The Incorporated Owners of Grenville House v. Keen Joy Enterprises Ltd
Read the full judgment text of LDBM 200/2020 on BabelCite. This Lands Tribunal judgment was delivered on 14 May 2024.
1. This is the second of three trials concerning Mandatory Building Inspection Scheme ( MBIS ) that I held from June to November 2023. All of them focused, one way or another, on alleged breaches of Code of Conduct for Procurement of Supplies, Goods and Services ( COP ) issued by the Authority pursuant to s.44 of Buildings Management Ordinance [1] ( BMO ), enforcement of COP and/or consequences of their breaches, if any.
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LDBM 200/2020 [2024] HKLdT 39 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO.200 OF 2020 __________________ BETWEEN
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_____________________ J U D G M E N T _____________________ Introduction 1.This is the second of three trials concerning Mandatory Building Inspection Scheme (MBIS) that I held from June to November 2023. All of them focused, one way or another, on alleged breaches of Code of Conduct for Procurement of Supplies, Goods and Services (COP) issued by the Authority pursuant to s.44 of Buildings Management Ordinance[1] (BMO), enforcement of COP and/or consequences of their breaches, if any. Parties to this application 2.The applicant is the incorporated owners (IO) of Grenville House (GH). It was incorporated as an owners’ corporation pursuant to the predecessor of BMO in 1972. At all material times, IO managed GH on its own assisted by a management company. Mr Warren Suen of counsel (Mr Suen) appeared for IO at trial. 3.The registered deed of mutual covenant of GH is dated 31 March 1971 (the DMC). According to the DMC, GH consists of 5 blocks, known as Blocks AB, CD, EF, GH and IJ. Each block is 12-storey high. GH contains 120 apartments in total. The land over which GH is built (the Land) is notionally divided in the DMC into 120 undivided shares with one share allocated to the purchaser thereof with exclusive use of one of the said apartments and one car parking space. 4.The respondent (Keen Joy) has since January 2000 been the registered owner of apartment No.F on 12/F of Block EF (including a portion of roof thereof) and car parking space No.156 of GH (Apartment F12), holding one undivided share of the Land. The saleable area of Apartment F12 exceeds 3,300 square feet, so do the remaining apartments of GH. Ms Fok Lai Lor Nora (Nora), the authorized representative of Keen Joy at this trial, was at all material times, and is, the sole director of Keen Joy. 5.On the provision of the DMC[2], pursuant to s.34D of BMO, and pursuant to s.41 of Conveyancing and Property Ordinance[3], the benefits and burdens of the provisions of the DMC run with the Land and are binding on its registered owners and the manager of GH defined therein. Hence, the provisions of the DMC were at all material times, and are, binding on Keen Joy and MC (as the manager of GH defined therein). Background facts 6.This litigation began with, I find, IO receiving in July 2016 notice issued by the Building Authority (BA) under Buildings Ordinance[4] (BO) pursuant to MBIS requiring it to complete prescribed inspection, and, if necessary, prescribed repair, to common parts of GH within 6 months and 12 months respectively (MBIS Notice). 7.In January 2017, management committee of IO (MC) resolved to appoint Albert Liu & Associates Ltd (AL&A) as MBIS consultant. 8.In October 2017, Mr Albert Liu (AL), registered inspector under MBIS, completed prescribed inspection, prepared a survey report as required by MBIS (the Survey Report) and later submitted it to Buildings Department (BD). 9.Later, MC terminated AL&A’s appointment as MBIS consultant for GH. In a meeting held in November 2018, MC resolved to appoint David S.K. Au & Associates Ltd (DSKA) as replacement MBIS consultant (in February 2019, MC in another meeting re-affirmed the said replacement). 10.On 8 December 2018, IO resolved in AGM to collect contribution from all GH owners $100,000 per apartment for in-house building fund (2019 Contribution). Keen Joy had paid its share of 2019 Contribution in sum of $100,000. 11.Between March 2019 and February 2020, DSKA as MBIS consultant for GH conducted tendering process for the contractor to carry out prescribed repairs as required by MBIS (the Prescribed Works). 12.On 14 February 2020, IO gave notice to all owners of GH of an annual general meeting (AGM) to be held on 29 February 2020. Agenda item 6 thereof is presentation by DKSA on tendering process of the contractor for the Prescribed Works. Agenda item 7 thereof is consideration of such tenders, appointment of a contractor and approval of contribution totaling $26,400,000 for the same. 13.Owners comprising 47.5% of GH owners, I find, attended AGM on 29 February 2020 (29/2/2020 AGM) either in person (17 owners) or by proxy (40 owners), including Nora as proxy for Keen Joy until agenda item 6 (see below). 14.During agenda item 6 of 29/2/2020 AGM, DKSA presented to GH owners present by explaining that 1) tender was prepared using the Survey Report submitted to BD; 2) 16 contractors submitted pre-qualification documents responding to advertisement and 8 of them passed the pre-qualification exercise; 3) 5 tenders were returned by closing date; and 4) the 3 lowest tenderers were interviewed and 3 best offers were replied by 5 February 2020. 15.This Tribunal would accept that tendering for the contractor for the Prescribed Works had indeed been carried out in the manners as presented by DKSA above. 16.During agenda item 6 of 29/2/2020 AGM, DKSA, I find, had also shown GH owners present the original tender sums of 5 returned tenderers and best offers from the 3 lowest tenderers, and recommended Well Engineering Development Ltd (the Contractor) be appointed contractor for the Prescribed Works by reference to tender analysis. 17.When it came to agenda item 7 of 29/2/2020 AGM, resolutions were, I find, finally passed 1) by 81.48% of GH owners present to appoint the Contractor to carry out the Prescribed Works, and 2) by 84.91% of GH owners present to approve a total contribution of $26,400,000 from all owners of GH (i.e. $220,000 per apartment) to fund the Prescribed Works (the Contribution) (collectively 29/2/2020 GM Resolutions). 18.Afterwards, MC, I find, resolved at its meeting held on 18 March 2020 (18/3/2020 MC Meeting) that the Contribution shall be collected from all GH owners in one instalment in April 2020 (18/3/2020 MC Resolution). On 25 March 2020, management company gave notice of 29/2/2020 GM resolutions to all GH owners requiring payment from them by 30 April 2020. 19.Despite debit note and two lawyer’s demand letters were sent to (and received by) Keen Joy in April, July & August 2020, Keen Joy has, I find, failed to pay its share of the Contribution in sum of $220,000 to IO by today. IO’s claim vs Keen Joy 20.IO took Keen Joy to this Tribunal to recover from it 1) the said contribution of $220,000, 2) interest on the said sum pursuant to the DMC, 3) collection charge of $150 under the DMC, and 4) costs on solicitors and own client basis pursuant to the DMC. Keen Joy’s opposition & counterclaim 21.In essence, Keen Joy did not admit IO’s claim and filed a counterclaim against IO. 22.Keen Joy first complains that IO had, in alleged breach of the DMC and s.18(1)(a) & (b) of BMO, failed to take concrete actions on an fire alarm problem said to be common to all apartments of GH i.e. the existing fire alarm at Apartment F12 located at common parts of GH would be inaudible in its bedroom, kitchen and staff quarter (Fire Alarm Problem). Keen Joy says it has raised the Fire Alarm Problem with MC since October 2018. 23.Nora had, it was said, also tabled a letter regarding the Fire Alarm Problem to MC immediately before 29/2/2020 AGM began. When it came to agenda item 6, she also pointed out the Fire Alarm Problem. She was, however, demanded by management staff to leave the meeting such that she left and was deprived of chances to raise questions on agenda items 6 and 7 leading to 29/2/2020 GM Resolutions 24.Since about January 2020, IO had, in further alleged breach of the DMC, s.20A of BMO and 2018 COP, denied Keen Joy access to information and/or documents relating to: 1) the 2019 Contribution; 2) the scope of the Prescribed Works; 3) the manner the Contribution was spent; 4) tender documents in respect of MBIS; and 5) relevant contracts of MBIS (collectively the Disclosure). 25.Nora had, it was said, repeatedly followed up the Disclosure with MC, including at AGM held on 11 May 2021 (11/5/2021 AGM) and another extraordinary general meeting (EGM) held on 4 June 2021 (4/6/2021 EGM), but the said wrongful denial has, said the respondent, persisted until today. 26.Wrongful denial of the Disclosure by IO was, the respondent stresses, contrary to the spirit of BMO and constituted breach of IO’s duties under the DMC, BMO and 2018 COP. 27.IO had, the respondent complains, on one hand demanded the Contribution from GH owners but did not on the other hand provide them with the necessary supporting documents and justifications for them to assess their financial liability on the Prescribed Works. 28.IO had further, in breach of the DMC and s.18(1)(a) & (b) of BMO, acted on an outdated and incomplete Survey Report and failed to ensure that necessary safety works over Block EF motor room located directly above Apartment F12 (which is common parts of GH) (the Motor Room) formed part of the Prescribed Works that were carried out by the Contractor so as to ensure safety of GH residents i.e. occupants of Apartment F12, leading to a sizable block of cement falling off from staircase of the Motor Room onto penthouse roof terrace of Apartment F12 in March 2021. 29.Keen Joy counterclaimed IO for specific performance of IO’s obligations under the DMC, BMO and 2018 COP with respect to: (1) its request for information and/or documents regarding the Prescribed Works and/or MBIS; and (2) Firm Alarm Problem with a view to ensure an effective fire alarm system with respect to Apartment F12. Further or alternatively, damages were sought in lieu of or in addition to specific performance with respect to Fire Alarm Problem. IO’s Reply & Defence to Counterclaim 30.IO first claimed in reply that it had made MBIS Notice known to all GH owners by various means in 2016 to 2018 including posting circulars, notices and minutes of MC meetings on noticeboard and uploading them, since October 2019, to GH Web Portal (Web Portal). 31.Fire alarm installation at GH, IO stresses, conforms with the requirements of Fire Services Department (FSD), as evidenced by Certificates of Fire Service Installation Equipment issued for 3 consecutive years. As there was no Fire Alarm Problem in GH, neither it nor Nora’s letter dated 29 February 2020 addressed to MC, was included as agenda in 29/2/2020 AGM. 32.During 29/2/2020 AGM, MBIS consultant had presented to GH owners present, inter alia, the tendering process of the Prescribed Works, the number of returned tenders, the interviews of the 3 lowest tenderers and their tender sums, before 29/02/2020 GM Resolutions was passed by majority of GH owners present. 33.Nora was only asked to be seated during agenda item 6 of 29/2/2020 AGM, as she had persistently insisted on pursuing the Fire Alarm Problem displaying an extremely disruptive behavior causing inordinate interruption to the due process of the AGM. 34.Regarding the Disclosure, IO replied that it “did not decline” the respondent’s request as alleged. GH used to circulate all notices, minutes and information by posting on noticeboard and, since October 2019, uploading them to Web Portal. The tender documents of the Prescribed Works were also uploaded to Web Portal on 15 October 2019. The respondent’s request for MBIS related documents was not made in compliance with the requirement of BMO and therefore it is not entitled to inspection thereof. IO’s claim proven on facts and law 35.Having considered background facts above, and the undisputed oral and documentary evidence adduced before me, I am satisfied that IO has proven (indeed, Keen Joy at trial took no issue on) the followings: (1) 29/2/2020 AGM and 18/3/2020 MC Meeting had been lawfully called and held; (2) 29/2/2020 GM Resolutions and 18/3/2020 MC Resolution had been duly passed[5]; (3) the subject matters of 29/2/2020 GM Resolutions are within power and duties of IO under s.18(1)(a) & (b) of BMO and also within power and authority of MC as manager of the DMC pursuant to such of its provisions[6] IO relies upon in its Notice of Application; and (4) the apportionment of the Contribution among all owners of GH in accordance with their respective share of the Land was properly made in line with the DMC[7] (and s.22 of BMO). 36.On proof of the above, Keen Joy is, I conclude, liable to pay IO its share of the Contribution in sum of $220,000 by 30 April 2020 pursuant to the DMC binding on Keen Joy and 29/2/2020 GM Resolutions[8]. It is also liable under the DMC[9] to pay IO interest on the said sum at 1% for each 30 days it is unpaid after 1 May 2020 and collection charge in sum of $150. 37.Notwithstanding alleged modus operandi of IO complained in [27] above, Keen Joy’s counterclaims are, in my views, separate and distinct cross-action it has against IO for breach of IO’s alleged duties under the DMC, BMO and/or COP. In other words, Keen Joy’s 2 specific performance counterclaims (even if proven and relief granted on them) afford it no defence to IO’s claim. They do not release Keen Joy from its legal liability above to pay its due share of the Contribution to IO. Nora had not been able to point to any provision of the DMC, BMO or produce any case authority to support the contrary view. Respondent’s counterclaim 38.Moving on to consider Keen Joy’s counterclaim, one starts with the provisions of the DMC, sections of BMO and paragraphs of COP it relies upon in Notice of Opposition & Counterclaim. DMC provisions relied upon by respondent 39.Clause 9 of the DMC reads as follows:
40.Clause 11 also reads:
BMO provisions relied upon by respondent 41.S.18(1) of BMO should first be noted:
42.S.18(2A) of BMO should also be noted:
43.S.20A(1) of BMO relating to procurement reads as follow:
44.S.20A(4) of BMO on tender documents reads:
COP paragraphs relied upon by respondent 45.Material parts of paragraphs 7.1 & 7.2 of COP published by the Authority on 17 August 2018[10] (2018 COP), which are relied upon by the respondent, reads:
Assessment of witnesses’ evidence 46.Having considered their evidence in the round, the evidence of all 3 witnesses who gave evidence at trial is not, I think, entirely satisfactory. Derek 47.Mr Chan Man Foon Derek (Derek), the chairman of MC of IO from 29/2/2020 AGM[11] onwards, gave evidence for IO. 48.I do not think Derek has told the whole truth with this tribunal. In his witness statement and in the stand (and in MC’s dealing with GH’s owners under his leadership), he was, I believe, economical with the truth. I am afraid he had tried his best to evade answering embarrassing questions of Nora in the box by giving, from time to time, excuses of “not recall” or “delegate to the manager” despite the questions concerned involved policy to be decided upon by MC and not enforcement matters to be handled by manager. 49.One must therefore, I think, watch out (and have reservation) about what (and how) Derek said as well as what he did not say (and what MC or IO had not done). Stephenie 50.Ms Kwok Man Shan Stephenie (Stephenie), the current Head of Operations of GH, also testified for IO. 51.In one aspect, Stephenie’s evidence is of limited assistance to this Tribunal. She joined GH only in October 2020. She thus had no personal knowledge of material events (including those of the Fire Alarm Problem) prior to October 2020. 52.Moreover, Stephenie has surprisingly managed to serve GH under three different management companies. She must, one thinks, be very loyal to IO (or its MCs in charge at the material times). One must therefore not lose sight of her undoubted loyalty to GH in assessing her evidence (and exercise caution) in deciding whether to accept her evidence given for IO in this application. Nora 53.Nora gave evidence for Keen Joy. She is not, I am afraid, entirely reliable or credible either. 54.Under cross-examination of Mr Suen, Nora gave evidence inconsistent with contents of the documents in trial bundle or that of her own witness statement. She contradicted herself in the box even on simple answer of sending emails or not. As Mr Suen has rightfully observed, she had also a tendency of filibustering on other topics she was not asked but she was concerned (and thus not answering the questions she was asked). 55.Moreover, Nora had a number of misunderstandings about MBIS. She was also, I have no doubt, so worried about innocent lives of GH being put at risk by the Fire Alarm Problem that she became obsessed with the thought of MC determined to “cover up” the Fire Alarm Problem. As a result, she had lost, I am afraid, her objectivity and judgment. Concrete defects of Motor Room No relief sought in counterclaim 56.This allegation raised by Keen Joy is, I think, a non-starter. Even if it is proven by Keen Joy, no relief was sought for the same by way of counterclaim. Failed to prove Survey Report incomplete or outdated 57.In any event, considering the merits of this allegation, I do not think the respondent could prove that AL had failed to cover alleged defects of Motor Room in the Survey Report. (1) Mr Suen did not dispute that Motor Room was, and is, common parts of GH as alleged by Nora and I would so find. If so, the Survey Report ought, by reason of MBIS Notice, to have covered it and AL, the registered inspector, must notify BA of any unauthorized building works at, inter alia, common parts of GH pursuant to s.30D(5)(b)(i)(A) of BO. (2) Secondly, the Survey Report that Nora had produced in her witness statement consists of only a few pages. It could not, I think, be the full report as it should have photos and reports (e.g. infra-red report and photos of, say, external walls of GH) annexed but they are nowhere to be found. 58.Neither do I not accept Nora’s claim that the Survey Report was “outdated”. The “expiry date” at page 1 thereof she focused on was, I agree with Mr Suen, that of the registration of the registered inspector who compiled it i.e. AL. 59.There is, I would point out, nothing suspicious (as Nora might suggest) of IO’s terminating AL’s consultant appointment after its completion of the Survey Report and DKSA being appointed thereafter to supervise the Prescribed Works, including its tendering process. The 2 stages of consultant works are separate and distinct. Under s.30D(2) of BO, the registered inspector responsible for carrying out prescribed inspection “may” (not “must”) be the same inspector responsible for supervising prescribed repair under MBIS. 60.Notwithstanding AL&A and DKSA were appointed by IO for 2 different stages of consultant service in this case, prescribed repair to be supervised by DKSA must cover all items identified as being defective or having deficiencies in the prescribed inspection[12] i.e. those identified in the Survey Report compiled by AL and submitted to BD: see reg.5(1)(b) & (c), reg.7 and reg.12(2)(a) of Building (Inspection and Repair) Regulations[13]. Cement had once fallen off 61.However, I accept Nora’s evidence that a sizable block of cement had fallen off from staircase of the Motor Room onto penthouse roof terrace of Apartment F12 in March 2021. Such evidence given by Nora, supported by photos and previous correspondences before me, is not disputed by Mr Suen. Motor Room defects fixed 62.What divided the parties before me is whether such concrete defect of Motor Room was fixed (or rectified) by the Contractor by June 2021 as part of the Prescribed Works as Stephenie had testified or not fixed (but only had paint put on them as “cover-up” without prior examination) as Nora had asserted under cross-examination. I prefer, and accept, the former for the following reasons: (1) Nora had admitted to repair works to Motor Room having been arranged by GH’s manager in April and June 2021 at paragraphs 38 & 39 of her witness statement. (2) The aforesaid repairs to Motor Room carried out by the Contractor were evidenced by a few correspondences adduced before me, including on issue of access to Apartment F12 for the same. (3) That no relief was sought in Keen Joy’s counterclaim about Motor Room is, I think, telling that the said problem has already been fixed as alleged by IO. 63.For the reasons given in this section, Keen Joy has, I conclude, failed to prove its allegations against IO regarding the Motor Room. Fire Alarm Problem Problem existed due to size of apartment 64.I accept Nora’s evidence that the Fire Alarm Problem existed. As early in October 2018, during fire alarm testing, she discovered that, due to the size of Apartment F12, the warning sound emitted by the existing fire alarm located outside Apartment F12 at common area (the Existing Fire Alarm) could only be heard in the living and dining room, but not in the bedrooms, kitchen and staff quarter, of Apartment F12. My reasons are as follows. (1) Mr Suen never see fit to challenge such material factual evidence given by Nora as a factual witness. (2) The then chairman of MC (Mr David Stannard) had replied Nora by letter in October 2018 that her question about “fire alarm testing” will be “looked into”. (3) A few members of MC, including Derek and staff of management company, had once had a meeting with Nora to discuss the Fire Alarm Problem on 20 September 2019 (20/9/2019 Meeting). (4) On documents before me, in subsequent testing of the Existing Fire Alarm with staff of manager attending Apartment F12, they also observed the Fire Alarm Problem. The manager once wrote, “the fire alarm sound might not be audible everywhere at your home”[14]. (5) Manager of GH had suggested to Nora in November 2019 (and again in February 2021) remedial proposal of installing extra fire alarms at front staircase outside Apartment F12 at her own costs and provided Keen Joy with fire services installation contractor’s quotation at the sum of $3,000 (the Proposal) (which proposal Keen Joy had not accepted). MC took no action despite Nora’s repeated complaints 65.I further find on Nora’s evidence and documents adduced before me that Nora had repeatedly written to MC demanding IO’s action on the Fire Alarm Problem in March, July, September, November and December 2019, January 2020, May, June and July 2021. 66.Shortly before 29/2/2020 AGM opened, Nora had also, I find, handed in a letter to MC about the Fire Alarm Problem. During agenda item 6 thereof, considering the manner of her making submissions in front of me, I find it likely that Nora stood up to raise the Fire Alarm Problem but found the convener of the meeting disagreed with her and dismissed the said problem. She likely persisted in expressing her strong views on the Fire Alarm Problem. As she disrupted orderly progress of 29/2/2020 AGM, staff of the management company came over to demand to her to sit down. She likely, I think, walked out the venue on her own in protest of her views being ignored. 67.Except for suggesting the Proposal, IO had, I find, taken no concrete action on the Fire Alarm Problem. Though MC did not “cover” it “up” as Nora had sought to portray (they did meet Nora on 20/9/2019 Meeting, arrange staff to investigate Apartment F12 and offered her the Proposal), MC sought, I think, to downplay it or keep it at a low profile. MC characterized it as a matter of “individual concern” (in minutes of 29/2/2020 AGM and of 18/3/2020 MC Meeting) that required “no further discussion”. IO’s mandatory duty re the Existing Fire Alarm as common parts 68.Looking at the DMC, and s.2 and Schedule 1 of BMO (item 10), I find the Existing Fire Alarm “common parts” of GH, for which IO is responsible to the exclusion of individual owner of GH under s.16 of BMO. 69.I also agree that IO has a mandatory duty under s.18(1)(a) of BMO to maintain the Existing Fire Alarm in a state of good and serviceable repair and clean conditions (s.18(1)(b) of BMO does not, however, apply as there is no evidence of any public officer exercising any statutory power to order or require any works to be done on the Exiting Fire Alarm). 70.Also, pursuant to clause 9(b)(10) of the DMC, IO is, I agree, under a mandatory duty to repair and keep in good repair and condition the Existing Fire Alarm and when necessary to replace any part or parts thereof which require replacement. Breach of IO’s mandatory duty not proven 71.However, I do not think that IO was in breach of clause 9(b)(10) of the DMC, or s.18(1)(a) of BMO (and Keen Joy has not proven either). 72.I give the following reasons. 73.First, the Existing Firm Alarm were, I find, in good working order at all material times. Its warning sound level likely conforms, I think, with minimum legal requirements set by Fire Services Department (FSD) by way of code of practice. (1) It is not the case that the Existing Firm Alarm did not emit warning sound at all. The Fire Alarm Problem is that such warning sound emitted by the Existing Firm Alarm did not reach the inner parts of Apartment F12 because of its large size (as such, there is, I think, every reason to believe that the same problem could happen to other equally large apartments of GH[15] and it may be prudent to investigate if other apartments also suffer from it. It could well turn out not be a matter of “individual concern” as MC had characterized it). (2) IO has apparently complied with the law and arranged for a registered fire service installation contractor to inspect, inter alia, the Existing Fire Alarm every 12 months. As proof thereof, after annual fire alarm testing in the years of 2000, 2021 and 2022, IO was issued with 3 certificates of fire service installation and equipment dated 18 July 2019, 19 June 2020 and 18 June 2021 (the 3 FS Certificates) by such registered contractor. (3) The Exiting Fire Alarm, said to conform” with FSD requirements”, was certified in all 3 FS Certificates “to be in efficient working order in accordance with the Codes of Practice for Minimum Fire Service Installations and Equipment and Inspection, Testing and Maintenance of Installations and Equipment… (COP MFSI) (Italics supplied)”[16]. (4) Management company staff had, I find, explained to Nora that the warning sound level of the Existing Fire Alarm conforms to legal minimum requirements set down by 2012 version of COP MFSI[17] and supplied Nora with extract thereof. Had the Existing Fire Alarm not conformed to the said legal minimum requirements, FSD officer Chin Ka Ho (with whom Nora had invited to attend to Apartment F12 on 27 September 2021 to observe the Fire Alarm Problem after writing a series of complaint letters to FSD) would, I think, likely have followed up on her complaint (but in fact he did not but had referred Nora again to COP MFSI for legal minimum requirements). (5) Even if the Fire Alarm Problem was known to registered inspector i.e. AL prior to completion of the Survey Report as alleged by Nora, it would not, I think, likely be required to be covered in the said report as, according to reg.5(2)(c) of Building (Inspection and Repair) Regulations, one standard of prescribed inspection is fire safety improvement works to be completed in accordance with Fire Safety (Buildings) Ordinance[18], whose Schedule 2 provides for specifications of installation of, inter alia, manual fire alarm to be in line with 1994 version of COP MFSI. 74.Hence, I find the Existing Firm Alarm did not require any repair or replacement at all material times. It has been kept in good working conditions. Accordingly, there has been no breach of s.18(1)(a) of BMO, or clause 9(b)(10) of the DMC. 75.Indeed, compliance of the Existing Fire Alarm with code of practice issued by the Authority supports my conclusion that IO was not in breach of its duty under s.18(1)(a) of BMO. 76.My reasoning is as follows. (1) In discharging its duty under s.18(1)(a) of BMO, IO shall have regard to and be guided by code of practice issued by the Authority issued under s.44: s.18(2A) of BMO. (2) Pursuant to s.44(1), the Authority had issued 2018 version of Code of Practice on Building Management and Safety effective as from 1 September 2018 (2018 COBMS) . (3) s.44(2) of BMO provides that failure to observe any Code of Practice issued under s.44(1) may, in any proceedings, be relied upon as tending to establish or to negative any liability which is in question in those proceedings. (4) Paragraph 7.2.7 of 2018 COBMS provides that fire service installations or equipment shall be maintained in efficient order at all times. And paragraph 7.2.8 thereof requires that fire service installations or equipment shall be inspected by a registered fire service installation contractor every 12 months. (5) IO had, I think, complied with paragraphs 7.2.7 and 7.2.8 of 2018 COBMS. Such compliance could, I think, be relied up by IO in these proceedings pursuant to s.44(2) of BMO. It tends, I think, to negate such claim of Keen Joy that IO had failed its duty under s.18(1)(a) of BMO as alleged. Upgrade of the Existing Fire Alarm at discretion of IO 77.To solve the Fire Alarm Problem, in line with the Proposal, as Nora had more than once articulated in the box, what the Existing Firm Alarm requires is, I agree, its “upgrade”. 78.“Upgrade” of the Existing Firm Alarm or, to put it in legal terms, “improvement” to the “common parts” of GH is something that IO may (not must), at its discretion, decide to do, or decide not to do, under s.18(2)(fa) of BMO. This remains, I think, the position notwithstanding the Fire Alarm Problem may turn out to be more than “individual concern” after investigation. 79.With respect, this Tribunal rarely, if ever, interferes with internal management of owners’ corporation if such legal minimum limit or requirements, if any, set down by BMO and the DMC have not been exceeded or breached. Improvement to common parts should better be carried out by way of internal lobbying within GH and requisitioning the chairman of MC to convene an EGM to turn consensus into concrete action by passing the necessary resolutions. 80.For above reasons, I cannot but conclude that Keen Joy’s counterclaim in respect of the Fire Alarm Problem fails. The Disclosure 81.To recap, Keen Joy relied on 3 legal sources to seek the Disclosure i.e. DMC, BMO and 2018 COP. 82.According to paragraph 11 of Court of Appeal (CA) judgment in Speed Gainer Limited v The Incorporated Owners of Malahon Apartments & Another, unreported, CACV 336/2004, 22 July 2005, “there could be no breach of the manager’s obligation to permit inspection without a valid request or demand for inspection followed by a wrongful failure to permit inspection (italic supplied)”, per Tang JA (as he then was). As such, Keen Joy has, I think, to make out both of these two elements in order to make good its counterclaim for the Disclosure. Keen Joy’s requests for the Disclosure 83.I accept from Nora’s evidence and documents disclosed by her that she had, as early as in January 2020, written to MC to seek the Disclosure and followed them up with MC in April, May, June, August, September 2020, March, May and June 2021. The matters that were sought are summed up at paragraph 44 of respondent’s opening submissions. Mr Suen had also helpfully reproduced, and grouped, them at paragraphs 82 to 84 of his closing submissions. 84.Basically, the matters sought in the Disclosure are the following: - (1) Questions regarding the 2020 operating budget; (2) Breakdown of the 2019 Contribution (or an account how it was spent); (3) Breakdown of how $628,900 building fund was spent on building and structure repaired in 2019; (4) Breakdown of the 2019 usage of fund; (5) 2019 audited accounts; (6) Minute of 20/9/2019 Meeting; and (7) MBIS documents (including scope of MBIS tender works, scope of defects and contracts entered with MBIS consultants and contractor). Web Portal channel etc. not assist IO 85.I agree with Nora (and Mr Suen cannot, I think, dispute) that no provision is found in either DMC or BMO to oblige GH owners to inspect or download the requested documents by accessing Web Portal or to make it the sole obligatory access route[19]. I further agree with Nora that DSKA’s presentation at 29/2/2020 AGM does not detract Keen Joy’s rights, if any, under the DMC and/or BMO to seek the Disclosure as an owner of GH. MC’s de facto refusal of the Disclosure 86.As a matter of facts, except for 2019 audited accounts to be discussed below, IO had, I find, so far not replied Keen Joy’s request for the Disclosure at all. (1) Effectively, MC ignored Keen Joy (one of many GH owners for which it was supposed to be accountable) and declined its request, though it did not formally say so to decline as it claimed to. (2) As a matter of courtesy, MC did not, I find, even bother to take the slightest effort to have replied Keen Joy (one owner of GH) to say, that the information sought could be found elsewhere at so and so, or to say that your request did not comply with so and so requirements set down by BMO. (3) Reading minute of 2021 EGM, vice chairman of MC was recorded to have agreed that there was “nothing to hide” in the MC and Derek was recorded to have “assigned the property manager to respond” to Nora’s letters. Regrettably, what MC had done (or omitted to do) gave this Tribunal the contrary impression. (4) At the last paragraph of his witness statement, Derek dismissed the Disclosure as “irrelevant” to respondent’s obligation to pay its share of the Contribution. That is true as far as I held at [37] above. But what about IO (or MC)’s duty to account to all owners of GH, including Keen Joy? With respects, Derek seemed to have avoided or overlooked that in his witness statement. (5) Consistent with MC’s refusal of the Disclosure, except for MBIS Notice, IO disclosed no other MBIS documents (be it tender documents or MBIS contracts) in these proceedings or included them into the trial bundles. (6) Instead of providing the Disclosure to Keen Joy on a voluntary basis to resolve Keen Joy’s counterclaim amicably, IO (or MC) was determined to spend, likely I think, disproportionately great amount of legal costs (out of IO funds) defending Keen Joy’s counterclaim to the very end to avoid making disclosure. Disclosure counterclaim not made out at law 87.Nevertheless, this Tribunal, as a court of law, can only decide Keen Joy’s counterclaim for the Disclosure on its merits at law. And my conclusion at law is that Keen Joy has failed to make out its 2nd counterclaim. No valid requests for information or new documents 88.First, no provision that Nora is now relying on supports, I think, her getting “answers” for her “questions”. In most of the request forming the Disclosure, Keen Joy was in substance putting forward “questions” seeking “answers” or “information” from MC. For example, Keen Joy asked MC how the 2019 Contribution was spent. 89.However, MC was not, I think, obliged at law by those provisions Keen Joy now rely upon to answer Keen Joy’s questions (it is, of course, a different question whether, as an accountable corporation, or, as MC is delegated with the power of management by IO, MC should have answered questions raised by owners, like Keen Joy, which form the IO in the first place). 90.Second, no provision that Nora is now relying on supports her, I think, to demand IO taking actions creating new documents for Keen Joy (as opposed to Keen Joy’s inspection or being supplied with copies of existing documents in IO’s possession). For example, Keen Joy had requested “a legally valid copy of 20/9/2019 Meeting minute with relevant approval ratification”. I do not think MC was obliged to create one as requested. Inspection not sought & DMC not assist 91.Regarding existing documents in IO’s possession that Keen Joy sought copies from IO in the Disclosure, as Nora had confirmed with Mr Suen in the box, Keen Joy did not seek inspection. As such, clauses 9(b)(21) and 11 of the DMC allowing inspection do not assist Keen Joy in its counterclaim. Copy of 2019 audited accounts given 92.Regarding 2019 audited account that Keen Joy sought copies, I agree with paragraph 91 of Mr Suen’s closing submissions. They were laid before GH owners at 2021 AGM held on 11 May 2021 after they were ready and, after the said AGM was over, copy of them were given to Nora on the same day. DMC provisions overridden by different BMO provisions 93.Should DMC provisions that allow an owner to inspect and/or take extract quoted above be applicable to this case, pursuant to s.27(5) of BMO, the provisions of Schedule 6 of BMO shall prevail to the extent its provisions are inconsistent with those of the DMC. Hence, what matters at the end of the day are BMO provisions. BMO disclosure provision not relied upon 94.Keen Joy sought to rely in its opening submissions Schedule 6 of BMO to support the Disclosure. But it is, I am afraid, not open for Keen Joy to rely. Schedule 6 was nowhere mentioned in its Notice of Opposition and Counterclaim. BMO disclosure requirements not met anyway 95.In any event, material parts of Schedule 6 read as follows:
96.Keen Joy had not, prior to these proceedings, gathered 5% of GH’s owners as required by paragraph 1A(a) of Schedule 6 to make out a valid request for inspection of documents. Neither was Keen Joy authorized by the court under paragraph 1B thereof to inspect pursuant to paragraph 1A(b) thereof. Prior to these proceedings, Keen Joy never wrote to IO to seek inspection as an authorized person under the said paragraph 1B thereof. No legal right under BMO to seek tender documents 97.Regarding MBIS documents including tender documents and MBIS consultant and/or contractor contracts that Keen Joy sought copies pursuant to paragraphs 7.1 and 7.2 of 2018 COP, I agree with Mr Suen that this Tribunal is bound by CA judgment in Chen Kun Ming v The Incorporated Owners of Tai On Building, Shau Kei Wan (Tai On Building Case) [2008] 2 HKCLRT 43 to give a negative answer to Keen Joy’s request for this group of documents. (1) The appellant in this case put forward, and relied, for the first time on appeal paragraph 9 of 1997 COP, whose second half is similar to paragraph 7.1 of 2018 COP (and paragraph 10 of 1997 COP is also, I note, similar to paragraph 7.2 of 2018 COP), to seek disclosure of, inter alia, tender proposals from owners’ corporation. (2) Yeung JA (as he then was), in giving the judgment of the CA, expressly disagreed with this reliance on 1997 COP and said at paragraph 34: “The Code of Practice is merely a document issued under section 44 of [BMO] in respect of the procurement of supplies, goods and services. The scope of the Code of Practice cannot exceed that of the Ordinance itself (bold and italics supplied).” (3) In so ruling above, the CA was, I think, pointing out that the scope of BMO does not allow discovery of tender documents sought by the appellant, who therefore cannot avail himself same discovery by way of COP, whose scope (if applicable as alleged[20]) cannot exceed that of BMO i.e. its primary legislation. (4) The above ratio of Tai On Building Case has recently been applied in January 2021 by HHJ M. Wong in his judgement of 樂年花園業主立案法團 v庾國強及胡美芳 [2021] HKLdT 4 (paragraphs 13 to 37) to reject a counterclaim by an owner to be supplied with copies of returned tender pursuant to, inter alia, paragraphs 7.1 & 7.2 of 2018 COP. (5) In passing, Yeung JA (as he then was) also explained in his judgment how the legislature struck the balance between IO’s duty to manage the building and its duty to properly account to the owners as follows:
GH Case distinguishable 98.Regarding CA judgment of Wong Tak Keung Stanley v Management Committee of The Incorporated Owners of Grenville House [2004] 2 HKC 194 (17 December 2003) (GH Case) cited by Nora, this case could, I think, no longer be relied upon by Keen Joy to support its request for the Disclosure against IO. 99.My reasons are as follows. (1) GH Case did not involve s.20A(1) of BMO or paragraphs 7.1 and 7.2 of 2018 COP that the respondent now relies on. It dealt with alleged breach of s.20A(2) of BMO and of paragraph 1 of 1997 COP (both involve tenders by invitation). (2) At paragraph 44 of the judgment of GH Case, Yuen JA (with which Cheung JA agreed) expressly said that it was not necessary for the purposes of the appeal to consider the question whether s.20A(1) is mandatory or directory. (3) GH Case was a striking-out appeal. It therefore suffices for the appellant to succeed on appeal to raise merely an “arguable” case on paragraph 1 of 1997 COP read together with s.20A(2) of BMO. As the case was discontinued afterwards, the Lands Tribunal never tried the case to reach a conclusion on the merits of the COP issue raised on appeal. (4) Yuen JA in GH Case never found it arguable on appeal that all paragraphs of 1997 COP are mandatory or have force of law[21]. As s.20A(2) of BMO was identical to paragraph 1 of 1997 COP[22], her ladyship thus found it arguable that the said paragraph 1 acquires (or was intended to have) force of law by such incorporation into s.20A(2) of BMO. (5) For (1) to (4) above, Yuen JA never disapproved with or “overruled” such pre-existing views of first instance authorities[23] that s.20A(1) of BMO (other paragraphs of 1997 COP, or 1997 COP itself) is merely directory and does not have force of law. (6) Notwithstanding GH Case, subsequent first instance courts and tribunals[24] continued to take the same view of the pre-existing authorities that COP is merely directory and does not have force of law. (7) In 2007 version of COP, paragraph 1 of 1997 COP was removed such that there was no longer any incorporation of that paragraph into BMO to become s.20A(2) as was relied upon in GH Case by Yuen JA. (8) As to paragraphs 7.1 and 7.2 of 2018 COP that the respondent relies, none of them have been repeated in (or incorporated into) BMO so far[25]. The said incorporation argument run in GH Case that Yuen JA then found favour is thus, I think, not open today to the respondent on the said 2 paragraphs of 2018 COP. 2018 COP merely directory for guidance and has no force of law 100.S.44 of BMO reads:
101.Considering wordings of s.44 of BMO above and the current state of the authorities, notwithstanding GH Case, I take the view that 2018 COP are merely directory and for guidance only. It does not have the force of law and compliance of its provisions, including paragraphs 7.1 and 7.2 Keen Joy seeks to rely upon, are not mandatory (though the Authority issued COP with the objective of them being followed by, at least, owners’ corporations). 102.In all the circumstances of this case, for one or more than one of the reasons given above, Keen Joy has, I think, failed to make out each request of the Disclosure against IO. I therefore have no choice but to also dismiss Keen Joy’s 2nd counterclaim for specific performance of the Disclosure. Disposition 103.On IO’s application against Keen Joy, I therefore enter judgment in IO’s favour as follows: - (1) Keen Joy do pay IO the sum of $220,000, together with interest thereon at 1% for every 30 days it is unpaid after 1 May 2020 until judgment; (2) Keen Joy do pay IO collection charge in sum of $150; and (3) The aforesaid 2 judgment sums of $220,000 and of $150 shall carry interest from judgment until full payment at judgment rate(s) from time to time published by the Chief Justice of the Court of Final Appeal. And I order that the entire counterclaim raised by Keen Joy against IO be dismissed. Costs order nisi 104.Costs normally follow the event after trial. IO has succeeded on both its claim and counterclaim. Clause 10(e) of the DMC further provides for costs to be paid on solicitor and own client basis on any proceedings to recover sums due under the DMC. 105.However, in exercising my costs discretion, I have also have regard to IO’s conducts before and during these proceedings. I do not think IO had responded reasonably to Nora’s repeated complaints of the Fire Alarm Problem (e.g. [67] & [73](1) above) and repeated requests of the Disclosure (e.g. [86] & [89] above), or had pressed on defending the counterclaim to the very end reasonably. For example, had MC prudently investigated other apartments of GH to prove that the Fire Alarm Problem was really a matter of “individual concern” as it claimed, and had MC voluntarily provided the Disclosure to Keen Joy as requested, Keen Joy most likely would not feel the need to raise, or continue to the end, its 2 counterclaims against IO. To reflect IO’s unreasonable conducts above, I propose to deprive IO 50% of its costs in defending Keen Joy’s counterclaim. 106.Accordingly, I make 1st costs order nisi that Keen Joy do pay on solicitor and own client basis IO costs of the application, including all its reserved costs and the costs of its trial, to be taxed on District Court scale if not agreed. 107.I further make 2nd costs order nisi that Keen Joy do pay IO 50% costs of the counterclaim, including 50% of its reserved costs and 50% of the trial of the counterclaim, to be taxed on District Court scale if not agreed. 108.While this Tribunal is most grateful for Mr Suen’s assistance at trial, I do not see fit to certify his attendance at trial in all the circumstances of this case. 109.The 2 orders nisi in [106] and [107] above shall become absolute if none applies to vary them within 14 days of the handing down of this Judgment. 110.Finally, IO’s solicitors do draft, file and serve this Judgment on Keen Joy.
Mr Warren Suen, instructed by King & Co., for the Applicant Ms Fok Lai Lor Nora, representative of the Respondent, present [1] Cap.344 [2] Clause 22(a) [3] Cap.219 [4] Cap.123 [5] Keen Joy at p.23 of its written opening submission made it clear that it does not seek to invalidate events happening at 29/2/2020 AGM by reference to matters at [23]. [6] Clauses 9(a), (b)(10) [7] Clause 10(a) [8] Under s.14 of BMO, resolutions in respect of common parts passed by owners at GM are binding all owners. [9] Clause 10(d)(1) & (2) [10] G.N. 6153. It took effect as from 1 September 2018. [11] Derek was appointed chairman of MC on 29/2/2020 AGM. But he has served as member of MC of IO from 2015. [12] together with proposals of their prescribed repair [13] Cap.123P [14] Letter from management company to Nora dated 21 November 2019 [15] For this reason, I tend to accept Nora’s hearsay evidence at paragraph 21 of her witness statement that another MC member (Ms Forissier) had discovered the Fire Alarm Problem in her apartment as well. [16] See also reg.10(2) of Fire Service (Installations and Equipment) Regulations, Cap.95B [17] With sound level of alarm measured at 3m from inside of main entrance door [18] Cap.572 [19] Indeed, February 2020 newsletter published by IO and distributed to GH’s residents suggested otherwise: see paragraph 53 of Nora’s witness statement. [20] CA did not find it necessary to decide if the words “the relevant documents” in 2nd half of paragraph 9 of 1997 COP mean all tender documents etc. referred to in 1st half of the said paragraph: see paragraph 37 of the judgment. [21] her ladyship said that the 1997 Code or its other paragraphs may be merely directory [22] thus the latter had been incorporated into primary legislation i.e. BMO [23] Pokfulam Development Company Limited v The Incorporated Owners of Scenic Villas, unreported, LDBM 70/2000, 1 February 2001 (pp.3 to 10) & 15 May 2001 (pp. 2 to 4), HHJ Chow; Jikan Development Limited v The Incorporated Owners of Million Fortune Industrial Centre & Others [2001-2003] HKCLRT 37, 12 September 2001, HHJ Chow; and The Incorporated Owners of Million Fortune Industrial Centre v Jikan Development Limited & Anor [2001] 3 HKLRD 588, 13 October 2001, paragraphs 2 to 4, per Deputy Judge To (as he then was) [24] Imax Investments Limited and Others v The Incorporated Owners of Yue Shing Commercial Building, unreported, LDBM 316/2004, 29 April 2005, paragraphs 33 to 42, per Deputy Judge Wong (as he then was); Re Ho Ho Wa ex parte The Incorporated Owners of Hoi Fu Court [2008] 1 HKCLRT 436, 26 May 2008, paragraphs 34 to 40, per Chu J (as she then was); The Incorporated Owners of Vincent Commercial Centre v Wing Sheung Land Investment Company Limited, unreported, LDBM 334 of 2007, 30 June 2008, paragraphs 15 to 24, per HHJ M. Wong [25] Indeed, there was no more reproduction of any paragraph of COP into BMO as from 2007 COP onwards |
Cases cited in this judgment
Further hearings and rulings under LDBM 200/2020