金基大廈(筲箕灣東大街)業主立案法團 v. Brave One Investments Ltd
Read the full judgment text of LDBM 182/2021 on BabelCite. This Lands Tribunal judgment was delivered on 3 June 2025.
1. The applicant is the Incorporated Owner of Kam Key Mansion (“IO”) Nos. 141-151 Shau Kei Wan Main Street East, Hong Kong (“Building”). Since February 2015, the respondent has been the registered owner of Shops A-D on G/F, 1/F, 2/F and 3/F of the Building (“Premises”). The Deed of Mutual Covenant dated 15 February 1988 (“DMC”) prescribes the parties respective duties and obligations. The IO is represented by Ms Fiona Chong. The respondent is represented by Mr Iverson Wong.
Cites 16 cases
|
LDBM 182/2021 LDBM 212/2022 (Consolidated) [2025] HKLdT 28 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO 182 OF 2021 __________________________ BETWEEN
__________________________ IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO 212 OF 2022 __________________________ BETWEEN
__________________________ (LDBM 182/2021 and LDBM 212/2022 are consolidated and proceeded as one action by name of LDBM 182/2021, pursuant to the Order made by Deputy District Judge M Lam (as she then was) on 11 December 2023)
________________ J U D G M E N T ________________ 1.The applicant is the Incorporated Owner of Kam Key Mansion (“IO”) Nos. 141-151 Shau Kei Wan Main Street East, Hong Kong (“Building”). Since February 2015, the respondent has been the registered owner of Shops A-D on G/F, 1/F, 2/F and 3/F of the Building (“Premises”). The Deed of Mutual Covenant dated 15 February 1988 (“DMC”) prescribes the parties respective duties and obligations. The IO is represented by Ms Fiona Chong. The respondent is represented by Mr Iverson Wong. 2.LDBM 182/2021 is a claim for outstanding management fees of $39,945 per month from November 2020 to August 2021, totalling HK$399,450. 3.LDBM 212/2022 is a claim for outstanding management fees of $39,945 per month from September 2021 to February 2024 and HK$32,400 per month thereafter. On 12 November 2024, the respondent through its solicitors Ernest Li & Co (“EL”) paid HK$259,200 representing the management fees from March 2024 to October 2024 to the IO through its solicitors Cheung & Yip (“C&Y”) without prejudice. The respondent counterclaims against the IO for a refund of the overpaid management fees and/or a set off of the overpaid amount against any outstanding amount. 4.The calculation of the management fees in respect of the Premises from March 2015 to February 2024 are set out in the Annexure attached hereto. The calculation was provided by the respondent and is accepted as accurate by the IO. The IO’s case 5.The IO’s case is that current outstanding management fees are:-
6.Between March 2015 and October 2020, the respondent duly paid management fees. LDBM 182/2021 claimed outstanding management fees of HK$39,945 per month for the period November 2020 and August 2021 (10 months). On 3 December 2021, the respondent paid HK$399,450 to the IO’s bank account. The basis and effect of the payment is in issue. The IO says that it was an unequivocal and unconditional settlement of the sum, which the respondent disputes. 7.From August 2021 the respondent completely stopped paying management fees, save for the without prejudice payment of HK$259,200 representing the management fees from March 2024 to October 2024. 8.The obligation of the respondent to pay management fees is prescribed by the DMC as follows:
9.The respondent disputes the quantum of management fees charged. The respondent’s primary defence is that the IO had overcharged the respondent management fees between March 2015 and August 2021 in the sum of HK$740,400, hence it is entitled to a set off or refund. To resist this, the IO relies on the principles of estoppel by convention. The respondent’s case 10.Since becoming a co-owner of the Building in February 2015, the respondent had been paying management fees to the IO as calculated and charged by the IO. On 9 June 2020, the respondent’s shareholding changed hands, the respondent’s new shareholders repeatedly asked the IO for the IO’s audited accounts and raised queries with the IO regarding the calculation of management fees. Pending the IO’s explanation and provision of documents, the respondent withheld payment of management fees due to doubts that had arisen. Upon checking the accounts subsequently provided by the IO, the respondent discovered that it had been overcharged by the IO over the years. 11.By overcharging the respondent, the IO has been (i) in breach of the DMC of the Building; (ii) in breach of sections 16 and 18 of the Building Management Ordinance (“BMO”); and/or (iii) unjustly enriched. On these bases, the respondent counterclaims against the IO for a refund of the overpaid management fees and/or a set off of the overpaid amount against any outstanding amount. However, Mr Wong confirmed that the respondent would only rely on breaches of the DMC, not of the BMO and unjust enrichment. LEGAL PRINCIPLES Overcharging management fees in breach of the DMC 12.Section 22, BMO provides that the amount of contribution by an owner towards management fees is fixed by the management committee of the owners’ incorporation in accordance with the DMC: Century Globe Limited and Others v Incorporated Owners of Fu Loy Garden LDBM 24/2015 (unrep., 30 August 2016) at §27. The calculation of the contributions may be carried out for the committee by a manager or other agent: Incorporated Owners of Tsuen Wan Garden v Leung Chun Hung and Others [2005] 1 HKLRD 240 at §§21-23. Charging management fees not in accordance with the calculation method prescribed by the DMC is a breach of the DMC and /or BMO: Century Globe at §79. Estoppel by convention 13.The IO relies on estoppel by convention in respect of management fees previously collected or demanded that were not calculated in accordance with the DMC. The respondent denies it can be established on the facts. 14.Estoppel by convention is a type of reliance-based estoppel. It aims to protect A from an unfair change of position by B. The change is unfair, not because a state of affairs has been assumed as a basis of dealings between A and B, but because B is responsible to A for A relying on B’s original position in such a way that A would suffer by reason of B’s subsequent change: Spencer Bower: Reliance-Based Estoppel (5th ed.) at §1.5. The manner in which the assumption has been occasioned or induced is thus crucial. Before B can be estopped, B must have played such a part in the adoption of the assumption that it would be unfair or unjust if B was left free to ignore it; Spencer Bower at §1.7. 15.Each type of reliance-based estoppel shares the following common requirements (Spencer Bower at §1.9):
16.The Court of Final Appel provided guidance on the essential elements in Unruh v Seeberger (2007) 10 HKCFAR 31. Ribeiro PJ reviewed the development of the estoppel at §§129-155. At §§129 and 130 as follows:-
17.Ribeiro PJ considered the elements of estoppel by convention, including the common assumption at §§133-137, that the matter assumed must be clear at §§138-139 and departure and detriment at §150. 18.The IO refers to elements of estoppel by convention stated in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd and Another (2012) 15 HKCFAR 569 at §79, citing Unruh: -
19.The IO sets out the elements of estoppel by convention stated in First Laser at §79 citing Unruh as follows: -
20.In Tinkler v Commissioners for Her Majesty’s Revenue and Customs [2022] AC 886 the English Supreme Court reviewed and confirmed the principles. Lord Burrows JSC at §§45 and 48-53 explains the statement of principles set out by Briggs J in Revenue and Customs Comrs v Benchdollar Ltd [2009] EWHC 1310 (Ch), [2010] 1 All ER 174, as amended in Blindley Heath Investments Ltd v Bass [2015] EWCA Civ 1023, [2017] Ch 389 as follows:-
21.Lord Burrows JSC explained the first three principles of Benchdollar at §§51-53:
22.The respondent sets out the five principles of estoppel by convention affirmed by Lord Burrows JSC in Tinkler at §§45, 49, namely:-
23.In Hong Kong Tinkler was considered in Chinachem Agencies Limited v Kung Yan Sum [2024] HKCFI 2010, where the essential elements of estoppel by convention from Laser at §79 and Tinkler at §45 are set out at §§17-18. 24.The respondent focuses particularly on three of the requirements of estoppel by convention as stated in Snell’s Equity (35th ed.) at §12-014 and Spencer Bower, namely:
25.The IO relies on various authorities that show estoppel by convention is commonly applied to reject claims for refund of management or other fees not calculated in accordance with the DMC, namely:-
26.In J & V Limited v ISS Eastpoint Property Management Limited and Anor LDBM 242/2009 (unrep., 10 August 2010), the owner’s claim for refund of overpayment of management fees and air-conditioning charges was rejected on the basis of, inter alia, estoppel by convention: §§67-70. The tribunal also accepted the defence of change of position against the owner’s claim for restitution based on unjust enrichment: at §§71-74. 27.The respondent relies on J & V Limited at §75e-f to show that in the context of overpayment, even if an estoppel by convention is established, it can only prevent the payee from seeking a refund of the overpaid amount. The overpaid amount can still be used to set off against any further amount due from the payee to the payor. 28.The respondent acknowledges that estoppel by convention has been applied by Hong Kong courts to reject claims for overpaid fees in the building management context. However, the cases do not bind the tribunal to reject the respondent’s claim, as estoppel by convention is fact-sensitive and ultimately must be applied in view of the unfairness in the actual circumstances of each case. There is no lack of cases where estoppel by convention has failed to strike down an overpayment claim: IVS Enterprises Ltd v Chelsea Cloisters Management Ltd [1994] EGCS 14; Philip Collins Ltd v Davis and Anor [2000] 3 All ER 808 at 823G-825G. The authorities are considered further below. Effect of estoppel by convention suspensory 29.The effect of an estoppel by convention is merely suspensory up to the point where it remains unconscionable to depart from the convention. The duration of its operation depends on whether it is still unconscionable to depart from it. If it is not, then the court will not give effect to the common assumption. Once the convention is shown to be erroneous or one side questions its correctness, the estoppel will not apply to the future dealings: Spencer Bower at §§8.54-8.55; Hiscox v Outhwaite [1992] 1 AC 562 at 575G-H; Wu Yuk Chun v Hon Hing Enterprises Ltd [2021] HKLdT 5 at §§69-72. Revealing a common assumption as erroneous is only one way to deactivate an estoppel: Bristol Rovers (1883) Limited v Sainsbury's Supermarkets Limited [2016] EWCA Civ 160 at §92. Attribution of knowledge and acts to incorporated bodies 30.The rules of attribution are relevant when considering the effect of the respondent’s representative attending the IO’s management committee meetings until 9 June 2020. 31.An incorporated body cannot act by itself. It can only act through natural persons. The question as to when an act and/or state of mind of a natural person is to be treated as that of a company depends on the application of rules of attribution in the circumstances. The question is always whose act or knowledge or state of mind is, for the purpose of the relevant rule, to count as the act, knowledge or state of mind of the company: Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 at 511-512; Bilta (UK) Ltd (in liquidation) v Nazir (No.2) [2016] AC 1 at §41. 32.The appropriate rules of attribution for the situation in question must be identified: Bilta at §40. There are three sets of rules as classified by Lord Hoffmann in Meridian, as follows:-
WITNESSES 33.Two witnesses gave evidence at trial, namely:
34.Their witness statements stood as their evidence in chief. The parties had agreed that the trial would be confined to issues in respect of outstanding management fees. Other pleaded issues were deleted from the Re-Amended Notice of Opposition and Re-Amended Reply and Defence to Counterclaim. Therefore, paragraphs of Mr Tsui’s witness statements were not relevant and related exhibits were excluded. Witness credibility 35.The IO relies on the principles of assessing witnesses’ testimony as summarised in Hydrotech Waterproofing Solutions Limited v Shun Yuen Construction Company Limited [2022] HKCFI 1170 at §§3-6 per Mimmie Chan J: -
36.The respondent relies on the principles as summarised by the Court of Appeal in Roderick Miller v Law Society of Hong Kong [2024] 3 HKLRD 929 at §37:-
CHRONOLOGY 37.The IO divided the chronology into three periods. In light of all the evidence, each party considered various facts to be uncontroversial as set out below. I accept those facts and matters, save where indicated that they are in issue and determined under a particular Issue. (1) The respondent, as owner and a member of the management committee of the IO, paid management fees without complaint between April 2015 and June 2020 38.On 28 February 2015, the respondent became the registered owner of the Premises in the Building. The respondent as owner, and a member of the management committee of the IO, paid management fees without complaint between April 2015 and June 2020. On 5 February 2018, the respondent attended an Owners’ Meeting and voted in favour of (i) passing the financial report and budget; (ii) increasing management fees for all units by 15% starting from 1 April 2018. 39.Between 13 April 2015 and 15 June 2020, the respondent was a member of the management committee of the IO. During that period, the respondent paid management fees in full as charged by the IO without complaint. From 14 April 2016 at the latest to 9 June 2020 representatives of the respondent, namely Mr Wu Tsz Man Felix and Mr Wong Ngai Hang, attended the majority of management committee meetings of the IO. The respondent, as committee member, never raised any issue with the calculation of management fees. As evidenced by the minutes of the management committee meetings held in that period, the topic of how to calculate the management fee payable was never canvassed. 40.The respondent relies on the following:-
(2) No complaint raised by the respondent/ Ms Luk regarding management fees between June 2020 and December 2022 41.On 9 June 2020, Ms Luk and her sister acquired the respondent’s entire shareholding through their corporate vehicle, the respondent. Between June and October 2020, the respondent continued to pay management fees as charged by the IO in full. In November 2020, the respondent stopped paying management fees. Since November 2020, the respondent withheld payment of management fee and kept asking the IO for inspection of its accounts. Whether Ms Luk kept asking for the accounts is in issue. Ms Luk clarified during cross-examination that, back in November 2020, she did not know that the management fee was not calculated based on the specified proportion under the DMC. She asked for the accounts because she had problems with the expenses relating to the lifts of the Building and had a general suspicion over various aspects of the management of the Building. 42.On 30 November 2020, Wah Nam Management Co., Ltd, for and on behalf of the respondent, issued a letter to complain about maintenance costs and electricity expenses for the residential lifts of the Building, and asked for the IO’s accounts to follow up on the issue. 43.On 18 December 2020, in response to 2 chaser emails by Honor Fame for outstanding management fees, the respondent requested the IO to provide its accounting records. 44.The IO then issued notices to chase for outstanding management fees, to which the respondent did not respond. Namely, on 2 February 2021 a Notice of Payment of Management Fees, 26 February 2021 a Final Notice of Outstanding Management Fees and 2 March 2021 a Final Notice of Outstanding Management Fees. 45.On 2 March 2021, the respondent wrote to request “all audited financial statements since the establishment of the IO”. On 5 March 2021, the IO only produced its 2019 audited accounts to the respondent, despite repeated requests for all accounts. The respondent did not spot the mistaken calculation of management fees. Ms Luk’s explanation was that she was still waiting for the IO to provide all the accounts for the previous years to her so that she could hand them all to the accountant in one go. On the same day, the IO issued the First C&Y Letter to chase for outstanding management fees. 46.On 17 March 2021, the respondent issued a letter to the IO in which no further request for accounts was made. The respondent continued to raise complaints about the electricity charges, repair and maintenance costs of the lifts of the Building. No complaint was raised about the calculation of management fees otherwise. 47.The respondent continued to ignore action taken by the IO to chase for outstanding management fees, that included: -
48.On 3 December 2021, the respondent paid HK$399,450, outstanding management fees from November 2020 to August 2021. On 13 December 2021 EL issued a letter to the IO, which the IO says make it clear that the respondent’s payment was an unqualified concession of the IO’s claim. This is disputed and determined under Issue 3. 49.The respondent stopped paying management fees again from September 2021. On 21 January 2022, the IO issued the Fourth C&Y Letter chasing outstanding management fees. 50.On 25 February 2022, the respondent filed its Form 7 under LDBM 182/2021. At that time the respondent’s defence was limited to complaints about expenses and charges related to the lifts. Nothing was said about the calculation of management fees. 51.On 11 May 2022, the IO issued the Fifth C&Y Letter. 52.On 5 July 2022, a further Memorandum of Charge was registered against the Premises. The respondent did not respond. (3) Events between December 2022 and the present 53.On 9 December 2022 the respondent first raised the issue of overcharging of management fees. The respondent says that it made clear that it would challenge the overcharging of the management fees. The respondent also requested audited accounts since 2016, the first such written request since March 2021. On 23 December 2022 C&Y stated that the IO needed more time to look for 6 years of accounts due to the intervening holidays. 54.On 18 January 2023, the IO provided the accounts from 2016-2021 to the respondent. 55.On 16 May 2023, Ms Luk attended the IO management committee meeting. According to the minutes, the respondent had yet to provide feedback on the accounts and Ms Luk promised to respond in writing regarding the accounts within 14 days. Ms Luk has no memory of making such statement. The IO says that there is no basis to find that the IO had made up the minutes. Ms Luk did not provide such feedback. 56.On 19 January 2024, an Owners’ Meeting was held that resolved to adjust the management fees charged to take effect from 1 March 2024. The IO thereby resolved to reduce the monthly management fee payable by the respondent, and recorded that such amount would be calculated in accordance with the proportion prescribed by the DMC. There is no dispute that the adjusted calculation of management fees is correct. 57.On 9 February 2024, the respondent filed its Amended Form 7 to include complaints about miscalculation of management fees and its present counterclaim. On 12 November 2024, the respondent paid HK$259,200, being management fees from March 2024 to October 2024, calculated on the correct basis. 58.Along the above timeline, there are some discrete factual points which require further analysis below. Tsui Chi Ho Dan 59.Mr Tsui gave evidence for the IO. His cross-examination included the following:-
60.Mr Tsui confirmed that the IO has delegated the calculation and collection of management fees to its management company. 61.Material evidence concerns Honor Fame’s practice in collecting management fees from owners. Mr Tsui confirmed that the manager would issue a monthly demand note to each owner. The demand note would only state the amount of management fee payable for that month, as copied from the list of management fees. Whilst Mr Tsui agreed that the manager would ensure that the amount stated on the demand note is correct, what was done by it was simply to check whether it aligns with the amount stated on the list of management fees. 62.Mr Tsui was asked about what an owner would reasonably expect when they receive a demand note from the manager. Mr Tsui effectively agreed that:-
63.Mr Tsui suggested methods for an owner to discover the miscalculation of management fees, namely (1) to check the audited account of the previous financial year, (2) to check the list of management fees, and (3) to check the quarterly summary of accounts. Mr Tsui said these documents were posted at the residential lobby of the Building. There was no evidence to demonstrate how the miscalculation could be spotted by reading either the list of management fees or the quarterly summary of accounts. In any event, the IO did not adduce either, the list or the quarterly summary of accounts, as evidence. 64.When asked whether the calculation of management fees was discussed in the management committee meetings from Honor Fame being engaged in July 2019 to the respondent ceasing to send representatives to attend meetings in June 2020, Mr Tsui confirmed that this was not included in the meetings’ agenda. That accords with the meeting minutes, showing that the calculation of management fee was never brought up in previous management committee meetings. 65.Mr Tsui confirmed that no physical owners’ meeting was held during the pandemic period, but could not tell the exact period. 66.Mr Tsui did not know much about what happened during the period from June to November 2020 when Ms Luk first acquired ownership of the respondent’s Premises. Mr Tsui seldom visited the Building and hence was unaware of what happened at the Building everyday as well as what was communicated between owners and the frontline staff stationed at the Building. He did not know whether Ms Luk went to the Building to check the renovation of her elderly home almost every day and whether she orally asked the stationed staff for accounts. 67.Mr Tsui’s views on the exchange of correspondence between the IO and, the respondent starting from 30 November 2020, add nothing as the letters and emails speak for themselves. Mr Tsui accepted that:-
68.The IO submits Mr Tsui was an honest witness, that he was firm and able to give good reasons when disagreeing with certain matters put to him, but also accepted suggestions made by the respondent’s counsel reasonably. He gave a straightforward version of events that took place. 69.Mr Wong accepted that Mr Tsui appeared to be an honest witness. His answers were sometimes evasive and were permeated by the repeated message that “the present manager Honor Fame just adopted the calculation of management fees performed by the previous manager Hang Way, any fault would be on Hang Way but not Honor Fame”. That does not much affect his general credibility. The respondent says save for the evidence highlighted, Mr Tsui’s evidence is not very helpful because (1) his employer Honor Fame was only engaged as the manager of the Building in July 2019, and (2) Mr Tsui works at a remote office and seldom visits the Building himself. Mr Tsui is not privy to the more important factual disputes in this case. Mr Wong concludes that Mr Tsui’s factual account is largely uncontroversial and that the tribunal may accept his evidence, save for those parts with which he is not too familiar. 70.I accept Mr Tsui’s evidence save as otherwise expressly stated. 71.Whether the respondent’s representative, being the shopping mall owner, had been denied access to the lobby of the Building is disputed. Mr Tsui said no, but accepted that this was originally a dispute in these proceedings. Mr Wong invites the tribunal to disregard Mr Tsui’s evidence on this topic as he was not stationed at the Building and is not familiar with its everyday matters. I shall not rely on that part of his evidence. Luk Ngai Ling Irene 72.Ms Luk adopted the content of her witness statement. She further adduced (1) a letter dated 12 November 2024 from EL to C&Y concerning the respondent’s payment of the March to October 2024 management fees in sum of HK$259,000 and (2) a letter dated 12 November 2024 from C&Y to EL enclosing the audited accounts of the Building for the year of 2023. 73.Ms Luk’s evidence may be summarised as follows:-
74.The respondent highlights the following evidence of Ms Luk given in cross-examination:-
75.After the commencement of LDBM 182/2021 on 29 September 2021, to avoid nuisance, to show the respondent’s goodwill and to attempt to resolve the matter of the Building together, the respondent paid HK$399,450 to the IO representing the management fee from November 2020 to August 2021. All the rights of the respondent were expressly reserved at that time by way of EL letter dated 13 December 2021. This payment is the subject of Issue 3. Ms Luk herself did not know when exactly the miscalculation of management fees was discovered by her colleagues, but the respondent managed to raise the issue of overpayment to the IO in the letter dated 9 December 2022. 76.Mr Wong submits that Ms Luk gave a simple and logical account that is inherently probable and reasonable and that is not contradicted by any contemporaneous or other evidence. The tribunal is invited to accept the above as broadly what happened. 77.On the other hand the IO’ alleges that Ms Luk was an evasive and defensive witness. She falls squarely within the category of “emotional witnesses”, who tried hard to reimagine past events with the benefit of hindsight and to paint herself in a favourable light. When faced with questions she could not answer or documents that she could not explain, she had the tendency to feign ignorance and blame her lawyers, (who have represented her throughout these proceedings). 78.In Ms Luk’s witness statement dated 10 September 2024, she claims that as early as 2020, she “was concerned and suspected there might have been an overcharging of management fee from the IO over the years”, withheld payment of management fees since November 2020 pending a satisfactory explanation from the IO as to the calculation of management fees and requested accounts to “verify [her] suspicion of overcharging”. During cross-examination, Ms Luk accepted that the above was false as she was in fact not aware of the miscalculation and thus could not have raised complaints at the time. 79.Whereas Mr Wong claims that Ms Luk’s credibility can be shown by the fact that she admitted that the respondent had not discovered the miscalculation of the management fee back in 2020 to 2021, such that her witness statement is not accurate. In the witness box, she could have stuck to what was said in her witness statement and told the tribunal that the respondent discovered the overpayment at a much earlier point of time, so that the common assumption between the IO and the respondent was shown erroneous much earlier. Ms Luk did not do so, and forthrightly told the tribunal that overpayment had not been discovered at that time. This shows that Ms Luk has taken every opportunity to tell the tribunal the truth and is a credible witness. 80.The IO replies that while the respondent tries to spin this as an instance of Ms Luk’s honesty, there was no way Ms Luk could have insisted on her original case, which was totally inconsistent with the contemporaneous documents. This reflects Ms Luk’s tendency to conjure up claims to suit her current case. 81.Mr Wong asserts that there is no conceivable reason why Ms Luk would lie about any fact, but not lie about the timing the respondent discovered the miscalculation. Hence, the tribunal is invited to accept Ms Luk’s entire factual account including her cross-examination. 82.I did not find Ms Luk to be “an emotional witness” or that she was trying to paint herself in a favourable light. She was a person of strong character and made some points forcefully but that did not suggest she was departing from the truth. I accept that there were some matters that she genuinely did not know. Rather than blaming her solicitors she left matters to be handled by the solicitors and did not also concentrate on matters she had delegated. Her evidence was inherently plausible and logical. She was not discredited by other evidence. Overall I find Ms Luk to be a credible witness and I accept her evidence. ISSUES 83.The Agreed List of Factual and/or Legal Issues dated 12 November 2024 lists the following 10 issues:
The respondent’s preliminary points 84.The respondent invites the tribunal to consider the following common realities in the context of building management in Hong Kong in approaching the issues. 85.First, a DMC is not an easy read. It may be difficult to interpret a DMC: Kwok Mo Kai Doris v The Incorporated Owners of Karin Court LDBM 46/2004 (unrep., 19 July 2005) at §16. The incorporated owners and/or management committee and/or management company (collectively “management bodies”), as the ones specifically entrusted with the task and power of managing the building, should carefully read and ensure due observance of the DMC in the management process. The co-owner would readily and understandably rely on the management bodies’ reading and assume that their way of managing the building is in accordance with the complex DMC. 86.Secondly, an owner has no duty to point out to the management bodies their breach or mistake: Kwok Mo Kai Doris at §13. That paragraph also says that “if he omits so to do, he might suffer prejudice”. However, whether there would be such prejudice still depends on the circumstances of each case. In the present case, the respondent’s failure to complain should not attract prejudice. It would be ideal if all owners can keep an eye on the manner in which the building is managed and notify the management bodies if there is something wrong. However, the burden rests on the management bodies to vigilantly review their own performance and ensure that their respective duties have been consistently discharged. This is especially so when the relevant part of the DMC is hard to comprehend or when the correctness of the management bodies’ act is hard to verify. In such circumstances a co-owner would normally trust the self-check and judgment of the management bodies. 87.Thirdly, whilst ultimate responsibility for building management lies with the incorporated owners, usually the daily and technical works are delegated to the property management company which are paid to provide management services to a building. Honor Fame is such a paid property management company. As remunerated service providers, property managers generally have a degree of expertise or specialty in building management, and owe different duties to the owners of the building they serve. The IO usually delegated to property managers the calculation and collection of management fees. This is the arrangement in the Building with Honor Fame, as confirmed by Mr Tsui. 88.The respondent submits the above three realities describe the situation of most multi-storey buildings in Hong Kong. They are based on the tribunal’s previous observations in Kwok Mo Kai Doris, witnesses’ evidence, or simply common sense. The tribunal should have regard to what is happening in the real world on everyday matters of building management. Mr Wong says that those realities are vital to the analysis of whether estoppel by convention can be established and, even if yes, when it should cease to operate on the facts of this case. 89.The IO does not agree that the respondent, as owner, has no duty in management fee issues: -
DISCUSSION 90.Issues 1 and 2 may be shortly answered. Issue 1: Was the respondent overcharged by the IO for management fees from March 2015 until February 2024, and if so, by how much? 91.The answer is “yes”. 92.The IO accepts that the calculation of management fees between March 2015 and February 2024 was not in accordance with the DMC. The amount of “overcharging” is not disputed. The attached Annexure table sets out the agreed detailed calculation of management fees. The IO also says that the previously wrongly calculated management fees were determined by the owners by a valid resolution, hence there was no “overpayment” in that sense. 93.The IO is still claiming from the respondent the wrongly calculated overcharged amount of management fees for the period from September 2021 to February 2024, despite now admitting that this amount is wrongly calculated contrary to the DMC. The respondent objects to paying any amount that is wrongly calculated. Issue 2: What are the arrears of management fees owed by the respondent to the IO from September 2021 to the present, if any? 94.The total amount of arrears as claimed by the IO is: -
95.After the amount due was correctly calculated and demanded, from March 2024 the respondent paid the management fees for March to October 2024. The period for which management fees remain unpaid is from September 2021 to February 2024. The respondent has not paid the remaining management fees because (1) the IO still insists the respondent should repay the miscalculated overcharged amount, and (2) the unpaid amount is pending to be set off against the amount overpaid in the past. Issue 3: On what basis did the respondent pay the IO HK$399,450 being the outstanding management fees between November 2020 and August 2021? 96.The respondent paid the IO HK$399,450 on 3 December 2021. It had pleaded that it paid to avoid nuisance. Ms Luk elaborated during cross-examination, that the IO not only failed to supply the accounts, but issued countless letters and chaser notes to the respondent asking for the outstanding management fees, such that she needed to pass all these documents to the respondent’s legal representative. LDBM 182/2021 was commenced on 29 September 2021. Ms Luk thought this was a kind of nuisance. Ms Luk further clarified the payment of HK$399,450 also aimed to show the respondent’s goodwill and its intention to attempt to resolve the disputes in the Building with the IO. Questioned which reason, Ms Luk said both. The EL 13 December 2021 letter regarding the payment concluded with a reservation of rights. 97.The IO submits first, the respondent’s position is inconsistent with contemporaneous legal correspondence and documents drafted for the respondent. The respondent’s original Form 7 filed on 25 February 2022 stated that the respondent’s payment of HK$399,450 was:-
98.The IO asserts that in its Re-Amended Form 7, the respondent added the claim that it paid HK$399,450 to “avoid nuisance” from the IO because the respondent realised that its previous concession would support the IO’s case of estoppel by convention. 99.There was nothing in the EL letter dated 13 December 2021 to suggest that the payment was made without prejudice to the respondent’s rights to dispute the IO’s entitlement to management fees as claimed. Rather, the respondent said: -
100.If the respondent had paid the IO’s costs as claimed, LDBM 182/2021 would have been entirely resolved in the IO’s favour. The respondent plainly did not intend to keep disputing the same. That is in line with it’s original Form 7 regarding the HK$399,450 payment. 101.The EL letter dated 13 December 2021 is to be contrasted with their letter dated 12 November 2024, which expressly states that its payment of management fees from March to October 2024 was “without prejudice to [R]’s right in the captioned matter, without admitting any liability of [R] to [A]’s claim, and further subject to any necessary refund if there is any overpayment by our client”. 102.Mr Wong submits that the IO’s assertion is unsustainable because the EL letter dated 13 December 2021 clearly stated at the last paragraph that “All our client’s rights are reserved”. There can be no admission of liability or settlement arrangement containing such reservation of right clause. Even if the respondent was contemplating settlement at that time, such settlement had not been reached and the payment of HK$399,450 was still subject to the respondent’s rights being reserved, including its right to ask for a refund if there was overpayment. The IO replies that the general statement that all of the respondent’s rights are “reserved” in the 13 December 2021 letter cannot now save the respondent’s case, when it is clear from the wording of the letter and the respondent’s original Form 7 that the respondent had admitted liability as to the IO’s entitlement to management fees as claimed. 103.First, in so far as the respondent’s original Form 7 filed on 25 February 2022, stating that the respondent’s payment of HK$399,450 was in settlement of the sum due may be construed as an admission, the respondent withdrew the admission by amendment. 104.The EL 13 December 2021 letter does record the payment forms part of the IO’s claim and that the remaining was HK$11,800. Subject to agreement there would be a settlement. The letter concluded with “All our client’s rights are reserved”. However close to a settlement, ultimately there was no agreement. In any event at the time of the payment the respondent did not know of the overcharging and that the demand and claim was not calculated in accordance with the DMC. 105.Secondly, the IO says that previous evidence is not entirely consistent with Ms Luk’s evidence in the witness box. When cross-examined as to why the respondent paid HK$399,450, Ms Luk gave as reasons (which are not in her Re-Amended Form 7 or witness statement) (1) that the parties had agreed that her complaints regarding the staircases would be separated from the issue of management fees; and (2) she made payment to show her goodwill. Ms Luk was confused about the timeline. It was not until 2023 (almost 2 years later) that DDJ M. Lam (as she then was) suggested to the parties that they separate the two causes of action. While payment out of “goodwill” does not mean that the respondent did not concede. I accept that one of the reasons was to show goodwill. 106.Third, the IO considers it is inherently implausible that the respondent paid to avoid nuisance. Ms Luk seemed to have forgotten that “avoiding nuisance” was stated as the reason for making payment until she was brought to the relevant pages during cross-examination. The “nuisance” she described is the issuance of 3 solicitors’ demand letters by the IO in March 2021, April 2021 and August 2021. She would pass any legal correspondence to her solicitors. The IO considers it is impossible that this “nuisance” would have caused her to make payment. 107.Ms Chong submits that the IO’s case that the payment of HK$399,450 was an unreserved concession as to the IO’s claim at the time should be accepted. It further goes to establish the common understanding between the parties at the material time. While the respondent alleges that the IO tries to twist the payment to being an admission of liability in respect of the corresponding management fee. 108.There was inconsistency in the respondent’s evidence over time. I do not find it inherently implausible that a payment would be made because of solicitor’s letters. The word “nuisance” may understate the effect of such letters. The impact may be of considerably greater concern. Ms Luk said they were chasing for money. Proceedings had been issued. I do not find it implausible that payment would be made without admitting the IO’s entitlement to management fees as calculated or that the basis of the claim is correct. Payments are often made without accepting the merits or for reasons such as to show good will when there are outstanding disputes. At the time of payment the respondent did not know that the management fees demanded were miscalculated. 109.I find that the payment does not amount to an unreserved admission of the IO’s claim that the sum was correctly calculated or the correct amount due, to which the respondent is now bound. Issue 4: When did the respondent first request the IO to provide copies of its annual audited accounts for checking? 110.Ms Luk says that immediately after they acquired the respondent’s shareholding on 9 June 2020 accounts were requested. She explained that this is the general practice in taking up a new company that the new owner would ask to check the relevant accounts, which include the IO’s audited accounts here. At that time, the requests were made by Ms Luk orally to the representative of the IO and/or Honor Fame stationed at the Building. 111.The respondent also made the first written request to inspect the IO’s accounts on 30 November 2020, as accepted by Mr Tsui. 112.Further written requests were made thereafter, including by email dated 18 December 2020 and by letter and email dated 2 March 2021. In parallel, Ms Luk never ceased making oral requests to inspect the IO’s accounts. 113.The IO accepts that the first written request was made on 30 November 2020, but disputes oral requests were made by Ms Luk at any time which are not backed up by any evidence, save for Ms Luk’s say-so. 114.The written requests have been proved. I have no hesitation in accepting that Ms Luk made oral requests for the accounts, both before and after, the first written request on 30 November 2020. It is inherently plausible that upon taking up the Premises the respondent would want and seek the accounts, and in these circumstances, that Ms Luk would first make oral requests. I readily accept that Ms Luk frequented the Building while her renovations were being carried out and sought the accounts from the staff at the Building. Having observed Ms Luk, her evidence that she would request and “scold” the staff has the ring of truth. Issue 5: From March 2015 and up to the point of time as answered under Issue 4, had the IO ever shown and explained to the respondent how the management fees charged by the IO were calculated, and if not, what bearing does it have on these proceedings? 115.The undisputed answer is “no”. There was no explanation. 116.The IO cannot see how this issue has any bearing on these proceedings. Mr Tsui said the respondent never requested the IO show or explain to the respondent how the management fees charged by the IO were calculated at the material time. Nor was there any complaint. Why would the IO then be expected to suddenly show and explain to the respondent how management fees were calculated on its own initiative? The respondent explains that the relevance is that the respondent simply could not have shared any common assumption with the IO as to the calculation of the management fee, as analysed under Issue 8. 117.Another issue is in respect of management committee meetings. The IO suggests that, since the respondent had sent its representatives to attend the IO’s management committee meetings until 9 June 2020, the respondent was fully aware of the calculation of the management fee. Mr Wong says that this cannot stand up to scrutiny:-
118.I find that the IO has not established knowledge in fact or that it should be attributed to the respondent by reason of attendance at any meeting. Issue 6: Did the IO fail to provide copies of its annual audited accounts as requested by the respondent, and if so, what bearing does it have on these proceedings? 119.According to the IO, it did not fail to provide copies. The respondent requested the IO’s audited accounts at 2 different points in time: (i) between November 2020 and March 2021; and (ii) in December 2022. 120.The IO accepts that the wording of the respondent’s letter dated 2 March 2021 requests “all audited financial statements since the establishment of [A]” and that only the 2019 accounts were produced to the respondent on 5 March 2021. However, the IO asserts that the respondent’s letter dated 17 March 2021 shows that the respondent was evidently satisfied with the accounts produced by the IO at the time. The letter states: “Despite we made repeated requests to the IO to inspect the account book over the past year, the IO did not provide the book to our Company until a week ago.” No further written request for accounts was then made until December 2022. 121.Ms Chong submits that although Ms Luk claimed that she continued to make oral requests after March 2021, this is implausible. If the respondent was dissatisfied with the extent of accounts produced, the respondent would have continued to make written requests, whether in the same letter or subsequently. I have found that Ms Luk continued to make such oral requests. The respondent was not satisfied. That is why Ms Luk kept asking for the accounts. The respondent’s request in December 2022 was handled within a reasonable time and accounts were produced by January 2023. 122.According to the respondent, the IO failed to provide the accounts as requested, although they were belatedly provided. Despite the respondent having made repeated oral requests since July 2020, written requests as early as on 30 November 2020, and a follow-up written request for accounts for all previous years on 2 March 2021, the IO belatedly provided the audited accounts to the respondent only as follows:-
123.By failing to provide the accounts as duly requested by the respondent in writing in a timely manner, the IO was in breach of the duties under the DMC Section VI Part H Clause 6 and Schedule 6 Paragraph 3 of BMO. The DMC provides as follows:-
124.The respondent’s case is that the IO’s wrongful delay in providing accounts has a bearing on whether the estoppel by convention could be sustained in light of the IO’s further breach. The question to ask is, when the IO itself is in breach of its duty to provide accounts to the respondent and such breach lowered, if not eliminated, the chance of the respondent finding out about the miscalculation earlier, whether the respondent should still be forced to pay the overcharged amount during that period? This is addressed further under Issue 8. 125.I find that the IO failed to provide the accounts timeously and as requested. The accounts coupled with the DMC were required to calculate the management fees correctly. The IO provided the 2019 accounts on 5 March 2021. It would have been possible for the respondent to use those accounts to discover that the management fees were wrongly calculated. However, the respondent was not on notice to look for the miscalculation that had occurred. Ms Luk was waiting for the full set of accounts to provide them to her accountant. The respondent was able to discover the issue with only the 2019 accounts, but this was after the dispute continued to escalate. In the circumstances where the respondent was renovating the Premise to run a business, I accept that the respondent did not discover the miscalculation but that had all the accounts been provided to the respondent earlier and passed to the accountants things may have been different. The effect of failure to provide a full set of accounts is addressed under Issue 8. Issue 7: By receiving and collecting the overpaid management fees from the respondent (if any), is the IO (i) in breach of the DMC, (ii) in breach of sections 16 and 18 of the BMO and/or (iii) unjustly enriched? 126.The IO is in breach of the DMC: Century Globe at §79; 黃瑞珊at §26. The DMC provides, inter alia, that:-
127.The IO accepts that not calculating management fees in accordance with the DMC is a breach of the DMC. The respondent confirmed in closing that it does not rely on breaches of sections 16, 18 and 22 BMO or unjust enrichment as a defence, which the applicant disputed. In claiming the refund of overpayment and/or a set off, the respondent relies on the IO’s breach of the DMC. Issue 8: If so, has the applicant made out the defences of estoppel by convention and/or change of position and/or other estoppel? The IO’s case on estoppel by convention 128.The IO confirmed that the defences of change of position and other estoppel do not need to be considered. Common assumption 129.An estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other: Spencer Bower at §8.4; Unruh at §131. The IO disputes the respondent’s position that as an owner, who is not responsible for calculating management fees and relies on the IO or the manager to do so, it cannot be taken to have “assumed responsibility” for the common assumption. Estoppel by convention may arise even where A and B independently (and often by mistake) make, and then deal with each other upon, the same assumption: Unruh at §134. The “responsibility” spoken of is simply “in the sense of conveying to the other party an understanding that he expected the other party to rely upon it”: Spencer Bower at §8.23. 130.Applying those principles, the IO’s case is that there was a clear common assumption between the parties that the management fees charged by the IO were calculated correctly at least from March 2015 until December 2022. (“IO’s Assumption”) 131.The respondent accepts that it did hold the assumption that the management fees as charged on the demand note were correctly calculated. This must be the case. Otherwise, why would the respondent have paid the fees? However, the respondent argues that it played no role in causing the IO to assume that the management fees had been calculated correctly. The IO considers the respondent’s approach wrong. An estoppel by convention is an estoppel from denying a proposition established, by mutual, express or implicit, assent. The estoppel is founded on a common assumption of facts or law as a basis of their relationship, to which B has so assented as to make B responsible for A’s reliance on it. When the parties have so acted in their relationship upon that shared assumption that it would be unfair on A for B to resile from it, then A will be entitled to relief against B: Spencer Bower §8.2. Further, Spencer Bower §8.26 provides: -
132.The proper question is whether the respondent, holding the assumption that the management fees were correctly calculated and charged, conveyed to the IO the understanding that it also expected the IO to rely on the same assumption. The IO says that the answer is a clear yes. Whereas the respondent says clearly not. 133.Between March 2015 and June 2020, the respondent paid management fees without complaint. The IO says that there cannot be clearer conduct to convey to the IO that the IO can rely on the same assumption that the management fees were correctly calculated and the IO can safely use the fees collected to defray expenses of the Building. 134.Between June 2020 and August 2021, the respondent, then owned by Ms Luk and her sister, also paid management fees without raising any complaint about the calculation (albeit the fees for November 2020 to August 2021 were paid late). This remains clear conduct conveying to the IO that the IO can act upon the common understanding. 135.After September 2021, the respondent once again stopped paying management fees because of other complaints about the Building, but no complaint was raised about the calculation of management fees until December 2022. There was thus nothing that would alter the common assumption between the parties that had been in place since March 2015. 136.The respondent’s conduct conveyed that the IO could safely rely on the common assumption. This is particularly so when the respondent was a member of the management committee at the time, which the respondent proclaims to be the ones specifically entrusted with the task and power of managing the building and should adopt a careful reading of the DMC and ensure that it has been duly observed. That the topic of how to calculate the management fees payable did not come up in management committee meetings when the respondent was a member is irrelevant. It is the respondent’s case that the management committee (which can only act through its members) should actively take up the duty to ensure that there is due compliance with the DMC. 137.Further, there was an Owners’ Meeting in 2018 concerning the financial budget and increase of management fees. The respondent, along with other owners, unanimously voted for the resolutions. 138.Ms Luk tried to blame her lack of knowledge of the miscalculation prior to December 2022 on the IO’s failure to provide the full set of audited accounts. The IO does not see the relevance but answers as follows. First, the respondent was satisfied with the production of the 2019 accounts in 2021. That is disputed. I have found that the respondent was not satisfied with just the 2019 accounts and continued to ask for all accounts. Secondly, the respondent could have discovered the miscalculation holding just the DMC and 1 year of audited accounts. The respondent’s letter dated 9 December 2022 shows it did that when the IO had not provided any further accounts. That is so. 139.The respondent says that Mr Tsui agreed with the respondent’s case as to the reasonable expectations of an owner when the owner received a demand note. The IO relies on the following: -
140.I accept Mr Tsui’s evidence included the above answers. He agreed that an owner would expect the manager would ensure there was no mistake in the calculation. Therefore, the IO knew that the respondent would assume that the IO would ensure the calculation was correct. Mr Tsui said owners could check as they could view the DMC when they purchased. He confirmed that the collection of management fees was based on the list of management fees. Honor Fame did not revisit the calculation because for years there was no adjustment to the management fees, not because of any assurance from any owner. They simply relied on the list. The IO’s common assumption submissions go to the Briggs J first three, and in particular, the second principle of estoppel by convention. Unjust to now allow the respondent to deviate from the common assumption 141.The IO claims that it would suffer detriment if it has to refund excess amounts of the already paid contributions or set off excess amounts against unpaid amounts, hence the IO’s accounts would not be balanced, when the common assumption had been acted upon for years. The “detriment” is detriment suffered by the owners of the Building as a whole. The respondent wrongly sees management fees as a profit or income earned by management companies, arguing that management companies would benefit unfairly if estoppel by convention is established. Management fees are paid by owners to collectively maintain the Building. As with other multi-storey buildings, the management fees collected have been used to defray operational expenses. The IO’s submissions that it would be unjust to allow the respondent to deviate from the common assumption, in particular, go to Briggs J’s fifth principle of estoppel by convention. 142.The IO refers to Young Kwok Sui, §31 as apposite: -
The respondent’s on case estoppel by convention 143.Mr Wong considers it essential to establish clearly what is objectively happening when the IO charged the respondent the management fee and the respondent paid the IO such fee. In analysing whether estoppel by convention can apply on the facts the following 4 questions are said to be pivotal. 144.First, whose responsibility is it to calculate and charge the correct amount of management fees? The respondent’s answer is:
145.In my view the authorities make it clear that the party relying on estoppel by convention may be at fault, have made a misrepresentation, be the cause of a mistake that is the basis of the common assumption or even negligent. Fault in causing the common assumption does not prevent a party establishing estoppel by convention. 146.Secondly, when the respondent, (or any other co-owners) paid the management fees as charged by the IO every month, what was actually being assumed by the respondent? The respondent’s answer is:
147.Thirdly, whether the respondent has any role to play in the IO’s adoption of its assumption that the amount of management fees charged by it had been correct? The respondent’s answer is:
148.Fourthly, whether the respondent should or could have reasonably spotted the mistaken calculation by the IO? The respondent’s answer is:
Application of the Benchdollar principles (as amended in Blindley Heath) and explained in Tinkler 149.I apply the Benchdollar principles, as amended in Blindley Heath, and explained in Tinkler to the facts. After ascertaining the actual circumstances surrounding the overpayment here, the respondent submits that the five principles of estoppel by convention enunciated in Tinkler at §§45-49 cannot be satisfied. Whereas the IO maintains that there was a common assumption and that estoppel by convention can be established. (1) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly shared between them, the conduct must have crossed the line between them which may consist either of words, or conduct from which the necessary sharing can properly be inferred Common assumption 150.First, the respondent submits that the IO and the respondent did not share any common assumption that the amount of management fee charged is correct. The IO’s Assumption is that “the management fees charged by the IO were calculated correctly at least from March 2015 until December 2022”. From the respondent’s perspective, it simply relied on the IO’s calculation, trusted that the IO would review whether the amount it calculated and charged is correct, and expected the IO to return any overpaid amount later discovered. Mr Wong submits that it cannot be the respondent’s, or any owner’s stance, that “yes, I now agree once and for all that the amount you charged is correct, even if it is later shown to contradict the DMC, it is still correct and you need not pay me back”. 151.The IO’s position is that the IO’s Assumption, that the calculation was correct was a common assumption. 152.The respondent replies that while the IO’s Assumption, that the calculation was correct was a common assumption, that was not the only assumption that was common to the parties. The Respondent’s Assumption was that the manager would review, spot and rectify its own mistake, that the manager would notify owners of any miscalculation of management fees and further, that the owner would be repaid any overpayment. Whether these assumptions are considered additional assumptions or they qualify the IO’s Assumption as to the assumed basis of their dealings may be a matter of semantics. What is material is the basis upon which the parties dealt with each other and the convention between them. The Respondent’s Assumption was accepted by Mr Tsui. He gave evidence of his understanding. The test is objective. I accept that what he assumed and what he believed owners would assume is indicative of what a reasonable manager and IO in the circumstances would assume on the present facts. I find that the Respondent’s Assumption was a reasonable assumption to be held in the circumstances and was held by the IO. 153.The first principle requires a common assumption. Ms Chong points out that there was no direct evidence from the respondent as to its assumption or confirming it held the Respondent’s Assumption. The respondent is claiming repayment of sums overcharged. The test is objective. I find that the respondent held the Respondent’s Assumption, including that if the amount was wrongly calculated the amount overpaid would be repaid. If the Respondent’s Assumption, including that overpaid amounts would be repaid, be the common assumption, the IO cannot rely on estoppel by convention to refuse to repay the overpaid amounts. The facts do not substantiate a defence to the respondent’s claim. 154.Whereas, if the IO’s Assumption was not only that the management fees calculation was correct but also that if the calculation was wrong the IO was entitled to refuse to repay any miscalculated sum paid, that assumption was not a common assumption. The respondent had not subscribed to that assumption. The common assumption upon which the estoppel is based must be understood by the parties in the same way: Laser U §79(4). In that event, the parties did not even understand the assumption in the same way. 155.The IO extended the assumption to add “and that the IO was able to defray the sums”. That would be so. However, an assumption that the sums paid may be defrayed upon receipt does not negate the assumption that if it turned out that there was a miscalculation it would then repay any overpayment. 156.The common assumption upon which the estoppel is based must not merely be understood by the parties in the same way. It must be shared between them, the conduct must have crossed the line between them. It may consist either of words, or conduct from which the necessary sharing can properly be inferred. In my view there was no conduct that crossed the line between them from which the necessary sharing could be inferred. This was not a situation where, for example, the respondent provided the IO with the sum the respondent calculated as due that the IO then adopted. Nor did the IO provide the calculation for the respondent’s approval before or with the demand note so that the respondent’s endorsement or payment could be said to have crossed the line between them. Nor was there any notice provided with or in the demand note that the respondent must check the calculation or an express limitation on the time within which the owners must raise any queries in respect of the amount charged, failing which they would be deemed to have accepted the sum was correct or debarred from challenging the calculation. There was simply no fact or conduct of the respondent in relation to the accuracy, or otherwise, of the calculation which could be said to have crossed the line between them so that the necessary sharing could be inferred. 157.Importantly, for the owner to check the sum on the demand note the owner required 2 things: (1) the DMC, and (2) the accounts or information that would appear in the accounts. The respondent only had the DMC. The respondent did not have the accounting information. The IO has not proved that such information was available to the respondent, say by notice posted in the Building disclosing the accounts or calculation. The IO did not produce the list of management fees provided to Honor Fame which was the basis of the sum demanded in the demand note or the quarterly summary of accounts. They were not made available to the respondent at any time before any payment was due. The information was available to the IO only, so it could not be inferred that the respondent was expressing any view by words or conduct as to the calculation and that they shared the same assumption. 158.Limiting the assumption simply to the IO’s Assumption, that the management fees charged by the IO were calculated correctly, I find that there was no common assumption that crossed the line between the IO and the respondent that the calculation was correct. 159.I find that the IO has not satisfied the first principle or element of estoppel by convention or proved a shared common assumption that could allow the IO to resist the respondent’s claim. (2) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying an understanding that he expected the other party to rely on it 160.Secondly, the respondent’s case is that it had not assumed any responsibility in the IO’s thinking that the amount it charged is correct. The responsibility to calculate the correct amount of management fees lies with the IO, not the respondent. The respondent did not and had no reason to induce the IO to think that the amount charged and paid is correct. To the contrary, it was the IO who told the respondent that the amount stated on the demand note is correct and demanded it pay that amount. 161.The IO’s says that the very act of payment shows irrefutably that the respondent was relaying to the IO that the calculation was correct. 162.The facts established are that the successive managers used the list of management fees to ascertain the management fee to charge. On the basis of that list the sum was printed on the demand note. The IO relied on its own calculation on its list of management fees. The calculation was completed before an amount was demanded. Otherwise the said demand note would not be sent. At that point the IO considered the sum demanded to be correct. Once the demand note was issued that was the sum due as far as the IO was concerned. It did not look to the respondent, or any owner, to reassure it as to its calculation or to verify the management fee calculation. The manager and the IO took responsibility for calculating the sum. 163.The parties relative responsibilities under the DMC are material. The DMC provides that the respondent shall pay the sum demanded within 30 days. Failure to pay within that time shall incur interest and a collection charge. Further, the unpaid sum may be recoverable by civil action and a charge may be registered against an owner’s property. The IO would know that the respondent paid upon receipt of the demand note because it was bound to do so under the DMC. Payment was not conveying to the IO that the respondent expected the IO to rely on the calculation as correct. The IO had no interest what so ever in whether the respondent expected the IO to rely on the calculation as being correct. The respondent’s views on the calculation played no part in the IO’s thinking. It was not waiting for the respondent’s verification. Time started to run immediately. The IO well knew that the payment was made because the respondent was bound to make payment upon issue of the demand note in accordance with the DMC. If payment was not made within 30 days, in terms of the DMC, the IO made further demands and moved on to enforcement action. It did not question the respondent about the accuracy or otherwise of the calculation. 164.I accept the respondent’s submissions distinguishing the facts here from other situations. This is not a caveat emptor situation. The IO did not issue an interim demand note or state a provisional sum subject to the verification or confirmation of the owner. The respondent had no intention to induce or to give the IO any reassurance that it’s calculation was correct and the IO did not look to the respondent to provide such reassurance or confirmation and was not induced by any conduct of the respondent. The IO did not rely on the respondent’s position at all. 165.Estoppel by convention is a reliance-based estoppel: Spencer Bower at §1.7. In my view the respondent played no part in the adoption of the IO’s Assumption. The respondent did not actually, and objectively it could not reasonably have been understood by the IO, to intend the IO to rely on the subscription of the respondent to their common view, as opposed to each keeping their own counsel, being responsible for his own view. The IO kept its own counsel and was entirely responsible for its own view. It is sufficient that, as the respondent intended or expected, the respondent’s affirmation of the common assumption strengthened, or influenced, the IO thereafter relying on the common assumption. Here any affirmation or subscription by the respondent to the IO’s Assumption did not even strengthen or influence the IO thereafter relying on the common assumption. 166.I do not agree with the respondent’s position with regards fault of the IO. The relevance of the IO’s conduct is to determine the common assumption and whether the IO could reasonably have been induced or understood that the respondent was conveying an understanding that the respondent expected the IO to rely on the calculation being correct. 167.In all the circumstances the respondent cannot properly be said to have assumed some element of responsibility for the assumption that the calculation of the management fees was correct. It certainly did not convey to the IO an understanding that the respondent expected the IO to rely on its view that the calculation of the management fee was correct. I find that the IO has failed to satisfy the second principle or element of estoppel by convention. (3) The person alleging the estoppel must in fact have relied upon the common assumption to a sufficient extent, rather than merely upon his own independent view of the matter 168.Thirdly, Mr Wong submits that the IO definitely had an independent view as to the correctness of the management fees charged. The IO came to the conclusion or assumption that the amount charged is correct based on its own calculation and reading of the DMC. Again, it is not the case that the IO looks to the respondent for confirmation of the payable amount. Rather, the situation at the Building is a top-down arrangement under which the IO charged the respondent an amount and the respondent paid that amount as charged. 169.The IO’s position is the IO relied on the common assumption and actual payment of the management fees by the respondent. 170.The IO’s Assumption is that the management fees charged by the IO were calculated correctly. The IO had its own independent view as to the correctness of the calculation of the management fees. The respondent did not cause the IO to assume the calculation was correct. The IO did not rely, even in part, on the respondent to check or inform the IO as to the accuracy of the calculation. The IO’s Assumption is as to the accuracy of the calculation. The IO relied entirely on its own calculation and the list of management fees. 171.I find that in fact the IO did not rely upon the common assumption that the management fees were calculated correctly to a sufficient extent, or at all, rather than merely upon its own independent view of the matter. Tinkler explanation of the first 3 principles 172.The formulation of Lord Burrows JSC in explaining the first three principles requires the shared common assumption strengthen, or influence the IO. In my view the respondent did not share the same common assumption which the IO knew, but in any event, the IO was not strengthened or influenced in reliance on that common assumption by that knowledge. The respondent did not (objectively) intend or expect that will be the effect on the IO of its conduct, which in any event did not cross the line, so that it can be said that the respondent had assumed some responsibility for the IO’s reliance on the IO’s Assumption. The IO did not rely to any extent on any affirmation by the respondent. (4) The reliance must have occurred in connection with some subsequent mutual dealing between the parties 173.Fourthly, the respondent maintains that the IO continued to charge the same amount under the wrong assumption that the amount charged is correct, not because the respondent was willing to pay the amount charged, but because the IO trusted its own calculation and thought there was no problem. The IO’s position is the subsequent dealing was the payment which the IO relied upon to defray expenses and manage the Building. 174.For the reasons above I find that the IO did not rely on any common assumption, the respondent’s payment or absence of complaint that the calculation was correct in connection with their subsequent dealings. (5) Some detriment must thereby have been suffered by the person alleging the estoppel sufficient to make it unjust or unconscionable for the latter to assert the true legal or factual position 175.Fifthly, the respondent’s case is that over the years, the respondent paid more while other owners paid less, all because of the IO’s breach of the DMC. If there is any detriment, it must be on the respondent’s side and the party to be blamed must be the IO as the breaching side. 176.The IO maintains that it would be unjust because any repayment or set off would affect all the other owners who have paid in the past and the IO relies on the budget and management fees to manage the Building. The IO refers to Young Kwok Sui where the unfairness included that the other owners had contributed money to the works and it would be unfair if they had to contribute money again: at §31. 177.The distinguishing feature here is that while the respondent has been overcharged the other owners have been correspondingly undercharged. The other owners may have relied on their payments being conclusive as to the sum due, and were there to be a balancing exercise they may claim detriment. However, in my view that is not sufficient to make it unjust or unconscionable for the respondent to assert the true legal and factual position. The respondent has effectively been subsidising all the other owners over the years. They have had the use of that money for the period it ought to have been paid for management of the Building. The detriment is not sufficient to make it unjust for the respondent now to require the management fees be calculated correctly in accordance with the DMC and adjustment be made, for the past, not just from March 2024 when the IO adjusted the calculation and demanded management fees on the proper basis in accordance with the DMC. 178.The IO has not satisfied the fifth principle or element of estoppel by convention. For the above reasons I hold that the IO has failed to establish estoppel by convention. 179.The respondent also relies on policy arguments as to why estoppel by convention should not arise in the present circumstances. First, it would mean that the responsibility for calculating the correct amount of management fees would be shifted from the management bodies to the layman owners. Property management companies would think that they do not need to follow the DMC when charging management fees, because so long as the owners pay that amount without finding out that amount is wrong, it is “assumed” to be correct. They would take no responsibility even if the amount charged is later found excessive. While owners would be forced to keep a close eye on the management fee charged every month. Owners who do not have the ability to understand the DMC may have to instruct a lawyer to check the formula prescribed by the DMC or an accountant to review the expenses charged, for fear that once the management fee is paid, it becomes non-refundable, even if it was excessive. 180.Secondly, such a reversal of responsibility is highly undesirable as a matter of proper building management. The owners paid a professional manager to manage their building who is responsible to do so in accordance with the DMC. If there is any mistake, the manager should be the first one to spot and rectify it. It should not be able to turn things around and estop an owner from complaining about its breach, simply because the owner did not raise the complaint earlier. Mr Wong accepts that certainly, if the owner knew about or should have known about such breach but still took no action, then he might well be estopped. The defences of acquiescence or waiver may also be available. But the overpayment problem at the Building is not such a case. Even Honor Fame failed to discover the problem in July 2019 despite carefully reading the DMC and trying to ensure it complied with the DMC. 181.In my view the respondent overstates the concerns. A decision in one case would not cause management companies to act with impunity. If managers or the IO require owners to verify the accuracy of the calculation of management fees or reassure them as to the figure, owners should be given notice that they are required to do so, notwithstanding the terms of the DMC. If responsibility to calculate or check the accuracy of the management fees is to be born by the owners they need to be provided with the necessary information to do so, in a timely manner. In this case that would be provision of the material accounting information to independently calculate the management fees accurately. That was not done. If an owner was required to apply in writing for the audited accounts they would only be available after completed at the end of the accounting year. The DMC requires that the owner shall pay within 30 days of demand and failure to do so would incur interest. The IO needs to receive management fees each month and to defray the fees in the management of the Building on an ongoing basis as and when they are paid. Payment cannot be withheld until annual accounts are available. 182.The respondent acknowledges that the application of estoppel by convention is fact-sensitive. The practice of calculating and collecting management fees can vary. One common method is to charge management fees based on the flat size, which may make it easier to verify the correct amount payable compared to the situation here. Different property management companies include different information in their demand note. Additional information may be made available to owners to enable them to calculate or verify management fees charged. The assumption of an owner when paying management fees in one case may be different from that in another. The factual variations will affect the applicability of estoppel by convention. Authorities on application of promissory estoppel in respect of management fees in building management cases 183.Mr Wong submits that whilst the tribunal will be guided by the overarching principles laid down in the authorities Unruh, First Laser and Tinkler, it should not be bound by how the principles were applied in previous overpayment cases concerning different facts. Thus, it is not necessary for the tribunal to determine the correctness of the overpayment cases cited by the IO. The respondent attempts to distinguish the cases, inter alia, on the facts. I have considered all of the authorities referred to by both parties. In my view they do not change the above analysis or application of the principles to the facts of this case. I address them below. 184.The Incorporated Owners of Beauty Court is the oft-cited authority for the proposition that an owner who has paid a certain amount of management fee for a long time would be estopped from complaining that such amount is wrong: at §§20-21. The Court of Appeal dismissed an appeal from The Incorporated Owners of Beauty Court v Hon Ping Kay and Anor LDBM 29/2001 (unrep., 16 July 2001). Mr Wong says however, the case did not concern the calculation of management fees at all. Rather, it concerned a monthly “reserved fee” of HK$300. In a 1990 Owners’ Meeting it was resolved that such special fee would be levied on the owners. The owner in question paid this fee for 6 years and later alleged that the charging of such fee was not properly resolved in an owners’ meeting 6 years previously. There was no mention of who bore the responsibility of calculating and charging this “reserved fee”, or whether payment was a DMC obligation. It appeared to be an additional fee suggested by the incorporated owners and then agreed by the owners during an owners’ meeting. The owners could agree to pay it or not. Whether or not the resolution in the owners’ meeting was valid, no one could be said to be at fault. On such facts, where the incorporated owners and the individual owners were on a level playing field, the tribunal and the Court of Appeal held that, since the owners themselves had agreed to pay the fee during an owners’ meeting and had in fact paid such fee for years, they could not later complain that the charging of such fee was illegitimate. Whereas the present situation is different. If it turns out the amount charged is incorrect, it would be the IO’s breach of duty and the innocent respondent should not be asked to share the IO’s responsibility. The respondent submits that the case has been repeatedly (mis)applied in subsequent cases concerning management fee. 185.The argument that The Incorporated Owners of Beauty Court is inapplicable to management fees cases has previously been rejected by HHJ Kot of The Incorporated Owners of Universal Industrial Centre at §§25 and 30. Ms Chong replies that the remainder of the respondent’s objections are based on the incorrect proposition that estoppel by convention does not apply because the IO has the sole responsibility for calculating management fees and should thus be rejected. 186.In my view estoppel by convention can undoubtedly apply to estop a claim for repayment of management fees wrongly calculated and paid. Further, The Incorporated Owners of Beauty Court may apply to management fee cases. The Court of Appeal decision is binding on the tribunal. The Court of Final Appeal decisions and reasoning in Unruh and First Laser on the principles of estoppel by convention are those further explained in Tinkler. In Hong Kong Tinkler has been applied in the Court of First Instance. The Incorporated Owners of Beauty Court decision pre-dated Tinkler but the same principles were applied. The decision may be distinguished on the facts. The Court of Appeal held that the owners themselves had agreed to pay the fee during an owners’ meeting and had in fact paid such fee for years. Their agreement and conduct crossed the line. The IO could be induced by the owners conduct to rely on the common assumption. 187.Leung Moon Cheung concerned the overpayment of management fees: at §§6-9, 17-18. The miscalculation was pointed out by the adjudicator in a prior case: at §§4-5. The doctrine of estoppel by convention was applied to reject the claim for refund of the overpaid amount. The law was stated “in simple terms, there existed a common assumption between the parties which had been acted upon for such time that a party’s deviation from which is unjust and unconscionable”: at §14. Mr Wong submits this was an incomplete statement of the doctrine because the rationale of reliance-based estoppel was omitted. Proceeding from such wrong starting point, it was decided that since there was a common assumption that the management fees were calculated in accordance with the DMC and it had been acted upon for years, it would be unjust to deviate from such mistaken common assumption: at §17. There was no analysis as to the elements of fault and responsibility. The claimant owner did not argue that the miscalculation of management fee was a breach of DMC, which is the crux in the present case. 188.I do not consider the fact that the calculation was a breach of the DMC to be the crux in the present case, as set out above. The principles, as explained in Tinkler, were not argued. Ms Chong has explained why the respondent’s objections based on “responsibility” alone cannot be sustained. The decision may be distinguished on the facts. There was a common assumption. 189.Young Kwok Sui does not concern estoppel by convention, which is the sole defence deployed by the IO here: at §§30-34. Mr Wong submits that there was no argument based on the incorporated owners’ breach of DMC and its liability as a result of overcharging the expenses of repair and maintenance works. Ms Chong maintains that the passages relied on by the IO apply equally to the present case of estoppel by convention. In my view the case is distinguishable on the facts. There was a common assumption. 190.Mr Wong submits that Chui Kit Hing v The Incorporated Owners of 188-190 Boundary Street and 5-7 Pentland Street LDBM 15/2015 (unrep., 19 July 2016) does not concern the calculation or charging of management fees, but the application of management fees: at §§50-53. The incorporated owners did not ask the owners to contribute funds for some finished construction works. The claimant owner alleged that the incorporated owners must have applied the management fees to pay for those construction works and complained that this arrangement is inappropriate. It was held that the application of management fees to pay for those construction works is legitimate. This fully answered the claimant owner’s complaint: at §§48-49. It then went on to observe that the incorporated owners and the owners also assumed that the management fee was duly collected, such that it would be unfair to ask for a refund later: at §52. Unlike the present case where the IO is in breach of its duties by overcharging, the incorporated owners in that case simply had done nothing wrong. There was no proper basis to ask for a refund. Any discussion on whether a refund was fair or not is at most obiter. 191.The IO disputes the respondent’s suggestion that the incorporated owners would have done “nothing wrong” by using fees collected to proceed with construction works not passed by resolution by management committee or at an owners’ meeting (if established). The analysis on estoppel by convention stands. Again, the case may be distinguished on the facts. 192.Mr Wong submits that The Incorporated Owners of Universal Industrial Centre at §§22, 29-31 §29 analysis shows the most distinguishing factor at line N-O, which states that “the respondents continued to pay despite knowing that there was a problem”. That clearly distinguishes the case. Further, the tribunal found the parties had assumed that “the incorporated owners collected management fees according to law”: §29 line M-N. That could not be the assumption of the respondent or any other reasonable owner. In any event, it appears that the tribunal did not consider whether the owner shared any responsibility in the incorporated owners’ adoption of the said assumption or any argument based on the incorporated owners’ breach of DMC. 193.The IO disputes whether in The Incorporated Owners of Universal Industrial Centre there was no common assumption that the management fees collected by the IO in this case were correct. The tribunal found that there was a common assumption. The decision is distinguishable on the facts. 194.The respondent submitted that in J & V Limited the assumption found, at §68 “the MF and AC are being levied in accordance with the provisions of the DMC before June 2008”, is different from the one advanced by the IO in this case: at §§67-70. Further, there did not appear to be consideration of whether it was fault on the part of the incorporated owners and the manager in overcharging. Mr Wong relies on this decision as support for the proposition that even if there is estoppel, the overpaid amount can still be used for set off purposes. 195.The respondent relies on IVS Enterprises Ltd and Philip Collins Ltd as examples of cases where estoppel by convention had “failed to strike down an overpayment claim”. Whereas the IO warns that neither of these cases are in the unique context of multi-storey buildings and incorporated owners in Hong Kong and hence do not advance the respondent’s case 196.In IVS Enterprises Ltd the English Court of Appeal held that it was impossible to hold that an estoppel by convention had been made out. There was no convention or common assumption. There was no more than the carrying out of the agreement according to the separate understanding of the parties. No issue was raised before the payments were made. Ralph Gibson LJ stated that to hold that a claim to recover overpayments as made under mistake of fact, or a claim to set off overpayments in equity against future payments due, is barred by estoppel by convention in the circumstances of the case, would be to bar any claim where a party who has received payments has believed or asserted the sums claimed to be due and the party making the payment mistaking believed the sums claimed to be due. On the facts of the case there was nothing more than the submission of the invoices and payment of them. There was nothing inequitable in permitting a set off against the following claims by the company in respect of any sums which the management could prove were overpaid. Evans LJ agreed that fairness and good conscience required that the excess be repaid. Granted this is not a Hong Kong building management case. It is, however, an example of a situation where mere issue of an invoice for sums billed as due, or demand note, followed by payment by a party mistakenly believing them due, with nothing more, does not give rise to an estoppel by convention. 197.Lest I be wrong, and estoppel by convention can be established, I address the parties further arguments. Set off 198.The respondent submits that even if an estoppel by convention is established, it cannot prevent the respondent from setting off the overpaid amount (from March 2015 to August 2021) against the outstanding amount (from September 2021 to February 2024). In J & V Limited, the tribunal found that the owner had overpaid certain management fees and air-conditioning charges for a period and had underpaid the same for another period: at §56. On the basis of estoppel by convention, the tribunal ruled that the owner was not entitled to ask for a refund of the overpaid amount: at §§67-70, 75f. Nonetheless, it does not stop the tribunal from ordering that the underpayment by the owner be set off from the overpaid amount: at §75e. If estoppel by convention is established, the respondent invites the tribunal to adopt a similar treatment to the overpayment, allowing it to be set off against the remaining unpaid management fees and disallowing the refund of the rest. 199.The IO disputes the respondent’s position that J & V Limited is support for its case that estoppel by convention does not prevent the respondent from setting off the overpaid amount against the outstanding amount. In that case, the incorporated owners’ counterclaim was for set off of outstanding management fees and air-conditioning charges against overpaid amounts: at §9(a). The issue of set off was not disputed between the parties. On first principles the effects of estoppel by convention is to bind the party estopped to the convention. The effect of an estoppel by convention is to preclude a party from denying the assumed fact or law if it would be unjust to allow him to go back on the assumption. If one of them does seek to go back on the assumption, the courts will give the other such remedy as the equity of the case demands: Spencer Bower at §§8.45-8.46. Here the detriment is the unfairness to all owners who have paid management fees as charged in the past, which have been used on the Building. In that sense, there is no difference between a refund and set off – if it is accepted that refund should be disallowed, there is no reason why set off should be granted. 200.Mr Wong adds that, whilst this should not be a decisive factor, allowing a set off is much less severe than compelling the IO to pay back the respondent a sum of money. The respondent is simply hoping that the substantial sum innocently overpaid by it can still generate some utility, by setting off the outstanding management fees owed to the IO (the amount of which claimed is still overcharged). The IO would not need to pay out a substantial sum from its pocket or ask the owners at the Building for further funding. Any hardship on the IO is minimal. 201.To establish estoppel by convention it must be unjust or unconscionable for the party to assert a position contrary to the assumption. Even if established, the appropriate remedy may have regard to the justice of the circumstances. Whether any set off or partial set off is still appropriate would depend on the facts. The other owners have paid corresponding less than the respondent has overpaid. Allowing a set off may affect the overall budget if the IO had allowed for full recovery from the respondent at some point in time. However, the justice of the case is such that if estoppel by convention had been established I would have allowed a set off of the overpaid sums paid against the unpaid sums claimed. When would estoppel by convention cease to operate 202.The respondent suggests that estoppel by convention may have ceased at 3 different points of time: (i) July 2019 when Honor Fame became the new manager; (ii) November 2020 when the respondent requested to inspect accounts; or (iii) December 2022 when the respondent first complained about the miscalculation. 203.Mr Wong submits that any estoppel by convention must have collapsed when two unacceptable incidents took place. The first incident is when Honor Fame became the new management company in place of Hang Way in July 2019. It was the basic duty of the new manager to familiarise itself with its duties under the DMC and to devise a system of work that fulfilled the DMC requirements. Mr Tsui said that Hang Way did perform such duty. The new manager should have discovered the miscalculation by the outgoing manager and rectified it. Yet, Honor Way failed to do so in breach of its primary duty under the DMC to ascertain the correct amount of management fees and falling below the basic expectation that it would endeavour to ensure that its performance complies with the DMC. Honor Fame just adopted Hang Way’s calculation of management fee, relying on the list of management fees and did not bother to verify if it was correct. Mr Wong says this is irresponsible. 204.As to (i) July 2019, the IO disputes the respondent’s reasoning. It is irrelevant whether it was “irresponsible” for Honor Fame not to have checked the calculation. This is simply not one of the elements of estoppel by convention. At the material time, both parties obviously still held the common assumption that the management fees were correctly calculated. 205.The second incident the respondent relies upon is the IO consistently ignoring the respondent’s legitimate written requests to inspect accounts, starting from November 2020. Had the IO provided the requested accounts at that time, Ms Luk would have passed them to her accountant or colleagues, who would perform an extensive review of the accounts and likely would have discovered the overpayment over the years. It is irrelevant that the respondent did not discover the overpayment upon receiving the 2019 accounts on 5 March 2021. If all accounts were provided they would be passed to the accountant for review in one go, such that the overpayment likely would then have been discovered. 206.As to (ii) November 2020, Ms Chong replies that the respondent did not in fact discover the miscalculation and hence continued to hold the common assumption at that time. That is the end of the matter. §8.43 of Spencer Bower provides:
207.The unconscionability of allowing the respondent to depart from the common assumption is the detriment to be suffered by all owners, not whether the respondent “might have” been able to discover the mistake earlier. 208.The life of an estoppel by convention hinges upon when it becomes not unconscionable for one side to depart from the common assumption. Mr Wong says that the two incidents represent two golden opportunities for the obscure problem of overpayment to be discovered. Both opportunities were unfortunately missed as a result of the IO’s fault. Therefore, it is unfair to allow the IO to take further advantage of its own fault or negligence to delay the revelation of its wrongful miscalculation. It should have been discovered much earlier, and the estoppel must not be allowed to live on beyond another instance of the IO’s fault. 209.As to (iii) December 2022, the respondent argues that an established estoppel by convention would not apply to future dealings once the convention is shown erroneous or one side questions its correctness. 210.Whereas the IO’s case is that it remains open to the tribunal to find that estoppel by convention continued to apply between December 2022 and February 2024, after which the management fees were correctly adjusted.The IO does ask the tribunal to do so. §8.55 of Spencer Bower provides: -
211.Even after the respondent raised its complaint in December 2022, there were still discussions between the parties in May 2023 at the management committee, where the respondent had yet to provide feedback on the accounts provided by the IO and promised to respond in writing within 14 days. In my view the IO and Honor Fame cannot use that as an excuse to drag their feet and fail to discharge their duties. 212.The IO also relies on its explanation of why it is still claiming the “miscalculated” amount from the respondent between September 2021 and February 2024. Despite not calculated in accordance with the DMC, management fees in the past were calculated after consideration of (i) the budget required to maintain the Building; and (ii) how that could be met by the total management fee income collected from all owners. If the respondent now pays less, the fees recovered would not cover the budget previously set and it would be unfair to all other owners. 213.In of The Incorporated Owners of Universal Industrial Centre at §29 it was held that: -
214.I find that once the miscalculation was discovered it ought to have been corrected. The IO asserted that calculating the management fees is a simple task that the respondent could readily do by reading the DMC. The IO had notice of the issue by December 2022. At that time the IO or Honor Fame should have immediately calculated the management fees correctly. That task would not have been time consuming. The IO or Honor Fame should have given notice to all owners that there had been a miscalculation and of the accurate calculation. Owners should also have been given notice that they were required to pay management fees in accordance with the DMC and the next demand note would be for the correct management fees due from each owner. The owners could be so informed during December 2022. Even allowing more time, the IO could have started demanding the correct amount from the February 2023 demand notes. However, they did not make the adjustment and issue demand notes for the correctly calculated amount until March 2024. Issue of demand notes is a mechanical exercise. Honor Fame could have done so within that sort of time frame. Owners may convene meetings as they saw fit. However, in the meantime the IO is duty bound to claim and collect management fees in accordance with the DMC. In my view any estoppel by convention should cease to operate by February 2023. Issues 9: Is the IO entitled to the relief sought? 215.The answer is “no”, subject to Issue 10. The IO seeks to recover all arrears of unpaid management fees as calculated under Issue 2. The total amount being HK$1,263,150. Issue 10: Is the respondent entitled to the relief sought? 216.The answer is “yes”. The respondent invites the tribunal to allow the respondent’s counterclaim and make an order in terms set out below. 217.For the respondent’s claim in respect of the overpaid management fees from March 2015 to August 2021:-
218.For the unpaid management fees from September 2021 to February 2024 the respondent submits that:-
219.In all the circumstances I do not allow the IO’s interest claim. 220.The respondent has failed to pay management fees as set out above. The IO has over charged the respondent management fees in breach of the DMC. The respondent has a good defence to the IO’s claim. I hold that the IO has failed to establish estoppel by convention. The IO cannot resist the respondent’s counterclaim on the basis of estoppel by convention. 221.I make the following order in terms sought by the respondent:-
COSTS 222.I make a costs order nisi that the applicant do pay the respondent’s costs on the District Court scale, with certificate for counsel, to be taxed if not agreed. Either party may apply to vary the costs order nisi within 14 days, failing which the nisi order shall become absolute.
Ms Fiona Chong, instructed by Cheung & Yip, for the applicant Mr Iverson Wong, instructed by Ernest Li & Co., for the respondent | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under LDBM 182/2021