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LDBM000033/1999
IN THE LANDS TRIBUNAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
Building Management Application No. LDBM 33 of 1999
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The Incorporated Owners of Yee On Court |
Applicant |
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AND |
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LI ZEE Zing Hai |
Respondent |
Coram: Deputy Judge LEE
Date of Hearing: 22 December 1999
Date of Judgment: 28 January 2000
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JUDGMENT
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1. The applicant and the respondent have agreed on the following facts:-
| 1. |
The applicant is the Incorporated Owners of Yee On Court. It was incorporated on 17th July 1980. The Incorporated Owners is also the Manager of Yee On Court ("the Building") at 124, 124A, 124C-E, 124G-H & 124J-M Angyle Street and Nos. 79B, 79D, 79F-G and 79J-K Waterloo Road, Kowloon. |
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| 2. |
A deed of covenant in respect of the Building dated 31st August 1976 was registered in the Land Registry by Memorial No. 1307749 ("the DMC"). |
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| 3. |
By an Assignment dated 25th May 1977, the respondent acquired ownership of Shop No. 7 on Ground Floor of the Building ("the Shop") subject to and with the benefit of the DMC. The respondent was and is at all material times the Registered Owner of the Shop according to the record of the Land registry. |
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| 4. |
The applicant as the Manager of the Building commenced these proceedings against the respondent as the registered owner of the Shop under Paragraph 3 of the Recital, Clauses 4(d), 4(g), 4(i), 4(r) and 9(c) of the DMC and the relevant resolutions of various Extraordinary General Meetings held by the applicant claiming against the respondent for the total sum of HK$45,220.00 outstanding made up of:- |
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(a) |
the sum of HK$22,800.00 being the respondent's contribution to the 1st Project as hereinafter defined; and |
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(b) |
the sum of HK$22,420.00 being the respondent's contribution to the 2nd Project as hereinafter defined. |
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| 5. |
The applicant took over the management of the Building pursuant to the DMC over 15 years ago, after the first Manger, International Property Management Limited, appointed under the DMC, resigned. |
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| 6. |
Mr. MAK Hon Kai ("Mr. MAK") joined the Management Committee since the incorporation of the applicant and was elected as the Chairman of the Management Committee since on about 2nd February 1991 to date. |
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| 7. |
Mr. LI Poa Hwa ("Mr. LI"), the husband of the respondent, has been responsible for dealing with the matters regarding the Shop on behalf of the respondent. Since 1977, the respondent has paid to the Manager the management fees charged in respect of the Shop. The respondent has not challenged the amount until the commencement of this Application. |
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| 8. |
The Building is a commercial complex consisting of shops on ground floor, commercial floors on the 1st floor, 2nd floor and 3rd floor, carparks on the 4th and 5th floors and 2 basements of carparks, 3 Blocks (A, B and C) of residential flats erected on the 5th floor podium. Undivided shares are allocated pursuant to paragraph 3 of the Recital of the DMC as follows:- |
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(a) |
336 residential flats from the 6th to 17th Floors which were allocated a total of 2,852 undivided shares: |
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(i) 84 flats in Block A; |
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(ii) 126 flats in Block B; and |
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(iii) 126 flats in Block C;
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(b) |
Shops which were allocated a total of 900 undivided shares: |
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(i) Shop on the Upper Basement of the Building; |
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(ii) Shops No. 1 to 18 on the Ground Floor of the Building; |
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(iii) Shop or Office space on the 1st, 2nd and 3rd Floors of the Building. |
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(c) |
322 car parking spaces which were allocated a total of 332 undivided shares; and |
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(d) |
All other spaces on the Lower Basement, Upper Basement, Ground, 1st, 2nd, 3rd, 4th and 5th Floors not intended for common use and flat roof and the main roof of the Building were allocated a total of 68 undivided shares. |
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| 9. |
Under paragraph 3 of the Recital of the DMC, the Shop is allocated 19 undivided shares of all those 4,152 and equal undivided parts or shares of and in the Building. |
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| 10. |
Mr. MAK took part in a previous renovation and repairing project to the Building in about 1988. At the Extra-Ordinary General Meeting of the applicant held on 25th August 1988 ("the 1st EGM"), a resolution ("the 1st Resolution") was validly passed by the majority of owners present to proceed with the renovation and repairing works of the Building ("the Previous Project") which was recorded in the Minutes dated 25th August 1988 in relation to, inter alia, the following works:- |
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(a) |
repairing the external walls and other structural parts; |
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(b) |
repairing sanitary pipes and fresh water pipes; and |
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(c) |
re-painting of common area of the Building. |
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| 11. |
Mr. MAK was a member of the Management Committee and was present at the 1st EGM. Mr. WONG Shek Choy, the then Chairman of the Management Committee, chaired the 1st EGM where a resolution ("the 2nd Resolution") was passed that the contribution for the cost of Previous Project should be made by the owners of the Building ("the Owners"). |
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| 12. |
The respondent was required to contribute only HK$1,520.00 Mr. SOONG Che Kai, the manager, had left the employment with the applicant on 31st August 1998. |
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| 13. |
The Management Committee issued a notice dated 21st September 1988 to all owners of the Building ("the Previous Notice") notifying them of the 1st Resolution to carry out the Previous Project, and the calculation of the contribution to the Previous Project, by way of the management fee share set out in the DMC. This was in contradiction with the 2nd Resolution. The Previous Notice was annexed with a schedule setting out clearly the amount of the contribution payable by each Owner ("the 1st Schedule"). |
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Mr. MAK also took park in the renovation and repairing project to the Building in about 1994. Mr. MAK, as the Chairman of the Management Committee, chaired an Extraordinary General Meeting of the Applicant held on 13th August 1994 ("the 2nd EGM"). A resolution ("the 3rd Resolution") was passed by the majority of owners to carry out renovation and repairing works to the Building ("the 1st Project"). It was recorded in the Minutes dated 13th August 1994. The works included:- |
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(a) renovation to arcade, entrance lobby, lift lobby, common toilet and carpark;
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(b) electrical works; and |
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(c) air-conditioning works. |
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All these works were of a non-recurrent nature.
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| 15. |
The Management Committee issued a notice dated 18th September 1995 to all owners of the Building ("the 1st Notice") notifying them of the 3rd Resolution to carry out the 1st project, and the calculation of the contribution to the 1st Project, by way of the undivided shares set out in the DMC. The 1st Notice was annexed with a schedule set out clearly the amount of the contribution payable by each Owner ("the 2nd Schedule"). |
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After the 1st Notice and the 2nd Schedule were issued, certain owners of the shops in the Building opposed the calculation of the contribution to the 1st Project by way of undivided shares in land, and suggested that the contribution should be calculated by way of management fee shares, as they were charged in the Previous Project. The Management Committee discussed the matter many times in order to find a fair and reasonable solution. |
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Mr. MAK chaired an Extraordinary General Meeting of the applicant on 2nd June 1996, to resolve the calculation of the contribution to the 1st Project. It was adjourned to 30th June 1996 ("the 3rd EGM") where a quorum of owners were present, and the matter was thoroughly discussed by the owners and the members of the Management Committee, whether the contribution to the 1st Project should be calculated in accordance with the "undivided shares" in land or the "management fee shares". A resolution ("the 4th Resolution") was passed by the majority of owners present that the contribution to the 1st Project shall be calculated in accordance with the undivided shares in land allocated to the respective owners of the Building. It was recorded in the Minutes dated 30th June 1996. |
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| 18. |
The Management Committee issued a notice dated 12th August 1996 to all owners of the Building ("the 3rd Notice"). It notified them of the 4th Resolution, that the calculation of the contribution to the 1st Project should be by way of the undivided shares in land set out in the DMC, and the last date for payment of contribution would be 31st August 1996. |
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The Management Committee issued a notice dated 18th October 1996 to all owners of the Building ("the 4th Notice"). It gave them final notice that all contribution to the 1st Project should be paid to the Applicant within 7 days. |
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The applicant issued a notice of Extraordinary General Meeting, dated 3rd October 1997, ("the 5th Notice") to all owners of the Building. |
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| 21. |
Mr. MAK chaired another Extraordinary General Meeting of the owners of the Building on 18th October 1997 ("the 4th EGM"). A resolution ("the 5th Resolution") was passed by the majority of owners to proceed with renovation and repairing works, which were of a non-recurrent nature ("the 2nd Project"). It was recorded in the Minutes dated 18th October 1997. The scope of works of the 2nd Project which were recorded in the contract document dated 4th March 1998 included:- |
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(a) electricity installation works; and |
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(b) fire fighting equipment. |
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All these works were required to be carried out by the Government Authority before A could obtain the Certificate of WR2 (which is the Periodic Test Certificate for the compliance with safety requirements under the Electricity Ordinance Cap 406). |
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| 22. |
The Management Committee issued a notice dated 10th November 1997 to all owners of the Building ("the 6th Notice") notifying them of the 5th Resolution, and that the calculation of the contributions to the 2nd Project should be by way of the undivided shares in land set out in the DMC. The last date for payment of contribution would be 25th November 1997. The 6th Notice was annexed with a schedule setting out clearly the amount of the contribution payable by each Owner ("the 3rd Schedule"). |
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| 23. |
The DMC provides that each owner shall be bound by and shall observe and perform the covenants provisions and restrictions as set out in Clause 4. |
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| 24. |
Clauses 4(d), 4(e), 4(f) and 4(g), 4(i), 4(r) and 9(c) of the DMC are the relevant clauses. |
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| 25. |
Clause 4(d) of the DMC provides that: |
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"The following costs charges and expenses shall be borne and paid by the owners of the Building in proportion to the number of unit or units therein for the time being owned by them, namely:- |
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(i) |
Electricity, water and other similar charges; |
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(ii) |
Remuneration for caretakers; |
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(iii) |
The costs of refuse disposal (with exception of the restaurant premises the owners of which shall be responsible for making separate arrangement for disposal of their own refuse); |
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(iv) |
The cost of repairing, renewing, maintaining, cleansing, painting, or decorating the Building or any part or parts thereof; |
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(v) |
The cost of operating and servicing the water pumps; |
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(vi) |
The cost of operating maintaining repairing servicing replacing and renewing all the lifts in the Building save and except that no contribution shall be payable by those parties whose shops or spaces are not served by the lifts; |
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(vii) |
The charges payable to government for the supply of flush water; |
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(viii) |
The premium payable for the insurance of the Building; |
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(ix) |
Legal or other costs; and |
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(x) |
The Manager's remuneration." |
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| 26. |
Under Clause 4(f) of the DMC, pursuant to the provisions set out in Clause 4(d), designates the contribution of HK$39,100 to the costs charges and expenses payable by the owners as follows:- |
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(a) |
336 residential flats which are required to contribute a total of HK$31,500.00: |
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(i) HK$8,820.00 consisting of HK$105.00 from each of the 84 flats in Block A;
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(ii) HK$11,340.00 consisting of HK$90.00 from each of the 126 flats in Block B; and |
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(iii) HK$11,340.00.00 consisting of HK$90.00 from each of the 126 flats in Block C; |
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(b) |
Shops which are required to contribute a total of HK$4,280.00: |
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(i) |
HK$200.00 from Shop on the Upper Basement of the Building; |
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(ii) |
HK$480.00 consisting of HK$40.00 each from Shops Nos. 1 to 12 on the Ground Floor of the Building; |
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(iii) |
HK$400.00 consisting of HK$80.00 each from Shops Nos. 14 to 18 on the the Ground Floor of the Buildng; |
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(iv) |
HK$3,200.00 from the Shop or Office space on the 1st, 2nd and 3rd Floors of the Building. |
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(c) |
332 car parking spaces which are required to contribute a total of HK$3,320.00 of HK$10.00 each. |
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| 27. |
Clause (4)(g) of the DMC further provides that: |
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"If the total contributions payable to the Manager by the owners of the Building as aforesaid shall be insufficient to cover all or any of the said costs charges and expenses then such owners shall make further contributions towards such expenses in the shares as above provided." |
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| 28. |
Clause 4(i) of the DMC provides that: |
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"the Manager shall have power and authority to do all or any of the following acts and things namely:- |
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(i) |
To demand and receive from each owner the contributions payable by each owner as thereinbefore specified and all such contributions shall without prejudice to any other remedy exercisable thereunder be recoverable by the Manager by civil action and the defaulting owner shall not be entitled to dispute the right of the Manager aforesaid to sue and recover the unpaid contributions; |
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(v) |
To replace repair renew maintain service clean and paint the Building or any of the common areas and common facilities thereof and for such purpose to engage and to enter into contracts with any person firm or corporation; |
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(viii) |
To paint or whitewash or treat with cement wash or other material or appropriate such of the exterior and common parts of the Building as should be painted, white washed or so treated at such intervals as the same may reasonably be required to be done; |
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(x) |
To keep in good repair and condition all water pumps, tanks, pipes, sewers, drains, watercourses, cables and wiring in the Building which are for the common use of the occupants of the Building; |
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(xi) |
To keep the lifts in the Building in good repair and condition and to replace any parts that may require replacement; |
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(xiii) |
To appoint a solicitor with authority to accept service on behalf of all the owners for the time being of the Building of all legal proceedings relating to the Building, its services apparatus and equipment; |
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(xix) |
To enter into contracts and to engage, employ, remunerate and dismiss solicitors, architects and other professional advisers and to commence conduct carry on and defend legal and other proceedings touching or concerning the Building or the management thereof on behalf of all the owners for the time being; |
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(xx) |
To enforce the due observance and performance by the owners of the terms and conditions of the DMC and to take action in respect of any breach thereof including the commencement, conduct and defence of legal proceedings and the registration and enforcement of charges as thereinafter mentioned." |
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Clause 4(r) of the DMC provides that: |
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"If any owner shall fail to pay any amount payable thereunder within 7 days of the date on which the demand for payment is served on him, he shall further pay to the Manager:- |
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(i) |
Interest calculated at the rate of HK$1.00 for each HK$100.00 or part thereof of the amount unpaid for each period of 30 days or part thereof for which it remains unpaid, and |
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A collection charge of HK$150.00 or such lesser sum as the Manager may agree to cover the cost (other than legal costs of proceedings as thereinafter mentioned) of the extra work occasioned by the default." |
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Clause 9(c) of the DMC provides that: |
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"In particular and in addition to the rights of enforcement conferred by this Clause, the Manager or the paying party shall be entitled to commence proceedings in his its or their own name or names against any defaulting party to recover any sum payable by such defaulting party in accordance with the provisions of the DMC without first making payment of the moneys due by such defaulting party if any as provided by sub-clause (a) hereof and to register and enter charges in respect thereof against the share or shares of any such defaulting party and generally to enforce the observance and performance of the covenants conditions and provisions of the DMC and to recover damages for the breach, non-performance or non-observance thereof and the expenses recoverable in any such proceedings as aforesaid shall not be in any way limited to the costs recoverable on taxation in accordance with the provisions of the Rules of the High Court." |
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The main issues for the Tribunal to decide are as follows:- |
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(a) |
Whether on a proper construction of the DMC, the contributions to the 1st Project shall be calculated in accordance with the undivided shares in land as provided in the Recital of the DMC or the management fee shares as stipulated in Clauses 4(d) and 4(f) of the DMC? |
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Whether on a proper construction of the DMC, the contributions to the 2nd Project shall be calculated in accordance with the undivided shares in land as provided in the Recital of the DMC or the management fee shares as stipulated in Clauses 4(d) and 4(f) of the DMC? |
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Whether on a proper construction of the DMC, the Respondent has been overcharged of the management fees in the past 12 years in respect of the maintenance fees for the lifts of the Building? |
The Application
2. The applicant claims the sum of $45,220.00; interest at 1% per month on the sum of $45,220.00 from the due dates; the collection charge of $150.00; costs and other relief.
The Counterclaim
3. The respondent counterclaims against the applicant for an account of the amount of the management fees overcharged on the Shop for the past 12 years; the refund of such amount found to be due to the respondent on taking of the account; ancillary relief; interest and costs.
4. The Tribunal was asked to decide whether:
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the contribution to the 1st Project should be calculated in accordance with the undivided shares as provided in the Recital to the Deed of Mutual Covenant (DMC) or the management shares as stated in clauses 4 (d) and (f) of the DMC. |
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| 2. |
the contribution to the 2nd Project should be calculated in accordance with the undivided shares as provided in the Recital to the Deed of Mutual Covenant (DMC) or the management shares as stated in clauses 4 (d) and (f) of the DMC. |
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the respondent had been overcharged in respect of the management fees for the past 12 years. |
5. The expenses for the 1st and 2nd Projects had been agreed to be expenses of a non-recurrent nature. The total quantum is not in dispute.
6. Clauses 4(d) of the DMC stated the "costs charges and expenses" which the owners of the building must pay for.
7. Clause 4 (f) of the DMC listed in details the amount each owner shall pay to the manager "on account of his share of the costs charges and expenses in Clause 4(d)" per Calendar month.
8. Clause 4 in effect refers only to the monthly management fees payable. According to the Fifth Schedule to the Building Management Ordinance Cap. 344, the management fees would be charged in accordance with the annual budget previously calculated and published by the manager or management committee prior to the beginning of a new financial period. The amount would be the sums, which, in the opinion of the management committee, will be reasonably necessary to meet payments of the kind specified in Section 20(1) of the Building Management Ordinance. These include a general fund to "defray the cost of the exercise of its powers and the performance of its duties under the Deed of Mutual Covenant" and the Ordinance.
9. Where extraordinary expenses of the nature under the 1st and 2nd Projects are concerned they do not come within the contemplation of Clause 4 of the building's DMC. These expenses were not that of the kind covered by the general management fund. The general fund is for general day to day expenses. This is required to be established and kept in being, as a continuing fund, with the owners making periodic contribution towards it.
10. The 1st and 2nd Projects are both one of a kind, for specific and ascertained purposes. They are not of a recurring nature. The contributions towards these projects are for the same specific nature. The expenditures are of a kind not expected to be incurred annually. There is no provision in the DMC for such expenses. They come within the meaning of "special fund" under clause 4 of the Seventh Schedule to the Building Management Ordinance, Cap.344. By virtue of Section 34E of the Building Management Ordinance the provisions of the Seventh Schedule to the Ordinance is impliedly incorporated into the building's DMC, and binds the owners and the management committee.
11. Clause 4(2) of the Seventh Schedule provides that, where there is a corporation, the corporation shall determine, by a resolution of the owners, the amount to be contributed to the special fund by the owners, and the time when those contributions shall be payable.
12. This special fund is within the ambit of the contingency fund under Section 20(2) of the Building Management Ordinance, the recovery of which is governed by Section 22 of the same Ordinance. This DMC does not provide for the fixing of the contributions. In the circumstances, the amount "shall be fixed by the management committee in accordance with the respective shares of the owners." [Section 22(2) BMO].
13. Clause 4 of the DMC covered the monthly management fees payable. The proportion of payment under Clause 4(f) set out the sum payable by each owner on account of his share of the "said costs charges and expenses per Calendar month."
14. The fact that Clause 4(d) (vi) of the DMC contained a "saving" clause does not mean that there must be further deduction from the sum payable for shops or spaces not served by lifts.
15. Clause 4(d)(iii) of the DMC contained a similar exception for the restaurant in respect of refuse disposal.
16. Clause 4(f) of the DMC stated the specific amount payable at the time the DMC came into being. The "said costs charges and expenses" must be those under Clause 4(d), in its entirety, with all the exceptions taken into account. Clause 4(f) would make no sense otherwise.
17. The issues raised are answered as follows:
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The contributions to the 1st Project should be calculated in accordance with the undivided shares in land as provided in the Recital of the DMC. |
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| 2. |
The contribution to the 2nd Project should be calculated in accordance with the undivided shares in land as provided in the Recital of the DMC. |
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| 3. |
The Respondent has not been overcharged on the management fees paid for the past 12 years. |
Judgment
18. There is judgment for the applicant in the sum of $45,220.00; interest at 1% per month on the sum of $45,220.00 from the due dates; and collection charge of $150.
19. The respondent's counterclaim is dismissed.
20. There is an order nisi that the respondent is to pay costs to the applicant, to be taxed if not agreed, to become absolute unless, within 14 days, application is made to the contrary.
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Deputy Judge LEE |
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Presiding Officer
Lands Tribunal |
Representation:
Mr. W. K. TO of M/S W. K. To & Co., for the Applicant
Mr. C. K. WONG of M/S Charles Yeung, Clement Lam & Co for the Respondent
Remarks:
Appeal by the Respondent to the Court of Appeal. Appeal allowed and case remitted back to the Lands Tribunal. Please refer to the Appeal Judgment CACV000181/2000.
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