The Incorporated Owners of Kan Oke v. Lee Yiu Kei and Another

Case No.HCMP 33/2014

Court

High Court CFI

Date15 Jan 2015

Judge—

Case Document

100%Judiciary

HCMP 33/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 33 OF 2014

______________________

BETWEEN
	THE INCORPORATED OWNERS OF KAN OKE	Plaintiff
	and
	LEE YIU KEI and LEUNG KWAI LING LORETTA	Defendants

______________________

Before: Deputy High Court Judge B Chu in Chambers

Dates of Hearing: 27 November 2014

Date of Judgment: 15 January 2015

_________________

J U D G M E N T

_________________

Introduction

1.The originating summons was issued by The Incorporated Owners of Kan Oke (“P”) for the determination of payment of all monies due to P under a memorandum of charge registered in the Land Registry and for sale of the defendants’ property, in order to discharge all the sums owed.

2.There were two named defendants, Lee Yiu Kei (“D1”) and Leung Kwai Ling Loretta (“D2”) and both acted and appeared in person before this court.

3.Before this court were D2’s notice of appeal filed on 21 August 2014 (“1^st Notice”), supplemental notice of appeal filed on 24 November 2014 (“2^nd Notice”), and an amended notice of appeal filed on 24 November 2014 to amend the 1^st Notice (“3^rd Notice”), all against an order of Master Hui made on 19 August 2014 which, among other things, dismissed D2’s applications for orders including summary judgment and / or default judgment on her purported amended counterclaim (“Amended Counterclaim”).

Background

4.P is the registered incorporated owners of the building known as Kan Oke at 28A Tai Hang Road Hong Kong (“Building”) under the Building Management Ordinance, Cap 344.

5.D1 and D2 (collectively “Ds”) are and were at all material times the registered owners of a property on the 1^st floor of Kan Oke (“Property”) having acquired ownership on 25 July 2000, subject to and with the benefit of the deed of mutual covenant of the Building dated 15 November 1967 (“DMC”).

6.P had registered a memorandum of charge (“Memorandum of Charge”) dated 15 December 2012 for a sum of HK$211,132, being the outstanding amount in respect of the Property due and payable by Ds to P under the provisions of the DMC for contribution for the Building’s renovation fund (“BR Fund”), and also legal costs and disbursements of HK$2,500.

7.It was P’s case that in breach of the DMC and despite repeated requests, Ds had failed to pay the outstanding amount.

8.P eventually issued the originating summons herein on 7 January 2014.

9.After P issued the originating summons, D2 filed a “Statement of Counterclaim” on 14 February 2014 (“Counterclaim”). In the Counterclaim, D2 alleged that P was liable for negligence in hiring the contractor (“Contractor”) for the Building’s renovation works (“BR Works”) and alleged various negligent acts to the Property as a result of the BR Works by the Contractor and she claimed various losses, harm, compensation and costs from P.

10.Subsequent thereto, D2 issued a summons on 1 April 2014 (“01.04.14 Summons”) for, among other things, default judgment be entered against P and / or for summary judgment, for failing to file a defence to the Counterclaim. This summons was supported by D2’s affidavit filed on 3 April 2014.

11.Upon being served with D2’s 01.04.14 Summons, Mr Cheung Wing Kan, the Chief Property Manager of the management company (“Cheung”) filed an affirmation on behalf of P, opposing D2’s 1^st Summons. D2 then filed a reply affidavit on 10 April 2014.

12.As D2 had not complied with O 28 r 7(2) of the Rules of the High Court (“RHC”), at the hearing of D2’s 01.04.14 Summons on 11 April 2014, the summons was ordered by Master J Wong to be treated as if it was a notice under O 28 r 7(2) of RHC by D2 to inform the court the nature of the Counterclaim, and Master Wong further ordered that D2’s summons was to be dealt with at the 1^st hearing of the originating summons (“11.04.14 Order”).

13.Thereafter, on 23 May 2014, D2 filed an amended Counterclaim (“Amended Counterclaim”). In the Amended Counterclaim, D2 amended the quantum of her claims and claimed a total sum of HK$14,220,500 from P.

14.This was followed by D2 issuing another summons on 9 June 2014 purported to be under O 19 r 2, r 8, and / or Order 13 r 1, for various orders including default judgment and summary judgment be entered against P (“09.06.14 Summons”). On 23 June 2014, D2’s 09.06.14 Summons was dismissed by Master H Au-Yeung. On 23 June 2014, D2 filed a notice to appeal against Master H Au-Yeung’s order, which was later heard before To J on 21 August 2014 and D2’s said appeal was dismissed by To J on the same day.

15.Prior to the hearing on 21 August 2014 before To J, D2 had further issued a total of 4 summonses as follows:

(a) Summons on 5 August 2014 (“1^st Summons”) seeking orders including the following:

(i) To restore her previous summons for summary judgment and final judgment ;

(ii) To decide/have trial on preliminary issue under O 33 r7 and r 3 that P was required to prove its claim of HK$200,000 and that as P’s claim was not a judgment debt, P could not apply for order for sale of the Property, and could not register the Memorandum of Charge on the Property;

(iii) P’s application for an order for sale of the Property be postponed indefinitely until after trial on preliminary issue of proof of P’s claim;

(iv) Leave be given for D2 to file 2^nd affidavit to oppose P’s 2^nd affirmation;

(v) Summary judgment and final judgment be entered against P for all amounts in her Amended Counterclaim as no defence served by P to the Amended Counterclaim under O 28 r 10(1) /O 28 r 7/O 14A (later amended to O14 r 5 );

(b) Summons on 6 August 2014 (“2^nd Summons”) seeking orders including the following:

(i) Within 7 days, P to file and serve accounts on the BR Fund under O 43 of RHC , showing payments from each and all owners of the Building and showing balance on 1 February 2014, and showing each payment to the Contractor and the consulting company to the renovation work (“Consulting Company”) and payment dates etc;

(ii) To decide/have trial on preliminary issue under O 33 r 7 and r 3 that the number of shares for the BR Fund was wrong and false, and that the number of shares should be 26 shares instead of 23 shares;

(iii) Attached to the 2^nd Summons was a “Notice of Request” under O 24 r 11(A) of RHC (“Notice of Request”) for certified true copies of the following documents to be provided by P within 7 days:

(1) BR Fund accounts ;

(2) Insurance payment receipt for around HK$800,000 for the BR Works;

(3) All receipts for all payments to the Contractor;

(4) All receipts for all payments to the Consulting Company in relation to the BR Works;

(vi) All receipts for payments of Building renovation fees (“BR Fees”) from each owner of the Building.

(c) Summons on 8 August 2014 (“3^rd Summons”) seeking orders including the following:

(i) P’s undated summons filed on 2 July 2014 for sale of the Property and for judgment on P’s claim for HK$200,000 etc be struck out under O 18 r 19(1) b, c, d;

(ii) P’s undated summons filed on 2 July 2014 and all applications of P be dismissed under O 18 r 19(1) b, c or d;

(iii) To amend the RHC number of the 1^st Summons for summary judgment under O 14 r 5 , and not O 14A, and under O 28 r 7.

(d) Summons on 12 August 2014 (“4^th Summons”) seeking orders including the following:

(i) Final judgment on all the amounts claimed by D2 in the Amended Counterclaim on the ground that P had failed to provide certified true copies of documents to D2 under O24 r 16(1) of RHC pursuant to her Notice of Request;

(ii) P to pay her all amounts in the Amended Counterclaim immediately;

(iii) P’s action, originating summons, and P’s summons filed on 2 July 2014 be dismissed under O 24 r 16(1) on grounds that P had failed to provide certified true copies of documents before deadline of 7 days, as requested in her Notice of Request;

(iv) Under O 18 r 19(1) b, c, and/or d, P’s exhibits of CWK 3-7, 9-10, and 12 in Leung’s 1^st affirmation, and P’s exhibits of CWK1, 3 and the DMC in CWK-5 in Leung’s 2^nd affirmation be struck out.

16.The above 4 summonses were supported by various affidavits filed by D2. Although the above 4 summonses, the Counterclaim / Amended Counterclaim were stated to be issued by D2, D1 had filed an affidavit on 8 August 2014 to support D2’s summonses, stating that with effect from 14 February 2014, he had transferred and passed to D2 all his rights to make counterclaim[1]. D1 filed another affidavit on the same day appointing D2 to act for him and sign all documents for him and to attend all hearings for him in this action. Anyway, the hearing of D2’s 4 summonses took place before Master Hui on 15 and 19 August 2014 (“Hearing”). Master Hui made the following orders on 19 August 2014 (“19.08.14 Order”):

(i) D2’s application relating to summary judgment and default judgment be dismissed;

(ii) D2’s application relating to restore the summons for summary judgment and amending the summons relating to summary judgment be dismissed;

(iii) D2’s application for striking out P’s original summons be dismissed;

(iv) D2’s application for leave to file counterclaim be dismissed;

(v) D2’s application for audited accounts for item (1) be dismissed;

(vi) Hearing of the originating summons be adjourned to a date to be fixed for further hearing with 2 hours reserved.

17.Thereafter, D2 issued the 1^st Notice, the 2^nd Notice and the 3^rd Notice to appeal against the above order.

D2’s Grounds of Appeal

18.D2 attached “grounds of appeal” to the 2^nd Notice. She set out a total of 5 grounds and suffice to say, she complained that the Master had made errors on points of law and facts. In her 3^rd Notice, she set out the 5 orders she sought from this court:

(i) Summary judgment and / or final judgment on items 1, 12, 13 and 15 and all items of the Amended Counterclaim totalling HK$14,220,500;

(ii) Final judgment be entered for all amounts in the Amended Counterclaim totalling HK$14,220,500;

(iii) P to pay amounts in the Amended Counterclaim totalling HK$14,220,500 to her immediately;

(iv) P to pay interest;

(v) P to provide audited accounts on the BR Fund.

19.She also set out that the above orders were applied under O 14 r 5, O 24 r 16(1), O 43, O 28 r 7 and r 10(1) of RHC and / or under the court’s inherent jurisdiction.

20.The day before the hearing of the appeal before this court, D2 filed skeleton submissions (“D2’s Skeleton Submissions”), and also another affidavit on that day.

21.In paragraph 1 of D2’s Skeleton Submissions, she sought leave to file her affidavit of 26 November 2014, and 6 affidavits filed between 8 – 18 August 2014, and also her 2^nd Notice and the 3^rd Notice, if leave was required. So far as the 6 affidavits and exhibits were concerned, these were filed prior to the 19.08.14 Order and there had been no objection from P to the filing of the same, and indeed these affidavits had been set out in the recital of the 19.08.14 Order and had been placed before Master Hui. As for D2’s affidavit of 26 November 2014 and her 2^nd Notice and 3^rd Notice, again there being no objection from P, leave was duly granted by this court.

22.As set out in paragraph 58/1/2 of the Hong Kong Civil Procedure 2015 Vol 1 (“HKCP”), an appeal from the master to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time.

1^st Summons

23.In the 1^st Summons, D2 had applied to “restore” her previous summons for summary judgment and final judgment.

24.As set out earlier, prior to the 1^st Summons, there were two summonses, namely the 01.04.14 Summons and the 10.06.14 Summons. As the 10.06.14 Summons had been dismissed by Master H Au-Yeung, and D2’s appeal dismissed by To J, presumably D2 was applying to restore her 01.04.14 Summons.

25.In the 01.04.14 Summons, D2 sought default judgment and summary judgment of her Counterclaim based on P’s alleged failure to file a defence to the Counterclaim. The 01.04.14 Summons had been ordered to be treated as if it was a notice under O 28 r 7 of RHC and was to be dealt with at the 1^st hearing of the originating summons namely the Hearing.

26.O 28 r 7 of RHC provides that:

“(1) A defendant to an action begun by originating summons who has acknowledged service of the summons and who alleges that he has any claim or is entitled to any relief or remedy against the plaintiff in respect of any matter (whenever and however arising) may make a counterclaim in the action in respect of that matter instead of bringing a separate action.

(2) A defendant who wishes to make a counterclaim under this rule must at the first or any resumed hearing of the originating summons by the Court but, in any case, at as early a stage in the proceedings as is practicable, inform the Court of the nature of his claim and, without prejudice to the powers of the Court under paragraph (3), the claim shall be made in such manner as the Court may direct under rule 4 or rule 8.

(3) If it appears on the application of a plaintiff against whom a counterclaim is made under this rule that the subject-matter of the counterclaim ought for any reason to be disposed of by a separate action, the Court may order the counterclaim to be struck out or may order it to be tried separately or make such other order as may be expedient.”

27.O 28 r 7(2) thus consists of two stages:

(i) Firstly, the defendant must inform the court of the nature of his counterclaim, and

(ii) Secondly, subject to the court’s power to strike it out under O 28 r 7(3), the counterclaim shall be made in such manner as the court may direct under O 28 rule 4 or 8.

28.The effect of O 28 r 7 has been explained in paragraph 28/7/1 of HKCP and although no procedure is laid down in the rule, the procedure suggested by the learned authors is as follows :

(i) the defendant should serve on the plaintiff (and file in court) proposed points of counterclaim before the hearing of his application;

(ii) the plaintiff should then raise any objection to there being a counterclaim before or at the hearing, probably by way of affidavit;

(iii) the court can then give such directions as may be appropriate.

29.Paragraph 28/7/2 of HKCP further sets out as follows:

“Presumably as the counterclaim will not have been formally made without leave, this means that the court may refuse leave to bring the claim. A defendant proposing to counterclaim has a duty to put before the court all matters necessary to enable the court to adjudicate on the preliminary question of the competency or bona fides of his counterclaim. If it is a sustainable claim, the court would be obliged to let it proceed, and to give directions as to how it should proceed. In other words, it would only be open to the court to refuse directions and to frustrate the counterclaim if it is disposed to strike it out for reasons under O 28 r 7(3) or O 18 r 19…”[2]

(emphasis added)

30.In Cheung’s 1^st and 2^nd affirmations, he had stated that the payment of the outstanding contribution for the BR Fund of the Property and Ds’ claim against the Contractor and P were two individual and separate matters, and that the Counterclaim / Amended Counterclaim was unfounded and groundless, and that Ds were not entitled to any set off [3]. P had clearly raised objection to the Counterclaim / Amended Counterclaim.

31.Under the 11.04.14 Order, D2 was only treated / deemed to have informed the court of the Counterclaim under the 1^st stage of O 28 r 7, no directions had ever been given by the court under O 28 r 4 or r 8 allowing the Counterclaim / Amended Counterclaim to be formally filed or to proceed.

32.As submitted by P’s Counsel Ms Sin, P was not required to file any defence to the Counterclaim / Amended Counterclaim until and unless the court had directed / ordered otherwise. I accept Ms Sin’s submissions, and in the circumstances, D2’s application for default judgment must fail.

33.In fact, D2 had in her 09.06.14 Summons again applied for final judgment under Order 13 r 1 and default judgment under O 19 r 8. Her applications for default judgment had already been dismissed by Master H Au-Yeung and her appeal dismissed. There was no further appeal by D2, and this should have been the end of the matter, in so far as D2’s application for default judgment was concerned.

34.D2 had indicated in her 1^st Summons that her application for summary judgment and final judgment was made under O 28 r 10(1), and / or O 28 r 7, and / or O 14 r 5. I have already set out O 28 r 7 earlier.

35.O 28 r 10(1) states that:

“(1) If the plaintiff in a cause or matter begun by originating summons makes default in complying with any order or direction of the Court as to the conduct of the proceedings, or if the Court is satisfied that the plaintiff in a cause or matter so begun is not prosecuting the proceedings with due despatch, the Court may order the cause or matter to be dismissed or may make such other order as may be just.”

36.There was no evidence that P had made default in complying with any order or direction of the court as to the conduct of the present proceedings, or that the plaintiff was not prosecuting the proceedings with due dispatch. I am unable to see why D2 should be entitled to judgment under O 28 r 10(1).

37.As for O 14 r 5, this only applies to a counterclaim filed by a defendant to an action begun by writ. There was no direction or order for the present proceedings to continue as if begun by writ. In any event, the court had not even given directions / leave for the Counterclaim / Amended Counterclaim to be formally filed or to proceed. This rule is not applicable.

38.At the Hearing, Master Hui had stated that from D2’s submissions and relevant documents produced by her, D2’s claims for alleged negligent acts in the Counterclaim / Amended Counterclaim were of the Contractor’s, and although D2 claimed that P should be responsible for her losses as P had hired the Contractor, Master Hui said he was not able to see from the documents produced by D2 as to why P should be responsible as alleged[4]. Master Hui came to the view that D2’s Counterclaim / Amended Counterclaim should be by way of a separate action and this was the reason why he did not grant any order / leave for Ds to formally file the Counterclaim / Amended Counterclaim or for the same to proceed. I agree with Master Hui’s views.

39.In the above circumstances, D2’s application for summary judgment must fail.

40.In D2’s 1^st Summons, she had also applied for a trial on preliminary issue, namely that P should be required to prove its claim of HK$200,000 and that P’s claim was not a judgment debt, and therefore, P was not entitled to register the Memorandum of Charge.

41.It would appear from the transcript of the Hearing that this part of the 1^st Summons, namely paragraphs 2 and 3 thereof, had been adjourned to be dealt with together with the originating summons[5], although this was not explicitly set out in the 19.08.14 Order.

42.In view of the above, I will dismiss paragraphs 1a and 1b of the 1^st Summons.

The 2^nd Summons

43.In this summons, D2 sought accounts of the BR Fund and various documents under O 43 of RHC. O 43 r 1(1A) only applies to a defendant to an action begun by writ who has served a counterclaim which includes a claim for an account or a claim which necessarily involves taking an account. Even if D2 had obtained an order or leave to formally file the Counterclaim / Amended Counterclaim, there was no claim in the Counterclaim / Amended Counterclaim for any account or any claim which necessarily involved taking an account. I do not see how or why O 43 is applicable.

44.In D2’s Notice of Request attached to the 2^nd Summons, she requested for certified true copies of various documents under O 24 r 11 (A) .

45.Notwithstanding P’s stance that such documents were not relevant nor necessary to dispose of the present action, as seen from the transcript of the Hearing, P’s solicitor Mr Wong who appeared on behalf of P at the Hearing had indicated to Master Hui that P had no objection to provide to D2 on a voluntary basis certified true copies of the accounts of the BR Fund and various receipts sought by P in items (1) – (4) of the Notice of Request and only objected to the provision of item (5). At the Hearing, D2 had sought to amend item (1) to seek audited accounts of the BR Fund, as opposed to certified true copies. In paragraph 5 of the 19.08.14 Order, Master Hui had dismissed her request for audited accounts for item (1).

46.The court has the power to make an order for discovery if it is satisfied that the discovery is relevant and necessary.

47.Under s 27(1) of the Building Management Ordinance, Cap 344, a management committee has the duty to maintain proper books or records of account and other financial records and shall prepare financial statements as provided for under that section. S 27(1A) provides that such financial statements shall only be audited in the case of a corporation incorporated in respect of a building which contains more than 50 flats. Applications in relation to s 27 would fall within Schedule 10 of the Building Management Ordinance and the jurisdiction of the Lands Tribunal and it would be open for D2 to make an application in the Lands Tribunal to seek documents under s 27, if she should deem it necessary to do so.

48.There was in fact no evidence as to whether there had been any audited accounts of the BR Fund, or audited financial statements prepared by P. Ms Sin submitted that such were irrelevant to P’s claim, as they would not negate Ds’ responsibility and liability under the DMC.

49.I accept Ms Sin’s submissions and therefore dismiss D2’s application for audited accounts of the BR Fund. No order had been made by Master Hui in relation to documents requested by D2 in the Notice of Request. Anyway, in the present appeal, D2 only sought the audited accounts of the BR Fund and had not sought any order for other items in the Notice of Request.

50.In the 2^nd Summons, D2 had again sought a trial on the preliminary issue on the calculation of the number of shares for the BR Fund, which she said should be 26 instead of 23. There was no order made by Master Hui on this application, which would appear to have been adjourned, as with the trial of the other preliminary issue sought in the 1^st Summons.

51.In light of what I have said above, I will only dismiss paragraph 1 of the 2^nd Summons.

3^rd Summons

52.D2 in the 3^rd Summons was seeking an order to strike out P’s summons issued on 2 July 2014 and that all P’s applications should be struck out or dismissed under O 18 r 19(1) b, c or d, namely, it was scandalous, frivolous or vexatious; or it might prejudice, embarrass or delay the fair trial of the action; or it was otherwise an abuse of the process of the court. There was no summons issued by P on 2 July 2014. P only filed a notice of appointment to hear the originating summons on that day.

53.In any event, I am unable to see in D2’s affidavits any sufficient evidence or sufficient grounds put forward by her to support her above application. I therefore dismiss the 3^rd Summons.

4^th Summons

54.In this summons, D2 sought final judgment on the ground that P had failed to provide certified true copies of documents pursuant to her Notice of Request.

55.As mentioned earlier, P had voluntarily agreed to provide certified true copies of items (1) to (4) of the documents in the Notice of Request. This was notwithstanding P’s stance that such documents were not relevant nor necessary for the disposing fairly of the cause or matter for saving costs. D2’s Notice of Request was served under O 24 r 11A(1). Under O 24 r 11A(3), where a party fails to supply the requested documents, the court, may, on application, make such order as to the supply of that document as it thinks fit.

56.There was no such order made by Master Hui under O 24 r 11A(3) in relation to the provision of the documents in the Notice of Request. I am of the view that D2’s application for final judgment in the 4^th Summons was under O 24 r 16(1) of RHC must again fail.

57.D2 had also sought an order to strike out exhibits CWK 1, 3 in Cheung’s 1^st affirmation and CWK- 5 in Cheung’s 2^nd affirmation. I am unable to see any sufficient grounds for D2 to seek such an order. Her application in this regard must therefore equally fail.

Paragraph 4 of the 19.08.14 Order

58.In paragraph 4 of the 19.08.14 Order, Master Hui ordered that D2’s application for leave to file the Counterclaim be dismissed. D2 submitted that she never made such an application and that leave was not required, or alternatively under the 11.04.14 Order, leave had been given by Master J Wong.

59.I repeat what was said earlier, Master J Wong only treated D2’s 01.04.14 Summons as notice under the 1^st stage of O 28 r 7(2), no leave was ever given. As stated in paragraph 28/7/2 of HKCP, the effect of O 28 r 7 (2) is that a counterclaim will not have been formally made without leave, and that the court may refuse leave to bring any counterclaim. D2 / Ds, by filing the Counterclaim / Amended Counterclaim had clearly intended to file the same, even though no proper application for direction / leave had been made by D2, she was deemed to have made such an application. In any event, whether she had made such an application or not, having considered the subject matter of the Counterclaim / Amended Counterclaim, I have said I agree with Master Hui that the Counterclaim / Amended Counterclaim should be by way of a separate action. I therefore refuse to grant leave to Ds to formally file the Counterclaim / Amended Counterclaim or to proceed with the same.

Conclusion

60.In light of the above, I dismiss the 2^nd named defendant’s appeal against Master Hui’s 19.08.14 Order. For avoidance of doubt,

(i) The summons issued on 1 April 2014 by the 2^nd named defendant is dismissed;

(ii) Paragraphs 1a and 1b of the summons issued on 5 August 2014 by the 2^nd named defendant for summary judgment and final judgment are dismissed;

(iii) Paragraph 1 of the summons issued by the 2^nd named defendant for accounts under O 43 of the Rules of the High Court on 6 August 2014 is dismissed;

(iv) The application of the 2^nd named defendant for audited accounts of item (1) of her Notice of Request issued on 6 August 2014 under O 24 r 1A of the Rules of the High Court is dismissed;

(v) The summons issued on 8 August 2014 by the 2^nd named defendant to strike out or dismiss the plaintiff’s originating summons is dismissed;

(vi) The summons issued on 12 August 2014 by the 2^nd named defendant for final judgment under O 24 r 16(1) of the Rules of the High Court is dismissed;

(vii) Leave for the defendants to formally file and serve or to proceed with the Counterclaim / Amended Counterclaim is refused.

(viii) Paragraphs 2 and 3 of the summons issued on 5 August 2014 and paragraph 2 of the summons issued on 6 August 2014 in relation to the applications of the 2^nd named defendant for trial on preliminary issues and the hearing of the originating summons be adjourned to a date to be fixed for further hearing before the Master with 2 hours reserved.