Un Chau Properties Ltd v. The Incorporated Owners of Manor Centre

HCA 1220/2022

[2026] HKCFI 3760

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1220 OF 2022

_______________________

BETWEEN

_______________________

_____________________

J U D G M E N T

_____________________

Introduction

1.This is a building management dispute between the Defendant (the Incorporated Owners of Manor Centre) and the Plaintiff (the owner of all the car parking spaces at the basement of Manor Centre) regarding the liability to pay management fee and to make contribution to the costs of major repair work at Manor Centre. The Plaintiff commenced these proceedings in December 2021, seeking, inter alia, declarations that (1) at all material times it has duly paid the management fee and there is/was no deficit in management fee payable by the Plaintiff; and (2) the Defendant has wrongfully charged the Plaintiff the sum of HK$4,588,682 as the Plaintiff’s contribution to the costs of major repair work. The Defendant opposed the Plaintiff’s action and made a counterclaim for, inter alia, (1) a management fee deficit in the sum of HK$4,312,708; and (2) the Plaintiff’s contribution to the costs of major repair work in the sum of HK$4,588,682.

2.Prior to the trial and pursuant to the directions of the Court, the parties filed a “List of Undisputed Facts”, from which I will set out some of the relevant facts as follows.

Manor Centre

3.Manor Centre is situated at No. 213 Un Chau Street and No. 218 Fuk Wing Street, Kowloon, Hong Kong (“Manor Centre”). It comprises 7 residential blocks (each of 13 storeys), the Ground Floor shops and a basement (“Basement”) which houses car parking spaces nos. 1 to 97 (collectively “Car Parking Spaces”).

4.The occupation permit for Manor Centre was issued on 17 November 1986.

5.The Defendant was and is an incorporation of the owners of Manor Centre which was incorporated on 2 February 1989.

6.Hong Yip Service Company Limited (“Hong Yip”) was the Manager of Manor Centre between 1987 and 31 December 2015. Since 1 January 2016, Creative Property Services Consultants Limited (“Creative Property”) has been the Manager of Manor Centre.

7.At all material times, the rights and liabilities of the co-owners of Manor Centre and the management of Manor Centre was and is governed by a Deed of Covenant dated 25 November 1986 (“DMC”) and the Building Management Ordinance (Cap. 344).

8.By an Assignment dated 16 December 1986, the Plaintiff acquired all of the Car Parking Spaces, and the ramp and driveway leading thereto as at the Ground Floor of Manor Centre were also assigned to the Plaintiff.

9.As the sole owner of the Car Parking Spaces, the Plaintiff had and has the exclusive ownership, enjoyment and use of the driveway, passages, staircases, lobbies and other area in the Basement which were (or are) not connected with other parts of Manor Centre (“CP Area”).

10.Between 1 January 1987 and 31 December 1996, the CP Area was managed by Wilson Parking (Holdings) Ltd. as the Plaintiff’s licensee; and since 1 January 1997, it has been managed by Imperial Parking (Hong Kong) Limited (“Imperial”) as the Plaintiff’s licensee.[1]

Proceedings in 2014 for management fees

11.For the 12 months before 27 March 2013, the Defendant charged and the Plaintiff paid a management fee of HK$64.2 per month for each of the Car Parking Spaces, and in total HK$6,227 per month for all the Car Parking Spaces.

12.On 27 March 2013, it was purportedly resolved in a Management Committee (“MC”) meeting that the management fee payable for each of the Car Parking Spaces should be increased by 285% on the basis that the initial management fee should be HK$125 for each Car Parking Space each month. Hence, the total increased management fee for all the Car Parking Spaces payable by the Plaintiff was purported to be HK$34,556 each month. It was to take effect from 1 June 2013.

13.On 12 April 2013, Hong Yip issued a letter to Imperial (the Plaintiff’s licensee) in which it was stated that as per the resolution of the MC of Manor Centre, Hong Yip proposed a revised management fee for the Car Parking Spaces to take effect from 1 June 2013: HK$34,193 each month, calculated by HK$125 x 2.82 x 97 = HK$34,193 (“2013 Purported Management Fee”).

14.The Plaintiff refused to pay management fee at the rate of the 2013 Purported Management Fee.

15.On 3 April 2014, the Defendant commenced proceedings in the Lands Tribunal, namely LDBM 88/2014, seeking outstanding payment of the 2013 Purported Management Fee (“LDBM Action”).

16.By a letter dated 10 June 2015 (“2015 Offer Letter”), Messrs. Kenneth C.C. Man & Co (“KCCM”), solicitors for the Plaintiff, proposed a settlement to Huen & Partners (“HP”), then solicitors for the Defendant, on the following terms and conditions (collectively “the Offer Terms”):-

(1) The monthly management fees of the Car Parking Spaces from 1 June 2013 to 30 April 2015 shall be HK$6,227 per calendar month.

(2) The monthly management fees of the Car Parking Spaces shall be increased to HK$6,788 per calendar month (i.e., 9% increment, same as other portions of the Manor Centre) effective from 1 May 2015.

(3) In the future, the management fees for the Car Parking Spaces and the other portions (i.e. Shops and Domestic Accommodation) of Manor Centre shall be adjusted simultaneously, such that:-

(i) for increment, the percentage shall not be greater than any of the other portions of Manor Centre; and

(ii) for reduction, the percentage shall not be less than any of the other portions of Manor Centre.

(4) Where any major repair, replacement or renovation is relevant only to one building or the Shops or the Domestic Accommodation or the Car Parking Spaces in Manor Centre, the costs and expenses thereof shall be borne only by the relevant owners in proportion to the monthly management fees then paid by such owners.

(5) Neither party shall make any claim against the other in respect of the subject matter of the LDBM Action.

(6) The LDBM Action shall be settled, and each party shall bear its own costs including but not limited to the legal costs in relation to the LDBM Action.

17.On 25 June 2015, by a “WITHOUT PREJUDICE” letter to KCCM (“2015 Reply Letter”), HP informed the Plaintiff, inter alia, that “our client is prepared to accept your proposal offer stated in your said letter dated 10 June 2015”. HP further stated, “We should be grateful if you would let us have your draft consent order or application for our consideration. Nothing shall be binding unless both parties sign the consent order or application”.

18.No consent order or application was ever signed but neither party has since 25 June 2015 further pursued the LDBM Action.

19.The Plaintiff and/or Imperial (for and on behalf of the Plaintiff) paid the following management fees:-

(1) Between 2012 and 30 April 2015, management fees of a monthly sum of HK$6,227;

(2) Between 1 May 2015 and 31 August 2020, management fees of a monthly sum of HK$6,788; and

(3) Between 1 September 2020 and the present, management fees of a monthly sum of HK$7,467.

Purported Contribution

20.On 30 October 2020, the Defendant issued a notice to hold an Owners’ Annual General Meeting on 26 November 2020 (“Purported AGM”). The agenda of the Purported AGM included “discussing and passing resolution in relation to the items to be included in the Purported Major Repair Work”; “discussing and passing resolution in relation to the contractor to be appointed for undertaking the Purported Major Repair Work”; and “discussing and passing resolution in relation to the purported apportionment, payment date and instalments to be paid for the Purported Major Repair Work”.

21.On 26 November 2020, the Purported AGM was held and the following resolutions, inter alia, were purportedly passed (“Purported Resolutions”):-

(1) A resolution purportedly authorising the undertaking of “(A) Major items as provided in the original tender”; “(B) Items for fire safety enhancement as provided in the original tender”; “(C) Optional items as chosen by the Incorporated Owners”; and “(D) Optional items as provided in the original tender” (as items of the “Purported Major Repair Work”); and

(2) A resolution purportedly for owners’ contribution to the costs of the Purported Major Repair Work to be made by four instalments, starting from 1 January 2021 to be paid every 2 months.

22.On 29 December 2020, the Defendant held a MC meeting to follow up on the apportionment of the costs of the Purported Major Repair Work by instructing Messrs. Pansy Leung Tang & Chua (“PLTC”) to calculate the apportionment of such costs in accordance with the proportion as provided in Clause 12(g) of the DMC and to prepare the notice for apportionment and notice of taking legal action accordingly.

23.On 6 January 2021, PLTC issued a notice on the apportionment of the costs of the Purported Major Repair Work which provided that each of the Car Parking Spaces was liable to pay contribution in the sum of HK$47,306. The total contribution payable by the Plaintiff was purported to be HK$47,306 x 97 Car Parking Spaces = HK$4,588,682 (“Purported Contribution”).

24.By a letter dated 7 January 2021, the Plaintiff objected to the Defendant’s calculation of the Purported Contribution and requested the Defendant to provide a detailed breakdown on the repair items relating to the Basement. In the same letter, the Plaintiff also stated that it would “consider to bear any reasonable cost for repairing works actually done to the Basement Carpark provided [the Defendant] g[a]ve [the Plaintiff] supporting evidence”. There was further correspondence exchanged between the parties in which the Plaintiff again requested for the breakdown and the accounts and records but to no avail. On 2 March 2021, Creative Property wrote to the Plaintiff seeking its payment of the first instalment of the Purported Contribution in the sum of HK$1,147,219. The Plaintiff again objected to the calculation of the Purported Contribution. On 9 April 2021, the Plaintiff wrote to the Defendant’s lawyers stating that the calculation was unjustified whilst maintaining its request to inspect the accounts for the Basement.

25.On 3 May 2021, the Defendant held its MC meeting and a resolution was passed to take legal action against the Plaintiff for recovery of the outstanding Purported Contribution.

26.On 16 August 2021, the Defendant registered a memorandum of charge against each and every one of the Car Parking Spaces owned by the Plaintiff in the total sum of HK$2,480,604.28, comprising the 1^st and 2^nd instalments of the Purported Contribution, interest and collection charges (“Memorandum of Charge”).

Purported Management Fee Deficit

27.On 17 July 2020, at a MC meeting, it was purportedly resolved that all management fees payable by all the owners of Manor Centre be increased at a uniform rate of 10%, effective from 1 September 2020, and the owners would be informed of the new management fee in writing by the Manager.

28.On 22 July 2020, Creative Property issued a notice informing all the owners of Manor Centre of the new management fee to be paid with effect from 1 September 2020. It was provided in the notice that the owner of the car parking area (“車場”) had to pay a monthly management fee in the sum of HK$7,467.

29.On 3 May 2021, at a MC meeting, a resolution was purportedly passed for taking legal action against the Plaintiff to recover an alleged deficit in management fee.

30.On 27 September 2021, during a MC meeting, it was alleged that the Plaintiff had failed to pay its management fee in accordance with the DMC for years. In response to this, a representative of the Plaintiff pointed out that the management fee purportedly charged by the Defendant was based on the provision in the DMC covering management fees only for the first 24 months from the date of the Occupation Permit.

31.On 13 November 2021, the Defendant held the Owner’s Special Meeting and a resolution was purportedly passed to authorize the commencement of legal proceedings against the Plaintiff to claim for an alleged deficit of management fee from 2012. The deficit for the period from June 2013 to February 2024 (as alleged in the Defendant’s Amended Defence and Amended Counterclaim[2]) was HK$4,312,708 (“Purported Management Fee Deficit”).

Keys issues in this trial

32.Before the trial commenced, the parties had filed a list of agreed issues to be tried and determined by the Court. Against the facts as set out above and as the trial proceeded, the key issues (put in general terms) in this trial are:-

(1) Did the parties enter into a valid, binding and enforceable settlement agreement on 25 June 2015 as pleaded in the Statement of Claim? (“the Settlement Issue”)

(2) In the alternative, was (and is) the Defendant estopped from claiming the Purported Management Fee Deficit? (“the Estoppel Issue”)

(3) Was it wrongful for the Defendant to make a claim for the Purported Management Fee Deficit under the DMC? (“the Management Fee Deficit Issue”)

(4) Was it wrongful for the Defendant to claim the Purported Contribution against the Plaintiff? (“the Contribution Issue”)

Discussions

33.Having carefully considered all the evidence presented by the parties and their respective submissions, I make the following findings:

(1) The Settlement Issue: no settlement agreement was made between the parties on 25 June 2015;

(2) The Estoppel Issue: the Defendant was (and is) estopped from claiming the Purported Management Fee Deficit;

(3) The Management Fee Deficit Issue: in any event, the Plaintiff has duly paid the management fee as determined pursuant to Clause 12A(c) of the DMC and there was (and is) no deficit in management fee payable by the Plaintiff;

(4) The Contribution Issue: the Defendant’s claim for the Purported Contribution was (and is) wrongful.

34.I shall explain these findings below in turn.

The Settlement Issue

35.It is the Plaintiff’s pleaded case[3] that the Defendant by its 2015 Reply Letter (dated 25 June 2015) accepted the Plaintiff’s Offer Terms as set out in the 2015 Offer Letter and therefore a valid, binding and enforceable settlement agreement was already made between the parties on 25 June 2015. The Plaintiff sought to support that conclusion by referring, inter alia, to following facts:-

(1) On 9 April 2015, it was resolved in a MC meeting that certain settlement terms (essentially (1), (2), (5) and (6) of the Offer Terms, but not (3) and (4)) be approved and that the then Chairlady be authorized to follow up the matter.

(2) In a MC meeting held on 19 June 2015, the MC unanimously approved the Offer Terms as set out in the 2015 Offer Letter and authorized its then Chairlady to follow up the matter.

(3) In the 2015 Reply Letter to the Plaintiff, it was made clear that the Defendant was “prepared to accept your proposal offer stated in your [2015 Offer Letter]”.

(4) Following the 2015 Reply Letter, the Plaintiff’s solicitors (KCCM) prepared a draft consent summons setting out the Offer Terms and it was not disputed by the parties that it was served on the Defendant possibly in about July 2015.

(5) Between 2015 and the date of the trial, the Plaintiff paid and the Defendant accepted management fees of such sums as to be in line with the Offer Terms.

36.Notwithstanding all of the very persuasive submissions advanced on behalf of the Plaintiff, I find against the Plaintiff on this Settlement Issue.

37.In my view, the pleaded case sets a high hurdle for the Plaintiff to overcome when it alleges the completion of the settlement agreement to have taken effect on 25 June 2015, i.e. the very date of the 2015 Reply Letter. But the 2015 Reply Letter, stated to be “without prejudice”, did not say that the Plaintiff’s Offer Terms were accepted by the Defendant. Instead, it merely stated that the Defendant was “prepared to accept” the proposed offer; and that was immediately followed by the Defendant’s request to have a draft consent order or application “for our consideration”, suggesting that the matter would still require further consideration. And significantly, it was further expressly stated in the 2015 Reply Letter that “Nothing shall be binding unless both parties sign the consent order or application” (“Nothing Shall Be Binding Provision”). These were express and clear words to rebut the Plaintiff’s contention that a binding settlement agreement had already been formed when the Plaintiff received the 2015 Reply Letter. It is not disputed that no consent order or application was ever signed by the parties.

38.At the trial, both parties agreed that the Nothing Shall Be Binding Provision in the present case has a very similar effect to the words “subject to contract” which are commonly employed in contract negotiations.

39.The words “subject to contract” have a clear prima facie meaning, being in themselves merely conditional, unless there is “a very strong and exceptional context which would induce the court not to give them that meaning in a particular case”: Alpenstow Ltd. v Regalian Properties plc [1985] 2 All ER 545 at 552b-c.

40.“The words ‘subject to contract’ are not lightly to be ignored; but where the court is satisfied on the evidence that they had no meaning, it is entitled to ignore them. It is also entitled to ignore them where the parties by their words or conduct have unequivocally demonstrated that they have agreed that the words may be treated as expunged from the instrument which contains them”: Hong Kong Housing Authority v Hung Pui & Anor. [1987] 3 HKC 495, at 497F-498C.

41.In the present case, I do not find the context to be so exceptional as to treat the Nothing Shall Be Binding Provision as having no meaning at all or having been expunged as at 25 June 2015. That, in my assessment, is fortified by the evidence of the minutes of the MC meeting on 23 November 2015: the MC observed then that although the settlement proposal with the Plaintiff had been “under negotiation for six months, no definite response had been received” from the Plaintiff; and the MC considered that they should present the matter at the owners’ meeting to decide whether to continue with the settlement or to revert to litigation. That evidence tends to show that from the MC’s perspective, whilst there had been negotiation, no definite agreement had been reached between the parties by November 2015.

42.In my assessment, upon consideration of all the evidence on what was communicated between the Plaintiff and the Defendant by words or conduct at the material times, it leads to an objective conclusion that no settlement agreement had been reached by them as at 25 June 2015. Therefore, I find against the Plaintiff on the Settlement Issue.

The Estoppel Issue

43.The Plaintiff has a much stronger case on this issue. The Plaintiff contends that since the issue of the 2015 Reply Letter, the parties have conducted themselves in accordance with the Offer Terms as follows:-

(1) Between 2012 and 30 April 2015, the Plaintiff paid management fee in a monthly sum of $6,227 in accordance with (1) of the Offer Terms.

(2) Between 1 May 2015 and 31 August 2020, the Plaintiff paid management fee in a monthly sum of $6,788 in accordance with (2) of the Offer Terms.

(3) On 17 July 2020, the MC resolved to increase the management fee by 10% with effect from 1 September 2020 and that was to be communicated to the owners of Manor Centre by the Manager. On 22 July 2020, Creative Property issued a notice informing all the owners including the Plaintiff of the 10% increase. In the table attached to the notice, it was provided that the owner of the car parking area (“車場”) had to pay a monthly management fee of $7,467 (i.e. an increase of 10% from $6,788). As the management fee for the Plaintiff and other owners was adjusted simultaneously and the percentage increase for the Plaintiff was no greater than that for other owners, the arrangement was in accordance with (3) of the Offer Terms.

(4) Between 1 September 2020 and the date of the trial, the Plaintiff paid management fee in a monthly sum of $7,467 in accordance with (3) of the Offer Terms.

(5) Further, there was no dispute at the trial that the Plaintiff had all along paid the management fee according to invoices issued by the Manager, and except in relation to the management fees of May, June and July 2015 and up to 3 May 2021, there had been no complaint or protest from the Defendant or the Manager about such payments.

(6) For the management fees of May, June and July 2015, the Plaintiff had apparently mistakenly continued to pay the lesser sum of $6,227 (at the rate as stated under (1) of the Offer Term), when according to (2) of the Offer Term, the management fee should be adjusted to $6,788; and that resulted in a total shortfall of $1,683 for three months. Because of that, the MC instructed the Manager to commence legal proceedings to claim that shortfall of $1,683 and the Plaintiff paid the shortfall before the MC meeting on 19 August 2015. This is significant in that the MC actually asserted the right to sue for the shortfall that was calculated in accordance with (2) of the Offer Terms.

(7) In line with (5) and (6) of the Offer Terms, neither party had further pursued the LDBM Action or sought any costs from the other party in relation to the LDBM Action.

44.In light of all the above-mentioned circumstances, the issue of estoppel against the Defendant is clearly raised for determination by the Court.

45.On this issue, the Defence contended, inter alia, that there has been no unequivocal conduct on the part of the Defendant amounting to any representation or common assumption upon which the Plaintiff had acted[4]. Further, any inaction on the part of the Defendant could be explained.

CHUNG’s explanation

46.During the trial, the Defence called the present Chairman of the Defendant, Mr. CHUNG Man Ching (“CHUNG”), who sought to give an explanation for the Defendant’s inaction to pursue its claims for the Purported Management Fee Deficit for some 5 years and 10 months. In his first statement filed on 28 February 2023, he asserted that he became the Chairman again in January 2016 and at that time there were big and small repair or management tasks that had to be carried out at Manor Centre; and Hong Yip had just left in December 2015 but had failed to hand over its papers to Creative Property. As time passed, both the MC and Creative Property put the litigation aside when the Plaintiff also did not take any action. In his oral testimony, CHUNG further asserted that there were also a number of Fire Safety Directions issued (on 30 June 2016) to the Defendant directing certain fire safety or installation requirements which had to be complied with by 30 June 2017.

47.In my assessment, CHUNG’s explanation for the Defendant’s inaction is not credible.

48.Looking at the past minutes of the MC[5], CHUNG had always been vocal about seeking to have the management fees payable by the Plaintiff adjusted or increased under the DMC. Yet, after he resumed to become the Chairman in January 2016, knowing well that the LDBM Action had already been launched by the Defendant in April 2014, he and the MC took no action for some 5 years and 10 months to cause the Defendant to further pursue its claim. In my view, it is more probable than not that CHUNG was well aware that the MC under its former Chairlady Madam Chan had already resolved[6] to settle the matter on the Offer Terms as proposed by the Plaintiff. After CHUNG had resumed his chairmanship, if the intention had been to insist on the Defendant’s claim for the Purported Management Fee Deficit, CHUNG could have readily instructed the lawyers to resume the LDBM Action, just like what the MC had done to quickly instruct the Manager to start legal action to claim the management fee deficit for the three months in May, June and July 2015. Yet, CHUNG took no action until 3 May 2021.

49.I fail to see why, even with a change of the Manager in January 2016, the Defendant could not have dealt with the matter about the Fire Safety Directions and at the same time simply instructed its lawyers to resume the LDBM Action if what CHUNG said is true. I find CHUNG’s explanation for the inaction to be a bad excuse.

50.Then why was action suddenly taken about the Purported Management Fee Deficit on 3 May 2021? Since January 2021, the Defendant had been seeking to have the Plaintiff pay for the Purported Contribution for the Purported Major Repair Work. Correspondence was exchanged between the parties when the Plaintiff repeatedly questioned the basis and calculation of the Purported Contribution. It appears to me that it was in that context that in the same MC meeting on 3 May 2021 when CHUNG and other members of the MC unanimously resolved to take legal action against the Plaintiff for the Purported Contribution, the issue of pursuing the Purported Management Fee Deficit against the Plaintiff was resurrected and resolved upon.

51.When assessing the credibility of CHUNG’s explanation about the Defendant’s inaction, I also took into account his evidence on other matters under cross-examination which did not impress me as being credible or reliable. I give the following examples:-

(1) CHUNG claimed that he had not read Clause 12(g) of the DMC, but the documentary evidence filed with the Court suggests otherwise: for example, as early as in the MC’s minutes dated 20 December 2012 which he had signed as the then Chairman, Clause 12(g) was specifically referred to as being the basis of the legal advice; in the Particulars of the Notice of Application filed for the LDBM Action which was signed by CHUNG to be true, Clause 12(g) was expressly quoted; Clause 12(g) was repeatedly mentioned in the letters or legal advice from the Defendant’s lawyers (including that of Counsel dated 3 December 2020); and part of Clause 12(g) was quoted in the MC minutes dated 29 December 2020 which CHUNG again signed as the Chairman.

(2) CHUNG was asked about the MC Minutes dated 23 November 2015 in which it was recorded that “[t]he MC considered presenting the matter at the owners’ meeting to seek the owners’ opinions on whether to continue with the settlement or revert to litigation.” When asked, he initially alleged that there was such a meeting of the owners held in 2020 even though there was no record of such a meeting ever produced in Court. He then seemed to prevaricate and suggested no such owners’ meeting was held because of the change of the management companies and due to the matter of the Fire Safety Directives.

(3) When asked who decided to put the LDBM Action aside, CHUNG claimed that the MC decided it although not in a formal MC meeting (and presumably that answer may explain why there was no minutes of such a decision before the Court). I find it incredible that when the discussions over the litigation were repeatedly recorded in the MC Minutes, the decision to put aside the LDBM Action was not.

(4) When CHUNG was asked about the electricity bill of the CP Area, he claimed that the Defendant had instructed Creative Property to produce supporting drawings and plans. Chung further disagreed with the suggestion that no supporting drawings and plans had been provided to the Plaintiff or had been disclosed in these proceedings; however, it was not disputed by the Defence that such documents were not provided or disclosed.

(5) CHUNG maintained in his evidence under cross-examination that the Basement was under the management of Hong Yip but that evidence is inconsistent with the records in which senior officers of Hong Yip stated that the Plaintiff had “not utilized the services of the management company”: see §§98-102 below.

52.I also noted that CHUNG often did not answer the questions asked of him directly which I considered to be signs of evasiveness, indicative of his unreliability. All in all, I have big reservations about the credibility of his evidence in many respects and in particular, I reject his explanation for the Defendant’s inaction until 3 May 2021.

SHEN’s evidence

53.The Defence also called Ms SHEN Xiao Li (“SHEN”), a Property Officer of Creative Property, as a witness. In her witness statement filed on 12 September 2024 which she adopted in her oral testimony, SHEN made the following assertions (“SHEN’s Assertions”):

(1) “I understand the litigation was never settled due to change of the members of the Management Committee of the Defendant.” (Para. 7)

(2) “I understand that due to historical reason, the management fee of the car parking spaces was never paid in accordance with the Deed of Mutual Covenant of Manor Centre. While the Defendant commenced proceedings against the Plaintiff in the Lands Tribunal in 2014, the proceedings were never resolved due to change of Management Committee members.” (Para. 9)

(3) “Since LDBM 88/2014 was not determined, the Plaintiff had no reason to pay more management fee, Creative therefore had no alternative but to continue accepting the previous rents by the Plaintiff ($6,778, increased to $7,467 since September 2020) to support the weak finance of Manor Centre.” (Para. 10)

54.The witness statement is in English and SHEN admitted under cross-examination that she only knew a little bit of English. Plainly, interpretation of the contents of the witness statement and its Statement of Truth was necessary before SHEN could sign the Statement of Truth confirming the facts in her statement to be true. There is simply no interpretation clause in SHEN’s witness statement contrary to Practice Direction 19.3. The Court entertains some doubt as to whether SHEN understood fully the contents of the statement that she had been asked to signed to be true.

55.Further, as the Plaintiff pointed out, SHEN was not the Defence’s first choice of a witness from Creative Property. The Defence had first filed a witness statement of a Mr. NG Wai Chung (“Ng”) (Senior Property Manager of Creative Property); but when NG left Creative Property, the Defence filed a witness statement of a Mr. YUN Wing Hong (“YUN”) (Assistant Property Manager of Creative Property). Clearly, it was only when YUN also became unavailable that the Defence arranged SHEN to be its witness from Creative Property, someone not even of the managerial rank but merely of the junior rank of a Property Officer.

56.It was stated in her witness statement that she was “in charge of the management of Manor Centre” during her employment with Creative Property between 2019 and 2022, and from 13 April 2023 onwards. However, in her oral testimony, SHEN corrected that and confirmed that she had only joined Creative Property in September 2021. As aforesaid, by 3 May 2021, the Defendant had already passed a resolution for taking legal action against the Plaintiff for recovering the Purported Contribution and the Purported Management Fee Deficit. That begs the question as to what SHEN being a junior officer could tell about the disputes before her joining Creative Property in September 2021, and during 2022 and 12 April 2023 when she was not “in charge of” Manor Centre. Indeed, the suggestion that she was already “in charge of the management of Manor Centre” as soon as she joined as a junior officer seems doubtful to me.

57.It was also apparent to the Court that SHEN clearly had no personal knowledge of many of the matters stated in her witness statement (including the Assertions), nor was there any documentary evidence filed with the Court suggesting any personal involvement on her part in handling the present disputes.

58.It was clear that SHEN’s evidence was adduced to cover what was said by NG in his witness statement. In her witness statement, she stated that she was to confirm the contents and accuracy of NG’s statement. She stated that she did that by “glancing through the documents and records kept in the management office of Manor Centre.” However, as pointed out by the Plaintiff, she was plainly very vague under cross-examination when asked what documents and records she had “glanced through”. She first answered they were the meeting minutes; and she also said NG’s witness statement (which answer was itself circular). She then mentioned correspondence with the lawyers and the DMC. She became agitated and gave the excuse that she was only responsible for the daily management matters.

59.There was a fair amount of documentary evidence before the Court but SHEN could not identify which of those documents or records actually supported her Assertions or enabled her to confirm the accuracy of the contents of NG’s witness statement.

60.Further, there were times during her testimony when she just stayed quiet and did not give any answer even after long pauses. The Court had the distinct impression that SHEN was a reluctant witness who had been asked to give evidence on matters that she did not have much knowledge about.

61.Furthermore, under cross-examination, SHEN suddenly claimed that a contractor Wai Nam had been engaged to check whether the water supply system was connected to the CP Area, but that was never asserted in any of the Defence witness statements (including her own) filed with the Court nor could that be seen from the documentary evidence before the Court. When further asked how Wai Nam had informed her of the result of the checking, SHEN evaded the question and did not give any direct answer to it.

62.Having carefully considered all of her evidence, I do not find SHEN to be reliable as a witness, especially when much of her evidence was not supported by the documentary evidence.

LAU’s evidence

63.The Plaintiff called Mr. LAU Kwok Keung (“LAU”), Head of Asset Management (Leasing) of the Plaintiff, as its only witness. Whilst LAU only took over the affairs of Manor Centre in 2020, much of his evidence was based on the documents and records which had been filed with the Court, and his evidence in such regards did not appear to be seriously challenged. Having observed and heard LAU give evidence in the witness box, I certainly find his evidence much more reliable than that of CHUNG and SHEN, especially when it was largely supported by the documentary evidence.

The legal principles on estoppel

64.There was no dispute between the parties on the general legal principles of estoppel. As Kerr LJ pointed out in The “August Leonhardt”[7]:-

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

65.The essential elements of estoppel by representation are: (1) a representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made; (2) an act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made; and (3) detriment to such person as a consequence of the act or omission: Mo Ying v Brillex Development Ltd. & Anor. [2014] 3 HKLRD 224 (CFI) at §144; and Greenwood v Martins Bank Ltd. [1933] AC 51 at 57.

66.The principles of estoppel by acquiescence were explained by the Court of Appeal in Mo Ying v Brillex Development Ltd. & Anor. [2015] 2 HKLRD 985 at §8.2 as follows:-

“1) An estoppel by silence, inaction or acquiescence arises where ‘a reasonable man would expect the person against whom the estoppel is raised, acting honestly and responsibly, to bring the true facts to the attention of the other party known to him to be under a mistake as to their respective rights and obligations’ and this has been approved as the general principle underlying estoppel by acquiescence’…

2) A duty to speak, such as to found an estoppel on silence will arise in circumstances:-

(1) ‘[w]here a person, having a title or right to property of any kind, perceives that another person is innocently, and ignorant, conducting himself with reference to the property in a manner inconsistent with such right or rights’: see Spencer Bower paragraph III.4.4(1)…”

67.The following legal principles can be gleaned from the decision of the Court of Final Appeal in Unruh v Seeberger (2007) 10 HKCFAR 31:-

(1) The parties must enter into some legal relationship on the basis of an assumption that is shared by or common to them both (§133):-

(a) This common assumption must be communicated between the parties and acted upon; i.e. there must be some “mutually manifest conduct of the parties” (§135);

(b) There is no necessity for the parties or either of them to believe that the assumed state of affairs is true, nor is it necessary for them to have been mistaken about the matters assumed (§136);

(c) What is important is that the parties act in the belief, manifested by words or conduct, that they are both proceeding with the transaction on the basis of the same shared assumption (§137); and

(d) The content of this common assumption must be sufficiently certain to enable the Court to give effect to it (§138);

(2) An attempt by one party to depart from the common assumption which departure would be unjust because of the part taken by him in occasioning its adoption by the other party (§150); and

(3) The other party would suffer detriment arising out of his having entered into the relevant transaction on the basis of the common assumption if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption (§150).

68.Applying the above legal principles to the present case, I find that on the available evidence, the Plaintiff could establish an estoppel by representation/conduct or by acquiescence, as well as an estoppel by convention.

69.I will not repeat in full the facts and the relevant conducts of the parties that I have outlined above. In gist, in the 2015 Reply Letter, it was conveyed to the Plaintiff that the Defendant was “prepared to accept” the Offer Terms. Even though no formal settlement was entered into, for at least some 5 years and 10 months (from 25 June 2015 and up to 3 May 2021), the Plaintiff had paid and the Defendant had accepted management fee every month, and the management fee was increased on 1 September 2020, all in a manner pursuant to or consistent with the Offer Terms regarding the management fees. During that period, no action was taken by the parties to further pursue the LDBM Action regarding any alleged outstanding management fee or its costs, again consistent with the Offer Terms. The MC of the Defendant even sought to commence legal proceedings to sue for the shortfall in management fee for May, June and July 2015 that was calculated again in accordance with the Offer Terms. During that period, the Defendant never once raised with the Plaintiff that notwithstanding its acceptance of the monthly management fee so paid by the Plaintiff, there was still a management fee deficit payable by the Plaintiff.

70.In light of the facts of the case and the whole of the parties’ conducts over the relevant time span, I find that there was a clear and unequivocal representation by words and conduct on the part of the Defendant that the Plaintiff (and/or its licensee) had duly paid the management fee and there was (and is) no deficit in such payment[8], which representation was intended to induce a course of conduct on the part of the Plaintiff to pay or continue to pay the management fee; and such representation was relied upon by the Plaintiff and led to its payment of management fee in accordance with the Offer Terms; and (3) sufficient detriment was occasioned to the Plaintiff as a consequence of its payment of the management fee throughout the years from 25 June 2015 and indeed up to the date of the trial.

71.The Defence further contended that estoppel by representation could not be established when it was not open for the Plaintiff to rely on the Defendant’s subsequent conduct without clarification[9]. In this regard, I agree with the Plaintiff’s submission that clarification is only an issue when the representation or conduct is open to more than one reasonable interpretation. As explained by Richard Snowden QC in Closegate Hotel Development (Durham) Ltd & Anor v Mclean & Ors. [2014] Bus LR 405 at §57:-

“On the basis of these decisions, it seems to me that the weight of authority is to the effect that for a plea of promissory estoppel to succeed, there must have been a clear and unequivocal statement; and that if ambiguous words were used which could reasonably be interpreted in several ways (one of which would not support the alleged estoppel) then those words will not found an estoppel unless the representee seeks and obtains clarification of the statement.”

72.Given that I find the words and conduct on the part of the Defendant to have amounted to a clear and unequivocal representation that the Plaintiff had duly paid the management fee and that there was no deficit in management fee, the issue of clarification falls away. In any event, this issue of “clarification” was not pleaded by the Defence in its pleadings and it would be unfair to the Plaintiff to allow the Defence to raise it only in its Closing Submissions.

73.The Defence also contended[10], as I understand it, that the Offer Terms had 6 clauses and the parties’ conduct did not relate to Clause (4) which dealt with the mechanism of apportioning costs for repair works. Therefore, the Defence argued that the Defendant’s conduct could not be an “unequivocal” representation so that the Defendant should be estopped from denying the parties had settled on the basis of all the clauses of the Offer Terms. I find some merit in that regard. Therefore, I do not find the parties’ conducts as amounting to a clear and unequivocal representation that Clause (4) of the Offer Terms regarding the apportionment of repair costs was to be acted upon. My finding is thus limited to an estoppel against the Defendant from claiming the Purported Management Fee Deficit.

74.The Defence further contended[11] that the detriment suffered by the Plaintiff acting on the Defendant’s representation was not “sufficiently substantial” as the increase in monthly management fee (with effect from September 2020) was only HK$679.

75.In Gillett v Holt [2001] Ch 210 (at 232D), Robert Walker LJ explained the requirement of detriment as follows: -

“The overwhelming weight of authority shows that detriment is required. But the authorities also show that it is not a narrow or technical concept. The detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances.

… The issue of detriment must be judged at the moment when the person who has given the assurance seeks to go back on it. Whether the detriment is sufficiently substantial is to be tested by whether it would be unjust or inequitable to allow the assurance to be disregarded - that is, again, the essential test of unconscionability…”

76.Whilst the increase in monthly management fee was only HK$679, when the question of detriment is considered in the whole context of the case (including the LDBM Action, the ongoing representation and continuing reliance over a lengthy period up to the date of the trial), the repudiation of the Defendant’s assurance (or representation) would in my assessment be unconscionable or unjust in all the circumstances. I am therefore satisfied that the requirement of sufficient detriment is made out in the present case.

77.Turning to the issue of estoppel by acquiescence, I also find in favour of the Plaintiff. In the context of the present case, a reasonable man would expect the Defendant, acting honestly and responsibly, to bring the true facts to the attention of the Plaintiff known or perceived by the Defendant to be under a mistake as to their respective rights and obligations, but throughout the relevant years, there was no complaint or protest made by the Defendant or the Manager on the amount of management fee that was paid by the Plaintiff. In my assessment, it was (and is) unjust for the Defendant to turn around suddenly on 3 May 2021 (i.e. after some 5 years and 10 months from 25 June 2015) to tell the Plaintiff that there was still a management fee deficit incurred since June 2013. Contrary to the Defence submission[12], I also find sufficient detriment made out in the circumstances of the case as in the case of estoppel by representation.

78.I also find estoppel by convention made out in the present case: there was the common assumption shared by the parties to settle the disputes over management fee deficit as communicated to the Plaintiff by the Defendant in its 2015 Reply Letter. Even though no formal settlement was entered into, for at least some 5 years and 10 months, the parties had acted in the belief, mutually manifested by words or conduct, that they were paying or accepting the management fees on the basis of the shared assumption; and the Defendant’s departure from the common assumption would be unjust because of the part it had taken to induce the Plaintiff’s payment of management fee or increased management fee pursuant to the common assumption, resulting in a substantial detriment to the Plaintiff as aforesaid.

79.The Defence contended[13] that in the present case, it was the Plaintiff which had arbitrarily and conveniently decided to take its own independent view that the parties had reached a “common intention”. I reject that contention for there was clear evidence to demonstrate a common intention (or assumption) on the part of the parties: when there was a shortfall of $1,683 in the management fees of May, June and July 2015, the MC actually instructed the Manager to commence legal proceedings to claim that shortfall which was calculated in accordance with (2) of the Offer Terms and the Plaintiff paid that shortfall before the MC meeting on 19 August 2015.

80.The Defence had also sought to argue that the issues of estoppel were not properly pleaded by the Plaintiff in its pleadings[14]. Having considered the Plaintiff’s pleadings, in particular, its Amended Reply and Amended Defence to Amended Counterclaim dated 2 April 2024 (see §§16 and 25), I find such issues sufficiently pleaded.

81.I therefore find that the Plaintiff has successfully raised the issue of estoppel against the Defendant in relation to management fee and the Defendant was (and is) therefore debarred from claiming the Purported Management Fee Deficit. It was accepted by the Defence that if the Court finds estoppel established, the claim for the Purported Management Fee Deficit “will fall away”[15].

The Management Fee Deficit Issue

82.In any event, I also find that it was wrongful for the Defendant to make a claim for the Purported Management Fee Deficit based on Clause 12(g) of the DMC, when it was conceded by the Defence during the trial that the operative clause should have been Clause 12A(c) of the DMC.

83.On the Management Fee Deficit Issue, the Court’s primary task is to interpret the relevant clauses in the DMC, including Clause 12 and Clause 12A.

84.Clause 12 provides:

“(a) As from issuance of the Occupation Permit of the Development the Manager shall prepare an annual budget showing the estimated expenditure of the Development and estimated Managers remunerations and every Owner of a Unit shall contribute towards this budget.

(b) The year shall, for the purpose of the annual budget commence from the date of the Occupation Permit of the Development and will in the first instance run until the 31st December in that year. Thereafter the year for the purpose of the annual budget shall follow the calendar year.

(c) The budget shall be an estimate by the Manager of the sum which in the opinion of the Manager will be necessary and improving the Development and without limiting the generality of the foregoing shall include:-

…

(ii) The cost of the maintenance and repair of the Development.

(iii) The remuneration of the Manager for carrying out its management duties in accordance with the provisions herein contained.

…

(v) The cost of employing all necessary persons whether as servants, agents or advisors to provide the services requisite for the due performance of the duties of the Manager as herein set out together with the cost of providing all equipment, accommodation, clothing and materials reasonably necessary for such purposes.

(vi) The cost of purchasing or hiring all necessary plant and equipment.

(vii) The cost of appropriate lighting for all Building Common Areas.

…

(x) The cost of electricity, water and other similar charges of or in connection with the Development as a whole and not in respect of any particular unit thereto.

…

(xii) The cost of the supply of salt and fresh water to all taps and toilets within the Development.

(xiii) The cost of cleansing the Building Common Areas.

(xiv) The provision of security services for the Development including the maintenance, repair and, as necessary, the replacement or the security system installed.

(xv) The cost of providing any or all of the services to be performed by the Manager under the terms of this Deed.

…

(e) The Manager shall reasonably determine the amount to be contributed each month to the annual budget by each Owner in proportion to the area of each Unit.

(f) In the event of the Manager finding at any time that the annual budget is insufficient to cover all expenditure it shall prepare a revised budget and may exercise all the powers conferred by this Clause in respect of such revised budget and may adjust the monthly contributions payable by each owner which may be rendered necessary by the adoption of such revised budget.

(g) It is hereby expressly agreed and declared that notwithstanding anything to the contrary herein contained for the first 24 months from the date of the Occupation Permit of the Development each Owner other than the First Owner and the Developer shall for the Unit owned by him pay to the Manager the Management fees in the following manner:-

(a) As to domestic Units

At 58¢ per sq. ft. (on gross floor area) per month;

(b) As to Shops

At 44¢ sq. ft. (on gross floor area) per month.

(c) As to Parking Space

At $125.00 for each of the Parking Spaces.

…”

85.Clause 12A provides:

“(a) If and when the Manager shall think appropriate, the management of the Basement shall be undertaken separately by a Sub-Manager to be appointed by the Manager, or shall be undertaken by the Manager on a separate budget and separate set of accounts.

(b) If the Manager shall decide that the Basement be managed separately, then any expenditure relating principally to the Basement or to facilities serving the Basement exclusively and no other Owner would receive any material benefit therefrom, the full amount of such expenditure shall be borne by the Owner or Owners of the Basement.

(c) The Manager shall have the sole right to decide and allocate the expenditure mentioned in Clause 12(c) as between management expenses of the Development as a whole and management expenses of the Basement and provided such decision and allocation is made in good faith the same shall be binding on all Owners save for manifest errors.

…”

86.During the trial, the Defendant indicated its agreement with the Plaintiff that on the interpretation exercise under the DMC, the Purported Management Fee Deficit Issue “should be assessed against the requirements prescribed by Clause 12A(c) of the DMC”; and it was also accepted by the Defence that “Clause 12A(c) should be preferred over Clause 12”.[16] Given “the parties’ consensus on the applicability of Clause 12A(c)”[17], I will decide this issue on the basis that the operative clause in the circumstances of this case was Clause 12A(c). I should mention that on the evidence before the Court, I do find Clause 12A(c) to be the applicable clause.

87.On the other hand, the Plaintiff complained that by that concession, the Defence was trying to revamp its case and advance a completely new line of claim or defence based on Clause 12A(c).[18]

88.Having carefully considered the Amended Defence and Amended Counterclaim, I find merits in the Plaintiff’s complaint. In particular, it was expressly pleaded by the Defendant at §18(g) that “the Manager, in exercising its discretion under Clause 12(e) of the DMC, is entitled to make reference to the historical figures stated under Clause 12(g) in calculating the management fee for the Car Parking Spaces”. In other words, it was the Defence pleaded case that the Manager had invoked its power under Clause 12(e) and with reference to Clause 12(g) to work out the management fee payable by the Plaintiff. It was never pleaded by the Defence (not even in the alternative) that it was on the basis of Clause 12A(c) that the Manager had worked out the management fee.

89.There appears to me to be a good reason for the Defendant to seek to change its case because the terms of Clause 12(g) clearly provide (and I find it to be the case) that it was only operative for the first 24 months from the date of the occupation permit of Manor Centre, i.e. 17 November 1986. The Purported Management Fee Deficit covered the period long after the 24 months had expired, namely from June 2013 to February 2024.

90.I find that by its concession on the applicability of Clause 12A(c), the Defence was indeed seeking to revamp and salvage its case. It would be an ambush to the Plaintiff and unfair to allow the Defendant to claim the Purported Management Fee Deficit on the revamped basis of Clause 12A(c).

91.In any event, the evidence simply does not show that the Manager had invoked its power under Clause 12A(c) to calculate the management fee payable by the Plaintiff. According to the documentary evidence placed before the Court, the Defendant was all along relying on Clause 12(g) in seeking to increase the management fee payable by the Plaintiff. In particular, the Court noted, inter alia, the following:-

(1) When seeking legal advice from the solicitors in January 2013 and February 2014 on the increase of management fee payable by the Plaintiff, CHUNG acting for the Defendant only referred to Clause 12(g) or its contents and not any other clauses: D/3/3 & D/9/32.

(2) Two different firms of solicitors both advised that the adjustment of management fee must be made in accordance with the ratio as set out in Clause 12(g). Their advice was not that Clause 12(g) could be used as a reference for determination under Clause 12(e) or Clause 12A(c): D/1/1 & D/10/33.

(3) In a MC meeting on 20 December 2012, CHUNG said “he had consulted with the legal advisor… according to paragraph 12(g) of the DMC, any necessary adjustments to the management fees must be made… in accordance with the management fee proportions specified in the DMC”: B1/11/105/9. Clearly, CHUNG relied on Clause 12(g) as the operative clause.

(4) In another MC meeting on 16 December 2013, CHUNG complained that Hong Yip had failed “to collect a management fee of $125 per parking space per month from [P] as stipulated in the DMC, resulting in a significant shortfall… compared to the current monthly fee of $6,227”; the reference to “$125” was to Clause 12(g): B1/17/150/4. The complaint was not that Hong Yip had wrongly determined the management fee under Clause 12(e) or Clause 12A(c).

(5) In the LDBM Action commenced in 2014, Clause 12(g) was relied upon as the basis of the claim for management fee deficit whereas Clause 12A(c) was not even pleaded: B1/1/1-13.

(6) A special meeting of the owners was held on 13 November 2021 when it was resolved that legal action be commenced against the Plaintiff to recover the Purported Management Fee Deficit. Even at that meeting, the solicitor who attended and explained the matter to the owners referred only to Clause 12(g). There was no mention of any determination of management fee by reference to Clause 12(e) or Clause 12A(c): B1/30/241-242/3.6.

92.On the documentary evidence, I find that the Defendant’s claim for the Purported Management Fee Deficit had all along been made on the basis of Clause 12(g) (which operation had already expired after the first 24 months) and not pursuant to Clause 12(e) or Clause 12A(c).

93.Further, there is a more fundamental problem in the Defendant’s revamped case. According to Clause 12A(c), it is the Manager who “shall have the sole right to decide and allocate the expenditure” as between the owners of Manor Centre as a whole and of the Basement. Therefore, the decision as to how much should be allocated between the owners was to be made by the Manager itself and not by the MC nor the owners.

94.But it is quite apparent from the documentary evidence before the Court that in the present case, the Manager had merely acted as per the instruction of the Defendant in proposing the increased management fee to the Plaintiff.

95.According to the minutes of a MC meeting dated 27 March 2013 (B1/12/109/3.6), it was unanimously agreed that “the management company should write a letter to ‘Imperial Parking’, stating that the management fee for each parking space was HK$125 when the building was occupied, with a total of 97 parking spaces available. Based on the current level of management fees, the rate has been adjusted to 2.85 times. Consequently, the parking lot management fees should also be increased by a similar factor, i.e. the total management fees should be HK$34,556. All committee members unanimously agreed that this revised fee would take effect on 1 June 2013.” It appears that in an earlier MC meeting, it had been resolved that the increase be 2.82 times (worked out to be about HK$34,193)[19]. In other words, the MC had decided itself what the increased fee was to be charged and instructed the Manager to inform the Plaintiff of it.

96.Then on 12 April 2013, Hong Yip (the Manager) wrote to Imperial (the Plaintiff’s licensee) (D/4/4):-

“… As per the resolution of the Manor Centre Management Committee, we are proposing a revised management fee for the basement car park, as detailed below:

Monthly fee of $125 x 2.82 x 97 parking spaces = $34,193.00

This revised fee will take effect from June 1, 2013. Additionally, the Management Committee reserves the right to request payment of the outstanding balance of management fees for the basement car park for the past 7 years from your company.”

97.Judging from the terms of the letter, it is obvious that the Manager simply conveyed the decision made by the MC to the Plaintiff and proposed the increased management fee as per the MC’s resolution to the Plaintiff. The increased fee was determined by the MC and not the Manager.

98.That conclusion is fortified by the documentary evidence tending to show that the Manager had in 2012 and 2013 taken the view that the then existing management fee of HK$6,227 was acceptable and not inadequate. I shall only set out some of the relevant records as follows.

99.In the minutes of a MC meeting dated 31 May 2012 (B1/9/86-87), it was recorded that the Senior District Manager Mr. Lo stated:-

“… Several years ago, the entire parking lot was sold to a company that has not utilized the services of the management company, opting instead to manage the parking lot on its own. As a result, Manor Centre has not provided any personnel or equipment for maintenance and repairs of the parking lot. Despite this, Manor Centre is still collecting over $6,000 per month. If Manor Centre aims to collect management fees in accordance with the Deed of Mutual Covenant (DMC), it must offer relevant personnel (daytime and nighttime staff…), equipment… and lighting facilities, which would incur certain expenses, and it is not acceptable to collect management fees without providing corresponding services…”

100.As recorded in the minutes of a MC meeting dated 20 December 2012 (B1/11/105), the District Manager Ms Choi stated that Mr. Lo had already explained the situation to the MC and that “according to [Clause] 12A(a) of the DMC, the manager has the authority to delegate management of the parking lot, and the management fees can be determined based on the actual conditions of the basement parking lot.”

101.In another MC meeting dated 29 October 2013, Manager Mr. Yeung of Hong Yip stated that if the management fee were to be collected in accordance with the DMC, then the Defendant might have to assume direct responsibility for the day-to-day management of the CP Area, which would incur an estimated cost of over HK$40,000 per month: B1/15/132.

102.In a letter to the Plaintiff dated 11 March 2014 (D/11/34-35), Manager Mr. Yeung wrote:-

“At present, the carpark basement is exclusively managed by your appointed management agent who implies that the day to day management services should be handled on separate basis by your agent. As such, our services only limit to administrative works on those management services which relate to main development pool of Manor Centre as well as all concerned liaison work. Although presently the carpark basement is managed separately by your appointed agent, your right and responsibilities as building owners still applies and the rule and regulation of existing DMC will be binding on your part…”

103.These records tend to show that the Plaintiff did not utilize any of Hong Yip’s management services; that the CP Area was exclusively managed by the Plaintiff (through its licensee Imperial); that the then existing management fee of HK$6,227 was considered by Hong Yip to be acceptable based on the actual conditions pertaining to the CP Area. Even if the Manager had to do some administrative or liaison work relating to the lighting system for the CP Area, or the water supply to the CP Area for washing or fire prevention purposes as contended by the Defendant[20], I fail to see any good reason in the evidence before the Court to explain why the acceptable fee of HK$6,227 should suddenly be increased by 2.82 times to HK$34,193 in June 2013 if it was not a decision imposed upon the Manager by the Defendant or its MC.

104.The Court also observed that the rate of HK$125 per each of the Car Parking Spaces as per Clause 12(g) was clearly intended to be applicable only in the first 24 months and probably in the context of the Car Parking Spaces being owned by different owners at that early stage. But Clause 19(d)(iii) of the DMC also provides:

“… so long as all the Parking Spaces vested in one Owner, the driveways, passages, staircases, lobbies and other area in the Basement not connected with the other parts of the Development shall be excluded from the definition of “Building Common Areas” and the person for the time being owning such Parking Spaces shall have the exclusive use of all the said driveways, passages, staircases, lobbies and other areas in the Basement not connected with the other parts of the Development.”

105.Therefore, pursuant to Clause 19(d)(iii), given that all the Car Parking Spaces were acquired by the Plaintiff, it had the exclusive use of the driveways, passages, staircases, lobbies and other area in the Basement which were not connected with the other parts of Manor Centre. When the Plaintiff actually engaged its own licensee to manage the CP Area, as confirmed by the senior officers of Hong Yip in the records, there was plainly no need for Hong Yip to be responsible for the day-to-day management of the CP Area. It is therefore palpable from the records that the senior officers were trying to explain that a strict application of the “historical figures” would not be acceptable in the Plaintiff’s case.

106.Therefore, even if the Defence were permitted to run its revamped case based on Clause 12A(c) to claim for the Purported Management Fee Deficit, I find that the evidence clearly does not support it and such a revamped claim would fail in any event. Accordingly, the Court finds that the increased fees claimed by the Defence (of HK$34,193 for June 2013 to April 2015, of HK$37,270 for May 2015 to August 2020 and HK$40,997 for September 2020 to February 2024) were wrongfully charged under the DMC. The Defendant’s counterclaim for the Purported Management Fee Deficit thus fails.

107.A related issue is whether the Plaintiff has at all material times duly paid the management fee as determined in good faith (and without manifest error) pursuant to Clause 12A(c) of the DMC. The Defence accepted that the Plaintiff had paid the management fee as per the invoices issued by the Manager at the material times; however, they contended that it is for the Plaintiff to prove to the Court’s satisfaction that the management fee was determined in good faith and without manifest error by the Manager. As objected to by the Plaintiff, I find that this issue of lack of good faith was not expressly pleaded as an issue in the Amended Defence and Amended Counterclaim and it was clearly only being raised as part of the revamped case. I also observed that this issue was also not raised in the Defendant’s Opening Submissions and the Summary of the Defendant’s Case. It is trite that any allegation of bad faith (or lack of good faith) has to be distinctly pleaded and particularized: see Hong Kong Civil Procedure 2025 at §18/12/12. The rationale for proper pleading is to (1) inform the other side of the nature of the case they have to meet; (2) prevent the other side from being taken by surprise at the trial; and (3) enable the other side to know what evidence they ought to be prepared with and to prepare for trial.[21] In all the circumstances, I consider it unfair to the Plaintiff to allow the Defence to raise this issue only at the stage of its Closing Submissions.

108.Nonetheless, even if the Defence were to be allowed to raise this issue of “lack of good faith”, judging from the above-mentioned records and all the other evidence, I would find in favour of the Plaintiff. As I have observed above, Hong Yip clearly took the view that the management fee of HK$6,227 was acceptable in 2012 and 2013 and supported it with reasons which appear to the Court to be sound and in good faith. That fee was increased to HK$6,788 from 1 May 2015 and to HK$7,467 from 1 September 2020 at the same percentage and at the same time as the fees payable by the other owners were increased. In its letter to all the owners (including the Plaintiff) dated 22 July 2020 (D/14/39), Creative Property gave proper reasons to justify the increase in the management fee.

109.I also accept the Plaintiff’s submission[22] that if necessary, it can rely on the common law presumption of “omnia praesumuntur rite esse acta” (all acts are presumed to have been done regularly and properly performed): Halsbury’s Laws of Hong Kong, 2^nd Ed, Vol. 27 at §175.080. As accepted by the Defence[23], “there is a presumption in favour of the good faith and validity of transactions which have long stood unchallenged.”

110.I further noted that there is no contrary evidence produced by the Defence to suggest that the management fees were not determined by the Manager in good faith.

111.I therefore also find in favour of the Plaintiff on this related issue of due payment of management fee by the Plaintiff.

The Contribution Issue

112.On this issue, the Plaintiff’s contended, inter alia, that the Purported Contribution was wrongly determined on the basis of Clause 12(g); and the calculation included costs of repairs and renovations which were totally unrelated to the Basement and the CP Area, or concerned the CP Area of which the Plaintiff had exclusive use but the Plaintiff had not been consulted about such works.

113.On the other hand, the Defence contended that on a proper interpretation of the DMC, the Manager was empowered by Clause 12(h) to determine and allocate the contribution to be made by the Plaintiff to the costs of the Purported Major Repair Works and that the Manager had rightfully made such a determination and allocation[24].

114.However, the Defence made two important concessions:-

(1) “… [the Defendant] must fairly accept that [the Defendant] and/or the Manager is only empowered by the DMC to carry out and seek contribution for Major Repair Works which relate to ‘common areas’ and/or ‘common parts’ of the Development (including the ‘common areas’ and/or ‘common parts’ of the Basement). It must be accepted that [the Defendant] and/or the Manager has no power to carry out works or seek contribution for works which are to areas or parts over which [the Plaintiff] (or any owner) enjoys the right to exclusive occupation and enjoyment.” [25] (“1^st Defence Concession”)

(2) “As to the quantum of [the Plaintiff’s] contribution for the Major Repair Works, [the Defendant] accepts that if its calculation for management fee is found to be inaccurate/invalid, [the Defendant’s] calculation for [the Plaintiff’s] contribution to the Major Repair Works would also be, as a consequence, incorrect.” [26] (“2^nd Defence Concession”)

115.Given the Court’s above findings against the Defendant on the Management Fee Deficit Issue and the 2^nd Defence Concession, the Defendant’s calculation for the Purported Contribution payable by the Plaintiff was clearly incorrect.

116.Further, judging from the documentary evidence, the Purported Contribution had clearly been calculated on the basis of Clause 12(g): B1/26/211/4, D/16/53-60, D/19/65/3. As I indicated above, the operation of Clause 12(g) had already expired after the first 24 months. Under Clause 12(h), the contribution to the costs of repairs and renovations should be “a share proportionate to the monthly contributions”. The reference to Clause 12(g) in the calculation of the Purported Contribution was therefore also incorrect.

117.Furthermore, as the Plaintiff rightly pointed out (which was not seriously challenged by the Defence during the trial), there were plainly (1) items of the Purported Major Repair Work which did not relate to “common areas” and/or “common parts” of the Basement; and (2) items of works done (without consultation with the Plaintiff) to such part(s) of the Basement which was supposed to be exclusively used and enjoyed by the Plaintiff under the DMC and the Assignment. Given the 1^st Defence Concession, the full amount of the Purported Contribution could not be justified against the Plaintiff.

118.As the Defendant has made a claim for a liquidated sum on the basis of a purported calculation which is wrong, the counterclaim for the Purported Contribution must fail: see The Incorporated Owners of Vincent Commercial Centre v Fanington Co. Ltd. & Ors., HCA 561/2006 (unreported and dated 22 September 2008) at §§90 and 91.

119.The parties did not ask the Court to determine the quantum of contribution payable by the Plaintiff as there was plainly insufficient information or evidence before the Court to make that determination. That would be a matter to be determined by the Manager under Clause 12(h) and/or Clause 12A, where applicable, depending on what works were actually carried out and where they were carried out. The Plaintiff’s contribution to the Purported Major Repair Work may not be limited to “a share proportionate to the monthly contributions” as per Clause 12(h) if some of the expenses related principally to the Basement or to facilities serving the Basement exclusively: see Clause 12A(b).

120.As mentioned above, when the Plaintiff failed to pay the Purported Contribution, the Defendant registered a Memorandum of Charge against each and every one of the Car Parking Spaces owned by the Plaintiff. Given that the claim for the Purported Contribution was wrongful, the registration of the Memorandum of Charge was also wrongful and should be vacated.

Conclusion

121.To conclude, I make the following findings:

(1) The Settlement Issue: no settlement agreement was made between the parties on 25 June 2015;

(2) The Estoppel Issue: the Defendant was (and is) estopped from claiming the Purported Management Fee Deficit;

(3) The Management Fee Deficit Issue: in any event, the Plaintiff has duly paid the management fee as determined pursuant to Clause 12A(c) of the DMC and there was (and is) no deficit in the management fee payable by the Plaintiff;

(4) The Contribution Issue: the Defendant’s claim for the Purported Contribution was (and is) wrongful.

122.Although I have only dealt with the major points and submissions raised by the parties and have only set out some of the salient evidence, I have considered all the issues and submissions raised in light of all the evidence before coming to the above findings.

Discussion on reliefs

123.I am satisfied that some of the declaratory reliefs sought by the Plaintiff could be properly granted in the circumstances of the present case: see Convoy Global Holdings Ltd & Anor v Kwok Hiu Kwan & Anor [2021] HKCA 1594, [2022] 1 HKC 551 at §§29-31.

124.The Court has inherent jurisdiction to vacate a registration of an instrument at the Land Registry upon good cause being shown: Re Li Fat [2009] 5 HKLRD 259 at §5.

125.Costs should follow the event. I shall order costs against the Defendant, although not on an indemnity basis as sought by the Plaintiff due to some of the obvious weaknesses in the Defence case. In exercising my discretion on costs, I have borne in mind that to some extent, the Plaintiff had not made it clear in its pleadings and written opening submissions as to whether or not it completely denies liability to pay management fee and make contribution. A certificate for two counsel is granted given that both parties consider the complexities of the case require the engagement of two counsel.

Reliefs

126.I therefore grant the following reliefs to the Plaintiff against the Defendant:-

(1) A Declaration that, at all material times, the Plaintiff has duly paid the management fee as determined pursuant to Clause 12A(c) of the DMC;

(2) A Declaration that, at all material times, there was (and is) no deficit in management fee payable by the Plaintiff;

(3) A Declaration that the Purported Resolutions for authorising the Purported Major Repair Work were not validly passed at the Owners’ Annual General Meeting held on 26 November 2020 and they are void and unenforceable against the Plaintiff;

(4) A Declaration that the Defendant has wrongfully charged the Applicant HK$4,588,682 as the Plaintiff’s contribution for the Purported Major Repair Work;

(5) An Order that the Defendant do furnish an account providing a breakdown of each and every item of the Purported Major Repair Work which concerns the common parts of the Basement and the Basement only within a reasonable time;

(6) A Declaration that the Defendant has wrongfully registered the Memorandum of Charge against each and every one of the Car Parking Spaces owned by the Plaintiff;

(7) An Order that the Defendant do vacate or cause to vacate the Memorandum of Charge at the Land Registry within 28 days of the Judgment;

(8) Nominal damages occasioned by the Defendant’s breach of the DMC by the wrongful registration of the Memorandum of Charge, assessed to be HK$2,000, to be paid by the Defendant to the Plaintiff within 28 days of the Judgment; and

(9) An Order nisi that costs of this action (including those of LDBM 224/2021) be to the Plaintiff (with a certificate for two counsel), to be taxed if not agreed.

Mr. Li Chau Yuen, SC leading Ms Ann Lee, instructed by Messrs. Kenneth C.C Man & Co., for the Plaintiff

Mr. Jose D’Almada Remedios and Ms Valerie Tang, instructed by Messrs. Yung, Yu, Yuen & Co., for the Defendant