The Incorporated Owners of Shatin New Town v. Yeung Kui

LDBM 339/2007

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Building Management Application No. LDBM 339 of 2007

----------------------

BETWEEN

----------------------

Coram: H.H. Judge WONG, Presiding Officer, Lands Tribunal

Date of Hearing: 2 December 2008

Date of Submission of Last Written Submission: 12 January 2009

Date of Handing Down of Judgment: 11 February 2009

----------------------

JUDGMENT

--------------------

Background

1.This application was transferred from the Small Claims Tribunal to the Lands Tribunal for determination.  The Applicant is the owners' corporation of Shatin New Town, Nos. 1 – 15 Wang Pok Street, Shatin New Territories, Hong Kong (“the Estate”).   The Respondent is the owner of a residential flat of the Estate known as Flat E, 7^th Floor, Block B1 (Chung Lam Court).  The Applicant's claim against the Respondent is for a sum of $9,000.00 being part of the Respondent‘s share of contribution for the maintenance works of the Estate, together with interest and costs.

2.The Estate is a private development consisting of two parts:-

(1) A commercial complex comprising the Basement, Level 1, Level 2, Level 3 and Level 4 which are designated mainly as car parking spaces and shops (“the Commercial Complex”); and

(2) A residential development consisting of 8 residential buildings (“the Blocks”) which are built on the flat roof of the Commercial Complex.

3.During an owners' meeting held on 19 November 2005, it was resolved that maintenance works were to be carried out in relation to the lobbies/entrance hall and exterior walls of the Blocks (“the Maintenance Works”).  It was also resolved that the monthly management fee of all residential units (totaling 1,400 units) would be increased to $1,000.00 from $550.00 (i.e. an increment of HK$450.00 per month) for a period of 24 months from 1 December 2005.  It was intended that a total sum of $15,120,000.00 ($450.00 x 24 x 1400) could then be raised for payment of the Maintenance Works.  Each residential unit, including the Respondent's unit, would effectively need to contribute a sum of $10,800.00.  The Respondent did pay his share of contribution until April 2006 when he stopped doing so.  The Respondent refuses to pay the increment of $450.00 per month from April 2006 to November 2007 totaling a sum of $9,000.00, which forms the subject matter of the present claim.

4.The Respondent relies on three lines of defence as follows:-

(1) The Maintenance Works, which mainly involved works on the exterior walls and hall entrances to the residential blocks, covered common or communal areas and common facilities, the legal ownership of which vested exclusively with the developers of the Estate, i.e. The World Realty Limited, Him Fook Company Limited, All Best Wishes Limited, and Chee Sheung Industry & Godown Company Limited (“the Developers”).  Hence the cost associated with the Maintenance Works should be shouldered solely by the Developers and not by individual owners (“the Communal Areas Defence”);

(2) Even if the individual residential owners have to pay for the cost of the Maintenance Works, the formula employed by the Applicant in computing the contribution by each individual owner was legally erroneous (“the Computation Defence”); and

(3) Procedural errors in the conduct of the relevant management committee meetings and owners' meetings invalidated the resolutions passed pertaining to the Maintenance Works (“the Procedural Irregularities Defence”).

The Communal Areas Defence

5.A Deed of Mutual Covenant and Management Agreement (“the DMC”) was entered on 18 May 1983 between the Developers, the first purchaser Lee Kin Ming and the manager Shatin Lucky Plaza Limited.  The DMC contains the following definitions:-

“the Estate”	shall mean the whole of the development known as “Shatin New Town”…
“Each Block”	shall mean each of the said eight residential buildings.
“the Estate's Common Areas”	shall mean the communal areas of the level and include:- (a) The main entrance to and exit from the Estate … …
	(m)	Those other parts of the Estate the right to use which is given by this Deed of Mutual Covenant to more than one Owner in accordance with this Deed.
“the Estate's Common Facilities”	shall mean and include:- (a) Such of the sewers, … …
	(f)	Any other facilities installed for the use and benefit of the Estate and not for the use and benefit of a particular Block.
“the Block's Common Areas”	shall mean and include the entrances and halls … and the exterior walls of each Block.
“the Block's Common Facilities”	shall mean and include:-
(a)	Water pipes, … of the particular Block
(underlines added)	…

6.From the above summary, it can be seen that the Estate's Common Areas and Common Facilities and the Block's Common Areas and Facilities are separately defined, and that the exterior walls and entrance halls of the 8 residential blocks are specifically defined as “the Block's Common Areas”.

7.According to the First Schedule of the DMC, the Estate was notionally divided into 83,186 shares, of which 62,452 shares are allocated to the 1,400 residential units, 15,713 shares to the shops on Level 1, 4168 shares to the shops on Level III and 823 shares to the car parking spaces on Basement, Level 1 and Level II.  Apart from the above, 23 and 7 shares are allocated as follows:-

“The Exterior Walls, Spaces underneath all	)
staircases, Store Rooms, Management Counter,	)
Caretakers' Counter, Security Guards' Counter,	)
Administration Office, Bicycle Parking,	)
Account Plant Room on Level I; Caretakers'	)
Office, Police Reporting Centre on Level III;	)
Flat-roof, Bicycle Parking, Service Lift Moto	)
Room on Level IV.	)	23/83186 th shares
.
Machine Room, Water Tank, Pump House,	)
Unexcavated Area on Basement; Water Tank,	)
Transformer Room, Meter Room, Schroff,	)
Switch Room, Lavatories, Entrance Hall,	)
Walkway, Arcade, Refuse Container Chamber	)
on Level I; Driveway on Level II;	)
Pedestrian Walkway, Arcades and Lavatories	)
on Level III; Switch Rooms, Pump House, Sum	)
Tank, Flower Beds, Machine Rooms, Platforms,	)
Pools, Planting, Sitting Areas, Children's	)
Play Areas, Entrance Halls on Level IV;	)
all communal areas of the Estate and of each	)
Block not hereinbefore mentioned including	)
footpaths, roads, gardens, open spaces,	)
Public Parking Spaces, recreational facilities	)
including common entrances, halls, passageways,	)
lift machine room, Water Tank, Pump House, and	)
terrace on 22nd floor of the buildings.	)	7/83186th shares”

8.It is not disputed that the aforesaid 23 and 7 shares are still retained by the Developers.  In fact, the land search records confirm that the Developers are the registered owners of the 23 and 7 shares.  It is described in the land search records that the addresses of the 23 and 7 shares are “MANAGEMENT AREAS” and “COMMUNAL AREAS” respectively.  The remarks stated in the land search record concerning these two terms are similar to the descriptions in the DMC concerning the 23 and 7 shares as stated above.

9.The Respondent argues that he is not liable to pay for the cost of the Maintenance Works because the exterior walls and entrance halls of the 8 residential blocks form part of the areas/facilities to which the 23 and 7 shares mentioned above were attached.  As the Developers still retain those shares, it follows that the cost of the Maintenance Work should be borne by them.

10.The Applicant, on the other hand, submits that the Respondent's argument is bound to fail given the true construction of the relevant provisions in the DMC.  When reading the part of the First Schedule of the DMC concerning the 23 shares, it can be seen that it is in fact divided into several segments of which each segment was ended with a specific level of the Commercial Complex.  One can also see that the item ‘Bicycle Parking' has appeared for more than once in the whole part.  Likewise, the part concerning the 7 shares is also written in similar way.  It largely refers to the Commercial Complex, of which areas/facilities such as ‘Pump House', ‘Water Tank' and ‘Entrance Hall' etc. could be found in more than one level of the Commercial Complex as described therein.  The Applicant therefore submits that these 2 parts are referring only to areas/facilities found in the specified parts of the Commercial Complex and some of these areas/facilities could be found in more than one level.

11.The Respondent, however, argues that despite semicolons are used in the definition apparently aimed at separating different facilities/areas on Levels I, III and IV, the entire definition would not make sense unless there is another semicolon between “Store Rooms” and “Management Counter” on the second line of the description concerning the 23 shares for the following reasons:-

(a) All levels (including the residential floors) have exterior walls, and likely spaces under staircases, and therefore it does not make sense to only cover exterior walls and spaces under staircases of Level 1, but not Levels III and IV and those of the residential floors.

(b) On the other hand, other facilities such as administrative office, bicycle parking, police reporting centre etc. appeared to be facilities built/set up at particular floors.

12.I disagree with the Respondent's interpretation in this regard.  I do not think that there is a mistake in not using a semicolon between “Store Rooms” and “Management Counter” as alleged.  The Applicant's interpretation makes perfect sense and there is no ambiguity at all in using a comma instead of a semicolon.  There is absolutely no need to rewrite the DMC in the way suggested by the Respondent.

13.Nevertheless, the Respondent further submits that even if the “Exterior Walls” were only intended to include that of Level I, the exterior walls for each residential block must have been included in the definition of “Communal Areas” (as stated in the land search record) under “all communal areas of the Estate and of each Block not hereinbefore mentioned”.

14.The Respondent argues that “Residential Development” and “Each Block” must be “subsets” of “the Estate” according to its respective definitions in the DMC.  Hence, the “Block's Common Areas” (which include exterior walls of each Block) must be part of the “Estate's Common Areas”.  Meanwhile, “Residential Unit” must also include the “Communal Areas” and “Management Areas” on the Lands Search records, being “any part or part of the Estate to which equal undivided shares in the Land and the Estate have been or may be allocated”.  Although there is no clear definition of “Communal Areas” in the DMC, the term “communal” had been referred to in the definition of “Estate's Common Area”, i.e. “shall mean the communal areas of the level and include …” (followed by a non-exhaustive list of usual common areas). Further, the word “communal' again appeared in the definition of “Block's Common Facilities” referring to “communal television antennae”.  The Respondent therefore urges the Tribunal to draw the inference from the DMC and interpret the term “communal” as synonymous to “common”.  As “communal” has a dictionary meaning as “used or shared in common by everyone in a community/ground” (see New Oxford Dictionary of English), “communal areas” should cover common areas of the Estate in the present situation.

15.Although I accept that one should not look at the description in the land search record to see what “Communal Areas” are, the second last segment of the part concerning the 7 shares in the First Schedule of the DMC also refers to “all communal areas of the Estate and of each Block not hereinbefore mentioned including footpaths, roads, gardens, open spaces, Public Parking Spaces, recreational facilities including common entrances, halls, passageways, lift machine room, Water Tank, Pump House, and terrace on 22nd floor of the buildings”.

16.The Applicant submits that the above phrase should not be interpreted to include the exterior walls and entrance halls of the residential blocks, and argues that had this particular segment been intended to refer to all communal areas of the Estate and the 8 residential blocks so as to “catch” the exterior walls and entrance halls of the residential blocks, it could have been drafted in a much simpler way by replacing the whole of that part (as well as the part concerning the 23 shares) with “the Estate's Common Areas” or “the Estate's Common Facilities” as defined in the DMC.  The Applicant also submits that the phrase “all communal areas of the Estate and of each Block not hereinbefore mentioned” should be construed to refer only to certain areas that are communal to both the Commercial Complex and the 8 residential blocks.  To interpret the said phrase too widely, as the Respondent now does, it would mean that “the communal areas of the Estate not hereinbefore mentioned” (when “the Estate” will already include the 8 residential Blocks) and/or “the communal areas of each Block not hereinbefore mentioned” (which in itself will then be redundant) are included.  It would clearly be contradictory to the fact that the exterior walls and entrance halls of the 8 residential blocks are purposively taken out as “the Estate's Common Areas” and put under “the Block's Common Areas”.

17.In this regard, I do not accept the Applicant's interpretation.  I agree with the Respondent that the phrase “all communal areas of the Estate and of each Block not hereinbefore mentioned” is a wide phrase and can cover the exterior walls and entrance halls of the residential blocks.  The Applicant's suggestion that the areas covered by this phrase must be communal to both the Commercial Complex and the 8 residential blocks is too narrow and it would require the word “both” to be impliedly inserted into the phrase.  I do not think that it is the intention of the DMC.  The DMC has clearly identified two sets of common areas and facilities, one for the Estate and one for the Blocks.  So the logical reading must be that these two sets of common areas and facilities are included.  It is just artificial to read it with the word “both” as suggested by the Applicant.  It may be that the DMC could be drafted in a simpler way, but I think the purpose of drafting it in the present way is to identify as many common areas and facilities as possible, but at the same time, no other common areas or facilities of the Estate or of the Blocks are to be omitted.

18.In fact “halls” are included under the phrase.  I do not think that there will be halls that are communal to both the Commercial Complex and the 8 residential blocks.  At least there is no evidence to that effect.  I find it difficult to exclude the entrance hall of each residential block from the phrase just because it does not serve the Commercial Complex as well.  I do not think that it is the intention of the DMC to exclude such halls.  Although exterior walls are not mentioned as examples under this phrase, they are included expressly in the definition of “the Block's Common Areas” (so are halls).  When entrance halls of the residential blocks are included under the phrase, there is no reason to exclude the exterior walls of the residential blocks from the ambit of this phrase at all.  I think all the areas covered by the definition of “the Block's Common Areas” should be included altogether under the phrase.

19.I therefore find that the Developers own the entrance halls as well as the exterior walls of the residential blocks by virtue of the 7 shares allotted to them.  As owners, and when the DMC does not stipulate otherwise, the Developers should bear the cost of the Maintenance Works, rather than individual owners of the residential flats.

20.Moreover, the Developers have reserved the right to use the exterior walls of the 8 residential blocks to themselves for advertising and piping purposes by virtue of clause 7 of the DMC.  As such, the Respondent argues that the Developers should be responsible for the cost of the Maintenance Works (at least in relation to the works at the exterior walls) by reason of section 34H of the Building Management Ordinance (“the BMO”).

21.Section 34H of the BMO stipulates that:-

“(1)      Where a person who owns any part of a building, has the right to the exclusive possession of any part of a building or has the exclusive right to the use, occupation or enjoyment of that part, as the case may be, but the deed of mutual covenant in respect of the building does not impose an obligation on that person to maintain the part in good repair and condition, that person shall maintain that part in good repair and condition.

(2)      The obligation in subsection (1) shall be deemed to be an obligation owed to all owners of the building under the deed of mutual covenant.”

22.It is clear from the wordings of section 34H that a person who owns any part of a building, but the deed of mutual covenant in respect of the building does not impose an obligation on that person to maintain the part in good repair and condition, that person shall maintain that part in good repair and condition.  That duty to maintain also extends to a person who has the right to the exclusive possession of any part of a building or has the exclusive right to the use, occupation or enjoyment of that part.  Thus, on the assumption that my finding on the Developers' ownership of the exterior walls and entrance halls is wrong, I would need to consider whether the Developers are regarded as having an exclusive right of possession, or an exclusive right of use, occupation and enjoyment of the exterior walls of the Blocks within the meaning of section 34H of the BMO.

23.In this regard, the Applicant relies on the case of The Incorporated Owners of Goa Building v. Wui Tat Company Limited,CACV 349/2002, in which the applicant (being the incorporated owners) claimed against the respondent (being the original developer) for cost of maintenance of the external walls of the buildings.  The claim was also made upon section 34H of the BMO.  At the conclusion of the trial in the Lands Tribunal, it was held that the respondent had the exclusive right to use, occupation and enjoyment of that part and was therefore liable to the claim.  On appeal, the Court of Appeal overturned the decision for reasons that neither the respondent was given the exclusive right to use, occupation and enjoyment of the exterior walls nor was section 34H applicable in the circumstances.

24.The relevant parts of the deed of mutual covenant in the Goa Building case are as follows:-

Clause 1.01

“The Vendor shall for the residue of the term of years set out in the said Schedule have the sole and exclusive right and privilege (A) to the use occupation and enjoyment of all the said units … and (B) Subject to any necessary approval of the Government Authority or Department to erect, construct, install … any signs, signboards, advertisements, … and at to or on such position or positions of the external walls of the said Building … in common use as the Vendor shall in its absolute discretion think expedient or desirable and … (C) Subject to necessary approval of the Government Authority or Department to erect, construct, install, … one or more flu pipes or … at to or on such part or parts of the open yard or years and of the external walls of the said Building …”

Clause 3.02

“The person or persons … in whom the sole and exclusive right and privilege … mentioned in Clause 1.01 hereof or … shall at all times observe and comply with all the laws and regulations relating to the erection maintenance … and shall be solely responsible for the repair, maintenance, upkeep … of any such sign, a signboard … other structure, chimney, flu pipe …and the part of the said Building in common use and the portion or portions of the external walls and … at which and/or to which and/or upon which such sign, signboard, advertisement, … chimneys, flu pipe or smoke stack shall be erected, constructed, installed ... and such person or persons shall at all times indemnify and keep indemnified the owners and occupiers for the time being of the said Building against all loss, damage …”

(underlines added)

25.In delivering his judgment, Rogers VP came to the conclusion that the respondent had not been given the exclusive right within the meaning of section 34H when reading the two clauses together.  The reasons of his judgment are as follows:-

“4. It is important to note that although the respondent (i.e. the Vendor) was given right in respect of various matters such as the erection of signs and signboards and flu pipes, it was not given either the exclusive possession of the external walls or the exclusive right to the use, occupation or enjoyment thereof.  Indeed, such rights as clause 1.01 gave the respondent extended not only to the external walls but also to any part of the building that was in common use.

5. Clause 3.02 of the deed of mutual covenant imposed three different types of obligation upon the respondent in respect of the exercise of those rights.  In the first place, the respondent was required to comply with all the various laws and regulations which might be involved.  In the second place, the respondent was required to be solely responsible for the repair and maintenance of any relevant item which might be so placed and also of “the part of the Building in common use and the portion or portions of the external walls and the portion or portions of the open yard or yards of the said Building at which and/or to which and/or upon which” any such item would have been placed.  In the third place, the respondent was required to keep the other owners indemnified for any loss or damage which might be occasioned by the exercise of the right granted under clause 1.01…

6. In my view, it was clear that the rights accorded to the respondent under clause 1.01 did not comprise all the rights which would amount to the exclusive possession or the exclusive right to the use occupation or enjoyment of a part of a building.  The rights accorded by clause 1.01 were merely part of the rights which might be enjoyed by an owner but were not the full and exclusive rights. …

7. In those circumstances, the respondent's liability in respect of the maintenance of the external walls would fall to be determined under clause 3.02 of the deed of mutual covenant and not under section 34H of the Ordinance.  Insofar as costs have been incurred in respect of maintenance falling within the terms of clause 3.02 then, no doubt, the respondent would be responsible therefore.  The respondent would not be responsible for the cost of maintaining the whole of the external walls of the building…”

26.The Applicant submits that according to the Goa Building case, a right conferred by the deed of mutual covenant will not be regarded as exclusive for the purpose of section 34H of the BMO simply because it is “named” to be so, but whether the exercise of such a right is subject to any condition or obligation which an “exclusive user” would not otherwise need to meet.  In the present case, clause 7 of Section I of the DMC reads as follows:

“7.      The Registered Owner shall subject to the prior approval in writing of the Manager:-

(a) have the exclusive right to erect one or more flu pipes or smoke stackes [sic.] or chimneys at the rear exterior wall or walls of each Block from the ground floor or any other level to the Roof thereof together with the right to maintain, replace or remove the same provided such erection, maintenance, replacement or removal shall not unnecessarily interrupt the enjoyment of the Residential Units in the Residential Block.

(b) have the exclusive right to use all the external walls of all of the Residential Block for advertising purposes and to display, install, erect, affix or permit to be displayed, installed, erected or affixed thereon and thereto such advertising signboard, placards, posters and other advertising signs or structures whatsoever (whether illuminated or not) subject to the approval of the Public Works Department or other Government Authorities concerned and with the right to remove, repair, maintain service or replace the same provided that the same shall not unnecessarily interrupt the enjoyment of the Residential Units in that Residential Block.”

(underlines added)

27.The Applicant accepts that the provisions of the DMC in the present case are different from that of the Goa Building case., but argues that on true construction of clause 7, the rights conferred to the Developers should not be regarded as exclusive for the following reasons:-

(1) Prior approval from the Manager will be required if the Developers decide to exercise any of those rights.

(2) The decision remains an absolute discretion of the Manager.

(3) In the case of advertising, the Developers are further required to meet the approval of the Public Works Department or other governmental authorities.  The ultimate purpose of that part is to place the Developers under an obligation to comply with all laws and regulations.  This obligation is more or less similar to that of the Goa Building case.

(4) Further, the Developers are under a duty not to exercise any of the rights in such ways which may interrupt the enjoyment of the residential units of the Blocks.

28.Although I am bound by the decision in the Goa Building case, I do not think that the Applicant has interpreted the decision correctly.  I do not think that Rogers VP has actually ruled that there was no exclusive possession because of the conditions imposed in clause 3.02.  The decision was reached because of the fact that there was an extension of exclusive rights to the common parts of the building.  Yam J. in The Incorporated Owners of Tropicana Gardens v Cheong Ming Investment Company Limited, HCSA 19/2006, had the same observation and said that:-

“The decision of Goa case was reached under the light of the extension of exclusive rights to the common parts of the building …”

29.Thus, I do not accept that the conditions imposed by clause 7 would nullify the Developers' right to exclusive possession of the exterior walls of the Blocks.  It is in fact common that an owner's right would be restricted by some conditions similar to those in clause 7.  One of the purposes of having a deed of mutual covenant is to regulate the rights of an owner, but it does not mean that having some restrictions in the exercise of the right, it would take away the right to exclusive possession of the owner completely.  Thus, the Applicant's argument in this regard is rejected.

30.Since the right under clause 7 of the DMC is not extended to other common part of the Blocks, I would distinguish the present case from the Goa case.  I find that the Developers do have an exclusive right to use the exterior walls of the Blocks as stipulated in clause 7 of the DMC.  By virtue of section 34H of the BMO, the Developers, rather than the Respondent or other owners, should be responsible for the cost of the Maintenance Works.  The Applicant has no right to pass any resolution to require the Respondent to pay the cost of the Maintenance Works.

The Computation Defence

31.The Applicant relies on Clause 1(4) of Sub-section B of Section V of the DMC to say that they have the duty “to paint white-wash or otherwise treat as may be appropriate the exterior and Block's Common Areas and the Estate's Commons Areas at such intervals as the same may reasonably require to be done” (Underline added).  Clause 1(b) of Sub-section D of Section V stipulates that the owners of the Estate shall pay a due proportion of the Management Expenses made up of, inter alia, “The cost of carrying out all or any of the duties of the Manager set out in Clause 1 of Sub-Section B of Section V hereof.”  However, an owner is not responsible for all kind of management expenses.  By Clause 6(a) of Sub-section D of Section V, the management expenses shall subject to the provisions of Sub-Section F of this Section be apportioned between the owners in the following manner:-

“(a)   Where any expenditure relates solely to or is solely for the benefit of any Residential Unit or Commercial Unit and no Owner of any other units would receive any material benefit therefrom the full amount of such expenditure shall be paid by the Owner of that Residential or Commercial Unit … “

32.However, I fail to see how Clause 1 (4) of Sub-section B could cover the Maintenance Works or at least part of them.  Clause 1 (4) refers to “paint white-wash or otherwise treat” the exterior and Block's Common Areas.  However, the works in question concerns the addition of water collection and drainage pipes for air conditioners, removal and replacement of clothes-racks and the renovation of the entrance lobby.  Under Clause 7(a) of the DMA, only the Developers have the exclusive right to erect pipes at the exterior walls.  The Manager or the Applicant has no duty or no right to carry out these works.  Thus, the owners should not share the expenses incurred for the Maintenance Works, or at least part of them, in the way suggested by the Applicant.

33.I also accept the Respondent's submission that the Applicant's construction of Clause 6(a) is erroneous.  The words “Where any expenditure relates solely to or is solely for the benefit of any Residential Unit or any Commercial Unit and no Owner of any other units ……” clearly refers to situations where expenses benefiting only one single residential or commercial unit are involved, and not to be interpreted as being applicable to situations involving expenses relating to residential units versus commercial units as a whole.  Clause 6(a) has therefore no application to the present case.

34.I agree with the Respondent that the Applicant erred in relying on Column 3 of the Second Schedule to compute the contributions to be made by the Respondent.  The $450 extra per month for 24 months does not represent the actual proportion and final total amount he is required to contribute for the Maintenance Works.  As an owner, the Respondent is required to pay a due proportion of the Management Expenses (Section V Part D Clause 2 and Clause 6), and Manager's Remuneration and Maintenance Expenses (Section II Part A).  In relation to owners' interest in the management funds, it is provided at Section V Part G that “…any balance of said funds or in the case of extinguishment of rights and obligations as aforesaid an appropriate part of said funds shall be divided proportionately between the owners of the undivided shares immediately…”.

35.From the aforesaid clauses, it is envisaged under the DMC that the owners' contributions and interests are to be determined by a formula/method of computation, whether based on undivided shares or any other method.  Applying the formula, an owner's final total amount of contribution could be determined.  However, Section V Part D Clause 7, for instance, only provided a mechanism calling for contributions by owners in advance or “on account”, and did not reflect the final amount an owner was required to contribute.  By the same token, Column 3 in the Second Schedule also only calls for monthly contribution in advance or “on account”.  The Respondent's final contribution to the Maintenance Works could not be derived therefrom.  Both Clause 7 and Column 3 therefore only furnish a procedure in collecting management fees or contributions by owners in advance, and not a formula to determine the ultimate amounts they are required to contribute.

36.Schedule 7 (paragraph 4) of the BMO specifically requires that the manager shall “maintain a special fund to provide for the expenditure of a kind not expected by him to be incurred annually.”  As the cost of the Maintenance Works is not to be incurred annually, a special fund should be set up, instead of using the computation method adopted by the Applicant.  As there is no provision for contributions for such a fund in the DMC, contributions by owners should be based on their respective undivided shares.  The present arrangement by the Applicant, i.e. depositing the collected funds into the general account of the Applicant for general expense, clearly contravenes the above statutory requirement.

37.As to the per flat quotient in Column 5 of the Second Schedule, i.e. 400/668, 522 shares, it is not clear where the denominator shares came from and whether it applies to the Blcok's Common Areas and Facilities as opposed to the Estate's Common Areas and Facilities.  I do not therefore find it applicable to the contributions in question.

38.Since the DMC is unclear on the computation method, sections 21 and 22 of the BMO should come into play.  Section 22(2) provides that:-

“(2) If there is no deed of mutual covenant, or if the deed of mutual covenant does not provide for the fixing of contributions, the amount to be contributed by an owner towards the amount determined under Section 21 shall be fixed by the management committee in accordance with the respective shares of the owners.”

39.I therefore find that the Respondent's contribution to the cost of the Maintenance Works, if he is required to pay, shall be computed in accordance with his undivided shares in the Estate, i.e. 37/83186.

The Procedural Irregularities Defence

40.The Respondent's complaints concerning the procedural irregularities are that:-

(1) The minutes of the Owners' Meeting on 19 November 2005 (“the Owners' Meeting”) did not mention that the computation adopted by the owners had already been fixed and approved by the Management Committee, a requirement under sections 21 and 22 of the BMO;

(2) The total cost for the Maintenance Works had yet been known or determined at the Owners' Meeting.  Only an estimate was given.  As a result, the resolution at the Owners' Meeting with respect to the Maintenance Works was invalid.

(3) The same applied to the owners' meeting held on 10 February 2007 (“the 2^nd Owners' Meeting).  The final amount of $15,120,000.00 was never passed; and

(4) The Applicant did not furnish to the owners the details relating to each tender prior to voting at the 2^nd Owners' Meeting.  The selection process by the Management Committee of the 5 final bidders also lacked transparency.

41.As held above, sections 21 and 22 of the BMO govern the contributions in question.  As the Management Committee meeting held immediately before the Owners' Meeting did not mention at all how the Management Committee fixed the contributions by owners, the resolution passed at the Owner's Meeting relating to payments could not have been based on the contributions fixed by the Management Committee, and hence it is passed in violation of sections and 22(2) of the BMO.

42.As to the complaint concerning the tender, since it is not pleaded in the Amended Notice of Opposition, I shall not deal with it.

43.The Applicant does not seem to have any answer to the issue of breaching section 22, save to suggest that sections 21 and 22 are not applicable to the present case.  However, as aforesaid, I do find that sections 21 and 22 are applicable.  Thus, the Applicant simply fails to explain or resolve the breach.

Conclusion

44.By reasons aforesaid, I find that the three lines of defence are all established and the Applicant is not entitled to claim the said sum of $9,000.00 from the Respondent.

45.I therefore order as follows:-

(1) The Application herein be dismissed; and

(2) Costs order nisi: The Applicant do pay the Respondent costs of the proceedings including the costs in the Small Claims Tribunal and with certificate for counsel, to be taxed on District Court Scale if not agreed.  If there is no further application for costs within 14 days from the date hereof, the costs order nisi shall become absolute.

Mr. LEE Shu Wun, instructed by M/S Tony Kan & Co., for the Applicant

Mr. Lawrence CHEUNG, instructed by M/S S.K. Lam, Alfred Chan & Co., for the Respondent