THE INCORPORATED OWNERS OF PEARL GARDENS HONG KONG AND OTHERS v. GILES WONG

LDBM 136/2014

BUILDING MANAGEMENT APPLICATION NO 136 OF 2014

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DECISION ON COSTS
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1.  This is a ruling on the question of costs for the interlocutory application taken out by the respondents dated 3 November 2015 (“the Stay Application”).

Background

2.  The 1^st applicant is the Incorporated Owners of Pearl Gardens Hong Kong (“IO”).  The 2^nd applicant is one of the directors of the 5^th applicant, who is the registered owner of Flat 3F.  The 3^rd applicants are the directors of New Modern Limited, the registered owner of Flat 5F.  The 4^th applicants are the registered owners and occupants of Flat 6F.  The respondents are the registered owners of Flat 4F.

3.  Since about February 2013, the IO and Synergis Management Services Limited (“Synergis”), the management company of Pearl Gardens, have received numerous complaints from many owners within Pearl Gardens including the 2^nd to 5^th applicants regarding continuous and excessive loud noises emanating from Flat 4F caused by radio and/or television and/or Hi-Fi and/or other electronic media.

4.  On 29 May 2014, the applicants commenced the present proceedings by filing a Notice of Application alleging breach of Deed of Mutual Covenant (“DMC”), seeking injunctive relief to restrain the respondents from emanating noise and excessive vibration which caused nuisance to other occupiers of Pearl Gardens. The 2^nd to 5^th applicants also claimed damages for distress and inconvenience, loss in revenue, costs of relocation and letting out, as well as loss in rental income against the respondents.  All applicants are represented by the same firm of solicitors, Messrs SK Lam, Alfred Chan & Co (“SK Lam”).

5.  On 25 July 2014, the applicants filed an application for an interlocutory injunction against the respondents.  In late 2014, there was an interim stay of these proceedings, along with the interlocutory injunction application, pending mediation.  Upon unsuccessful attempt of mediation, the application for interlocutory injunction was fixed to be heard on 27 November 2015. 

6.  The IO has filed a Notice of Discontinuance of the application on 6 August 2015 against the respondents so the IO is no longer a party in these proceedings.

7.  On 14 September 2015, Messrs Tanner De Witt solicitors (“TDW”) filed a Notice of Change of Solicitors (“the 1^st Notice”) purporting to act as solicitors for the 2^nd and 5^th applicants in place of SK Lam.  On 14 October 2015, TDW filed another Notice of Change of Solicitors (“the 2^nd Notice”) purporting to act as solicitors for the 3^rd applicants as well.  As a result, there were on record separate legal representations for the applicants, with SK Lam still acting for the 4^th applicants whilst the 2^nd, 3^rd and 5^th applicants are represented by TDW.

8.  The respondents filed the Stay Application on 3 November 2015 asking for a stay of all further proceedings between the 2^nd to 5^th applicants and the respondents on the ground that the present proceedings are not properly constituted and irregular by reason of the purported separate legal representation of the applicants in these proceedings.

9.  The 2^nd and 5^th applicants had filed their Notice of Discontinuance on 17 November 2015.

10.  At the hearing of the Stay Application on 19 November 2015, the 3^rd and 4^th applicants agreed to the stay of these proceedings as requested by the respondents.  The only issue is costs of the Stay Application.  I have heard submissions of the parties at the hearing and allowed the 4^th applicants and the respondents to file further written submissions as well.  The respondents are asking for costs of the Stay Application to be borne by the 3^rd and 4^th applicants.  TDW for the 3^rd applicants asked for costs of the Stay Application be in the cause whilst SK Lam for the 4^th applicants is asking for costs of the Stay Application as well.

11.  The following exchange of correspondence is relevant to the determination of the costs of the Stay Application.

The Respondents’ Contention

12.  Mr Leung SC for the respondents submitted that it is trite law that co-plaintiffs will not be allowed to sever or take inconsistent steps and must appear at the trial by the same solicitor and counsel (Hong Kong Civil Procedure 2016, Vol 1 para 15/4/3).  This is a rule established in common law and premised on procedural fairness and equality of arms, which apply with equal force to the application before the Lands Tribunal.  Co-plaintiffs would not have the unfair advantage of dual representations and if the defendants lose in the proceedings, they should not suffer the disadvantage of facing two sets of costs, which would be the case if the co-plaintiffs have separate representation.

13.  Upon the filing of the 1^st Notice, there was on record separate legal representations for the applicants and this rendered the proceedings irregular.  Despite being alerted of the irregularity, SK Lam and TDW had done nothing to remedy the same and allows the irregularity to remain. Since the proceedings are irregular and not properly constituted, there is only one proper way for the respondents to respond, which is to seek a stay until the proceedings are properly constituted.

14.  At the hearing, since both the 3^rd applicants and the 4^th applicants conceded and agreed to the Stay Application, costs should follow the event, hence both the 3^rd and 4^th applicants should bear the costs of the respondents in this Stay Application.  If not for the irregularity, the respondents did not have to take out the Stay Application. The Stay Application is through no fault of the respondents and notwithstanding being alerted of the irregularity, there was no application by either applicants for leave to retain separate representation.  Despite the lapse of more than 7 days after the issuance of the Stay Application, the respondents heard nothing from the applicants who were under a duty to put their own house in order.

15.  And it is no excuse for the 4^th applicants to shift the blame to other applicants (particularly the 3^rd applicants).  All applicants should ensure that they have no conflict of interest and are represented by the same firm of solicitors.  In Lewis v Daily Telegraph (No. 2) (1964) 2 QB 601, it is said by Pearson LJ that :

"When the solicitors, who had been acting for the plaintiff company and the plaintiff Lewis jointly throughout the first trial, found it necessary to withdraw from the record, the two plaintiffs should have concurred in appointing a new firm of solicitors to represent the two of them.  That is still, in my view what ought to be done, and the only satisfactory basis.  Until that is done the action is not properly constituted ..." (at 622) (emphasis added).

16.  The separate representation was caused by the 3^rd and 4^th applicants. Before the change of representation by any of them, it is inconceivable that they would not have discussed the matters amongst themselves, or that they would not have been advised by SK Lam of the legal consequences.

17.  Once it is realised that the 3^rd and 4^th applicants cannot agree on the retention of a single firm of solicitors, it is incumbent on them to apply for leave so that they can each be represented by different lawyers.  The 4^th applicants should either sort things out with the 3^rd applicants, or else they should apply for leave from the Tribunal, yet the 4^th applicants had done neither.

The 3^rd Applicants’ Contention

18.  It is admitted by Mr Lane who appeared for the 3^rd applicants that there is an irregularity in the proceedings due to the fact that 2 of the applicants are separately represented.  However, it is the submission of Mr Lane that the respondents have pursued with the Stay Application with some vigor, by imposing arbitrary time limits and following the passing of those time limits, issued brief to counsels and insisted proceeding with the hearing notwithstanding repeated requests by the 3^rd and 4^th applicants to have the application adjourned to the hearing scheduled on 27 November 2015.  The rationale for the suggestion of an adjournment is for the irregularity to be resolved, either by the discontinuance of the 4^th applicants or the question of legal representation to be sorted out between the 3^rd and 4^th applicants.  With a little more cooperation between the parties, the hearing for the Stay Application can be avoided.  Mr Lane submitted that there should be a stay of the proceedings with costs be in the cause.

The 4^th Applicants’ Contention

19.  Mr Ho for the 4^th applicants submitted that the 4^th applicants should have its costs incurred in respect of this Stay Application since such an application is academic and unnecessary.  As found by this Tribunal in its Decision dated 13 November 2015 concerning costs between the 1^st applicant and the respondents upon the discontinuance of the action, since there is no longer any need for an injunction against the respondents, the whole case become academic.  The 4^th applicants had tried to settle the entire proceedings with the respondents with no order as to costs but such had been refused by the respondents.  Since the issue of noise nuisance had become academic, parties should settle the entire action on a drop hand basis, rather than to incur disproportionate costs in pursuing pointless and academic applications like the Stay Application.

20.  In any event, the 4^th applicants had already consented to the Stay Application in its letter dated 12 November 2015 and the 4^th applicants had all along instructed the same set of solicitors to act on their behalf, it was beyond their control that some of the other applicants decided to instruct a different set of solicitors.  Hence, the 4^th applicants should not be penalised in costs.

Discussion

21.  Having considered the submissions from all parties, I agree with the submissions by the respondents and I see no reason why the 3^rd and 4^th applicants should not bear the costs of the Stay Application on the principle of costs should follow the event. 

22.  The irregularity of separate legal representation is being caused by the 3^rd and 4^th applicants and the respondents have nothing to blame.  Unless such an irregularity is being remedied, there is in no way that this proceedings can be further proceeded and a stay is a must.  The cure of the irregularity can either be the discontinuance of the action by the 4^th applicants or the same solicitor firm acting for both the 3^rd and 4^th applicants. I cannot see how and why the 4^th applicants said that the Stay Application is unnecessary when neither of this happened.  The fact that an injunction against the respondents is no longer necessary in this action has nothing to do with the irregularity nor can it solve the irregularity.  Unless and until the irregularity is remedied, the respondents have to take out the Stay Application.

23.  TDW had failed to reply to the respondents’ proposal by letter and even though SK Lam agreed to the proposed directions, question of costs concerning the Stay Application is still in issue, Under such circumstances, the hearing of the Stay Application cannot be avoided.  The complaint by TDW that the respondents had set arbitrary time limits is also unfounded.  The applicants had been alerted of the irregularity since early October 2015.  It is the inaction of the 3^rd and 4^th applicants that leads to the taking out of the Stay Application on 3 November 2015.  The applicants had already been given time to deal with the matter before the taking out of the Stay Application. Yet the applicants had taken a stalling attitude towards the matter.  Given the upcoming hearing on 19 November 2015, the setting of deadlines for brief to be delivered to counsel cannot said to be unreasonable.

24.  The contention by the 3^rd applicants that the irregularity can be cured if the hearing for the Stay Application is to be adjourned and accused the respondents of having acted unreasonably in refusing an adjournment is also unfounded. The 3^rd and 4^th applicants had been alerted of the irregularity as early as 2 October 2015 and the problem had not been dealt with by the applicants, and as of today, the irregularity still remains.  The 3^rd and 4^th applicants had been given ample opportunity to rectify the situation but such had not been utilised to achieve any fruitful result, a further adjournment is just a waste of time and further delayed the matter.  Even given further time, it is unlikely that the irregularity can be resolved and the hearing of this Stay Application can be avoided.

25.  As for the 4^th applicants’ contention that they should not be blamed when the other applicants had elected to engage a different lawyer, I found this to be a futile attempt to shift the burden on the other applicants, including the 3^rd applicants.  The legal requirement that co-plaintiffs will not be allowed separate representation should be within the knowledge of SK Lam and TDW.  Each firm should have advised their respective clients of the consequences and the necessity of having a firm of solicitors to act for them.  It is the duty of the respective applicants to resolve the conflict amongst themselves and should not be the responsibility of one or some of the applicants.  Even though SK Lam is the solicitor who comes into the picture since the very beginning, this will not ease or discharge its burden in trying to remedy the irregularity.  The fact that the 3^rd and 4^th applicants remained to be represented separately, it is apparent that neither the 3^rd applicants nor the 4^th applicants are prepared to give up their own solicitors.  In the circumstances, the irregularity must be constituted by both the 3^rd and the 4^th applicants and neither of them can shift the blame on the other.

Conclusion

26.  Costs should follow the event.  I see no reason why the respondents should be deprived of its costs in the Stay Application or why the 4^th applicants should be awarded costs of this Stay Application.  And I also found counsel’s certificate is justified given the legal arguments involved.

Order

27.  It is ordered that costs of, occasioned by and/or arising out of this Stay Application and any costs wasted by reason of the Stay Application, including the costs of the hearing on 19 November 2015, be borne by the 3^rd and 4^th applicants, with certificate for 1 counsel, to be taxed if not agreed on District Court scale and to be paid forthwith.

LDBM 136/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 136 OF 2014

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DECISION ON COSTS

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1.  This is an application by the respondents for costs of these proceedings upon the discontinuance by the 1^st applicant by way of a Notice of Discontinuance dated 6 August 2015.

Background

2.  The 1^st applicant is the Incorporated Owners of Pearl Gardens Hong Kong (“IO”).  The 2^nd applicant is one of the directors of the 5^th applicant, who is the registered owner of Flat 3F.  The 3^rd applicants are the directors of New Modern Limited, the registered owner of Flat 5F.  The 4^th applicants are the registered owners and occupants of Flat 6F.  The respondents are the registered owners of Flat 4F.

3.  Since about February 2013, the IO and Synergis Management Services Limited (“Synergis”), the management company of Pearl Gardens, have received numerous complaints from many owners within Pearl Gardens including the 2^nd to 5^th applicants regarding continuous and excessive loud noises emanating from Flat 4F caused by radio and/or television and/or Hi-Fi and/or other electronic media.

4.  The noises were persistent in duration, lasting throughout the day from 7am to 11pm, and at unreasonable hours.  The 3^rd applicants and their family had to move out of Flat 5F due to the noise nuisance created by the respondents.  Between 25 February 2013 and 3 March 2014, the owners or management staff have had to formally report to the police on no less than 31 occasions to complain about noise nuisance emanating from Flat 4F.

5.  On 29 May 2014, the applicants commenced the present proceedings by filing a Notice of Application for breach of Deed of Mutual Covenant (“DMC”), seeking injunctive relief to restrain the respondents from emanating noise and excessive vibration which caused nuisance to other occupiers of Pearl Gardens.  The 2^nd to 5^th applicants also claimed damages for distress and inconvenience, loss in revenue, costs of relocation and letting out, as well as loss in rental income against the respondents.

6.  On 25 July 2014, the applicants filed an application for an interlocutory injunction against the respondents.  Directions were given for the filing of evidence and no date was fixed for substantive argument as the parties thereafter went into settlement negotiations. 

7.  On 6 August 2015, the IO has filed and served a Notice of Discontinuance with this Tribunal.  On 20 August 2015, the respondents has taken out an interlocutory application asking for an order that the IO do forthwith pay 25% of the costs of these proceedings (including the costs of the interlocutory application filed on 25 July 2014) up to the date of the Notice of Discontinuance.

8.  The IO has filed the 2^nd Affidavit of Leung Man Lai dated 6 August 2015 to explain the reason behind the decision to discontinue these proceedings, namely the IO and Synergis had received no further complaint from owners or occupiers regarding noise nuisance emitting from Flat 4F since around February 2015, so it was no longer necessary to seek an injunctive relief against the respondents.

9.  It is the submission of Ms. Lam for the IO that where the discontinuance of the proceedings is due to the matter having become academic, the court may depart from the general rule that a defendant is entitled to the costs of the action if the action is discontinued.

10.  Mr Leung SC for the respondents submitted that the IO should never be a necessary party to these proceedings in the first place and the IO had failed to discharge the burden of showing there is special circumstances in this case which justified a departure from the general rule.  Since there are still live issues to be determined in this case, the argument that the matter had become academic must fail.  In any event, it is not for the IO to decide whether the argument had become academic or not. 

Costs upon Discontinuance

11.  Rule 27 of the Lands Tribunal Rules (“LTR”) allows this Tribunal wide discretion in the determination of the question of costs upon discontinuance as it thinks fit.  Rule 27 LTR provided that :

“(1) A party may, without leave of the Tribunal, discontinue the proceedings or withdraw any part thereof by serving a notice to that effect on the other party.

(2)   A party upon whom a notice mentioned in subrule (1) is served may, within 14 days of that service, apply to the Tribunal for an order for costs and, subject to the Landlord and Tenant (Consolidation) Ordinance (Cap 7), the Tribunal may make such order as it thinks fit.”

12.  Parties have no dispute about my findings in the case of Sino Estates Management Ltd v Leung Wai Piu LDBM238/2004 (unreported 28 May 2010) concerning costs on discontinuance for cases in the Lands Tribunal :-

“9. It is said by Keith J in Trend Publishing v Vivien Chan & Co (a firm) [1996] 2 HKLR 227 that :

‘It is well settled that the general rule is that a defendant is entitled to the costs of the action if the action is discontinued…But that is not an absolute rule. The rules recognise that there may be circumstances in which a plaintiff should be permitted to discontinue an action without having to pay the defendant’s cost.’

10. I found this general rule is applicable to cases in the Lands Tribunal and Section 27 of the Lands Tribunal Rules only stipulated the procedure that the Respondent have to apply for costs upon the Applicant filing the Notice of Discontinuance. It is then for the Tribunal to consider the question of costs and to make such order as it thinks fit, subject to the general rule stated above. I accept that the Respondent is not entitled to costs as of right.

11.     Yet, the burden is on the Applicant to show good reason for displacing the general rule governing costs upon discontinuance.”  

13.  It is also the recognised principles applicable to the determination of costs, where an action is discontinued, as set out in paragraph 21/5/12 of the Hong Kong Civil Procedure2016 and the cases cited therein that:

“While the general rule is that a party withdrawing a claim should pay for the costs of the opposite party, the court has complete discretion in dealing with the issue of costs and to do justice between the parties. The general rule that a defendant is entitled to costs when an action is discontinued may be departed from in a case where the discontinuance of the proceedings is due to the matter having become academic, rather than to any acknowledgment by the plaintiff of likely defeat.”

Discussion

14.  The IO is relying on the fact that the matter between the IO and the respondents has become academic as a ground to justify a departure from the general rule that the party against whom the action was being discontinued should have costs of the proceedings.  The respondents disputed whether the matter has become academic.

15.  Having considered the submissions of the parties, I agree with the IO that the matter has become academic. 

16.  This is a case where the IO has acted upon complaints against the respondents for noise nuisance and the IO is asking for an injunctive relief in this case to stop the nuisance.  Given the fact that there were no more complaints since February 2015, the need for an injunction to restrain the respondents from making any noise nuisance is no longer necessary.  Since an injunction is no longer necessary, the matter as to whether there had been noise nuisance created by the respondents must have become academic as between the IO and the respondents.  These issues may still be alive as between the other applicants and the respondents and need to be resolved at trial.  But this is no longer the situation for the IO who is no longer seeking for the injunctive relief.  Since the complained act, which is the basis for the claim of injunctive relief had already ceased, even if the case were to proceed to trial, the IO will have difficulty in justifying why an injunction is still required.  And it would be a waste of time and costs should the IO elect to proceed under such circumstances.

17.  Parties had addressed this court on the merits of the IO’s case against the respondents. Whilst this is not the occasion for the merits of the case to be determined since the factual disputes has to be resolved after trial, the only observation to make is that in view of the number of complaints received by the IO and Synergis from a number of owners, it cannot be said that the IO does not have a case against the respondents.

18.  As for the argument that the IO was never a necessary party to these proceedings, I beg to differ.  The IO is duty bound to enforce the terms of the DMC and with the complaints lodged by the other owners, the IO should take action against the owner being complained of instead of leaving it to the respective owners to take action.  Even though the other applicants may have asked for an injunctive relief as well, without being involved in this case, the IO would not be in a position to enforce the court order even if an injunction is being granted against the respondents.  So to be involved in this case is what a responsible incorporated owner should do.

Order

19.  It is ordered that there shall be no order as to costs in these proceedings including the interlocutory application filed on 25 July 2014 as between the 1^st applicant and the respondents.

20.  Costs order nisi that costs of this costs application be to the 1^st applicant, with certificate for counsel, to be taxed if not agreed on District Court scale.  Unless any of the parties apply by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.