The Incorporated Owners of Grenville House v. Wong Tak Keung Stanley and Another

LDBM 199/2020

[2024] HKLdT 69

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO.199 OF 2020

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D E C I S I O N

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1.On 14 May 2024, this Tribunal handed down judgment after trial of this application and counterclaim (the Judgment)[1]. I adopt in this Decision the same expressions and abbreviations in the Judgment.

2.On IO’s application, I ordered the Couple to pay IO 1) interest on the sum of $220,000 at 1% for each 30 days from 1 May 2020 to 14 December 2021 and 2) collection charge of $150 (§195 of the Judgment).

3.Moreover, I dismissed the entirety of the counterclaim raised against IO (§196 of the Judgment).

4.By way of first and second costs orders nisi both on District Court scale, I awarded respectively costs of the application on solicitors and own client basis to IO (§198 of the Judgment) and 50% of the costs of the counterclaim together with certificate for counsel for its trial to IO too (§204 of the Judgment).

5.None applied to vary my first costs order nisi for IO’s application within 14 days of the Judgment and it became absolute on 29 May 2024.

6.On 28 May 2024, the Couple applied by summons to vary my second costs order nisi on their counterclaim (the Variation Summons).

7.Before the Variation Summons was heard, by another summons filed on 11 June 2024 (the Leave Summons), the Couple sought leave to appeal against the Judgment as per draft Notice of Appeal attached thereto.

8.On 14 June 2024, after hearing the parties on the Variation Summons, I dismissed the said application and made my second costs order nisi on the counterclaim absolute.

9.This is my Decision on the Leave Summons.

10.Mr Bernard Man SC (Mr Man) who did not appear at trial, leading Ms Carol Wong who appeared at trial, represented the Couple before me.

11.Mr Anthony Chan SC (Mr Chan), who also did not appear at trial, leading Mr Warren Suen who appeared at trial, represented IO before me.

Discussion

Rules & principles on leave to appeal

12.Under s.11(2) of Lands Tribunal Ordinance (LTO)[2], any party to proceedings before the Tribunal may appeal to the Court of Appeal against a judgment of the Tribunal on the ground that such judgment is erroneous in point of law.

13.S.11AA(1) of the LTO requires leave to be granted by the Tribunal or the Court of Appeal before an appeal under s.11(2) can be made. S.11AA(5)(a) of LTO provides that leave to appeal may be granted in respect of a particular issue arising out of the judgment. S.11AA(6) of LTO further provides that leave to appeal shall not be granted unless the Tribunal is satisfied that:

(a)  the appeal has a reasonable prospect of success; or

(b)  there is some other reason in the interests of justice why the appeal should be heard.

14.Such criterion of “reasonable prospect of success” was described in SMSE v KL [2009] 4 HKLRD 125 at [17] by Le Pichon JA (as she then was) as involving the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful” without having to be “probable”.

15.Even if it is not demonstrated that the appeal has any reasonable prospect of success, there may be many reasons why leave should still be granted in the interests of justice. For example, the issue may be one which the court considers should in the public interest be examined by appellate court or the court may take the view that the case raises an issue where the law requires clarifying: Ma Bik Yung v Ko Chuen [2009] 3 HKC 359, 361B-C.

Overview of the Judgment

16.On my findings, in July 2016, IO received from BA MBIS Notice on common parts of GH. At 29/2/2020 AGM, GH owners by majority vote resolved by 29/2/2020 GM Resolution to appoint the Contractor to carry out the Prescribed Works and to approve the Contribution ($220,000 per apartment) to fund the Prescribed Works: §§13, 24-26 and 31 of the Judgment.

17.By 18/3/2020 MC Resolution, MC resolved, I find, to collect the Contribution from GH owners in one instalment in April 2020. GH owners were given notice to pay up by 30 April 2020. Despite debit note and lawyer’s demand letter in April, July and August 2020, the Couple, joint owners of an apartment at GH, failed to pay their share despite the due date had expired: §§32-34 of the Judgment.

18.On 23 December 2020, IO took out this application seeking to recover from the Couple 1) the said sum of $220,000; 2) interest on the said sum pursuant to the DMC; 3) collection charge in sum of $150 pursuant to the DMC; and 4) costs: §41 of the Judgment.

19.In turn, the Couple raised 3 counterclaims against IO, or sought 3 orders all to be made against IO pursuant to s.20A(7) discretion of Building Management Ordinance[3] (BMO)[4], namely: -

(1)  Stanley’s request to inspect returned tenders (and to take copies of relevant documents) of the Prescribed Works, made as early as on 15 February 2020 (the Request), be forthwith complied with (1^st Order);

(2)  after compliance of 1^st Order, a general meeting of GH be held to decide whether or not to avoid IO’s contract with the Contractor and whether or not 18/3/2020 MC Resolution should be affirmed (2^nd Order); and

(3)  IO be not entitled to any of its claimed reliefs including interest on the said sum of $220,000 until after its compliance with 1^st and 2^nd Orders above (3^rd Order): §§49-54 of the Judgment.

First Ground of Appeal

20.It is first complained that this Tribunal had erred in holding that the Couple had no legal right to inspect the submitted tender documents under the Code of Practice on Procurement of Supplies, Goods and Services (COP) or BMO (§§187 and 189 of the Judgment).

(a)  When a statute declares that a thing ‘shall’ be done, the natural and proper meaning is that a peremptory mandate is enjoined: Wong Tak Keung Stanley v The Management Committee of the Incorporated Owners of Grenville House [2004] 2 HKC 194, §36 (abbreviated as GH Case in the Judgment).

(b)  Under s.20A(1), IO’s (sic) procurement in the present case “shall” comply with such standards and guidelines as may be specified in the COP. Paragraphs 1.2, 7.1 and 7.2 of the COP further make clear that the obligations stated in those paragraphs are mandatory in the sense that they are required to be complied with, and are not mere guidance or recommendations.

(c)  Insofar as necessary, the Couple will also rely on s.18(2A).

(d)  The relevant obligations in the COP, i.e. to permit an owner to inspect all tender documents and other relevant documents in the possession of IO (sic), are owed to the owners and intended to be enforceable by the owners. The owners have sufficient interest to see that relevant obligations are complied with.

(e)  It matters not even if (i) other paragraphs of the COP may not have the same legal status; (ii) there may be other remedies available; (iii) persons or entities other than the owners may have recourse via other means; (iv) the breach of the relevant obligations does not automatically, or does not in the circumstances of the case, render the resultant contract void or voidable.

(f)  This Tribunal, it was said, should have granted the 1^st Order (as defined in the Judgment) or like relief, regardless of whether any other relief is granted.

Second Ground of Appeal

21.It is next complained that this Tribunal had erred in ordering interest and collection charge against the Couple:

(a)  IO should not have been allowed to benefit from its own wrong, by passing the relevant resolutions at those particular times as a result of, and following, a breach of its legal obligations.

(b)  The claim for interest and collection charge is premised upon the resolutions being passed at those particular times.

(c)  Even if it is uncertain whether the resolutions would have been passed if IO had complied with its obligations; this uncertainty was created by reason of IO’s wrong, i.e. the breach of its obligations, and IO should not be allowed to benefit from it.

Third Ground of Appeal

22.Further, in the circumstances of this case, in particular given IO’s breach of its obligations, that the submitted tender documents have still not been offered for inspection, the Couple (sic) had made payment of $220,000 in December 2021, and the matters relied on by this Tribunal to deprive IO 50% of their costs in the counterclaim, costs of the entire action, it was last complained, should be to the Couple, or that an order more favourable to the Couple than that made by this Tribunal should have been made.

No error of law identified in Third Ground

23.It is well-established law that a judge has the discretion to award costs; an appellate court will not interfere with the costs order unless it is satisfied that it involves an error of law or the judge’s exercise of the discretion is plainly wrong: Kai Tak Garden (Choi Hung Road) (IO) v Woo Tak Yan and Another [2020] 1 HKLRD 736, [22], per Chu JA (as she then was).

24.The appeal court will not interfere with the exercise of a judge’s discretion in the award of costs unless it was shown that he had failed to exercise the discretion, or exercised it on a false principle, or did not exercise it judicially or the exercise of discretion was demonstrably flawed. The hurdle for appellate intervention is high: Felan Investment Ltd v Sarwin Industries Ltd and Another [2019] HKCA 96, [11], per Kwan JA (as she then was).

25.I refer to §§197, 198, 201 to 204 of the Judgment.

26.The Couple, I am afraid, had not identified any error of law in my two costs orders absolute. Nor did Mr Man allege that this Tribunal had failed to exercise my costs discretion, exercised it on a false principle, did not exercise it judicially or that my exercise of my costs discretion was demonstrably flawed.

27.I therefore agree with Mr Chan that this Third Ground is hopeless.

28.As I am not satisfied that this Third Ground carries reasonable prospect of success on appeal, I have no choice but to refuse granting leave on this ground.

Second Ground a new one not allowed on appeal

29.Put shortly, Mr Man argued that the reason why the Couple did not pay their share of the Contribution on time was that IO had breached its obligation under COP in terms of the Request. But not for such breach, it was, he argued, reasonably arguable that the Couple would have paid their share on demand.

30.IO, Mr Man further argued, should not have been allowed to benefit from its own wrong (i.e. its breach of §§7.1 and 7.2 of 2018 COP) by passing 29/2/2020 GM Resolution and 18/3/2020 MC Resolution at such times they were passed as a result of, and following, its breach of its legal obligation under COP.

31.Mr Man prayed in aid the “prevention principle” which operates to prevent a party who is in breach of an obligation owed to the other party from asserting rights or claiming benefits which arose as a consequence of the breach: Kensland Realty Ltd v Whale View Investment Ltd and Another [2002] 1 HKLRD 87, [91]-[99], per Ribeiro PJ.

32.However, this Second Ground has never been raised at trial. Apart from not admitting IO’s claim, the Couple defended at trial IO’s claim for interest and collection charge by seeking the 3^rd Order pursuant to s.20A(7) discretion in their counterclaim.

33.On top of conceding that this Second Ground is a new point, Mr Man also conceded before me that whether the prevention principle applies or not is a mixed question of law and fact: see China Agri-Products Exchange Ltd v Wang Xiu Qun and Another [2016] 1 HKLRD 868, [40], per Chu JA (as she then was) cited by Mr Chan.

34.Where new points are sought to be raised on appeal, it is for the Court of Appeal to decide in its discretion whether or not to allow this. The Court of Appeal will almost invariably expect an explanation to be given as to why new points raised on appeal were not raised in the Court below. It is most pertinent to bear in mind the “state of the evidence” bar. Where a party has omitted to take a point at the trial and then seeks to raise that point on appeal, he will be barred from doing so unless there is no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at the trial. New points which are fact sensitive or otherwise affect the course of evidence or conduct of the case at the hearing below should not be allowed: Re: Qin Jun ex parte Win Wind Resources Limited [2018] HKCA 527, [28]-[30].

35.Mr Man had not offered before me any explanation why this Second Ground was not raised earlier at trial.

36.I am also not satisfied that the Couple could overcome the “state of the evidence” bar. Had this Second Ground been raised earlier at trial, the course of evidence, or conduct of IO’s case, at trial might well, I think, be different.

37.After all, IO’s non-compliance of the Request (or breach of its COP obligation) entailed no legal obligation on the part of the Couple to pay their share of the Contribution. The liability of the Couple to pay their share only arose after GH owners (not IO or MC) resolved at 29/2/2020 AGM to pass 29/2/2020 GM Resolution. The Couple was thereafter obliged by the terms of the DMC to pay interest and collection charge as they elected not to pay their share by the deadline imposed by 18/3/2020 MC Resolution. Though IO had not complied with the Request and the parties reached no settlement, the Couple elected ultimately to pay their share on a non-admission basis in December 2021: §§37-38, 46-48 and 135(1)-(16) of the Judgment.

38.The aforesaid evidence was not, I think, fully explored by parties’ counsels at trial. Against a bitter unfortunate background of mistrust between MC and the Couple, would they have paid their share on time or earlier had the Request be complied with? For such background and its adverse consequences on the parties, I refer to §§16-18, 35-36, 40, 100-104 and 111-114 of the Judgment.

39.On the same aforesaid evidence, though IO (or MC) gave notice of 29/2/2020 AGM and resolved on 18/3/2020 MC Resolution, it could not, I think, control the number of GH owners attending 29/2/2020 AGM. Neither could IO control its proceedings and voting result. For example, GH owners in attendance could, if they saw fit, have resolved to reject the Contribution or to adjourn 29/2/2020 AGM to another date for IO to comply with the Request first: §§85(11)-(12) of the Judgment. One should not forget that Stanley also attended 29/2/2020 AGM holding five proxies from other GH owners.

40.It should be remembered that s.14(1) dealing with effect of GM resolution like 29/2/2020 GM Resolution reads: “Subject to this Ordinance, at a meeting of a corporation any resolution may be passed with respect to the control, management and administration of the common parts … and any such resolution shall be binding on the management committee and all the owners (bold and underline supplied).”

41.For above reasons, I find it unarguable that the causation requirement for the prevention principle has been met in this case. IO’s entitlement to interest and collection charge as against the Couple did not, I think, arise as a direct consequence of its breach of COP obligation in terms of the Request. This Second Ground therefore carries no reasonable prospect of success on appeal either.

42.In any event, it is, I agree with Mr Chan, up to the Court of Appeal (and not for this Tribunal) to decide in its discretion whether or not to allow this Second Ground to be raised on appeal.

43.For reasons given in this section, I therefore also refuse giving leave on this Second Ground.

First Ground having no reasonable prospect of success

44.Provisions of BMO and of COP relevant to the First Ground focusing on the 1^st Order are set out, and have been considered, at section H of the Judgment.

45.This Tribunal had found IO in breach of §§7.1 and 7.2 of 2018 COP in terms of the Request: §§67 and 139 of the Judgment.

46.However, this Tribunal declined to grant the 1^st Order on the counterclaim for the following 5 reasons given in section U of the Judgment, namely: -

(1)  S.20A(7) discretion operates only on the procurement contract between the Contractor and IO, and their contractual right inter se. The 1^st Order does not relate to such procurement contract: §§186, 182, 79(5) and 81(9) of the Judgment (First Reason).

(2)  S.20A(7) discretion exists only when the procurement contract was entered without invitation to tender in breach of s.20A(2) or without GM resolution in breach of s.20A(2B). But IO had complied with both sub-sections in this case: §§186, 184, 94, 97 and 98 of the Judgment (Second Reason).

(3)  On Tai On Building Case binding on this Tribunal, Stanley does not, I think, enjoy legal right to inspect and/or obtain returned tender documents pursuant to §§7.1 and 7.2 of 2018 COP (or at BMO): §§187, 80 and 81(8) of the Judgment (Third Reason).

(4)  COP are, I conclude, directory in nature and consequence, if any, of their non-compliance are limited to those set out in ss.44(2), 20A(5) to 20A(8): §§90-92 of the Judgment (Fourth Reason).

(5)  Had s.20A(7) discretion been open to me contrary to my conclusions at (1) and (2) above, in view of the Couple having no legal right to the returned tender documents under 2018 COP (or BMO), I would have also declined exercising my discretion in their favour: §189 of the Judgment (Fifth Reason).

47.With respect, the First Ground and Mr Man’s submissions on it are, I think, no more than repetition of such failed submissions made at trial, and his picking from the Judgment of such points, in favour of the Couple, on the 1^st Order. This Tribunal has considered them all in the Judgment.

48.I refer to §§78(1) and (2) of the Judgment. At §16 of his skeleton, Mr Man further referred to 2 extracts of legislative materials relating to the 2007 Amendments in the Couple’s favour. They can also be found at footnote 43 and §96 of the Judgment.

49.For the sake of completeness, Mr Chan further quoted at §20(2) of his skeleton §126 of the Report of Bills Committee on Building Management (Amendment) Bill 2005[5], which reads: “The statutory procurement requirements are also set out in the Code of Practice on Procurement of Supplies, Goods and Services issued by SHA under the BMO. While the statutory procurement requirements impose a legal obligation on OCs, compliance with the Code of Practice is not mandatory under the law (bold and underline of Mr Chan)”.

50.Relying on the aforesaid extract of legislative materials not found in the Judgment, Mr Chan submitted that OCs are only under a legal obligation to comply after particular paragraph of COP has been incorporated into BMO to become statutory requirements, as is the case with ss.20A(2) and 20A(2B).

51.Dealing with each of the 5 reasons I gave for refusing the 1^st Order, as Mr Chan rightly pointed out in his submissions and I agree, Mr Man gave no reason at all why the First, Second and Fifth Reasons given by this Tribunal all involving s.20A(7) discretion are erroneous in point of law.

52.Before me, Mr Man avoided dealing with s.20A(7) relied by those instructing him at §51(3) of Amended Notice of Opposition to seek the 1^st Order by submitting that all material facts for the Couple to rely on §§7.1 and 7.2 of 2018 COP have been put down. He cited §18/15/5 at p.549 of Volume 1 of Hong Kong Civil Procedure 2024.

53.Again, by submitting point (e) of the First Ground, Mr Man avoided dealing with the nature, and effect, of other paragraphs of 2018 COP. Under Fourth Reason, this Tribunal, Mr Chan also observed, had held all COP paragraphs directory in nature and consequence of their non-compliance, if any, are, as a matter of statutory construction, confined to particular provisions of BMO (Mr Man had not, I believe, elaborated on any error of law in my result of statutory construction in the Judgment).

54.Among other factors in arriving at my result of statutory construction, as observed by Court of Appeal in Beauty Court Case, s.44(1) remaining in BMO today is supportive of IO’s submissions at trial that 2018 COP are merely directory or for guidance: §79(1) of the Judgment. To be fair to the Couple, as Mr Man pointed out, ss.20A(1) and 18(2A) were not addressed in this case.

55.On the topic of statutory interpretation, at §17 of his skeleton, Mr Chan further cited the expressio unius est exclusio alterius principle quoted at §9.9 of Bennion on Statutory Interpretation, 8^th Edition, and local authorities of its application, to support the result of statutory interpretation reached in the Judgment. Mr Man for his part disputed the application of such principle to this case in his oral submissions.

56.Moving to the Third Reason, Mr Man had no choice but to deal with Tai On Building Case relied by this Tribunal because the appellant therein did rely on appeal §9 of 1997 COP which is similar to §7.1 of 2018 COP relied by him for the First Ground (or the 1^st Order): §81(2) of the Judgment.

57.Mr Man took 3 points on Tai On Building Case at §21(a)-(c) of his skeleton. His first point at §21(a) is the same observation made at §81(1) of the Judgment. His second point at §21(b) was also observed at §§81(2) and (6) of the Judgment. His third point at §21(c), though not mentioned in the Judgment, is well familiar to this Tribunal for personal reason made known to parties’ counsels at trial[6].

58.Importantly, Mr Man failed to deal with §§80, 81(3)-(7) of the Judgment i.e. Court of Appeal’s rejection of reliance of §9 of 1997 COP to seek tender document on the ground that it exceeds the scope of BMO as a binding second ratio of the judgment. It is true that the Court of Appeal may depart from its previous decision. But Mr Man had not elaborated in his skeleton or his oral submission why the Court of Appeal would see fit to take that exceptional course.

59.In the First Ground (and in his skeleton and submissions), Mr Man relied much on GH Case decided two decades ago. I repeat §§77(1)-(10) of the Judgment and maintain my view that GH Case is “of very limited assistance” to the Couple 20 years later on their counterclaim for the 1^st Order. Mr Man had not pinpointed any error of law committed by me in the Judgment in the above paragraphs.

60.By way of further case law research after trial, Mr Chan submitted that the word “shall” in s.20A(1) may be merely permissive and not by way of mandatory requirement. He cited the judgment of Saunders J. in Woomera Company Limited v Commissioner for Transport, unreported, HCAL 146/2008, 15 May 2009, decided about 5 years after GH Case, in support of that submission.

61.By way of latest legislative materials to support conclusions reached in the Judgment, relying on §24.19 of Bennion, supra, Mr Chan made further submissions by references to Building Management (Amendment) Ordinance 2024[7] (2024 Amendments) published on gazette on 12 July 2024, arguing that 2024 Amendments may assist one to interpret current provisions of BMO.

62.Not surprisingly, Mr Man had no choice but to debate with Mr Chan whether or not the 2024 Amendments could properly be an aid to the interpretation of the current BMO, and on whether or not Woomera, supra, could shed light on the word “shall” found at s.20A(1).

63.I do not find it necessary for myself to resolve the above new debates between the two senior counsels.

64.For reasons given in this section, it suffices for me to point out that the Couple had not identified any error of law made by this Tribunal in the Judgment in rejecting the 1^st Order sought on the counterclaim.

65.Accordingly, I am not satisfied that the First Ground has reasonable prospect of success on appeal and I decline to grant leave on such ground.

Leave on First Ground in the interests of justice

66.Nevertheless, I am prepared to grant leave for the Couple to pursue the First Ground on appeal in the interests of justice.

67.I am fully aware that, current s.20A will be repealed[8] when the 2024 Amendments take effect as from 13 July 2025[9]. Moreover, as from the commencement of 2024 Amendments, a new “Division 5 – Procurement of Supplies, Goods or Services” would be added, bringing with it a new s.28A entitled “Compliance with Code of Practice”[10] and a new s.28C entitled “Permitting inspection of procurement documents”.

68.In brief, the new s.28C allows 5% owners, or an owner authorized by the court, to inspect procurement documents kept by an owners’ corporation, including tender documents.

69.Nonetheless, COP will definitely not disappear in the future, as the title of new s.28A suggests. Consequences, if any, of non-compliance with COP will remain, I think, a recurrent difficult issue to be resolved by the courts in future.

70.In view of the rapid aging of urban Hong Kong, the authorities are likely issuing more MBIS notices to owners’ corporations and/or taking more active steps to enforce MBIS notices previously issued. Procurement disputes touching on COP will, I think, likely increase for our courts to tackle in the future.

71.It is, I agree with Mr Man’s submission at §29 of his skeleton, in the interests of justice for this home-grown area of case law on BMO and COP to be fully considered by the appellate court, and, if see fit, clarified and/or developed to serve the best long-term interest of Hong Kong residents.

72.For avoidance of doubt, this Tribunal would wish to record that it does not fully subscribe to Mr Man’s submissions at §§27 and 28 of his skeleton.

73.This Tribunal would also add that, due to the transitional provision of new s.44B to be added by the 2024 Amendments[11], the current BMO provisions would continue to apply to would-be and pending procurement disputes and proceedings if the initiation date for the procurement precedes the coming into operation of the 2024 Amendments on 13 July 2025, unless no procurement contract has been entered into after expiry of 3 years from the taking effect of the 2024 Amendments.

74.Hence, in at least the short term of the coming few years, legal disputes and proceedings over current s.20A and/or §§7.1 and 7.2 of 2018 COP could well, I think, likely continue. Guidance from appellate court on the current BMO provisions and 2018 COP is, I think, desirable for the public good and in the interests of justice.

Disposition

75.This Tribunal therefore, pursuant to s.11AA(6)(b) of LTO, grants leave to the Respondents to appeal against the Judgment as per First Ground only in draft Notice of Appeal attached to the Leave Summons. For avoidance of doubt, the remainder of the Leave Summons is dismissed.

Costs

76.Considering my disposition of the Leave Summons and the time taken by parties on the First Ground as compared to other two grounds, I makes a costs order nisi that 80% costs of the Leave Summons, including 80% costs of the hearing held on 18 July 2024, be in the cause of the appeal.

77.Finally, I thank both legal teams for their helpful written submissions.

Mr Anthony Chan SC, leading Mr Warren Suen, instructed by King & Co, for the Applicant

Mr Bernard Man SC, leading Ms Carol Wong, instructed by Jones Day, for the Respondents