The Incorporated Owners of Hing Hon Building v. Leung Kam Wah

LDBM000145/1999

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Building Management Application No. LDBM 145 of 1999

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Coram : Deputy Judge LEE

Date of Hearing : 5 August 1999

Date of Judgment : 26 August 1999

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J U D G M E N T

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1. The Applicant is seeking the determination of the Lands Tribunal on a preliminary issue. The issue is: whether on the construction of the Deed of Mutual Covenant Memorial No. 1089866 (DMC), the management charges should be at a flat rate for all owners of Hing Hon Building (the Building), or in accordance with their undivided shares.

2. The Applicant is asking for a ruling from the Lands Tribunal that Clause 12(j)(iii) of the DMC prevails over the Building Management Ordinance Cap.344 (BMO). Clause 12(j)(iii) reads:

"No resolution shall be valid if it is contrary to the provisions of this deed. And to remove doubt it is hereby declared that resolutions duly passed at a duly convened meeting by a majority of the owners present in person or by proxy and voting varying or increasing the monthly contributions payable by the owners shall not be deemed to be contrary to the provisions of this deed."

3. It is agreed that the Respondent (R) is the owner of storage room no. 2 on the first floor of the Building. R is the owner of one share out of a total of 623 undivided shares in the Building.

4. Under Clause 3 of the DMC, each of the owners "shall pay his due proportion of " the following charges:

the Crown Rent, which is now the Government Rent;

charges for water used the Building, unless it is separately metered;

charges for sea water for flushing;

insurance premium;

cost of cleaning and keeping common areas and facilities in good condition; (Damage cause by the act, default or negligence of the parties to the DMC, or their servants, agents, tenants or licensees are excluded from this item.)

electricity and incidental charges for the common areas and facilities.

Clause 4 of the DMC provided that:

"The amount which each of the parties hereto shall be liable to pay or contribute under Clause 3 shall (except as hereinafter otherwise specified) be in proportion to the share of and in the said premises and building for the time being vested in him." This means that unless there is a specific exception stated in the DMC, the contribution under items of expenses in Clause 3 should be in accordance with the undivided shares.

5. The lifts are not included in Clause 3. They are provided for in Clause 5, which stated that "the maintenance, operating expenses, cost or expenses incurred in any repair" of the lifts and their replacement, "shall be shared by the owners of each of " the units from the 1st to the 25th floors. There is provision for the form of sharing under the DMC. Under clause 10 (c) the owners of the units from the 1st to the 25th floors should pay according to the number of units they owned. However, the owners of the car parks on the Ground floor and the ground floor facilities are not required to contribute, as they are specifically excluded under Clause 5. The owner of each unit from the 1st to the 25th floors has to pay an equal contribution towards the lift expenses.

Under Clause 10(c):

" The owner of each unit in the building shall in respect of each unit owned by him pay for the time being a sum of $80.00 per calendar month payable monthly in advance to the Manager on the 1st day of each and every month as contribution towards the costs and expenses of the following: -

(i) Maintaining an office and employing adequate staff for the management of the said building.

(ii) Maintaining the well (if any) water tanks and electric pumps and electricity charges for operating such pumps.

(iii) Cleaning and maintaining in good repair and condition the parts of the said building in common use.

(iv) Disposing of garbage.

(v) Operating maintaining and repairing the lifts and charges for electricity used for operating the said lifts and for lighting the corridors lifts lobbies and staircases.

(vi) Legal or other fees and expenses which may be incurred by the Manager in the performance of any of its duties or in the exercise of any of its powers contained herein."

Under Clause 10(f):

"If the total contributions towards any of the expenses aforesaid (Crown Rent excepted) shall be insufficient to cover the same then those owners liable to contribute towards such expenses as aforesaid shall make further contributions towards such expenses in proportion to the number of flats storage rooms or shops owned by such owners who are liable to contribution."

6. Taking Clauses 3,4,5 & 10 together, only those items listed in Clause 10(c) were to be paid for at a flat rate per unit, by the owners, according to the number of units that they owned. Increases under Clause 10(f) are also according to the number of units owned. The sharing of the expenses for items outside the scope of Clause 10(c) must be calculated in accordance with the undivided shares, under Clause 4.

Clause 12(j)(iii) specified that:

"No resolution shall be valid if it is contrary to the provisions of this deed. And to remove doubt it is hereby declared that resolutions duly passed at a duly convened meeting by a majority of the owners present in person or by proxy and voting varying or increasing the monthly contributions payable by the owners shall not be deemed to be contrary to the provisions of this deed."

7. It is the Applicant's submission that this clause gives the meeting of owners the power to vary or increase the monthly contributions, even if the increase or variation is contrary to the DMC.

8. If it were the Applicant's contention that it could vary or increase the management fees, but in accordance with the terms of the DMC, the result would be different from an increase or variation contrary to the DMC terms. In the former case, the combined effect of the BMO and the DMC means that, the Applicant would require the management expenses to be itemized in details, with breakdown for each separate head of expenditure. A differentiation would have to be made with reference to Clauses 3 and 10 (c), for the item of expenditure to be classified. The apportionment would follow the classification. Items falling within Clause 10(c) would be contributed to at a uniform rate for each unit in the Building. Items outside the scope of Clause 10(c) would be contributed in accordance with the undivided shares.

9. Under Section 21(1) of the BMO, a management committee shall determine the amount to be contributed by the owners to the funds established and maintained under section 20, during a period not exceeding 12 months. These funds include a general fund for the costs of the exercise of the incorporated owners' powers, and the performance of its duties under the DMC. The management fees fall within this category.

10. Under Section 22(1)(a) of the BMO, the amount to be contributed shall be fixed by the management committee, in accordance with the DMC. Where the DMC has provided for the amount to be contributed by the owners, the DMC must be followed. Where the DMC does not so provide, then the amount to be contributed shall be in accordance with the respective shares of the owners (S. 22(2) BMO).

11. If it were the Applicant's contention that it could vary or increase the management fees without regards to the DMC, it would be in effect saying that the DMC has not provided for the fixing of contribution. The BMO was enacted to provide for the management of buildings and for matters incidental or connected to it. The increase and apportionment of the management fees is one of these matters. Where there is no provision in the DMC, the BMO fills the lacuna.

12. In this case, the contribution must be fixed in accordance with the respective undivided shares of the owners.

Representation:

Mr. Anthony P. W. Cheung instructed by Messrs. Lau Kwong & Hung for the Applicant.

The Respondent in person.