The Incorporation Owners of Lux Theatre Building v. Wu Yuk Ting and Another

LDBM 373-383 OF 2004

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

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BUILDING MANAGEMENT Application No. 373 of 2004

Between

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BUILDING MANAGEMENT Application No. 374 of 2004

Between

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BUILDING MANAGEMENT Application No. 375 of 2004

Between

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BUILDING MANAGEMENT Application No. 376 of 2004

Between

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BUILDING MANAGEMENT Application No. 377 of 2004

Between

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BUILDING MANAGEMENT Application No. 378 of 2004

Between

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BUILDING MANAGEMENT Application No. 379 of 2004

Between

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BUILDING MANAGEMENT Application No. 380 of 2004

Between

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BUILDING MANAGEMENT Application No. 381 of 2004

Between

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BUILDING MANAGEMENT Application No. 382 of 2004

Between

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BUILDING MANAGEMENT Application No. 383 of 2004

Between

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Before: H. H. Judge Yung, Presiding Officer of the Lands Tribunal

Date of Hearing: 17 - 19 August 2005 & 20 - 21 October 2005

Date of Judgment: 14 December 2005

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J U D G M E N T

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1.These cases have been transferred from the Small Claims Tribunal.  The same questions of fact and points of law arise from these cases and therefore the cases were heard together.  These respondents are owners of residential flats in the building in question.  The Applicant is the owners incorporation and by these proceedings is claiming monthly management fees of $340, outstanding for over three years. The Respondents are counter-claiming for damages, refund of contributions, interests etc.

2.When these cases first came before me on 6 June 2005, it was already the fourth call-over hearing, some six months after their transfer to this Tribunal.  At this call-over hearing, the Respondents complained that the Applicant had not disclosed certain accounts and documents.  This was disputed by Mr. Yeung, then counsel for the Applicant. He maintained that all relevant documents have been disclosed and stressed that he did not know what documents the Respondents were referring to.

3.In order to avoid further delay of the matter, I was prepared to regard this complaint as an application for specific discovery, only that the Respondent could not specify what those documents were.  Quite sensibly, Mr. Yeung did not object to the application made in such an informal way.  His only worry was that legal costs and copying charges might have to be unnecessarily incurred supplying the Respondents every single corporation documents and accounts.  He said such costs could be huge. I agreed with him.  I stood the matter down to enable the parties to make a last effort to sort out what documents and accounts the Respondents might be referring to.   Parties failed to resolve the matter.   As the Respondents could not make out a list of the documents they wanted and by looking at the matters in dispute, I tended to agree with Mr. Yeung that all relevant documents have been disclosed.  In these circumstances, I required the Respondents to make a formal application when they could work out the list of documents and if they wished to pursue the matter. In the meantime I set the case down for trial.

4.On the first day of trial Mr. Poon, counsel for the Respondents, made a number of applications on behalf one of the Respondents.  If he was to succeed, the case has to be adjourned. Firstly he argued that a formal consolidation of all these cases was desirable contending that the Applicant should file and serve a consolidated Notice of Application, similar to a consolidated Statement of Claim in the High Court.  Following that, he argued, the Respondents should be given time to respond by filing notice of opposition.  Put it simply, the pleadings should be re-done all over again. Mr. Poon attempted to justify such course but his arguments had no merits.  Mr. Poon might have been misled by his clients as to the history of these cases, and if not, his courage in making such bold attempt to justify these suggestions is admirable.  H H Judge K Y Chan at the first call-over hearing had directed that these cases be tried together. The defences and counter-claims in these cases are identical. It serves no useful purpose to have the pleadings re-done again.  The application for formal consolidation was therefore refused.  The other applications were withdrawn. The trial then commenced after half day had been spent on dealing with Mr. Poon’s applications on behalf of one of the Respondents.

5.Like other flat owners in many other similar cases, the Respondents indulged themselves in giving vent to their dissatisfaction with the management of the building.  Unfortunately for them, many of their complaints, even if substantiated, could not justify their refusal to pay the monthly management fees in question. More than that, those complaints were either not supported by facts or they had no cause for such complaints. For example, the Respondents cited an incident to show the apportionments of monthly management fees being unfair or incorrect. The owner of one the residential flats on the 3/F was only charged half of the management fees. The Applicant explained that this arrangement was necessary in order to secure access to the flat roof/podium owned by another to regularly clear away rubbish collected thereon.  Similar offer had even been refused by other owners on the same floor.  In this regard the Respondents also complained that the Applicant should not spend money cleaning private property. It is not clear whether the roof/podium is common area.  One thing is clear it is not owned by the flat owner who was given a 50% concession on management fees. Assuming the roof/podium is not common area, it is still within the legitimate duty of the Applicant in managing the building to keep its environment clean and sanitary.  Ideally those who threw rubbish or allow it to be collected there should be made to bear the costs.    It is easier said than done.  If the Applicant did not do it itself, it might have to resort to legal proceedings.  This would be an expensive and comparatively ineffective exercise. The arrangement as adopted by the Applicant must be the best solution to the problem. In any event no better alternative has been suggested by the Respondents. There are other incidents of building management problems which the Respondents used as reasons for not paying management fees. They are misconceived. It is not necessarily to deal with them one by one. It suffices to deal with those which Mr. Poon still pursued in his final submission.

6.The conspicuous point of defence is that the Applicant never explained to the Respondent the rationale behind the apportionment. An owners incorporation or the manager of the building has a duty to explain such rationale. There is no duty on the part of individual owners to pay whatever management fees demanded of them. They are entitled to an explanation and in appropriate case the failure to explain might constitute a good defence.  However, in the instant case, there is no ground for such allegation. The Applicant has shown the Respondents the legal opinion it obtained in this respect.  In fact the solicitors for the Respondents in a letter admitted that the apportionment method was correct.  At the trial Mr. Poon sought to retract this admission. He is entitled so to do. His argument is no different from that put forward by the Respondents. The Respondents contended that Lux theatre has now been converted into a number of different shops and therefore each of such newly created shops should have the same liability as other shops to pay monthly services charges. In the deed of mutual covenant the theatre is regarded as a single unit and its liability to contribute to various expenses is not the same as other categories of owners.   That its liability to pay monthly service charges changes after partitioning into different shops is open to argument. In fact the Applicant has at the instigation of the Respondents or some of the Respondents sought to impose such liability by way of legal proceedings on the theatre owner and has been met with a defence.  The proceedings have not been concluded on its merits. The Applicant has difficulty in overcoming the apparent reasonableness of the defence raised. Firstly the owner of the theatre managed its own property and no extra costs have been incurred by the Applicant to manage the shops created out of the theatre. Secondly support cannot be readily derived from the provisions of the deed of mutual covenant. The Applicant has yet to decide what to do and this difficult question would probably be left to be decided at the meeting of the owners. The Respondents are not entitled to make use of this situation to withhold payment of management fees.

7.The Applicant has lost a litigation  battle over the title of a back alley originally owned by them.  As a result it has incurred expenditure of some seven hundred thousand dollars in legal costs.  The Applicant has also undertaken a renovation project costing about four million.  None of these two items of expenditure has been apportioned to the theatre owner. The Respondents therefore contends that because of these they need not have to pay monthly management fees.  Mr. Poon supplemented their argument. He submitted that had the theatre owner been required to contribute to these two items the financial situation would not have been so bad as to require an increase in management fees.  Firstly the defence of the Respondents is that they do not have to pay anything. Secondly the financial situation postulated by Mr. Poon is a pure conjecture not supported even by simple arithmetic. The owners contributed separately to these two items. If the theatre owner had been asked to contribute to these two items, the other owners’ contribution would be reduced proportionately. It would not improve the overall financial situation of the Applicant.   The Applicant has not yet decided to abandon the claim against the theatre owner.  Even if the Applicant has failed to take reasonable steps to recover such contribution or abandoned such claim, it would not afford  the Respondents a defence. Management fees and contributions are separate matters.  If the Respondents did not need to pay, by the same token all other residential owners did not need to pay. I cannot imagine how the building can be managed in that situation.

8.Mr. Poon also raised the defence that without production of proper accounts it is not known whether the increase was necessary. He also suggested there might be fraud and irregularity going on.  There is no basis for these suggestion or suspicious. This case has nothing to do with an action for account. Whether or not items of expenditure are booked correctly or whether some one is committing fraud on the Applicant is quite beside the point. The Respondents cannot withhold payment of management fees on the simple ground that they suspect that something, fraud or other irregularity, is going on. If the Applicant can justify the basis for charging that amount of management fees, the Respondents have to pay.  If the want to challenge the account for the previous years or for the current year or for the years to come, they can always do that in good time. What they are not entitled to do is to withhold payment of monthly management fees until they are satisfied with the accounts.  

9.I find all the defences raised in the pleadings and the witness statements failed. Mr. Poon in his final submission raised certain defences for the first time. These defences should be more aptly described as putting the Applicant to strict proof of its case.  Mr. Ng, counsel for the Applicant at the trial, strenuously opposed this. Mr. Poon argued that the Respondents were not legally represented at the early stage of these proceedings. He urged the Tribunal to take a liberal approach in inferring the implied defences he now raised.  I must point out that the Respondents were represented as early as 19 July, a month before the trial commenced. Not only that no amendments were sought, no warnings were ever given to the Applicant about the matters now raised in the final submissions.  It would be quite unfair to his clients if Mr. Poon attributed this unsatisfactory state of affairs to their ignorance.

10.The Tribunal should be informal and show latitude but only as far as circumstances permit and justice requires. It is trite law that the Applicant must prove its case. On the other hand the Applicant does not need to prove something which is not in dispute.

11.The factual and legal basis of charging the Respondents and the other residential owners a monthly management fees of $340 dates back to a resolution of the management committee in 1997. The resolution was passed to raise the management fees by $60 representing less than 22% of increase. The Respondents have paid this amount for some 5 years before stopping paying anything. The copy of the minutes containing this resolution was exhibited to the witness statement as directed by H H Judge K Y Chan. No question of authenticity has been raised in respect of this document.  Nothing has been raised or suggested that the resolution is invalid in one way or the other.  Now Mr. Poon argues in effect that the Applicant has to prove every single procedural requirement for the meeting before I can find the resolution valid. I disagree.  It is clear from the evidence and from the pleadings that the Respondents did not dispute that the meeting and resolution have complied with all the procedural requirements. Even if I were to adopt the approach suggested by Mr. Poon, I would have certainly inferred that the Respondents are not disputing the validity of the resolution.  It is too late for Mr. Poon to raise the issue about the validity of the meeting and the resolutions.  I am satisfied the management fees were increased for the purported reasons given in the minutes of the meeting.  The management committee is entitled to raise the monthly management fees for residential owners to $340.

12.Mr. Poon also threw doubts on the composition of the management committee at the time of the said meeting in 1997.  Again this point was raised for the first time in his final submission. Such defence cannot be inferred from history of the case, the evidence, and the pleadings. I would not allow Mr. Poon to raise this point.

13.I find that the Applicant has proved its case and I give judgment for the Applicant against each and every Respondent for the sum claimed and interest at judgment rate thereon from 15 January 2005 until payment.

14.As to counter-claims by these Respondents, there is no proof that they have made contributions to the said renovation project or to the expenditure in relation to the failed litigation. These counter-claims should not have been made and are dismissed.

15.There be an order nisi for costs in favour of the Applicant on High Court Scale with Certificate for Counsel to be taxed if not agreed.

The Applicant: represented by Mr. Tong NG instructed by M/S Lo & Yeung

The Respondent: represented by Mr. Anthony POON of M/S Ho, Tse, Wai Partners