The Incorporated Owners of San Po Kong Mansion v. on Rich (HK) Investment Ltd

HCA 557/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 557 OF 2013

________________________

________________________

________________________

JUDGMENT

________________________

A. INTRODUCTION

1.The plaintiff in this action is the incorporated owners of San Po Kong Mansion (the “IO”), a composite commercial and residential development built in the 1960s consisting of four connected 20-storey blocks (the “Building”).  The IO was incorporated in 1972, after the Multi-storey Building (Owners Incorporation) Ordinance (the “MBO”), the predecessor of the Building Management Ordinance (Cap 344) (the “BMO”), came into effect on 19 June 1970.

2.When the Building was constructed, it comprised a cinema theatre, a restaurant, shops and other commercial premises, car parks and residential flats.  By a Deed of Mutual Covenant dated 15 May 1968 (the “DMC”), the cinema theatre, portions of the ground, first and second floors of the Building and the flat roof of the Building immediately adjoining the theatre (collectively, the “Theatre Parts”) were allocated 80 undivided shares out of a total of 800 undivided shares.  The remaining 720 shares were allocated to the other parts of the Building (the “Non-Theatre Parts”), including the roofs of the Building (which were separate from the flat roof of the Theatre) (the “Non-Theatre Roofs”).

3.By an Assignment dated 4 January 2007 (the “Assignment”), the defendant acquired the said 80 undivided shares in the Building allotted to the Theatre Parts.  Subsequently, the defendant converted and sub-divided the Theatre Parts into a shopping mall with sub-units by way of a Sub-DMC dated 3 March 2008.  The defendant later sold some of the units amounting to 11 out of 80 undivided shares allotted to the Theatre Parts, with the result that the defendant remains the registered owner of 69 undivided shares of the Building.  The remaining units owned by the defendant have since been leased out to a related company of the defendant to operate a home for the elderly.

4.The parties have referred to the owners of the undivided shares originally allotted to the Theatre Parts under the DMC as the “Theatre Owners” and the owners of those allotted to the Non-Theatre Parts as the “Non-Theatre Owners”.  The defendant is, of course, one of the Theatre Owners.

B.   THE TRESPASS ACTION

5.In August 2001, Shine Empire Limited (“Shine Empire”), being the successor-in-title of the developer of the Building and having the right to exclusive possession of the Non-Theatre Roofs under the DMC, instituted proceedings in Shine Empire Limited v The Incorporated Owners of San Po Kong Mansion & others (HCA 3444/2001) against the IO and five telecommunications companies, namely, Hutchison Telephone Company Limited (“Hutchison”), New World PCS Limited, Smartone Mobile Communications Limited (“Smartone”), Mandarin Communications Limited and Hong Kong CSL Limited (collectively, the “Telcos”) for, inter alia, trespass and restitution (the “Trespass Action”).

6.The premise of the Trespass Action was that the Telcos had installed telecommunications equipment and cables on the Non-Theatre Roofs and the attached parapet walls without Shine Empire’s consent.  Rather, it was the IO that purported to licence the Non-Theatre Roofs to the Telcos pursuant to a series of licence agreements and collected licence fees pursuant to the same.

7.Shine Empire thus claimed, inter alia, possession of the Non-Theatre Roofs, mesne profits and damages to be assessed, and the licence fees paid by the Telcos to the IO from April 1998 to 30 June 2001.

8.The IO resisted the claim and counterclaimed that it had dispossessed Shine Empire of the Non-Theatre Roofs for the requisite period of 20 years under sections 7(2) and 17 of the Limitation Ordinance (Cap 347) and had thereby acquired a possessory title to the same.

9.On 20 October 2004, Sakhrani J ordered, inter alia, that all issues on liability between Shine Empire and the IO be tried first.  The split trial was heard by Deputy High Court Judge Mayo in November 2004, and on 3 December 2004, the Deputy Judge gave judgment in favour of Shine Empire and dismissed the IO’s counterclaim with costs.

10.The IO appealed against the judgment first to the Court of Appeal in CACV 19/2005 and then to the Court of Final Appeal in FACV 16/2006.  Both appeals were dismissed on 22 March 2006 and 30 April 2007 respectively with costs.

11.On 10 November 2008, Shine Empire obtained interlocutory judgment with damages to be assessed against each of the 5 Telcos. Shine Empire subsequently reached a settlement on quantum with Hutchison, and proceeded to a contested hearing on assessment of damages with the remaining 4 Telcos before Master R Lai, the dispute being primarily on liability for pre-judgment interest.  On 28 January 2011, the Master assessed damages against the 4 Telcos including interest, and ordered (by consent) that the costs of the Trespass Action as between Shine Empire and the 4 Telcos be to Shine Empire, to be taxed on a party and party basis if not agreed.

12.The arguments and the determinations in the Trespass Action (and related appeals) are set out in the judgments in those proceedings and not repeated here, save where the context requires for the determination of the issues in the present action.

C.   THE DISPUTE AND AGREED LIST OF ISSUES

13.As a result of the Trespass Action, the IO was found liable for the licence fees received from the Telcos, and the Telcos were found liable for damages for trespass and mesne profits.  From the evidence available before the court, no orders for contribution were made between the IO and the Telcos in the Trespass Action.  Rather, Mr Yim Ka Wah (“Mr Yim”), the IO’s current chairman, in his witness statement, stated that:

「自終審法院的判決後, 該法團除了要向明霸賠償訟費,同時亦面臨五間電訊商的彌償訴訟。早在2003年, 該法團已經與該訴訟的第四被告人達成協議, 同意彌償第四被告人於該訴訟的所有的賠償款項, 利息及訟費。而在2009年至2010年間, 申請人也和其他的被告人達成相同的和解方案。」

English Translation:

“ After the CFA judgment, apart from paying costs to Shine Empire, the IO had to face indemnity proceedings of the five telecommunication companies as well. Back in 2003, the IO had already reached an agreement with the fourth defendant in that action, agreeing to indemnify the fourth defendant for all damages, interest and costs arising from that action. Between 2009 and 2010, the applicant and other defendants have also arrived at the same proposal for settlement.”

14.It is not entirely clear from this passage whether contribution proceedings had in fact been instituted by the Telcos against the IO or merely threats of proceedings made.  In any event, the IO purportedly decided to enter into agreements with each of the Telcos indemnifying them for all damages, interest and costs arising from the Trespass Action (the “Indemnity Agreements”).  I will say more about these Indemnity Agreements below and explain why I have used the term “purportedly”.

15.On 3 March 2011, the IO issued a notice of annual general meeting of the Incorporated Owners to be held on 19 March 2011 (the “Notice of 2011 AGM”).  The last item on the agenda was,「議決天台『明霸』訴訟賠償集資方案」 (“Resolution on fund-raising proposal for settling the damages in the Shine Empire action [ie the Trespass Action]”).

16.On 19 March 2011, the annual general meeting (the “2011 AGM”) was held.  In the minutes of the meeting, it was recorded that, inter alia:

「 司儀周小姐表示就天台『明霸』訴訟案件一事，案件由2001年開始至今已數年，有關案件法團為第一被告人並以於年前由大廈集資賠償於天台業權人，索取之訴訟費該賠償包括1995年至2004年法團錯誤地收取電訊公司的租金，利息及被告之律師費。

而是次業主大會中所需要進行集資之金額為 $16,000,000，用以賠償予第二至第六被告之電訊商。由於現時大廈沒有足夠盈餘支付有關費用，故需安排於是次業主大會中由業主投票有關之集資方案。此外，法團亦於是次業主大會邀請協助法團處理此案件之律師―梁律師出席會議，並向與會業主講解案件詳情及現時之狀況，以及大廈需要盡快進行集資，賠償予電訊商以避免進一步之利息支出……」

English translation:

“ Miss Chow, the master of ceremonies, indicated that the Shine Empire action had lasted for some years since its commencement in 2001, and that [the IO] being D1 in the case had already indemnified the owner of the rooftop by raising funds some time before [for] the legal costs demanded, [and] the damages included the rental wrongly collected by [the IO] between 1995 and 2004 from [the Telcos], interests and lawyers’ charges incurred by the defendant.

This general meeting aimed pooling an amount of $16,000,000 for paying damages to D2 to D6, [the Telcos].  Since the building at present did not have sufficiently surplus to make the payment concerned, it was necessary to make arrangements in this general meeting for owners to vote on the fund-raising proposal.  Moreover, [the IO] had also invited Leung, the lawyer who had been assisting [the IO] to deal with this case, to attend this meeting and to explain to the owners in attendance the details and current situation of the case, and that fund-raising and payment of damages to [the Telcos] had to be done as soon as possible so as to avoid accruing further interest …”

The minutes noted that it was then resolved inter alia that each co-owner of the Building (without distinction between the Theatre and Non-Theatre Owners) shall contribute HK$20,000.00 per undivided share by way of 2 equal instalments, the first being due April 2011 and the second being due the following month (the “March 19 Resolution”).

17.Pursuant to the March 19 Resolution, the IO demanded from the defendant a contribution in the total sum of HK$1,380,000.00, being HK$20,000 × 69 shares (a sum of HK$690,000 due in April 2011 and a further sum of HK$690,000 due in May 2011).  The defendant refused to accede to the demand.  It is this dispute that has given rise to the present action.

18.Pursuant to the Order of Anthony Chan J at the pre-trial review hearing on 7 December 2016, the parties are bound by an agreed list of issues as follows:

(1)  Whether the 2011 AGM was validly convened, the determination of which depends on whether the Notice of 2011 AGM was properly served on the owners (the “AGM Issue”);

(2)  Whether on the proper construction of the DMC (including any implied term(s) thereof) the defendant is liable to make contributions pursuant to the March 19 Resolution (the “DMC Issue”);

(3)  Whether the IO can rely upon sections 20, 21 and 22 of the BMO to seek contributions from the defendant, the determination of which depends on (the “BMO Issue”):

(a)   The construction of those provisions in the light of the DMC; and

(b)   Whether there was at the material times a validly appointed management committee who had made a determination regarding the contributions;

(4)  Whether the IO is estopped from seeking any contributions from the defendant by reason of the matters pleaded in paragraph 18A of the Amended Defence (the “Estoppel Issue”).

I shall determine each of the issues in the order above.

D.   THE AGM ISSUE

The parties’ cases

19.It is the IO’s case as pleaded in its amended statement of claim that the 2011 AGM was duly convened and held, and the IO passed the March 19 Resolution “…to settle all the judgment debt, interest and costs owed to the [Telcos] under the [Trespass Action]”. At the trial, both parties proceeded in their submissions on the basis that the funds sought to be raised at the 2011 AGM were for the payment of a judgment debt in the Trespass Action due to the Telcos.  However, in the course of producing this judgment, the court noted this was inconsistent with Mr Yim’s evidence mentioned above and the procedural background set out in Master Lai’s ruling on damages in the Trespass Action.  The court therefore directed written submissions from the parties on whether the court’s understanding was correct, and if so, how the error would impact upon the parties’ submissions.  In response, Mr Erik Shum, counsel for the IO (but did not settle the statement of claim), confirmed that the IO’s liability to the Telcos did in fact arise from the Indemnity Agreements and not from any judgment in the Trespass Action.  I will say more about the implications of this below.

20.In its amended defence, the defendant did not admit that the 2011 AGM had been held or the March 19 Resolution passed.  More importantly, the defendant’s case was that notice of the 2011 AGM had not been served on the Theatre Owners, including the defendant, and therefore, the March 19 Resolution could not have been validly passed.

21.In its reply, the IO averred that notices of each of the IO’s general meetings, including the Notice of 2011 AGM, had in fact been served on the Theatre Owners by leaving the relevant notices at their respective premises.  Further, the Theatre Owners were entitled to elect and to be elected as members of the IO’s management committee, and one of the Theatre Owners was indeed elected and was a current member of the management committee as at the date of the reply, being 17 September 2015.

The IO’s Evidence

22.In the light of the defendant’s denial that it has been served with the Notice of 2011 AGM (or any prior notices), the burden is squarely on the IO to show, on a balance of probabilities, that it has done so.  The IO has not, whether in its pleadings or in submissions at the trial, advanced a case that the 2011 AGM and the March 19 Resolution should nevertheless be valid and binding on the defendant even if the court were to find that there had not been valid service of the Notice of 2011 AGM on the defendant or the other Theatre Owners.  This is also clear from the manner in which the AGM Issue has been framed by the parties.

23.Given the importance of the AGM Issue, the evidence adduced by the IO in this regard is, I must say, surprisingly, thin:

(1)  The only witness called by the IO was Mr Yim, its current chairman.  Mr Yim purchased a unit in the Non-Theatre Parts of the Building (and thus became one of the Non-Theatre Owners) on 29 April 2011.  In September 2013, he became a member of the IO’s management committee, and was elected chairman two months later.  Prior to becoming a member of the management committee, he had no involvement in the management of the Building. Hence, the material events in this action all took place before Mr Yim even became an owner in the Building.

(2)  Mr Yim’s evidence on this issue was that whenever there was an annual general meeting and other general meetings affecting the interests of the owners, the IO would deliver the notice of meeting to each of the owners.  In respect of the shop owners, the notice would be delivered to the relevant shops and units.  As to the defendant, the relevant notices would be delivered to a Ms Wong, the administrator of the elderly home, to forward to the defendant.  Generally, the IO would not ask the owners to sign for receipt of such notices.

(3)  Mr Yim makes no mention, however, whether this practice of delivering notices of meeting to the shop owners (including the Theatre Owners), existed in 2011, or at any time prior to his involvement in the management committee in 2013.  Plainly, he had no personal knowledge of such matters, and he admitted that he had no knowledge whether there were any internal records showing delivery of the Notice of 2011 AGM on the defendant, as he was not even an owner at the time.  He did not say whether he made any attempt to locate such records.

(4)  Presumably, employees of the management company or the IO would have performed the task of delivery.  Although Mr Yim remarked in cross-examination that there were frequent changes to the management company staff, there is no evidence of any attempt by Mr Yim or the IO to locate and adduce evidence from any of the persons involved in delivering such notices on the shop owners, whether at the time of the Notice of 2011 AGM or at any other time.

(5)  Indeed, there is no evidence at all from any persons who were involved in the management of the Building (whether from the management company or the management committee) at the time of the 2011 AGM.  From the minutes of the 2011 AGM, it can be seen that the management committee at the time consisted of at least seven members, in addition to the chairman and vice-chairman.  When asked in cross-examination why such persons were not called, Mr Yim said that all of them had been or were being sued by the IO.  In the absence of any supporting evidence, I do not find that assertion convincing, and in any event, there is no explanation as to why the management company could not be called to give evidence.

24.Mr Shum candidly accepted Mr Yim’s evidence in this regard was “hearsay”.  Leaving aside whether such evidence can properly be admissible in a witness statement, I attach little weight to it.  Mr Shum contends, however, that Mr Yim’s evidence is corroborated by the following matters:

(1)  The notices of general meetings, including the Notice of 2011 AGM, and the minutes of those general meetings were “undisputed”.  The minutes of the general meetings stated that they were intended for all owners of the Building, and in the 2011 AGM minutes, the 80 undivided shares of the Theatre Owners were included to form the denominator for the calculation of 10% quorum.  The inference to be drawn, says Mr Shum, is that those general meetings were meant to be attended by all co-owners and that notices of such meetings must have been served on all co‑owners.

(2)  In various minutes of management committee meetings conducted prior to the 2011 AGM, management fees were put on record to be levied against the Theatre Owners which were increased together with other management fees in the region of 10% per year.  The necessary inference, Mr Shum argues, is that the Theatre Owners would have been notified of the management fees they needed to pay as a result of the resolutions passed at the management committee.

(3)  Mr Yim’s evidence that the caretaker and management company of the whole Building managed also the Theatre Parts, including care-taking and cleaning work, was not cross-examined upon.  Hence, the inference to be drawn was that management fees must have been levied on the Theatre Owners, and in turn, the inference should be drawn that notices must have been communicated to the Theatre Owners.

(4)  Finally, there was no mention in the evidence of Luk Ngai Ling Irene (“Ms Luk”), the defendant’s witness, as to how the Theatre Parts, including the elderly home and other shops were managed in terms of the cleaning, maintenance, repair and servicing of water supplies, rubbish disposal and security services.  The inference must be that that someone not engaged by the Theatre Owners, namely, the caretaker employed by the IO, would have taken care of these services.

I consider each of these points in turn.

25.On the issue of the notices and minutes of general meetings, including those of the 2011 AGM, it is not correct to characterise them as “undisputed”.  The defendant’s case has all along been that it never received them and never attended any of the meetings.  It is correct that the notices of AGM, including the Notice of 2011 AGM were stated to be for “owners of the Building”, without drawing any distinction between Theatre Owners and Non-Theatre Owners.  Further, in the minutes of the meetings, including the 2011 AGM, there is a statement that the denominator used for calculating the quorum of 10% was 800 shares, being the total number of undivided shares of the Building, including the shares allotted to the Theatre Owners.  However, in the absence of any evidence from the persons drafting the notices and the minutes, the general statements in the documents relied upon by Mr Shum carry little weight on the question of whether those documents were served on the Theatre Owners, including in particular the defendant.

26.Moreover, as can be seen from the excerpt of the 2011 AGM Minutes above, it appears that sometime before the 2011 AGM, a prior fund had been raised for the purpose of compensating Shine Empire for the licence fees the IO had wrongfully collected from the Telcos, as well as interest and costs.  Curiously, there is no evidence from the IO as to how that fund was raised, the status of that fund, and whether any demands had been made to the Theatre Owners for contribution to that fund.  Suffice it to say that had such demands been made, it would be surprising that no mention of the same has been made by the IO in these proceedings, irrespective of whether such demands were satisfied.

27.As to the supposed inference that the Theatre Owners would have been notified of the management fees they needed to pay as a result of the resolutions passed at the management committee, there is no evidence at all from the IO of any demands issued to the Theatre Owners for the payment of such fees, not to mention any evidence of actual payment by any of the Theatre Owners.  If such payments had been made, the IO would plainly be in possession of such records, and yet none has been produced. 

28.As to Mr Yim’s assertion that the caretaker and management company of the whole Building worked also for the Theatre Parts, including care-taking and cleaning work, his evidence was nothing more than a bare and unsubstantiated assertion.  As mentioned above, Mr Yim has no personal knowledge of the management of the Building prior to 2013.  Whilst I accept that Mr Mak did not specifically cross-examine Mr Yim on this subject, such cross-examination would have been fairly meaningless given Mr Yim’s professed lack of knowledge.  As the Court of Appeal noted in Menno Leendert Vos v Global Fair Industrial Limited and others (unreported) CACV 281/2009, 6 October 2014, at §98:

“ … the principle in Browne v Dunn (1894) 6 R 67 HL does not lay down an inflexible rule requiring every point that might be used against a witness to be put to him. It is ultimately a question of whether it would be unfair to the witness if a specific point was not put to him.”

There was no unfairness in this instance.  Further, no evidence has been adduced from the caretaker or the management company on whether they performed any such work for the Theatre Parts.  Again, such evidence should have been readily obtainable by the IO.

29.For the reasons above, I do not find that any of the matters raised by Mr Shum improves upon Mr Yim’s evidence or assists the IO’s case.

30.As mentioned above, Ms Luk is the sole witness for the defendant.  In addition to being a director of the defendant, she and her family members are the ultimate beneficial shareholders of the defendant and the related company operating the elderly home.  She filed a lengthy witness statement of some 38 pages, much of which comprised repetition of the pleadings and legal arguments as to the “true and proper” construction of the DMC, including the existence of the Alleged Implied Term, and why the defendant should not be liable for the Telcos Compensation under the BMO.  Indeed, large parts of her statement are liable to be struck out.  In cross-examination, Ms Luk frankly admitted that the statement had been drafted by the defendant’s lawyers, although she said she confirmed its contents.

31.Practitioners should not need reminding that witness statements must contain only such material facts as the witness is able to prove of his own knowledge, and is the equivalent of the oral evidence that the witness will give, if called, in his evidence-in-chief at trial.  Whilst a party’s lawyers will almost invariably assist in the preparation of witness statements, their role should be confined to guiding the witness to the relevant factual issues to which his or her evidence relates, and then recording his or her evidence into a written statement in the customary format.  Statements should be in the witness’ own words, and must not be massaged or crafted by lawyers.  Needless to say, a witness statement should not contain legal arguments or submissions.  These are undoubtedly matters that the court can take into account in taxation of costs.

32.For present purposes, two aspects of Ms Luk’s evidence are relevant:

(1)  The defendant never received any notices from the IO, including the Notice of 2011 Notice of AGM, nor any notices of nomination or election of the management committee.  In cross-examination, Ms Luk explained that although she was stationed at the defendant’s office and not at the elderly home, the staff at the elderly home sent to the defendant any mail or notices received relating to the premises; and

(2)  Since its acquisition of the Theatre Parts to it in 2007, the Theatre Owners managed, maintained and repaired the Theatre Parts, including spending money on painting the external walls of the Theatre Parts, and neither the IO nor the Non-Theatre Owners contributed to the same.  On the other hand, the defendant had not paid (and was not asked or required to pay) any management fee(s) nor was it required to share in any contributions with the rest of the Building.

33.Ms Luk’s evidence is not free from criticism.  Perhaps the most glaring error was that, in her witness statement, she stated that:

“ I confirm (and I also ascertained from the previous owner(s), i.e. Mr Chan of Powerluck Properties Limited) that the Defendant all along had not been served with any to attend meeting of the Plaintiff or invited to be elected as a member of the same.”

In cross-examination, she accepted that although she may have spoken to the said Mr Chan on one occasion prior to the purchase of the property, she had not spoken to him afterwards, and she candidly accepted that the paragraph in the witness statement was wrong.

34.Further, although Mr Yim had specifically mentioned that notices were delivered to Ms Wong at the elderly home, Ms Luk accepted that she had not investigated the matter personally with Ms Wong but rather only with the nurses.  She maintained, however, that had anything been received, it would have been forwarded to the defendant’s office.

35.Having observed Ms Luk in the witness box and her response to Mr Shum’s cross-examination, I do not find her to be a dishonest witness, and I would attribute the error in relation to Mr Chan, which she candidly accepted, to overzealous drafting by the draftsman of the statement. On balance, on the two aspects of Ms Luk’s evidence mentioned above, I prefer her evidence to that of Mr Yim, having regard in particular to Mr Yim’s complete lack of personal knowledge.

36.In the circumstances, I find on the balance of probabilities that the IO, at least until after the 2011 AGM, failed to serve any notices, including notices of general meetings, notices of nomination or election of the management committee, on the defendant.  It follows that I answer the AGM Issue in the negative.

E.   THE DMC ISSUE

The IO’s case

37.In the amended statement of claim, the IO expressly refers and relies upon Clauses 9, 14, 26, 28 and 29 as being “material to the present Action”.  It is further pleaded that pursuant to Schedule 3 (or, more accurately, the Third Schedule) of the DMC, the Theatre Owners should contribute to one-tenth part of the expenses of the Building under Clause 9 of the DMC.  Due to the length of the provisions of the DMC, I have reproduced those relied upon by each of the parties in the Annex to this Judgment.

38.The IO contends that the defendant, as one of the Theatre Owners, is and was liable to contribute to the Telcos Compensation by reason of the above provisions.  I confess having difficulty discerning any basis for the IO’s plea:

(1)  In clause 9, provision is made for the contribution by all parties to the DMC (including the Theatre Owners) of a due proportion of: (a) Crown or Government rent; (b) water charges; (c) insurance premiums; and (d) rebuilding or re‑instatement of the Building or parts of the Building which have been damaged or destroyed;

(2)  The Third Schedule further provides that the Theatre Owners are liable to contribute one equal tenth part of the expenses listed in clause 9, and “Nil” for any of the expenses listed in clauses 10, 11, 13, 17 and 18;

(3)  The Telcos Compensation plainly do not fall within any of the categories in clause 9 or the Third Schedule.

39.Indeed, I do not understand Mr Shum to have pressed this aspect of its case at the trial.  Rather, as I shall explain further below, Mr Shum relies primarily upon the IO’s alternative case that as the DMC makes no provision for the fixing of contributions in the nature of the Telcos Compensation, section 22 of the BMO applies.

The defendant’s case

40.Notwithstanding my findings the above, I set out the defendant’s case on the DMC Issue, as it relates also to the defendant’s case on the BMO Issue.

41.In summary, the defendant contends that on a proper construction of the express terms of the DMC and having regard to the “factual matrix”, the Theatre Owners, including the defendant, are not liable to pay or contribute to any of the Telcos Compensation.

42.As to the express terms of the DMC, the defendant refers and relies upon clauses 6, 8, 9, 10, 11, 12, 14, 17, 18, 25, 27, 28 and 31 and the Third Schedule (see Annex to this Judgment).  The defendant contends that by virtue of these clauses:

(1)  The Theatre Owners do not have the right, as the Non-Theatre Owners do, to use or enjoy the common part(s) of the Building (clause 6), and similarly, the Non-Theatre Owners do not have the right to use or enjoy any part of the Theatre Parts (clause 9);

(2)  The Theatre Owners are solely responsible for the repair and maintenance of the Theatre Parts and the facilities thereon (clause 12); whereas only the Non-Theatre Owners are responsible for the repair and maintenance of the Non-Theatre Parts and the facilities thereon (clauses 10, 11, 13, 14 and the Third Schedule);

(3)  The Theatre Owners are not allowed to participate in the management of and/or the appointment of a manager to manage the Non-Theatre Parts; whereas only the Non-Theatre Owners are entitled to hold meetings to discuss the management of and/or appoint a manager to manage the Non‑Theatre Parts and be liable for the costs and expenses relating to the management of the Non-Theatre Parts (clauses 10, 11, 13, 14, 17, 18, 25, 31 and the Third Schedule);

(4)  Hence, notwithstanding that the Theatre Parts physically form part of the Building, the DMC provides for separate management of the Theatre Parts by the Theatre Owners and the Non-Theatre Parts by the Non-Theatre Owners.  Further, save for those amounts and expenses specifically set out in clause 9 of the DMC, the Theatre Owners are not liable to pay or contribute to any amounts or expenses relating to the Non‑Theatre Parts, including (but not limited to) any costs, expenses, or any other liabilities as may be incurred by the manager and/or the IO in connection with their management of the Non-Theatre Parts.

43.It should also be mentioned that clause 12(d) provides that:

“ The [Theatre Owners] shall … contribute to the expenses enumerated in Clause 9 hereof and also to the cost of maintaining the transformer room such contribution to be 80 equal 800^th part of the said cost.”

The remainder of clause 12 is concerned with matters relating solely to the Theatre Parts.

44.In paragraph 8B of the Amended Defence, the defendant pleads an implied term (the “Alleged Implied Term”), said to arise by operation of law, to give business efficacy to the transaction or to give effect to the common intent of the parties, that:

“ … save for those amounts and expenses specifically set out in clause 9 of the DMC, [the Theatre Owners] are not liable to share or contribute to any amounts or expenses relating to [the Non-Theatre Parts], including (but not limited to) any costs, expenses or any other liabilities as may be incurred by the manager and/or the plaintiff in connection with their management or mismanagement of the [Non-Theatre Parts].”

During the trial, upon the defendant’s application (and without objection from the IO), I allowed the defendant to amend paragraph 8B to read “… save for those amounts and expenses specifically set out in clauses 9 and 12(d) of the DMC …”

45.The defendant further relies, insofar as necessary, on the “factual matrix” in support of its construction of the DMC and the implication of the Alleged Implied Term:

(1)  In terms of design and layout of the Building, the Theatre Parts were and are separate and independent from the Non-Theatre Parts in that the Theatre Parts had and has its own physical access and egress and its own servicing facilities (this is uncontroversial and was accepted by Mr Yim in cross-examination); and

(2)  The conduct of the parties since the DMC in 1968, including inter alia: (a) the defendant not having been required or demanded by the IO to contribute or share in any expenses for the management and maintenance of the common parts or any parts of the Building; (b) similarly, the IO not having been required or demanded by the defendant to share in any expenses for the management and maintenance of the Theatre Parts; and (c) the Theatre Owners had never received any notice(s) of AGM of the IO, notice(s) of election of the management committee, or notice(s) of nomination.

46.It is well established that post-contractual conduct of the parties to a contract is irrelevant and indeed inadmissible for the purposes construing its terms (see eg SNE Engineering Co Ltd v Chim Kee Machinery Co Ltd (unreported) CACV 101/2016, 11 July 2017 at §52).  Hence, whilst the court may take into account the physical design and layout of the Building (which are not in serious dispute) as part of the overall factual matrix, the alleged conduct of the parties since 1968 is, at least for the purpose of construction of the DMC, irrelevant.

Discussion

47.As mentioned above, I am unable to see how any of the express terms of the DMC pleaded and relied upon by the IO assist its case.  I therefore answer the DMC Issue in the negative.

48.As to the implication of the Alleged Implied Term, the circumstances in which a term will be implied into an instrument are well established.  As Lord Hoffmann explained in Attorney General of Belize v Belize Telecom Ltd (PC) [2009] 1 WLR 1988 at §§17 and 18:

“ The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls.

In some cases, however, the reasonable addressee would understand the instrument to mean something else.  He would consider that the only meaning consistent with the other provisions of the instrument, read against the relevant background, is that something is to happen.  The event in question is to affect the rights of the parties.  The instrument may not have expressly said so, but this is what it must mean.  In such a case, it is said that the court implies a term as to what will happen if the event in question occurs.  But the implication of the term is not an addition to the instrument.  It only spells out what the instrument means.”

And at §21:

“ It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean.”

49.As I have found, none of the provisions of the DMC, including in particular, clauses 9 and 12(d) and the Third Schedule, imposes any obligation or liability on the Theatre Owners to contribute or share the costs or expenses in the nature of the Telcos Compensation. In the absence of any express term, as far as the DMC is concerned, “nothing is to happen”.  Indeed, it would be for the IO to contend (which it has not) the implication of a term that “something is to happen”, ie that the Theatre Owners should in fact bear such a portion of such liability, notwithstanding that this has not been expressly provided for.

50.In the circumstances, it is unnecessary to imply the Alleged Implied Term, which expresses in negative terms what has not been expressly been provided for in positive terms in the DMC.  It is also worth noting that as the DMC predated both the MBO and the BMO, the draftsman could not have contemplated any obligations or liabilities arising from those enactments.  Hence, the DMC cannot be understood to mean that the defendant should be exempted from such obligations or liabilities (if any and if capable of exemption) and no term can be implied to such effect.

51.For these reasons, I reject the implication of the Alleged Implied Term into the DMC.

F.   THE BMO ISSUE

F1.  Whether valid management committee

52.In short, the IO’s case is that the Telcos Compensation was an expenditure of an unexpected or urgent nature, and hence, the IO was entitled under section 21(1) to determine the amount to be contributed by the owners to the contingency fund to meet such expenditure.  As the DMC does not provide for the fixing of contributions to such a fund, the management committee was entitled to fix such contributions pursuant to section 22(2) in accordance with each owners’ respective shareholding in the Building.

53.Sections 21 and 22 provide inter alia:

Section 21(1):

“ … a management committee shall determine the amount to be contributed by the owners to the funds established and maintained under section 20 during such period —

(a) in the case of the first such period after the date of registration of the corporation, not exceeding 15 months; and

(b) in any other case, not exceeding 12 months,

as the management committee may determine.

Section 22:

“ (1) The amount to be contributed by an owner towards the amount determined under section 21 shall be —

(a) fixed by the management committee in accordance with the deed of mutual covenant (if any);

(b) payable at such times and in such manner as the management committee may determine.

(2) If there is no deed of mutual covenant, or if the deed of mutual covenant does not provide for the fixing of contributions, the amount to be contributed by an owner towards the amount determined under section 21 shall be fixed by the management committee in accordance with the respective shares of the owners.” (emphases added)

54.I deal first with the question of whether there was at the relevant time a validly appointed management committee for the reason that if there was no such committee, then no binding determination could have been made on the contributions to be made by the defendant under sections 21 and 22, and the BMO Issue must be answered in the negative.

55.It is the defendant’s case that no management committee had been validly appointed at the time of determination of the subject contributions, as no notice of any meeting for its appointment had been served on the Theatre Owners.

56.The IO’s position here is similar to that for the AGM Issue, namely, that notices of meetings had all along been served on the Theatre Owners, including the defendant, by leaving the relevant notices at their respective premises.  As mentioned above, it is also pleaded in the amended statement of claim that one of the Theatre Owners was actually elected and has been sitting as a current member of the management committee.  However, Mr Yim accepted in his witness statement that that owner was also the owner of a unit in the Non-Theatre Parts, and was therefore also one of the Non-Theatre Owners.  No evidence has been adduced from that owner, and I do not understand Mr Shum to have pressed this point at the trial.

57.As I have found above in respect of the AGM Issue, no notices of any meetings had been served on the Theatre Owners, at least until after the 2011 AGM.  Again, no argument has been advanced by the IO that the acts of the purported management committee, including its determination regarding the subject contributions, should be regarded as valid and binding on the defendant even if no notices for the appointment of its members had been served on the defendant.

58.It follows then that no valid management committee had been appointed and no valid determination made in respect of the contributions pursuant to sections 21 and 22.  In the circumstances, the answer to this issue must also be in the negative.

F2.  Sections 20 to 22 of the BMO

The parties’ cases

59.The defendant’s primary argument here is that the Theatre Owners are not liable to contribute to the Telcos Compensation, as such expenditure was concerned solely with the IO’s management of the Non-Theatre Parts:

(1)  The claims and counterclaims raised in the Trespass Action (and subsequent appeals) concerned only actions of the IO in connection with its purported management of the Non-Theatre Roofs.

(2)  The alleged income and/or licence fees collected by the IO from the Telcos were applied only for the welfare and interests of the Non-Theatre Owners.

(3)  All the debts, liabilities and costs were incurred by the IO in the Trespass Action (and the subsequent appeals) in connection with its purported management of the Non-Theatre Parts, for which the defendant is not liable.

(4)  The then Theatre Owners and their successors-in-title, including the defendant, were not involved in the Trespass Action (and the subsequent appeals) at all.  They had not been informed of its progress or invited by the IO to attend any meeting for or in connection with the Trespass Action (and the subsequent appeals).

60.The defendant refers in particular to clauses 17 and 18 of the DMC:

“ 17. …

For the purpose of this clause and the following clause 18 the words ‘the said building’ shall not include the Theatre and parcels sold there-with.

18. Each of the co-owners of the said building save and except [the Theatre Owners] shall pay to the Manager in each and every calendar month in advance the sum set out against the class of premises owned by them in the Third Column of the Third Schedule hereto or such monthly sum as may from time to time be determined or fixed by the Manager as payment on account of his share of all the costs charges and expenses due and payable by him in connection with the management of the said building and each such co-owner shall on or before taking possession of the premises pay to the Manager a deposit equivalent to 6 of such monthly sum ….” (emphases added)

61.Mr Mak submits that the Telcos Compensation falls within, “… the costs charges and expenses due and payable … in connection with the management of the said building [excluding the Theatre Parts]” in clause 18 of the DMC, and hence, in accordance with that clause and the Third Schedule, no contribution is required by the Theatre Owners.

62.Further, it is contended that the Telcos Compensation was not an expenditure of an “unexpected or urgent nature” within the meaning of section 20(2)(a) of the BMO.

Discussion

63.Sections 20(1) and (2) provide inter alia:

“ (1) A corporation shall establish and maintain a general fund —

(a) to defray the cost of the exercise of its powers and the performance of its duties under the deed of mutual covenant (if any) and this Ordinance; and

(b) to pay Government rent, premiums, taxes or other outgoings (including any outgoings in relation to any maintenance or repair work) which are payable in respect of the building as a whole.

(2) A corporation may establish and maintain a contingency fund —

(a) to provide for any expenditure of an unexpected or urgent nature; and

(b)   to meet any payments of the kind specified in sub‑section (1) if the fund established thereby is insufficient to meet them.”

64.It is clear that the funds established under section 20 may be used only for the specific purposes in subsections (1) and (2).  In simple terms, the general fund is for regular or recurring expenses falling within subsections (1)(a) and (b), whereas a contingency fund is for any expenditure of an unexpected or urgent nature and to meet any shortfalls for expenses payable from the general fund.

65.Plainly, the Telcos Compensation does not fall within Government rent, premiums or taxes or other outgoings payable in respect of the Building as a whole.  Hence, to seek a contribution from the owners so that the Telcos Compensation can be drawn from the general fund, the Telco Compensation must be a cost of the exercise of the IO’s powers and the performance of its duties under the DMC and/or the BMO.  Put another way, the Indemnity Agreements would have to have been entered into in the proper exercise of the IO’s powers and performance of its duties under the DMC and the BMO.

66.Although section 20(2)(a) merely provides that the expenditure is to be of an unexpected or urgent nature, in my view such expenditure must be one that the IO is empowered and authorised to incur under the DMC and/or the BMO.  It follows that the Indemnity Agreements must have been agreements that the IO was empowered or authorised to make under the terms of the DMC and/or the BMO.

67.The difficulty here is that the IO’s case was pleaded and argued at the trial on the incorrect basis that the Telcos Compensation arose from a judgment debt rather than a liability under the Indemnity Agreements.  The difference is not insignificant:

(1)  In the case of a judgment debt, the liability arises from a judgment of the court, which is compulsory in nature and is the legal consequence of prior actions taken by the IO (or individuals purportedly acting on behalf of the IO).  For instance, the judgment debt owed by the IO to Shine Empire in the Trespass Action, including the costs of the trial and subsequent appeals, were the direct consequence of its prior acts of trespass against Shine Empire;

(2)  On the other hand, the IO’s liability for the Telcos Compensation is a direct consequence of the Indemnity Agreements themselves, even if the rationale for entering into such agreements was that the IO should bear some or all of the responsibility for the Telcos’ liabilities to Shine Empire.  It would be somewhat surprising though if the IO were to be held wholly responsible, given that there should have been significant doubts from a cursory reading of Clause 19 of the DMC (expressly reserving the use of the Non-Theatre Roofs to the vendor) as to the IO’s purported power to licence the same;

(3)  The focus of the parties’ pleaded cases and arguments at the trial was the IO’s actions in licencing the Non-Theatre Roofs and its conduct of the Trespass Action (and subsequent appeals), and whether the defendant is liable to contribute to the costs and expenses arising from such acts.  This is unsurprising given the way the IO had pleaded its case. 

(4)  Had the IO’s case been pleaded properly, the focus would have been on the IO’s agreements to indemnify the Telcos, and whether the defendant is liable to contribute to the costs and expenses arising from such agreements.

68.Unfortunately, the terms of the Indemnity Agreements and the circumstances in which they were entered into are wholly unknown to this court, save for what was briefly mentioned in Mr Yim’s witness statement excerpted above.  There is no explanation or details of the nature and extent of the liability to the Telcos in the 2011 AGM Minutes, other than that a sum of HK$16,000,000 was required to be raised.  There is also no evidence of any earlier meetings discussing and authorising the IO (or the management committee) to enter into the Indemnity Agreements.  These are matters which would all need to be explored.  In any event, in the light of my findings above, the defendant would not have been served with notices or minutes of any such meetings (including meetings appointing the management committee).

69.Mr Shum, in his further written submissions, argued that the distinction between the Telcos Compensation arising from a judgment debt and from the Indemnity Agreements was not argued by the defendant, and the distinction would not impact upon the list of issues to which the parties are bound.  I disagree.  It is clear from the manner in which the pleadings were drafted, the only case the defendant had (quite understandably) come to meet was that the Telcos Compensation was a judgment debt in the Trespass Action - that was how the issue was argued by both parties at the trial.  As I have explained above, the distinction is not insignificant, and it would be highly unsatisfactory for the court to determine this issue given the improper premise on which it was pleaded in the statement of claim.  Fortunately, it is unnecessary for me to do so to determine the outcome of this action.

70.Indeed, the matter is far from straightforward, and I have some reservations as to whether the IO in fact had the power or the authority to enter into the Indemnity Agreements:

(1)  I do not think that the DMC can be read as granting the power to the IO to enter into the Indemnity Agreements or similar agreements, nor can entering into the agreements be regarded as enforcing any obligations in the DMC.

(2)  The IO’s powers and duties in the BMO as provided for in the relevant parts of sections 14, 16, 18(1) and 18(2)(a) to (fa), are principally concerned with the enforcement of the DMC and the management of the common parts of the Building.  It is difficult to see how entering into the Indemnity Agreements, which were concerned with indemnifying the liabilities of the Telcos arising from their trespass of the Non-Theatre Roofs and attached parapet walls (which were found by the court not to be common parts of the Building), can be said to be concerned with the management of the common parts of the Building.

(3)  Section 18(2)(g), which provides that the IO may act on behalf of the owners in respect of any other matter in which the owners have a common interest, does not in my view assist.  First, it has been held that the section does not confer any power on the IO to act where no such power otherwise exists under the BMO.  In any event, even if section 18(2)(g) were capable of supplying such power, it can only do so where there is a common interest, in the sense of a legal right or liability common to all of the co-owners, is involved: see eg Incorporated Owners of One Beacon Hill v Match Power Investment Ltd [2012] 6 HKC 200 at §§56 – 69, Jikan Development Ltd v Million Fortune Industrial Centre (2003) 6 HKCFAR 446 at §62.  It is far from clear why Shine Empire, for instance, being one of the owners of the Building, had any interest in entering into the Indemnity Agreements with the Telcos.

71.In any event, as the matter has not been properly pleaded or argued before me, I do not form any concluded view on the same.

72.Finally, it is unnecessary for me to deal with the defendant’s arguments as summarised above on this aspect of the BMO Issue since the arguments are premised upon the assumption that the Telcos Compensation was a judgment debt, and not a liability arising from the Indemnity Agreements.

G.   THE ESTOPPEL ARGUMENT

73.The defendant raises the alternative plea that the IO is estopped from “… passing any resolution or making any determination to hold the defendant liable for the contribution towards the settlement of the debts, liabilities and costs incurred by the [IO] in [the Trespass Action] (and the subsequent appeals)”.

74.The estoppel argument is premised on the assumption that the IO is, but for the estoppel, entitled to pass a resolution to seek a contribution from the defendant for the Telcos Compensation.  For present purposes, I leave to one side that the Telcos Compensation is not in fact a liability or cost incurred by the IO in the Trespass Action, but rather a liability arising from the Indemnity Agreements.

75.There is no dispute between the parties on the principles of estoppel, which are of course well established.  For estoppel by convention, Mr Mak referred me to the essential elements summarised by the Court of Final Appeal in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd & another (2012) 15 HKCFAR 569 at §79 (citing Unruh v Seeberger (2007) 10 HKCFAR 31):

“ (1) the parties entered into some transaction or legal relationship on the basis of an assumption that was shared by or common to them both, and it was the element of commonality of the assumption that marked out estoppel by convention as a distinct form of estoppel [133];

(2) it must be shown that assumption was communicated between the parties and acted upon, and there must be some mutually manifest conduct by the parties [135];

(3) there was no necessity for the parties to believe that the assumed state of affairs was true, nor was there any necessity for the parties to have been mistaken [136];

(4) what is important is for them to act in the belief, manifested by words or conduct, that they are both proceeding with the transaction on the basis of the same shared assumption [137];

(5) the contents of the common assumption must be sufficiently certain to enable the court to give effect to it [138];

(6) estoppel by convention is concerned with a common assumption relied upon as a basis upon which the persons sharing such assumptions enter into a transaction or legal relationship [142]; and

(7)  there must be an attempt by one party to depart from the common assumption which departure would be unjust because of the part taken by him in occasioning its adoption by the other party, and the other party would suffer detriment arising out of his having entered into the relevant transaction on the basis of the common assumption if the opposite party were afterwards allowed to set up rights inconsistent with the assumption [150].” 

76.As for estoppel by representation, Mr Mak referred me to Mo Ying v Brillex Development Ltd & another [2014] 3 HKLRD 224 at §144:

“ The essential elements of estoppel by representation are (1) a representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made, (2) an act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made, and (3) detriment to such person as a consequence of the act or omission.”

77.Mr Shum does not dispute these principles, but emphasised for an estoppel by convention the importance of the assumption being communicated between the parties and acted upon.  There must be some mutually manifest conduct by the parties.  In Unruh v Seeberger (2007) 10 HKCFAR 31, Ribeiro PJ referred with approval the observations of Kerr LJ in The “August Leonhardt” [1985] 2 Lloyd’s Rep 28 at 34 – 35:

“ All estoppels must involve some statement or conduct by the party alleged to be estopped on which the alleged representee was entitled to rely and did rely. In this sense all estoppels may be regarded as requiring some manifest representation which crosses the line between representor and representee, either by statement or conduct. It may be an express statement or it may be implied from conduct, eg a failure by the alleged representor to react to something said or done by the alleged representee so as to imply a manifestation of assent which leads to an estoppel by silence or acquiescence. Similarly, in cases of so-called estoppels by convention, there must be some mutually manifest conduct by the parties which is based on a common but mistaken assumption. The alleged representor’s participation in this conduct can then be relied upon by the representee as a basis for this form of estoppel.”

78.I would add that for both estoppels by representation and by convention, the representation or statement relied upon must be clear and unequivocal (see eg Unruh v Seeberger (supra) at §138).

79.The matters pleaded by the defendant in support of the estoppel were primarily that (1) the income and fees collected by the IO from the Telcos were applied only for the welfare and interests of the Non-Theatre Owners; and (2) the Theatre Owners were not involved in the Trespass Action, were never informed of its progress, and were never given notice to attend any meetings concerning the action and the subsequent appeals.

80.By reason of such matters, it is said that there was a common assumption between the IO and the Theatre Owners, or alternatively, a representation by the IO through its conduct that “(i) the collection of income and/or licence fees from [the Telcos] and the conduct of [the Trespass Action] (and the subsequent appeals) had nothing to do with the owners of [the Theatre Parts]; and (ii) the owners of [the Theatre Parts] had no interest and no liability in connection with such matters.”

81.It is then said that in reliance or on the faith of such a common assumption or representation, the Theatre Owners including the defendant acted to their detriment or otherwise changed their position by (1) not making enquiries, asking for or insisting on sharing the benefit of the licence fees collected from the Telcos; and (2) not taking steps to participate in any discussion or any decision relating to the Trespass Action and the subsequent appeals.

82.In my judgment, the matters relied upon by the defendant are unable to give rise to any estoppel, whether by representation or by convention:

(1)  None of the matters pleaded and relied upon by the defendant amounted to a clear and unequivocal representation that the IO would not seek a contribution for any liabilities arising from the Trespass Action;

(2)  Silence may in certain cases amount to a representation where such silence implies a manifestation of assent or acquiescence, such as, for instance, where a person fails to react to something said or done by the other person.  However, in the present case, the mere fact that the IO did not give any notice of meetings to discuss the Trespass Action and subsequent appeals, does not amount to a clear and unequivocal representation that no contributions would be sought;

(3)  As to the application of the licence fees, I accept that there is no evidence before the court as to how the fees were applied.  Notwithstanding that the matter was put in issue in the pleadings, no documentary evidence, such as accounts or journals were produced by the IO to show how the licence fees were applied.  In cross-examination, Mr Yim suggested that such information may have been contained in a black ledger book that he had seen, but no such book has been discovered.  I attach no weight to Mr Yim’s evidence in this regard.  However, even assuming that the fees had not been applied for the benefit of the Theatre Owners, I do not see how that (whether by itself or together with the failure to give notice) can constitute a representation that no contributions would be sought from the defendant for liabilities arising from the Trespass Action;

(4)  Similarly, there is no communication of the assumption, or mutual manifest conduct based on the assumption, that no contributions would be sought from the defendant for any liabilities relating to that action.  The mere fact that the IO may not have applied the licence fees to the benefit of the defendant, or that it did not give any notice of meetings to the defendant to discuss the Trespass Action and subsequent appeals, are insufficient to amount to any communication of, or manifest conduct based on, such an assumption.

83.Finally, even if the matters pleaded and relied upon by the defendant amounted to a representation as alleged, I agree with Mr Shum that there was no real reliance by the defendant on any such representation. On Ms Luk’s own evidence, the defendant had all along understood on its own interpretation of the DMC that it would not be liable for any contribution to liabilities arising from the Trespass Action.  In the circumstances, even if the IO’s conduct amounted to a representation, it was not relied upon by the defendant and was not a cause of any action or inaction.

84.For the reasons above, I would answer the question in the negative.

H.   CONCLUSION

85.As will be apparent from my answers to the agreed list of issues, the action is dismissed.  I also make an order nisi that the defendant is to have the costs of the action, to be taxed on a party and party basis, if not agreed.

86.Last but not least, I thank both counsel for their assistance.

Mr Erik Shum, instructed by Joseph Leung & Associates, for the plaintiff

Mr Andrew YS Mak and Ms Carol Wong, instructed by C T Chan & Co, for the defendant

Annex

RELEVANT CLAUSES IN THE DMC

6.   Subject to Clause 19 hereof each of the parties hereto and their assigns (save and except the Owner of the Theatre) shall have the right in common with his co-owners their tenants licencees and all other persons authorized by them to use for the purpose of access to and egress from the premises in the said Building so allotted to them (but for no other purpose) the entrance hall staircases and landings and corridors in the said building and such of the passages therein and in the open yard space (if any) as are not included in any one of the other premises in the said Building PROVIDED THAT the entrance hall staircases and landings and corridors in or leading to the Theatre shall not be deemed to be included in his grant and shall be reserved for the use of the Owner for the time being of the said Theatre and persons authorised by him.

8.   The Owner for the time being of the Theatre shall be entitled to the exclusive use and enjoyment of:-

(a)  all corridors, passage ways staircases landings entrance halls giving access to the Theatre;

(b)  the external and internal walls of the said Theatre and other parcels sold therewith for the purpose of advertising provided that no hoardings, boards, frames or lights are erected beyond the level of the roof of the Theatre or the elevation of the maid parcels;

(c)  the water storage tank cooling tower and well (if any) especially erected for the use of the Theatre.

9.   Each party hereto shall pay his due proportion for:-

(a)  The Crown Rent.

(b)  The charges for water consumed on the said premises (subject to clause 13 hereof).

(c)  The insurance premium for the policy or insurance (if any) against loss or damage by fire.

(d)  The rebuilding or re-instatement of the said building or any part thereof as far as the same may be destroyed or damaged.

10.   Each of the Owners of premises in the said building save and except the owner of the Theatre shall pay his due proportion of the cost of cleaning the said building and keeping in good and tenantable repair of the building and keeping in good and supports beams gutters fences cellars chimneys and entrance doors and other outside parts of the said building and all the drains walls pumps pipes electric conduits lights and all plumbing   apparatus and machinery intended for the general service of the said building and the common entrance hall corridors or passage ways thereof (except as regards damage caused or resulting from any act or default or negligence by either or the parties hereto or for which one of them is responsible) and the wages of watchmen care-takers and managers (if any) to look after the said building and the said premises and the quarters for such persons and electricity charges and other expenses for the lighting of all parts of the said building in common use and for supplying water to the flush systems of the said building.  For the purposes of this clause the words “the said building” shall not include the Theatre and parcels sold therewith the maintenance whereof shall be the sole responsibility of the Owner of the Theatre as provided for in Clause 12 hereof.

11.   The costs and expenses of insuring operating servicing maintaining repairing and replacing the said lifts in the said building (other than the lifts (if any) serving the Theatre) shall be borne and paid by the Owners who are entitled to the exclusive use and enjoyment of premises on the first and higher floors of the said building in equal shares.  The owners of the roof of the said building, the right to advertise and the owners of premises on the ground and mezzanine floors and the owners of the Theatre and the parcels sold therewith shall not be liable to pay any of the afore-said costs and expenses.

12.   The Owner of the Theatre shall:-

(a)  Keep the external and internal walls of the said Theatre and the parcels sold therewith as well as the roof of the said Theatre in good clean and substantial repair and condition and to maintain the said Theatre;

(b)   Not assent or permit to be erected on the roof of the said Theatre and the parcels hold therewith or elsewhere on the land agreed to be sold any structure (including but not restricted to neon-light and name signs) and not to store or permit to be stored anything whatsoever on the roof of the Theatre;

(c)  Maintain and keep the cooling tower wall (if any) and water tank reserved for its own use in good and substantial repair and condition and pay all costs and expenses in connection with or in anywise relating thereto;

(d)   To contribute to the expenses enumerated in Clause 9 hereof and also to the cost of maintaining the transformer room such contribution to be 80 equal 800^th part of the said cost,

(e)  with all regulations governing the operation of Theatre and

(f)  Not to use any of the other walls and water tanks constructed on the said premises which shall be reserved for the use of the other co-owners of the said building their tenants licencees and others authorized by them.

13.   Each party hereto shall when required by the hereinafter mentioned Manager apply to the Water Authority or other proper officer of the Government of Hong Kong for a separate water meter to be installed in his or her flat or shop and in the event of the Water Authority or other proper officer of the Government offering such a separate meter such parties shall accept the offer and take all such steps and do all acts which may be necessary to secure the installation of such separate meters PROVIDED THAT until such time as separate meters are installed in his or her said flat or shop the Owner of such flat or shop shall pay a proper proportion of all water supplied through the meter which serve his or her flat or shop.  The cost of water so supplied shall be divided equally amongst the flats or shops served by each particular common meter for the time being each flat paying its proper proportion of the cost of water consumed through the respective common meter in any one month or part thereof in which the flat or shop shall have been so supplied with water through such common meter.  The cost of repairing all external pipes shall be shared in like proportion but all internal pipes and faucets shall be repaired and maintained at the cost of the party in whose flat or shop the same is installed.

14.   The proportion which each of the parties hereto shall be liable to pay or contribute under Clauses 9, 10, 11, 13, 17 and 18 hereof shall be as set out in the Third Schedule hereto and it is agreed that the 16 parts or shares relating to the use of the roof and the right to advertise shall not be liable to contribute to any of the aforesaid expenses and outgoings.

17.   For the purpose of more effectually maintaining the said building the co-owners of the said building save the Owner of the Theatre and parcels sold therewith shall employ a Manager to operate, service, maintain and keep in repair the lifts, water pumps, walls water tanks, plumbing apparatus and fire fighting equipment for the general service of the said building and the lighting of the entrances, staircases and landings and passages and corridors in common use and to make arrangements for the cleaning of all parts of the said building in common use and for the disposal of garbage from all flats and shops in the said building and to engage one or more watchmen for the said building and generally to carry out such works and collect the charges mentioned herein.  The co-owners of the said building shall pay the salary or wages or remuneration of such Manager in the proportion set out in the Third Schedule hereof, such Manager shall be appointed by a meeting called pursuant to clause 25 hereof.  If such co-owners fail to appoint such Manger then the said Yue Lee Company Limited while holding not less than twenty undivided shares in the premises shall have full power and authority to appoint such Manager.  The parties hereto shall appoint the Kung Ping Services Company Limited whose registered office is situated at Room No.301 China Building Queen’s Road Central Victoria in the Colony of Hong Kong to be the first Manager of the said building for a period of three years from the date when the certificate of Occupation of the said premises is issued by the building Authority at a salary of $200.00 per month.  For the purpose of this clause and the following clause 18 the words “the said building” shall not include the Theatre and parcels sold there-with.

18.   Each of the co-owners of the said building save and except the owner of the Theatre shall pay to the Manager in each and every calendar month in advance the sum set out against the class of premises owned by them in the Third Column of the Third Schedule hereto or such monthly sum as may from time to time be determined or fixed by the Manager as payment on account of his share of all the costs charges and expenses due and payable by him in connection with the management of the said building and each such co-owner shall on or before taking possession of the premises pay to the Manager a deposit equivalent to 6 of such monthly sum Provided That if any of the co-owners shall fail to make any such monthly payment or fail to pay his share of any such costs charges and expenses within seven days from the date of any notice from the Manager the Manager shall be at liberty to disconnect all water supply to that part of the said building to which the defaulting party is entitled to exclusive use and enjoyment until such payment shall have been made by such defaulting party and such defaulting party shall not institute any legal proceedings or motions against the Manager for such disconnection of water supply.

19.   The sole right and privilege to the use of the open yard space (if any) subject to clause 6 hereof and of the roof of the said building (other than the roof of the Theatre) shall be reserved to the Vendor of the building and/or its assigns who may at their own cost and expense erect on the roof one or more additional floor or penthouse or attic and extend the lift to serve such floor or penthouse or attic (all of which shall be its exclusive property) if and when the plans thereof are approved by the Building Authority…

25.   From time to time there shall be meetings of the owners of the said building (other than the Theatre and the parcels sold therewith) to discuss and decide matters concerning the management of the said building (after than the Theatre and parcels) and in regard to such meetings the following provisions shall apply:-

(a)  A meeting may be validly convened by the Manager or those co-owners holding between them not less than 20 equal eight hundred shares in the said premises.

(b)  Every such meeting shall be convened by at least seven days notice in writing specifying the time and place of the meeting and the matter or matters to be discussed.

(c)  No business shall be transacted at any meeting unless a quorum is present.  A quorum at such meeting shall be the holders of not less than 50 equal eight hundredth share in the said premises.

(d)  The co-owners present at each meeting shall choose someone of their number to be chairman who shall record the names and addresses of those present together with the amount of their shares in the said premises and particulars of every resolution passes. The chairman shall have a casting vote in case of equality of votes.

(e)  Voting shall be by a show of hands unless a poll is requested either before the vote is taken or immediately after the taking of the vote.  On a poll each person shall have one vote for each equal undivided 800^th share held by him and in case of owners who together are entitled to one such equal undivided share of and in the said premises such owners shall jointly have one vote for each such share. The holder of any such share shall be entitled to appoint a proxy to vote for his at any such meeting provided that the instrument or proxy shall be in writing and produced to the chairman before the vote is taken and provided further that only one vote shall be accepted in respect of each such share.

(f)  Resolutions shall be passed by a simple majority and be binding on the parties hereto.

26.   The following matters shall be determined by a simple majority of the holders of the undivided shares or interests in the said land and building:-

(a)  Notwithstanding the covenant hereinbefore contained in Clause 5 hereof, in the event of the said building being so damaged by fire, typhoon, earthquake, white-ants, subsidence or other cause not attributable to the act or default of any of the parties hereto so as to render the said building wholly unfit for habitation on in the event of the building being condemned by any competent authority for any cause not attributable directly to the act or default of any of the parties hereto whether to re-build or re-instate the said building, or whether to extinguish the respective grants hereinbefore contained in which case each party shall release unto the other party or parties all the rights and privileges hereinbefore contained and from the exclusive right of occupation conferred by the various assignments of the premises and from the covenants to be performed hereunder and these presents shall then be deemed to be cancelled and of no further effect.

(b)  Any amendment to these presents.

27.   If at any time it is necessary to carry out any works to the said building i.e., pursuance of any resolution as aforesaid, any party or parties hereto may serve on all other parties to be affected by such work a notice in writing signed by the party serving it requiring such other parties to carry out such works within a reasonable time according to the nature of the work but in any case not less than one month from the date of service of such notice. In the event of the parties upon whom such not less are served failing to comply with the same, then the party or parties serving such notice shall be entitled at their direction, but so as to cause the least possible disturbance of the other parties and after giving not less than one week’s written notice of their intention so to do, to carry out such work themselves or through their agent or contractors, whereupon the defaulting parties shall be liable for their proportionate part of the costs and expenses incurred by the party or parties executing such work. 

28.   Any sum payable by any party hereto pursuant to any resolution or to the last preceding clause or to any covenant herein shall become and be a charge upon the parts or shares or interest of the indebted party of and in the said premises and building until payment thereof but so that such charge shall not be effective against a third party unless and until notice of such charge shall have been registered in the Land Office by any other party or parties against the said part share or interest of the indebted party.

29.   The grants and covenants on the part of every party hereto shall be binding on their respective executors administrators successors in title and assigns and the word “party” or “parties” shall include the executors administrators successors in title and assigns of every such party or parties provided that no party shall be bound thereby after ceasing to own any party or share of and in the said premises and building or any interest therein save and except in respect of any matter arising previously to his ceasing to own such part of share or interest therein.

31.   Each of the parties hereto shall comply with and observe all rules and regulations for the management of the said building (other than the Theatre and parcels) which may from time to time be passed as resolution in meetings in manner aforesaid and shall be responsible to the other parties hereto for the due compliance and observance by his tenants or lessees or occupiers of such rules and regulations.

4

THE THIRD SCHEDULE ABOVE REFERRED TO