The Incorporated Owners of Greenwood Terrace v. U Teck Ltd
Read the full judgment text of LDBM 11/2011 on BabelCite. This Lands Tribunal judgment was delivered on 29 May 2012.
1. The applicant (“the IO”) is the Incorporated Owners of the development known as Greenwood Terrace (“the Estate”) in Chai Wan.
Cited by 2 cases · Cites 1 case
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LDBM 11/2011 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO. 11 OF 2011 _________________
_________________ Before: Deputy Judge KOT, Presiding Officer, Lands Tribunal Date of Hearing: 24 and 27 April 2012 Date of Judgment: 29 May 2012 _________________ J U D G M E N T _________________ Background 1.The applicant (“the IO”) is the Incorporated Owners of the development known as Greenwood Terrace (“the Estate”) in Chai Wan. 2.The Estate consists of 8 multi-storey buildings. Tower 1 to Tower 7 are residential blocks with a kindergarten (“the Kindergarten”) underneath Tower 7. The other building (hereinafter called the “Shop Building”) is one with car parking spaces on Level 1 to Level 4 (“the Car Parking Spaces”) and shops on Level 5 and Level 6. The floor slab of Level 5 extends horizontally and projects sideways to form a large open area known as the Podium (“the Podium”). Level 4 is directly and immediately below Level 5 and the Podium and the Car Parking Spaces occupied a much larger area than Level 5 (layout plan at page 397 of Bundle B). 3.There are 18 shops on Level 5 whilst Level 6 is being used as a restaurant. Level 6 had been assigned with 2,309 undivided shares of the Estate and Level 5 got 1,951 undivided shares (page 67 of Bundle B). 4.The respondent was the registered owner of Level 6 and Shop 1A and 6B on Level 5. Shop 1A is being assigned 156 undivided shares (page 2 of Bundle B) and Shop 6B got 134 undivided shares (page 8 of Bundle B). 5.In November 2007, the respondent lodged a complaint with the IO about the water seepage problem of the roof slab on Level 6. In or around February 2008, an architect was being engaged by the IO to look into the water seepage problem. By a written report dated 25 April 2008, the architect advised the IO that the most appropriate method for resolving the water seepage problem is to replace the water proof membrane of the roof slab of the Shop Building (“the Membrane”). 6.At the Management Committee meeting held on 12 June 2008, it was resolved that the work to replace the Membrane should be carried out (“the Repair Work”). At another meeting held on 11 September 2008, it was resolved that the total contract price for the Repair Work should be $2,016,630.00 and contributions should be collected in 3 equal instalments, in November 2008, December 2008 and January 2009 respectively (minutes of meeting at page 200 and 219 of Bundle B). 7.The IO demanded payments from the shop owners of Level 5 and Level 6 as well as from the Kindergarten by issuing 3 debit notes dated 1 November 2008, 23 January 2009 and 19 March 2009 respectively for their share in the Repair Work. The respondent failed to settle the same. 8.By a letter from its solicitor dated 2 September 2009, the respondent indicated its stance in refusing to pay is that owners of the Car Parking Spaces should also be required to contribute towards the Repair Work. The IO took out an action in the High Court on 30 December 2009 (HCA 2557/2009 refers) against the respondent for its share in the Repair Work. By an order dated 20 December 2010 by Registrar Lung, the action was being transferred to this Tribunal for disposal. 9.The facts stated above are not in dispute. The respondent maintained its stance as stated in paragraph 8 above, i.e. whether the owners of the Car Parking Spaces should contribute to the costs of the Repair Work. On top of this, how the contribution should be apportioned amongst owners of Level 5 is also in issue. These are the issues to be determined in this judgment and both involved the interpretation of the terms of the Deed of Mutual Covenant (“DMC”) governing the Estate. Relevant Provisions of the DMC 10.For easy reference, the relevant provisions of the DMC are copied herein. 11.Clause 1 of the DMC
12.Clause 12 (a) to (c) of the DMC
13.Clause 12 (e)(A) to (C) of the DMC
14.Clause 12 (f) of the DMC
15.Clause 12 (i)(ii) of the DMC
16.Clause 13 (a) and (b) of the DMC
17.Clause 21(k)(i) of the DMC
18.The Eighth Schedule (page 83 of Bundle B)
The Applicant’s Contention 19.The applicant contends that Clause 12(c) required the Manager to divide the Estate’s expenses, including the repair and maintenance expenses, into 3 separate accounts (i.e. Account (A) to (C)). It also empowered the Manager to quantify and apportion the share for each account according to its own opinion which is conclusive for all purposes. And according to Clause 12(e), the owners of Car Parking Spaces are being treated as a distinct category completely separated from the owners of Level 5, Level 6 and the Kindergarten. 20.As long as the Manager formed the opinion in good faith, it is not open to the owners to challenge the apportionment. Since the IO and/or the Manager had formed an honest opinion in good faith that the costs for the Repair Work should go into Account (A) to be borne by owners of the Commercial Block excluding the owners of the Car Parking Spaces, such an opinion is conclusive for all purposes and the respondent is not entitled to raise any objection. And according to Clause 12(i)(ii) of the DMC, the Manager can demand additional amount from each owner by notice in writing should the sum budgeted for the management is not sufficient. 21.Clause 12(e) stipulated that the management expenses of the Commercial Block should be apportioned by reference to the management units set out in the Eighth Schedule of the DMC. However, there is no sub-division of management units for the 18 shops on Level 5. In practice, the Manager had assigned a number of management units to each shop on Level 5 (page 401 of Bundle B) all along in the collection of management fees. Shop 1A had been allotted 685 management units and Shop 6B had been allotted 590 management units. This should be the basis for the calculation of the respondent’s share as far as Level 5 is concerned. 22.Therefore, the respondent’s share of management units should be :
23.And the respondent’s share in the costs of the Repair Work according to Schedule 8 of the DMC should be :
24.Should the Tribunal find that the DMC had not provided for the fixing of contributions for Level 5, the contributions should be fixed by the management committee in accordance with the respective shares of the owners in accordance with Section 22(2) of the Building Management Ordinance (“BMO”). 25.Adopting the undivided shares allotted to Level 5 and those for Shop 1A and 6B, [2,309 ÷ (156 + 134)], the respondent’s share is 12.6% of Level 5. Applying this share in the tabulation of management units, [10,129 x 12.6%], the respondent should hold 1,276 management units in Level 5. Hence, the respondent’s share should be :
The Respondent’s Argument 26.As far as the apportionment is concerned, Clause 12(a) and Clause 12(c) of the DMC are not applicable. The costs for the Repair Work had not been included in any annual budget as required under Clause 12(a), hence the provision of this clause cannot be triggered off and the IO cannot rely on it. Instead, Clause 12(f)(ii) of the DMC should be the provision to be relied upon in the apportionment, i.e. owners who enjoyed the plant, equipment, apparatus etc shall be solely responsible for the repair costs. 27.The Membrane serves the purpose of protecting all the levels below it, including Level 5, Level 6, the lift shaft, the staircases and the Car parking Spaces. It is clear that the Membrane protects facilities that are being used by all owners of the Shop Building and not only serves Level 5 and Level 6. What’s more, Clause 21(k)(i) of the DMC allows all owners to have the right to use the roofs of the buildings for escape in case of emergency. The roof and the Membrane are used exclusively by owners of Level 5, Level 6 and the Car Parking Spaces so they should be the one to bear the costs of the Repair Work. 28.Even if Clause 12(a) and 12(c) are applicable, the Manager is not entitled to adopt a broad-brush approach in determining which item of expenditure falls into which category or simply makes an honest guess which is not so provided in the DMC. The wordings of Clause 12(f)(ii) laid down the paramount principle that owners who enjoy the benefit shall bear the costs of repair, notwithstanding the provisions in Clause 12(c). The apportionment stipulated in Clause 12(c)(A) to (C) are not mutually exclusive in the sense that contributions charged by the Manager could in fact contain elements of expenses common for more than 1 group of owners. Clause 12(c)(C) requires the owners of the Car Parking Spaces to contribute such proportionate part of “the said general expenditure” which include costs of repair of the common areas and money for contingencies. The Membrane no doubt lies in the common area and the Repair Work is a contingency, the Manager should require the owners of the Car Parking Spaces to contribute towards this general expenditure and it would only be fair and reasonable for all owners of the Shop Building to contribute. 29.So, the respondent’s share should be :
Is a Budget a must before demand of payment 30.It is true that Clause 12(a) of the DMC required the Manager to prepare an annual budget showing the estimated expenditure for the ensuring year and Clause 12(e) provided that each owner shall bear and pay for the sum budgeted by the Manager to cover the maintenance and management costs. But this is not the end of the matter. 31.Clause 12(i)(ii) of the DMC also empowered the Manager to demand further payment of maintenance or management costs should the sum budgeted is insufficient to cover any further costs incurred or to be incurred over and above the said budgeted sum. So, the Manager may demand further payment from respective owners by written notice without the need of another budget being prepared should there be deficiency in meeting any maintenance or management costs. There is no requirement for the further sum for maintenance had to be originally included in the annual budget. The fact that the DMC allowed the Manager the absolute discretion to decide on the amount of the further contribution supports such a conclusion. The Manager is under a duty to “repair and keep in good repair and condition the main structure and fabric of the buildings (including the main roofs)” under Clause 11(c)(7) of the DMC. The maintenance costs should include whatever sum required for the discharge of such duty. It would be absurd to require the Manager to include certain item in the annual budget before it can discharge its duty of repair since this may cause unnecessary delay. 32.In this case, the Manager had already indicated at the Management Committee meeting on 8 May 2008 (page 194 of Bundle B) that the repair costs for the Membrane was about $1.5 million whilst the surplus of the management account for the Commercial Unit was only $300,000 odd. This is effectively saying that the budgeted sum within the account for the Commercial Unit is not sufficient to cover the repair costs. 33.And at the Management Committee meeting held on 12 June 2008, it was resolved that the repair work on the roof should be carried out and the Manager had indicated again that since the surplus in the management account of the Commercial Unit was not sufficient to cover the costs, demand would be made to owners of the Commercial Units for advance payment for such purpose (page 203 of Bundle B). 34.The Manager then issued the demand letters to the owners of Level 5, Level 6 and Kindergarten for their respective share in the costs of the Repair Work. I found what the Manager had done is in line with the requirement under Clause 12(i)(ii) of the DMC to cover further maintenance to be incurred which may not have been included in the annual budget. I found the Manager is entitled to issue written debit notes to demand for the costs of the Repair Work. Liability of Respective Owners 35.Before one can answer the ultimate question as to whether owners of the Car Parking Spaces should be liable for the costs of the Repair Work, the liability of respective owners under the DMC should be examined. 36.I agreed with Mr. Chan for the respondent that to decide who should be responsible for what management expenses, the Manager had to work that out in accordance with the terms of the DMC instead of by way of wild guess by the Manager, no matter how honest the Manager had been in making the decision. The opinion formed by the Manager has to be in line with the provisions of the DMC and as long as this is followed, the decision is conclusive for all purposes. 37.The DMC had provided for the liability of respective owners in their payment of the management expenses. Clause 12(c) of the DMC had differentiated 3 different kinds of management expenses, i.e. :
38.Clause 12(e) of the DMC stipulated the obligation of different owners to pay for their share of the management expenses, i.e.:
39.One should note that the term “owners of the commercial units” is being used in Clause 12(e) instead of “owners of the Commercial Block”. This is apparently due to the fact that though included in the definition of Commercial Block, the expenses for Car Parking Spaces and Parking Common Areas are specifically excluded from the CB expenses under Clause 12(c)(A) and another category, i.e. CPS expenses had been created to cater for the Car Parking Spaces and Parking Common Area under Clause 12(c)(C). From the wordings of Clause 12(e), 12(c)(A) and 12(c)(C), the only conclusion must be that the CB expenses defined under Clause 12(c)(A) is intended to be borne by owners of Level 5, Level 6 and the Kindergarten only with the Car Parking Spaces being excluded, hence they are being referred to as “owners of commercial units” instead of owners of Commercial Block. 40.So, Clause 12(e) required owners of the Commercial Units, i.e. owners of Level 5, Level 6 and the Kindergarten to be liable only for the CB expenses whilst the owners of the Car Parking Spaces are only liable to bear the CPS expenses. Whilst the general expenses are common and to be shared by the 3 different categories of owners, I found those specifically referred to as expenses under their respective head is distinct to each group and in effect, mutually exclusive. 41.Adopting the requirement under Clause 12(e), in order for the owners of the Car Parking Spaces to be required to contribute to the costs of the Repair Work, it must fall within general expenses. If the costs of the Repair Work are CB expenses but not general expenses, it should be borne by owners of the Commercial Units only. Is the costs of the Repair Work fall within general expenses? 42.Clause 12 (c)(D) of the DMC provided that general expenses shall cover “expenditure to be expended for the benefit of all owners as essential or required for the proper management cleansing security and maintenance of the Estate as a whole (and not for any particular residential blocks or car parking spaces or the commercial block)” (my emphasis). 43.Is the Repair Work for the benefit of all owners? I found the answer to this question must be no. The owners of the Residential Blocks and the Kindergarten may well go to the Shop Building from time to time but the intention of having the Membrane is definitely not for their benefit. The Membrane cannot be said to be for the benefit of all owners. As to who actually takes the benefit, this will be dealt with below. 44.I found the costs of the Repair Work cannot be classified as general expenses since it is not an expenses common to all owners and cannot be shared by all owners as required under Clause 12(c)(D). 45.Clause 12(c)(D)(ii) and (v) provided that the management expenses of the Estate includes the costs of maintaining the Common Areas. 46.Common Areas, as defined in Clause 1 of the DMC had specifically included the main roofs of the residential blocks but not the roof of the Shop Building (“the Roof”). This is apparently not an inadvertence with the Roof not being included. And to become a Common Area, it must be “areas in the Estate intended for common use and enjoyment of all owners of the Estate” (my emphasis). I found the Membrane is not intended for the common use and enjoyment of owners of the Residential Block and the Kindergarten, hence it cannot be classified as for the common use and enjoyment of all owners of the Estate. 47.The respondent also tries to argue that all owners are entitled to use the Roof as a place of escape in case of emergency. But as can be seen from the wordings of Clause 21(k)(i), owners are allowed to use the roofs for escape only and not otherwise. This is just a conditional usage and cannot be said to be common use and enjoyment as such. 48.Judging from the definition of Common Areas in Clause 1, unless the Roof falls within Estate Common Areas, Commercial Common Area or Parking Common Areas, it cannot be considered as Common Areas. 49.Estate Common Areas covered “those parts … intended for the common use and benefit of all the owners and/or persons using or visiting the Estate”. Adopting the rationale stated in paragraph 43, the Membrane cannot be said to be intended for the common use and benefit of all owners and/or persons using or visiting the Estate. I found the Membrane does not fall within Estate Common Areas. 50.Commercial Common Areas, as defined in Clause 1 of the DMC, include “any other parts of the commercial block for the exclusive use and benefit of the commercial block” (page 18 of Bundle B) (my emphasis). Since the Kindergarten being part of the Commercial Block does not enjoy the benefit of the Membrane, I found the Membrane does not fall within the Commercial Common Areas. 51.And judging from the definition of Parking Common Areas, the Membrane cannot be considered as part of it. Neither can the Membrane be said to be intended to be used by owners of the Car Parking Spaces only. 52.I found the Membrane does not fall within the definition of Common Areas as stipulated under Clause 12(c)(D)(ii) and (v) and so cannot be considered as general expenses. 53.It is never the respondent’s case that the costs of the Repair Work should be borne by the owners of the Residential Block. This is inconsistent with its contention that the costs of the Repair Work falls within general expenses which according to Clause 12(c) should be borne by all owners in proportion. Nor is the respondent suggesting that the owners of the Car Parking Spaces should be the only one to bear the same. 54.So the only remaining question is whether the costs of the Repair Work is being caught by Clause 12(c)(A), i.e. being expenses specifically referred to the Commercial Block other than the Car Parking Spaces, or Clause 12(f)(ii), i.e. owners who enjoyed the benefit shall bear the costs. The Membrane – for whose benefit? 55.It is not in dispute that the Membrane lies above Level 6 and is part of the Roof. There is the dispute as to whether the Car Parking Spaces also took the benefit of the protection of the Membrane. Both parties had adduced expert evidence in this regard. 56.Mr. Cheung, the applicant’s expert opined that the Membrane can always be said to have a role in serving as part of the waterproofing protection for the Car Parking Spaces. However, given the many layers of surfaces below the roof with other waterproofing membranes, the Car Parking Spaces will still be fully protected even if the Membrane does not exist (report at page 177-182 of Bundle A). And the lift shaft and the staircase are separate structures and water coming from the Roof via the Membrane will go straight down to the ground with Level 1 to 4 unaffected. 57.Mr. Chan, expert of the respondent opined that the Membrane is designed for the waterproofing and weather protection of the Car Parking Spaces. Level 1 to 4 will not be fully protected from weather if the Membrane does not exist or defective since there is no other waterproofing membrane on the floor slab of Level 6 and below and rainwater will run down from the Roof, via the lift shaft and the escape staircase, to the lower floors. 58.Having considered the expert evidence, I accept Mr. Chan’s opinion and found that the Membrane is for the protection of the shops as well as the Car Parking Spaces. As rightly pointed out by the respondent in its final submission, Mr. Cheung’s opinion is founded on the assumption that there are other waterproofing membranes below the Roof but the Finishing Schedule (page 409 of Bundle B) of the Estate proved this not to be the case. And Mr. Chan’s description of the lift shaft and the staircase as separated from the Car Parking Spaces is also unfounded in view of Mr. Cheung’s description of the layout of the building (at paragraph 3.3 of his report) which is confirmed to be correct by Mr. Mui, an employee of the Manager. I found Mr. Chan’s evidence unacceptable. 59.I found that the Membrane provides protection to Level 5, Level 6 as well as to the Car Parking Spaces. Clause 12(f)(ii)of the DMC 60.The respondent is relying on Clause 12(f)(ii) of the DMC to argue that should the court find the Membrane is for the protection of the shops and the Car Parking Spaces, Clause 12(f)(ii) should be applicable. I disagreed. From the wordings of Clause 12(f), it is apparently catered for those portions of the buildings in separate occupation and for exclusive use of particular owners. The Membrane or even the Roof cannot be said to be in separate occupation of any owner nor can it be said to be owned by particular owner or owners. 61.The respondent also tries to argue that all owners are entitled to use the Roof as a place of escape in case of emergency but this does not involve separate occupation or ownership by the owners. I found Clause 12(f)(ii) is not applicable in this case. Clause 12(c)(A) of the DMC 62.The CB expenses under Clause 12(c)(A) of the DMC are expenses specifically referable to the Commercial Block except those expenses referable to the Car Parking Spaces and the Parking Common Areas which are classified as the CPS expenses. With such differentiation, the only inference to be drawn must be that the expenses of the Commercial Block which are only referable to the Car Parking Spaces and named as CPS expenses is taken out from the CB expenses and were to be borne by owners of the Car Parking Spaces solely under Clause 12(e)(C). 63.The liability of the owners of the Car Parking Spaces is confined to the costs specifically referable to the Car Parking Spaces whereas other expenses specifically referable to the Commercial Block are not within their responsibility. It is the responsibility of the owners of the Commercial Units instead. So the Roof and the Membrane not being specifically referable to the Car Parking Spaces but to the Commercial Block, should be the responsibility of the owners of the Commercial Units only. 64.It is also stated in Clause 12(c)(A) that “the maintenance, repair, cleansing … of the common areas within the commercial block excluding the car parking spaces and Parking Common Areas” are included as CB expenses and were to be borne by owners of the Commercial Units. I found the “common areas within the commercial block” is different from Commercial Common Areas or Estate Common Areas. This ‘common area within the Commercial Block’ should not be mixed up with the above two defined Common Areas. 65.The “common areas within the commercial block” should be given its ordinary meaning and there is no dispute that the Roof and the Membrane are common area of the commercial block. According to Clause 12(c)(A), the expenses for the maintenance and repair of the Membrane should be solely borne by the owners of the Commercial Units, i.e. the shops and the Kindergarten. 66.I conclude that the owners of the Car Parking Spaces are not required under the DMC to bear the costs of the Repair Work. The Management Units of Shop 1A and 6B 67.The next issue to determine is how much the respondent should be responsible as far as the costs of the Repair Work is concerned. This turns on what should be the management units apportioned to Shop 1A and 6B. 68.Even though the respondent had, in its pleadings, raised the argument that the share of Level 5 should be equally divided amongst the 18 shops, there is no evidence adduced in support of such a contention. I found the respondent had failed to substantiate its case in this regard. 69.The applicant had provided the respondent with an Allotment Schedule (page 401 of Bundle B) which shows the respective management units assigned to each shop on Level 5. The respondent challenged the basis for such tabulation. 70.There is no evidence as to the basis of the tabulation but from the calculation provided by the applicant in paragraph 22 and 25 above, the management units assigned to each shop of Level 5 by the Manager is more or less in line with their respective shares. There is no dispute that Section 22(2) of BMO should be applicable when the DMC had been silent as to the contribution. Since the DMC had not provided for the respective management units assigned to each shop on Level 5, I found Section 22(2) should be applicable and the undivided shares of respective shop owners should be adopted in the calculation of the assignment of management units. 71.I accept the applicant’s calculation by way of undivided shares. I found the respondent’s share in the costs of Repair Work should be $1,200,820.53. Interests 72.The applicant is asking for interests to be charged for the sum to be paid by the respondent. Counsel for the respondent argued in his final submission that since no repair work had been done, no interests should be levied. I found such a contention cannot stand. Clause 13(b)(ii) of the DMC did empowered the Manager to charge interests on non-payment and there is nothing in the provision to require that actual work should have been done before interests can be levied. 73.I found the IO is entitled to charge interests in accordance with Clause 13(b)(ii). The Declaratory Relief 74.The applicant is asking for a declaration that only owners of those units of Level 5 and Level 6 of the Shop Building as well as the Kindergarten and not owners of the Car Parking Spaces would be obliged to pay towards the expenses incurred or to be incurred for the Repair Work. The respondent contended that this serves no useful purpose since the respondent is no longer an owner and other owners of the Commercial Block are not involved in this case, hence the relief sought should be declined. 75.Judging from my ruling above, it is clear that the owners of the shops and the Kindergarten should be the only one to bear the costs of the Repair Work. Given the respondent is the only one within the Commercial Block to raise objection to the liability to pay for the repair costs, I agree with the respondent that the declaration sought by the applicant serves no useful purpose and should be declined. The Order 76.It is ordered that :-
Mr Kenneth Lam, instructed by Messrs Chow, Griffiths & Chan, for the applicant Mr Kenneth Chan and Raymond Tsui, instructed by Messrs Raymond Chan, Kenneth Yuen & Co., for the respondent | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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