of ABF; and (ii) Leung, the Honorary Secretary-General and Treasurer of ABF, who also kept documents regarding the funds of ABF;

c. ABF was sued for outstanding fees for marketing services under an agreement, which was signed by Lau on behalf of ABF on 26 February 2004 (“Agreement”);

d. both Lau and Leung were regarded as the key and responsible officers of ABF, who were heavily involved in the operation of ABF as well as the performance and payment arrangement of the Agreement, and in particular, Lau was a major if not key player in the negotiation and creation of the Agreement, who was also alleged to have made a number of representations, warranties and created a collateral agreement relating to the Agreement. A personal claim was also laid against her; and

e. that is under such circumstances that the Learned Judge found both of them, in their key roles and heavy involvements in ABF as well as the Agreement, shared common interests and common grievances with the members of ABF in determination of the issues in dispute, namely, (i) the rights and liabilities of ABF, (ii) whether ABF was liable to pay the service fees, (iii) whether ABF had a good defence or even counterclaim arisen from defective and delayed services rendered under the Agreement.

70.Obviously, the peculiar features in that case are missing in the present case. The two representatives apparently were heavily in charge of and having personal knowledge of the operation of ABF, the performance of the Agreement and the dealings with the plaintiff and its assignor/ predecessor.

71.Further, the relationship between the responsible officers of an unincorporated association and its members is sharply different from that between a service provider and its customers. Lau and Leung were apparently regarded as both the “brain” and “limbs” of the unincorporated association, ABF, who were in charge of the operation of ABF, the represented persons, as well as the performance of the Agreement, the subject matter of the proceedings, whereas, in the present case, Wellpoint is just a service provider for the Plaza with restricted powers and subject to the instructions of the Plaza Committee/ Plaza Owners. Their roles and positions are in sharp contrast.

72.Coupled with the allegations relating to the issue in dispute against Lau and Leung personally, as allegation of holding out as such to the third parties dealing with ABF, not to mention the other allegations regarding breach of warranty and collateral agreement against Lau, it is understandable that they had common interest and common grievances with the members of the ABF in the proceedings.

73.Different from Leung and Lau, Wellpoint itself is not involved in the DMC. There is no personal claim or allegation against it. It has no defence, counterclaim or set-off against IO. It is just a service provider acting upon instructions. It plainly does not have the same interest or grievance as the Plaza Owners. Hence, no analogy could be drawn from that case.

74.IO also seeks support from Baynard Ltd v Secretary for Justice (HCA 4073/2002, unreported, 24 Sep 2010) to suggest that the Court should exercise the power to compel an individual to be a representative defendant even against her will and notwithstanding the representative’s declared attitude that if appointed, she would just let the proceedings proceed by default.

75.Such suggestion neglects the peculiar facts of that case that the representative defendant there had all along been actively leading the owners to oppose the plaintiff’s project, that she was a member of the class of owners, that she had been nominated by other owners as their representative, that she had the benefit of receiving legal advice on the issue in dispute from counsel at the expenses of the plaintiff, that the plaintiff had undertaken not to seek recovery of costs from her and that the plaintiff was willing to fund her legal costs in the proceedings. Such material elements are simply absent in the present case. Such case cannot assist IO’s contention.

TRUSTEE OF THE MANAGEMENT FEES

76.As to the argument premised on Wellpoint’s capacity as a trustee in holding the Collected Fees, IO makes reference to Ideal Films Ltd v Richards [1927] 1 KB 374 as an authority to suggest that a trustee holding funds for an unregistered association may be joined as a party in an action against the beneficiaries so as to enable the plaintiff to obtain an order in the same action for payment by them out of the funds of the association of all damages and costs for which the plaintiff might obtain judgment.

77.IO also seeks support from Order 15 rule 14(1) RHC, which provides that:-

“(1) Any proceedings, including proceedings to enforce a security by foreclosure or otherwise, may be brought by or against trustees, executors or administrators in their capacity as such without joining any of the persons having a beneficial interest in the trust or estate, as the case may be; and any judgment or order given or made in those proceedings shall be binding on those persons unless the Court in the same or other proceedings otherwise orders on the ground that the trustees, executors or administrators, as the case may be, could not or did not in fact represent the interests of those persons in the first-mentioned proceedings.”

78.I accept Wellpoint’s submission that the Ideal Films Ltd case and Order 15 rule 14 merely provide that a trustee can be sued in its capacity as a trustee, such that it would be bound in any eventual judgment, but not as representative of the beneficiary for the purpose of determination of the issue of liability against the beneficiary personally as in the present proceedings. They do not support the proposition that, without having established any lawful title to the Collected Fees, Wellpoint could be strictly ordered to pay the Collected Fees out to IO. An order sought against Wellpoint must be premised on the Plaza Owners’ liability to pay the Alleged Outstanding Fees and the title to the Collected Fees. The mere fact that Wellpoint is in possession of the Collected Fees does not give rise to any liability owed by Wellpoint to IO.

VIABLE ALTERNATIVE

79.Given the issue in dispute of the present claim is strictly between IO and the Plaza Owners which does not involve Wellpoint, IO may consider suing the Plaza Owners who did not pay up, or select some proper persons to represent them in accordance with the legal principles under Order 15 rule 12 RHC. As elaborated above, it actually has no difficulty in identifying the Plaza Owners.

STRIKING-OUT SUMMONS

80.Given my ruling that Wellpoint is not the proper person to represent the Plaza Owners in the present proceedings, the ANOA is liable to be struck out on the ground of it disclosing no reasonable cause of action. The present action stands dismissed due to the absence of a valid claim against Wellpoint in its personal capacity, and, the claim against Wellpoint in the representative capacity is struck out.

81.Mr Chan sensibly concedes at the hearing that the other grounds of the Striking-out Summons would not be relied on. In any event, I detect no indication of IO conducting the present proceedings with an improper motive. Lacking any solid evidence to illustrate any mala fides or any ulterior motive on the part of the IO, the present action impresses me as a bona fide application for recovery of outstanding management fees due under the DMC but regrettably, stands to be dismissed due to procedural misconception. I do not detect any sign of deliberate abuse of process on the IO’s part or any elements of scandalous, frivolous or vexatious proceedings.

CONCLUSION

82.Having considered the submissions of both parties and all the relevant documents before me, I make an order that: -

(1) the Representative Summons be dismissed;

(2) the ANOA be struck out on the ground of it disclosing no reasonable cause of action; and

(3) the present action be dismissed.

COSTS

83.Having considered all the relevant circumstances, I form the view that costs should follow the event. I make an order nisi that IO do pay Wellpoint’s costs of the whole action, including the two Summonses and all costs reserved, with certificate for one Counsel, to be taxed on District Court scale if not agreed.

84.This costs order nisi shall become absolute in the absence of an application to vary by Form 1 within 14 days.

85.I thank all Counsel for their assistance.

Mr Henry Cheng, instructed by Messrs CW Chan & Co, for the Applicant

Mr Danny Chan and Mr Johnson Cheung, instructed by Messrs Kenneth CC Man & Co, for the Respondent