Re The Incorporated Owners of Albert House

HCCW 1046/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 1046 OF 2004

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Before: Hon Kwan J in Chambers

Date of Hearing: 8 December 2004

Date of Decision: 8 December 2004

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D E C I S I O N

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1.This is an application of the Official Receiver as the provisional liquidator of the Incorporated Owners of Albert House (“the Incorporated Owners”), under section 182 of the Companies Ordinance, Cap. 32, seeking a validation order in respect of the following:

(1)    dispositions of the property of the Incorporated Owners in the ordinary course of the management of Albert House (“the building”) for proper value;

(2)    dispositions of the property of Albert House in the sums of HK$54,808.30 and HK$58,933.30 for settlement of the monthly expenses of the building for October and November 2004 respectively; and

(3)    future dispositions of the property of the Incorporated Owners in an amount not exceeding HK$60,000.00 a month for settlement of the management expenses of the building.

2.On 30 September 2004, Aberdeen Winner Investment Company Limited presented a creditor’s petition to wind up the Incorporated Owners.  The petition was founded on three judgment debts, in HCA No. 3408 of 2003 dated 21 January 2004 for HK$9,239,437.87, in HCA No. 2308 of 2003 dated 20 July 2004 for HK$2,449,563.88, and HCA No. 1623 of 2004 dated 16 August 2004 for HK$12,002,299.02.  These amounts are the contributions sought by the petitioning creditor against the Incorporated Owners in respect of the liability to pay compensation awarded to the plaintiffs in a personal injuries case.

3.On 8 November 2004, a winding-up order was made against the Incorporated Owners.

4.According to the former members of the management committee of the Incorporated Owners, the total assets of the Incorporated Owners amounted to HK$1,844,645.30, with liabilities of HK$25,405,040.00.  The Incorporated Owners are apparently unable to discharge their debts and liabilities out of their own assets.

5.At the time of the Official Receiver’s first report dated 25 November 2004, the Official Receiver has received HK$1,798,815.88 from the Incorporated Owners, out of which HK$1,789,586.00 was claimed to be trust money held on behalf of the owners of the building for payment of the compensation in the personal injuries case and the Incorporated Owners’ legal costs in defending various court actions in relation thereto.  As at the hearing today, proofs of debt received amounted to HK$25,205,206.02.

6.The management of the building has been undertaken by PP Management Consultants Company Limited (“the Management Company”) under a building management contract.  The management expenses of the building comprise two parts, services and disbursements.  Disbursements involve fire services contracts, water pump maintenance contract, lift maintenance contract, public antenna system maintenance contract, digital surveillance system service agreement, public liability insurance policy and fire insurance policy.  All these contracts are subsisting and unless terminated earlier, will not expire until next year.

7.The Management Company has continued to collect monthly management fees from all the owners of the building.  Monthly income includes rental of HK$7,500.00 in respect of the roof top let by the Incorporated Owners to Hong Kong CSL Limited for telecommunication installations.  The average monthly management expenses of building for September to November 2004 were about HK$57,000.00 odd and the average monthly management fees received for the same period amounted to HK$56,000.00 odd.  The balance brought forward in the income and expenditure account kept by the Management Company as at 30 November 2004 is HK$36,204.70.  From these figures, it would appear that the management fees contribution with the rental received for the roof top should be sufficient on average to discharge the monthly management expenses.

8.The present case is different from the usual situation where a validation order is sought in respect of a company which is the subject of a winding-up petition or order.  This is a corporation of flat owners incorporated under the Building Management Ordinance, Cap. 344.  Notwithstanding the winding up of the Incorporated Owners, it is necessary to have management and maintenance of the building continued for the need of the owners in the use and enjoyment of their units in the building and for the safety of the building as a whole in the interest of the public and the owners.

9.In a similar case, Re the Incorporated Owners of Foremost Building, HCCW No. 47 of 2004, 28 October 2004, I made a validation order for payment of monthly management expenses of the building in question out of the management fees contributions paid into the Companies Liquidation Accountant, holding that the incorporated owners would still have statutory functions to perform under section 18(1) of Cap. 344 notwithstanding that the incorporated owners were ordered to be wound up.

10.Here, to perform the statutory functions under Cap. 344, it is necessary to have the present management continued under the building management contract.  It is necessary to have the various service contracts continued, in particular the lift maintenance contract, to enable discharge of the statutory obligation on the part of the owners under section 19 of the Lifts and Escalators (Safety) Ordinance, Cap. 327.

11.It would be appropriate to make a validation order to allow the discharge of expenses necessarily incurred in the management of the building, so long as the management fees contributions received from the owners are kept entirely separate and are not to be used for any other purpose.

12.I therefore make an order in terms of paragraphs 1 to 3 and 5 of the application amended in the manner as indicated at the beginning of this decision.

Mr H Y Chau, for the Official Receiver