The Incorporated Owners ofPo Hang Building v. Sam Woo Marine Works Ltd

DCCJ 1271/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION No. 1271 OF 2011

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BETWEEN

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Before: Deputy District Judge Kent Yee in Chambers (open to public)

Date of Hearing and Decision: 1 February 2012

Date of Reasons for Decision: 9 February 2012

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REASONS FOR DECISION

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1.By the Judgment dated 8^th December 2011, I confirmed the decision of a master granting the plaintiff summary judgment against the defendant and dismissed the defendant’s appeal with costs. The defendant applied to this court by summons dated 3 January 2012 for leave to appeal against the Judgment. At the conclusion of the hearing, I dismissed the defendant’s application with costs summarily assessed at HK$56,310. These are my reasons for my decision.

2.The parties do not differ in regard to the legal principles applicable to the application. Pursuant to section 63A of the District Court Ordinance, Cap. 336, leave to appeal shall not be granted unless this court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice that the appeal should be heard. A reasonable prospect of success means an appeal with prospects that are more than “fanciful” but which do need to be shown to be “probable”: SMSE v KL [2009] 4 HKLRD 125 at§17 per Le Pichon JA.

3.The plaintiff’s claim was for a sum of HK$211,407.00 being the defendant’s share of the repair and renovation charges incurred together a collection charge of HK$300 plus interest thereon. The background facts and the provisions of the Deed of Mutual Covenants germane to the application can be found in my Reasons For Judgment dated 19^th December 2011 and I shall not repeat them here. I shall also adopt the abbreviations used in that document below.

4.The application was supported by an affirmation of Chiu Kam Kun Eric dated 3^rd January 2012 exhibiting thereto a draft notice of appeal setting out the proposed grounds of appeal. Ms Ng, counsel for Sam Woo, further elaborated on those proposed grounds at the hearing. However, as pointed out by Mr Ng, counsel for the IO, the majority of them was a sheer repetition of the arguments previously raised and I have already rejected them in my Reasons For Judgment. Here I shall only cover those grounds with which I did not specifically deal in the Reasons For Judgment.

5.First, Ms Ng contended that the way in which the surplus or deficit of the Building was calculated and reflected in the books and accounts of the Building as a whole and not being apportioned to any individual units of the Building as alleged by Mr Lee, the bookkeeper of the IO since 2002,[1] was irrelevant to whether there was in fact individual surplus attributable to Sam Woo. She further submitted that given (1) Mr Lee’s confirmation in his oral testimony in the Lands Tribunal proceedings under LDBM 179/2008 on 18^th November 2008 that the sum of HK$162,939.00 represented the total amount of surplus of Sam Woo’s monthly management fees from October 1992 to August 2008 and (2) the table prepared by Mr Lee clearly showed that there was a surplus in the said sum for the said period relating to Sam Woo, there should be individual surplus attributable to Sam Woo.

6.I determined the IO’s application in its favour on the basis that there was indeed surplus in the management fund of the Building: §§28 and 30 of the Reasons For Judgment. I accepted the uncontradicted evidence of Mr Lee. I found that the table and the transcript of the hearing in LDBM 179/2008 lent support to his explanation and they should be understood in context. There is no provision in the DMC to the effect that surplus in the management fund of the Building should be divided among individual owners and/or that individual owners can claim the return of those surplus attributable to them. I cannot see any evidential basis upon which it could be said that there should be surplus attributable to Sam Woo. I am not convinced that there is any substance in this contention.

7.It was further submitted that I was wrong in rejecting Sam Woo’s calculation of the overpayment/surplus for the period from February 1983 to September 1992 and the period from September 2008 to April 2010 in the absence of the IO’s evidence.

8.I dismissed the calculation of Sam Woo on a pro-rata basis as baseless and speculative irrespective of the actual amounts of surplus or deficit for the said periods. I cannot accept that, as a matter of principle, such calculations of surplus/deficit in the management fund can be done on a pro-rata basis given the fact that the expenditure of the Building in each month inevitably varies.

9.More importantly, I held that Sam Woo was liable to pay its share of the Charges even if there was surplus in the management fund of the Building. None of such surplus should be attributable to Sam Woo and Sam Woo cannot possibly claim set-off against its share of the Charges. There is no need to calculate the surplus allegedly attributable to Sam Woo at all.

10.Next Ms Ng argued that there should be an equitable set-off of the surplus attributable to Sam Woo towards its share of the Charges by virtue of the effect of Clauses 3(f), (j) and (k) of the DMC. She submitted that this defence should be accepted and in any event Sam Woo should be allowed a chance to establish this defence at trial.

11.This ground is unarguable given my finding of the absence of any surplus attributable to Sam Woo. Moreover, for an equitable set-off, there must be in the first place a cross-claim on the part of the defendant:  Karpex (HK) Ltd v Yasmine Printing (China) Ltd [2008] 1 HKLRD 199 per Cheung JA at §10. As stated in §28 of the Reasons For Judgment, Ms Ng accepted that there was no provision in the DMC allowing the refund/release of any unused portion of management fees previously paid by an individual owner. Ms Ng also accepted that Sam Woo could not make a claim for such funds. There can be no cross-claim on the part of Sam Woo. I agree with Mr Ng that the purported defence of an equitable set-off is without legal or factual basis. It does not even begin to get off the ground.

12.On the construction of Clause 3(i) of the DMC, Ms Ng submitted that I was wrong when the words “such owners” could not refer to all the owners under Clause 3(h) but only refer to those particular owners whose monthly contribution was found to be insufficient to cover all or any of the costs, charges and expenses as set out in Clause 3(f).

13.I am not persuaded that I was arguably wrong in my construction of Clause 3(i) of the DMC. I have sufficiently explained in §§23-26 of the Reasons For Judgment why the provision is not amenable to the construction submitted by Ms Ng. The phrase “the total monthly payments payable to the Manager by the owner” in Clause 3(i) clearly refers to the total monthly payments that the owners are obliged to pay to the Manager and not those monthly payments that the owners have already paid to the Manager.

14.I cannot see how the reference to “such owners” can assist Ms Ng’s construction. There can be no dispute that Clause 3(i) of the DMC is applicable to all the owners of the Building. The costs, charges and expenses referred to therein are those set out in Clause 3(f) of the DMC. Among them, however, some are to be borne and paid by certain owners only: Clauses 3(f)(vi) and (ix) of the DMC. Thus, only “such owners” who are liable to bear and pay those costs, charges and expenses under Clause 3(f)(vi) and (ix) are required to make further contributions towards such costs, charges and expenses pursuant to Clause 3(i). In other cases, for costs, charges and expenses other than those specified in Clause 3(f)(vi) and (ix), “such owners” actually include all the owners when all of them are liable to bear and pay such expenses pursuant to Clauses 3(f) and (i) of the DMC.

15.Having rejected Sam Woo’s construction of Clause 3(i), I do not see how the resolutions passed at the Meeting are in any way inconsistent with Clause 13(k) of the DMC.

16.Lastly, Ms Ng argued that this court ought to have found that since the exact amount of shares by each owner was not specified in the said resolutions, the said resolutions did not render Sam Woo liable to contribute to the Charges.

17.This argument is completely devoid of merit. I have explained why I rejected this argument in §29 of the Reasons For Judgment. Additionally, as rightly pointed out by Mr Ng, in the Court of Appeal, the case of Sam Woo was that its liability to contribute to the Charges was governed by Clauses 3(h) and 3(i) of the DMC: §2 of the Judgment (CACV 368/2008, unreported, 11.11.2009)[2]. It was not necessary for the said resolutions to set out the exact amount of each and every individual owner had to pay so as to make them liable to pay their shares. The clear function and purpose of the said resolutions were to approve/endorse the Charges to be incurred by the IO. As long as the Charges have been approved/endorsed by the IO, the owners are liable to contribute to the Charges in accordance with the DMC.

18.For the reasons given, I concluded that Sam Woo failed to meet the threshold and accordingly I refused to grant Sam Woo leave to appeal. The application was dismissed with costs on a solicitor and own client basis (Clause 15(b) of the DMC) and I endorsed the engagement of counsel by the IO.   

Mr Lawrence Ng, instructed by Messrs Lam & Partners for the Plaintiff

Ms Queenie Ng, instructed by Messrs K.H. Lam & Co. for the Defendant

[1] Mr Lee referred himself to be the accountant of the IO (會計) in his witness statement filed in LDBM 179/2008 [225] but as the book-keeper of the IO in the affirmation filed on 17^th June 2011 [95].

[2] [186] of the Hearing Bundle