Read the full judgment text of HCA 013338/1995 on BabelCite. This High Court CFI judgment was delivered on 23 May 1996 before Le Pichon J.
Civil law – building management – Deeds of Mutual Covenant – power to disconnect water supply for non-payment of management charges – House Rules – injunction – Waterworks Ordinance (Cap.102) – Building Management Ordinance (Cap.344) – owners' corporation incorporation – management committee constitution – resolution validity – surcharge – management fees – duty to repair common parts – set-off – damages for cost of repairs – expert evidence. Plaintiff owned three units in Fontana Gardens, Causeway Bay, occupied by its secretary Mr K.C. Chow. The Defendants cut off the water supply to all three units in late December 1995 alleging arrears of management fees, pipe and lift renovation contributions and surcharges. The Plaintiff obtained an ex parte injunction on 22 December 1995 and sought to make it permanent. Whether House Rule (j) of the DMC for Block A could authorise the Defendants to disconnect a flat-owner's water supply for non-payment of management charges – No; the Waterworks Ordinance (Cap.102) provides a comprehensive regulatory framework and section 14 prohibits any person from 'altering' an inside service without the prior written permission of the Water Authority, which is not available for non-payment of management fees. Disconnection necessarily involves an 'alteration' within section 14. Whether the resolution of 15 December 1995 of the 1st Defendant's management committee replacing the House Rules of Blocks B and D with those of Block A was valid – No; the committee was irregularly constituted because it was elected by 50% of all owners across blocks rather than 50% of the owners of each individual block as required by section 3(2) of Cap.344. Whether proper notice was given under House Rule (j) – No; no surcharge was mentioned in payment advices and the first reference was in the Defendants' solicitors' letters of 16 December 1995. Whether the Plaintiff's failure to exhibit the DMC for Block A at the ex parte hearing warranted discharge of the injunction – No; the omission was understandable given the urgency, the similarity of the DMCs, and the Defendants' failure to identify the provision when asked. Whether the Plaintiff was bound to pay the $45,000 pipe and lift renovation contribution for Block A – No; sub-clause (k) of Clause 14 of the Block A DMC was not shown to have been complied with and the resolution went beyond maintenance to improvement or upgrading of the building, which following The Incorporated Owners of Bayview Mansion (SCTPO No. 32, 1994) is beyond the powers conferred by a maintenance-only DMC. Whether the Plaintiff was bound to pay the $48,000 pipe and lift renovation contribution for Block B – No; the resolutions of 19 February and 23 July 1995 were invalid as the Block B DMC and Supplemental Deed contain no provision for majority decision of owners; the Plaintiff is prima facie liable for a pro rata share of the first three items of work (lift overhaul, pipe replacement, and pump room repair) under Clause 3(c), reduced proportionately by the $1,308,000 of reserves applied and based on the actual tendered price of $1,510,000 rather than the $2 million estimate in the minutes. Whether the Defendants are entitled to recover management fees despite the failure to repair – Yes; effecting repairs is not the only duty remunerated by management fees, and the proper remedy for any breach is a set-off. The duty to repair the common parts is integral to the management functions and is not conditional on owners first providing funds; the DMCs empower the agent or manager to recover fees and contributions, with the concomitant duty to raise necessary finance. Quantum of damages for repairs to the Plaintiff's three units – $690,000 ($74,000 for Unit G/24 Block A, $34,000 for Unit 1/3 Block B, and $582,000 for Unit 8/11 Block D), accepting the evidence of the Plaintiff's chartered quantity surveyor over the Defendants' chartered building surveyor. Claim for damages for repairs to common parts not yet carried out – Dismissed; the court has no jurisdiction to make the orders proposed. Plaintiff granted permanent injunction restraining disconnection of water supply; Plaintiff liable to the 1st Defendant for $79,619.25 in management fees and Block A surcharge; Plaintiff awarded $690,000 in damages with set-off; costs to Plaintiff; liberty to apply.
Legal issues: Validity of House Rule (j) empowering disconnection of water supply under the Waterworks Ordinance (Cap.102) · Validity of the resolution of 15 December 1995 replacing the House Rules of Blocks B and D · Sufficiency of notice under House Rule (j) for disconnection of water supply · Non-disclosure at the ex parte injunction application · Validity of the demand for $45,000 pipe and lift renovation contribution for Block A · Validity of the demand for $48,000 pipe and lift renovation contribution for Block B · Defendants' entitlement to management fees despite failure to carry out repairs · Quantum of damages for cost of repairs to the Plaintiff's three units · Damages for cost of repairs to common parts not yet carried out
Outcome: Plaintiff granted permanent injunction restraining disconnection of water supply; Plaintiff liable for $79,619.25 in management fees and surcharges (subject to set-off); Plaintiff awarded damages of $690,000 for cost of repairs to its three units; claim for damages for repairs to common parts dismissed; costs to Plaintiff; liberty to apply.
Cited by 6 cases