The Incorporated Owners of Wah Lai Mansion (Marble Road) v. Lo Hok Yee

                                                LDBM 79 and 80 OF 2005

(Heard together)

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT Application No. 79 of 2005

and No. 80 of 2005

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Between

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

Date of Hearing: 1st and 2nd of June 2006

Date of Judgment: 18 July 2006

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J U D G M E N T

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1.In 2002, the Applicant (“ the IO”) undertook certain renovation work of the building. The usual resolution was passed at a meeting of owners to raise the requisite fund.

2.Some of the owners, not including the Respondents, successfully challenged the demand by the IO for contributions to the funds in this Tribunal.  As a result, the claim for contributions against these owners by the IO was dismissed by H H Judge Chow  ( LDBM53-61/2001).  

3.As would be expected, this has caused some disquiet among the owners who have paid the contributions to the fund in good faith. Some of them have already begun withholding monthly management fees claiming to set them off against contributions which they had paid but which the IO had no right to collect.

4.The witness for the IO described the ensuing difficulty in managing the building since the ruling of the Tribunal.  I accept his evidence.  The scenario he described was the natural and normal reaction of the owners who had abided by the resolution.  I also accept that something must be done to facilitate the better management of the building in view of the earlier invalid resolution and its consequence.  Furthermore the IO was of the view that it was under a duty to refund the owner and it required funds to do so and it also required funds to settle the balance of the contract price of the renovation work and the legal costs in the lost litigation.  In order to accomplish this, the Applicant sought to establish a contingency fund. 

5.nbsp;The Applicant accepted the ruling of H H Judge Chow and followed the fund raising procedure laid down in judgment of the learned judge. It is reasonable for the Applicant to do so. In the instant case, the Respondent does not challenge the procedure of raising the fund and they also accepted as correct the fund raising procedure as laid down in the said judgment.

6.Initially the Respondents raised the defence that the Applicant failed to re-elect the management committee and therefore no business of the Applicant could be effected or transacted.  This defence was not pursued after their attention was drawn to the majority decision of the Court of Appeal in The Incorporated Owners of Finance Building V Bright Hill Management Consultants Company Limited (CACV 386/2000).

7.The remaining complaint of the Respondents is of two folds as I understand their argument. Firstly the Respondents argue that no fund, or no fund of the declared amount, was in fact raised. The owners who had paid their contributions pursuant to the earlier resolution would be given credit of the same amount and they were only required to pay the difference. Those who had not paid earlier, including the Respondents, would be required to pay the full amount.  This exercise, according to the Respondents, did not amount to raising a fund of the declared amount.  This argument is technical and has no merit.  There is a short answer to this argument. The crux of the argument of the Respondents runs like this. As some of the owners are given credits, the nature of the exercise is not of fund raising. The IO, if necessary, could have asked all the owners to pay first. Only after collecting the contributions totalling the declared  amount of the fund, would they begin refunding those owners the amount they had paid under the former invalid resolution. If this was to be done the Respondents would have raised no complaint.  Equally they would have no complaint and in fact their counsel did not raise any when asked about it, if the owners who handed in cash of the contributions to a management staff member would immediately get a refund from the same staff member or another one sitting next to him. It would be quite illogical and affront to common sense that the Applicant is not entitled to raise fund if it intended to collect it in the former way but entitled to do so if they collected in the latter two ways. In any one of these three ways, the purpose of the fund and the right of owners inter se are no different.

8.The second argument of the Respondents is that this fund raising exercise has a retrospective effect and is a means to circumvent the result of the decision of H H Judge Chow.   The decision of the then leading case of Court of Appeal case has been cited in support: The Grande Properties Management Limited V Sun Wah Ornament Manufactory Limited. Quite unfortunately for the Respondents this leading case went on appeal and the decision of the Court of Appeal was overturned by the Court of Final Appeal a few days ago (13 July 2006, FACV No.2 of 2006). That being the case, this argument of the Respondent cannot be supported.

9.All the points pleaded or pursued at the trial fail. However it is worthwhile to deal with a fundamental point which has not been raised.  It is not in every case that a Manager or an owners incorporation can rectify its fault, or ratify its unauthorised decision, by subsequent resolution of the owners or of the management committee. Ultimately it is question of fairness. 

10.In the instant case, the question to be asked is whether the owners who had abided by the decision of the IO, albeit an invalid one, to pay their share of contributions should be refunded. Even the Respondents could not say or dare say that they should not be refunded. From the history of the matter, these owners should not be treated differently from the Respondents and their like. The account in this respect can be re-opened easily. I do not see any unfairness that the Respondents should be treated like any other owners in contributing to cost of renovation work undertaken, and the legal cost in the lost litigation.

11.For the reasons given above, I give judgment for the Applicant against the Respondents for the respective amounts claimed with interest thereon at judgment rate from today until payment. 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. Paul WU instructed by M/S Chung & Kwan

The Respondent: represented by Mr. CHAN Chung instructed by M/S Weir & Associates