INCORPORATED OWNERS OF FU NING GARDEN AND ANOTHER v. GRANTWIN DEVELOPMENT LTD.

HCA001747A/2002

HCA 1747/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1747 OF 2002

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BETWEEN
INCORPORATED OWNERS OF FU NING GARDEN 1st Plaintiff
FUNING PROPERTY MANAGEMENT LIMITED 2nd Plaintiff
AND
GRANTWIN DEVELOPMENT LIMITED 1st Defendant
CHAN WAI HING 2nd Defendant

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Coram: Deputy High Court Judge A Cheung in Chambers

Date of Hearing: 28 June 2002

Date of Judgment: 28 June 2002

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J U D G M E N T

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1. This is an application for the entry of default judgment by the Plaintiffs against the two Defendants who have failed to file anydefence to the Statement of Claim in this action. I shall not repeat the background of this piece of litigation. It has already beenset out in an earlier judgment given by me when the Plaintiffs applied for interlocutory injunction against the two Defendants on17 May 2002.

2. On that occasion, an interlocutory injunction was granted by me against the 2nd Defendant and no injunction was granted against the1st Defendant because the 1st Defendant gave an undertaking which was found to be satisfactory to me. It is not in dispute that thetwo Defendants have not filed any defence to the Plaintiffs’ claim. In those circumstances, my task is to look at the Statement ofClaim and see what relief the Plaintiffs are entitled to obtain based on their pleading.

3. Having done that, I am fully satisfied that the Plaintiffs are entitled to the relief sought by them which is in fact reflected inthe interlocutory injunction that the two Plaintiffs have already successfully obtained against the 2nd Defendant.

4. At today’s hearing, those representing the Defendants put forward no real argument against the grant of permanent relief by the Courtin favour of the Plaintiffs. So in those circumstances, I make an order in terms of paragraph 1 of the Summons in relation to theinjunctive relief; I also make an order in terms of paragraph 2 of the Summons in relation to the payment of damages to be assessed.

5. Finally, as regards the payment of costs, Mr Lin, counsel for the Plaintiffs, asks for payment of costs on a solicitor and own clientbasis, relying on clause 12(d) and (g) in the Deed of Mutual Covenant, which is binding on both the 1st Defendant as the registeredowner as well as the 2nd Defendant as the tenant, pursuant to the provisions in section 41 of the Conveyancing and Property Ordinance (Cap. 219).

6. In this regard, although the provisions in the DMC refer to payment of costs on a solicitor and own client basis, I am persuadedby Mr Lin’s argument that this does not make it a positive covenant within the meaning of section 41(6) of the Ordinance. The promise to pay costs on a solicitor and own client basis is in relation to the manager’s taking of court actionto enforce the covenants in the Deed of Mutual Covenant. It is ancillary in nature; and whether it amounts to a “positive” covenantshould, in my judgment, depend on whether the manager is seeking to enforce a “positive” covenant substantively in the action ornot.

7. Since in the present action, the covenants involved are negative in nature, in my judgment, that also determines the nature of thecontractual right to demand for solicitor and own client costs in the present case. So for that reason, I am of the view that notonly is the covenant in question binding on the 1st Defendant as owner, it is also binding on the 2nd Defendant as tenant, notwithstandingthe provisions in section 41(5) of the Ordinance relating to the limited binding effect of a positive covenant.

8. Turning to the basis of taxation, there being no possible dispute as to the Plaintiffs’ entitlement to costs, I agree with Mr Lin’ssubmission that in a case where there is expressly provided for a contractual entitlement to costs on a particular basis, whilstthe Court does nonetheless retain an unfettered discretion in relation to costs, the Court would normally exercise its discretionin accordance with the contractual provisions save in exceptional circumstances: Chekiang First Bank v Fong Siu Kin [1997] 2 HKC 302; Yeung Kwok Fan v Standard Chartered Bank [2001] 4 HKC 486. Having heard the parties, I can find no exceptional circumstances in the present case.

9. I am minded to make an order in relation to costs that would reflect the contractual entitlement of the Plaintiffs in the presentcase. The Deed of Mutual Covenant refers to payment of costs on a solicitor and own client basis. On the face of it, that may bemore appropriate as a basis of taxation in a non-contentious matter: c. f. O. 62 r. 29(1). (I say no more than that as I have not heard much argument on this point.) However, the Court, as I say, has an unfettereddiscretion in the matter; and all I need to do is to make an order that reflects the contractual entitlement of the Plaintiffs relatingto costs. In this regard, I note that O. 62 r. 28(4)(a) provides for the payment of indemnity costs, the definition of which is similarto the definition of costs payable on a solicitor and own client basis.

10. In the circumstances, in the exercise of my discretion, I make an order that the Defendants pay to the Plaintiffs their costs ofthe action to be taxed on an indemnity basis if not agreed. This would apply in relation to taxation of the costs of the Plaintiffs’application for interlocutory injunction mentioned by me above as well.

(A Cheung)
Deputy Judge of the Court of First Instance
High Court

Representation:

Mr Kenny Lin, instructed by Messrs Alvan Liu & Partners, for the Plaintiffs

Mr Samuel L C Yang, of Messrs Samuel L C Yang & Co., for the 1st Defendant

Mr Kenny Chan, instructed by Messrs Philip Ng & Wong, for the 2nd Defendant