NG YUI TONG v. TAIKOO SHING (MANAGEMENT) LTD

CAMP 218/2021

[2021] HKCA 1942

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 218 OF 2021

(ON AN INTENDED APPEAL FROM LDBM 191 OF 2018,

LDBM 196 OF 2018 & LDBM 116 OF 2019 (consolidated))

_______________

_______________

_______________

D E C I S I O N

_______________

Hon Au JA (giving the Decision of the Court):

A.  INTRODUCTION

1.  This is the applicant’s application for leave to appeal from the judgment (“the Judgment”) of Deputy District Judge Soong (“the Judge”) dated 5 March 2021.

2.  By way of the Judgment, the Judge dismissed the applicant’s applications made respectively under LDBM 116/2019, LDBM 191/2018 and LDBM 196/2018.

3.  The applicant is an owner of a residential flat at Stage III of the large development known as Taikoo Shing, and the respondent is the manager (“the Manager”) of Taikoo Shing.

4.  In LDMB 116/2019, the applicant claimed that the Manager was in breach of clause 7(a) of the relevant Deed of Mutual Covenant (“the DMC”) in organising various annual or otherwise recreational and social activities (“the Activities”) for residents of Taikoo Shing since 2006[1], and hence the Manager was further in breach of clause 8(a) of the DMC by including the expenses for the Activities in the relevant annual budgets.  He therefore asked for various reliefs, including an injunction against the Manager from organising these activities, declarations for breach of the DMC and damages.  See [11] - [13] of the Judgment.

5.  In LDMB 191/2018, the applicant claimed that the Manager had no power to collect contributions from him for carrying out certain renovation works on the planter outside his apartment as part of an overall renovation project of the exterior of the buildings, pursuant to a resolution passed in the owners’ meeting.  This is so as the applicant said the relevant planter is not part of the common parts but is owned by him.  See [6], [7] and [77] of the Judgment.

6.  In LDMB 196/2018, the applicant challenged the Manager’s inclusion in the 2018 budget of the expenses for various items (“the Objected Items”): (a) festive decorations in the lobbies of various buildings for Chinese New Year and Christmas, (b) Mid-Autumn festival variety show, (c) 6% pay-rise of management staff, (c) meal subsidy of $40 provided to certain staff of the Manager, and (d) upgrading the accounting and management system as well as engagement of a project manager.  The applicant said the inclusion or approval of these expenses in the 2018 budget were not permitted under the DMC or the law[2].  See [8] and [90] of Judgment.

7.  After a 1‑day trial, by way of the Judgment, the Judge dismissed all the applicant’s applications for the principal reasons that, on a proper construction of the relevant clauses in the DMC, the Manager was not in breach in any of the provisions as contended for by the applicant in relation to all the complained matters as summarized above.

8.  By a decision dated 27 May 2021, the Judge further dismissed the applicant’s application for leave to appeal the Judgment as the intended appeal has no merits as (a) some of the intended grounds of appeal raised were new arguments not set out in the respective Notices of Application and should not be entertained, and (b) the rest of the grounds were mere repetitions of the arguments already raised and rejected by the Judge with reasons[3].

9.  By way of a summons filed herein[4], the applicant now seeks leave to appeal from this court.  He has further filed a draft Grounds of Appeal (“the Draft NOA”) and a written submission both dated 23 July 2021 in support of the leave application.  Although the application was out of time, as it was a short delay and the respondent does not take issue with it[5], we will focus on the merits of the intended appeal.

10.  In the Draft NOA and the written submissions, in summary, the applicant set out his intended grounds of appeal as follows:

(1)  The Judge erred in law in finding that the Manager was not in breach of the DMC in organising the Activities and in including those expenses in its respective budgets, as on a proper construction, the Activities did not fall within the meaning and scope of clauses (5) of the Preamble and 7(a) and 7(a)(24) of the DMC (respectively, “Clause (5)”, “Clause 7(a)” and “Clause 7(a)(24)”) (“Ground 1”).  See paragraphs 2, 3 of the Draft NOA, and paragraphs 2 - 7 of the written submissions.

(2)  The Judge erred in law in finding that the Manager was not in breach of the DMC in seeking contribution from him for the renovation expenses of the planter outside his apartment as part of the general renovation costs of the development, as the Manager did not follow the calculation as provided in the DMC to require contribution equally from all the owners of Stage III but by reference to the number of undivided shares owned by the owners of residential flats only (“Ground 2”).  See paragraph 4 of the Draft NOA, and paragraphs 8 - 9 of the written submissions.

(3)  The Judge erred in law in finding that the Manager was not in breach of the DMC by including the expenses of the Objected Items in the 2018 budget as these were not made in accordance with the terms of the DMC (“Ground 3”).  See paragraph 5 of the Draft NOA, and paragraphs 10 - 13 of the written submissions.

11.  In opposing this application, Mr Hunsworth for the Manager has filed a written statement of opposition dated 5 August 2021.

12.  After looking at the papers relating to this application, we regard it as appropriate to deal with this application on paper without an oral hearing.

13.  This is our decision[6].

B.  DISCUSSION

14.  Under sections 11(2) and 11AA(6) of the Lands Tribunal Ordinance (Cap 17), leave to appeal from the decision of the Lands Tribunal shall not be granted unless the decision is erroneous in law and the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

15.  As can be seen from the intended grounds of appeal and the reasons for the Judgment, the intended appeal principally relates to questions of construction of the relevant clauses in the DMC, which are questions of law.  The focus of this application is therefore whether the intended grounds of appeal have a reasonable prospect of success.  For that, we will now turn to look at the grounds in turn.

B.1    Ground 1

16.  The relevant part of Clause (5) provides as follows:

“(5) The Parties hereto have agreed with the Management Company for the Management Company to undertake the management, operation, servicing, maintenance, repair, renovation, replacement, security, and insurance of the said Land and the buildings thereon and their equipment services and apparatus (all or any of which activities are hereinafter included under the word ‘management’) and the parties hereto have agreed to enter into this Deed for the purposes of making provisions for such management and of defining and regulating the rights interests and obligations of themselves and all subsequent owners in respect of the said Land and the buildings thereon.” (emphasis added)

17.  Clause 7 of the DMC relates to the “Powers and Functions of the Management Company” and provides relevantly as follows:

“(a) Except as otherwise expressly provided by these presents, the Management Company shall be responsible for and shall have full and unrestricted authority to do all such acts and things as may be necessary or required to for or in connection with the said Land and any of the buildings thereon and the management thereof including in particular but without in any way limiting the generality of the foregoing:-

…

(24) to do all such other things as are reasonably incidental to the management of the said Land and the said buildings;” (emphasis added)

18.  Under this ground, the applicant in gist contends that when Clauses (5), 7(a) and 7(24) are read together, they would only permit the Manager to organise activities that are necessary for, related to, and / or have something to do with the maintenance and control or administration of the management of Stage III.  This is so as Clause (5) and Clause 7(a)(24) both refer and relate only to matters concerning the “management” of Stage III.  In the premises, the words in Clause 7(a) that the Manager has full and unrestricted authority to do all such acts and things as may be “necessary or requisite for or in connection” with Stage III must be properly read to be qualified by reference to only matters relating to the “management” of Stage III.  However, it is clear that the Activities had nothing to do with the management of Stage III, and thus the Manager was in breach of these provisions in organising the Activities and in including their expenses in the annual budgets.

19.  In our view, it is pertinent to note that the word “management” in the DMC is defined under Clause (5) as “including the management, operation, servicing, maintenance, repair, renovation, replacement, security and insurance of” Stage III.  Given this definition, it is reasonably arguable that the Manager only has power under clause 7 to carry out all such acts and things that “may be necessary or requisite for or in connection” with these matters.  As such, it is also reasonably arguable that the Activities (save for the Tower Festive Decorations[7]) did not fall within the meaning and scope of “management” of Stage III as so defined in the DMC.

20.  In the premises, we would grant leave to the applicant to appeal the Judgment under Ground 1 (but not for challenge against the Tower Festive Decorations).

B2.    Ground 2

21.  Under this ground, the applicant now submits that, if the planters formed part of the common areas, then the Manager was in breach of the DMC by requiring the owners, including the applicant, to contribute to the costs of the planters’ renovation by reference only to the number of undivided shares owned by owners of the residential premises as the Manager had sought to do, but not by reference to the number of undivided shares owned by the respective owners of the entire Stage III[8] as provided by the DMC.  See: paragraph 4 of the Draft NOA, and paragraphs 8 ‑ 9 of the written submissions.

22.  As rightly pointed out by Mr Hunsworth, this contention was not raised and relied upon by the applicant in his Notice of Application under LDBM 191/2018 and before the Judge.  In the Notice of Application and before the Judge, the applicant’s arguments were only that the planters are not part of the common areas but are owned by the respective owners.  This was rejected by the Judge who found that the planters are part of the common areas.

23.  In the premises, we agree with Mr Hunsworth that this new ground is simply not open to the applicant to rely on in the intended appeal.  On this basis, leave to appeal will not be granted for this ground.

24.  If insofar as the applicant is to say that under this ground, he is still also contending that the Judge was wrong in law in finding that the planters form part of the common areas, as the planters are not weight bearing structures and also do not fall within the definition of “common area” as provided under section 2 of the Building Management Ordinance (Cap 344) (“the BMO”), this ground is also without merits.

25.  The Judge found that the planters form part of the common parts of the building for the following reasons in the Judgment (footnote omitted):

“82. I also note that in the assignment under which the Applicant acquired his property, the assigned property is described as:-

‘… ALL THAT FLAT “H” on the “TENTH FLOOR of FU SHAN MANSION, KAO SHAN TERRANCE as shown and coloured Pink on the Floor Plan annexed to an Assignment registered in the Land Registry by Memorial No.1590262 …’

83. There is no textual description in the assignment to the effect planter was assigned to the assignee thereunder.

84. In the floor plan annexed to the assignment registered by Memorial No.1590262, the Applicant’s unit (i.e. Flat H on 10^th Floor of Fu Shan Mansion) was coloured pink but the planter outside his unit was not coloured pink.

85. Section 3 [it should be section 2] of the Building Management Ordinance, Cap.344 defines ‘common parts’ to mean:-

‘… the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner…’

86. As neither the planter itself nor its outer and upper sides has been specified or designated in any registered instrument for the exclusive use, occupation or enjoyment of the Applicant, it should form the common parts which the Respondent has powers and obligation to repair and maintain under the DMC.

87. The fact that owners are generally allowed to use the planters constructed outside their premises is neither here nor there because such use was not designated or specified by any registered instrument.

88. In any event, the owners have not been permitted to use the upper or outer side or surface of the planters. Their de facto use of the void inside the planters should not turn the external surface of the planters into the owners’ property.”

26.  We entirely agree with the Judge’s reasoning.  In the premises, even if Ground 2 is understood to be the applicant’s challenge of the Judge’s finding that the planter outside his flat forms part of the common areas, this ground is not reasonably arguable and we will similarly refuse to grant leave to appeal under this ground.

B3.    Ground 3

27.  As mentioned above, the applicant contends under this ground that the Judge wrongly concluded that the expenses for the Objected Items were lawfully included in the 2018 budget by the Manager and approved.  In the Amended Notice of Application under LDBM 196/2018, the applicant said these items as included in the budget were approved not in accordance with the terms of the DMC.  In his written opening submissions at the trial, he complained that these items were not related to or incidental to the management of Stage III[9].

28.  We will turn to look at the applicant’s contentions now raised against these items in turn under this ground of appeal.

29.  As to the item of festive decorations in the lobbies of various buildings for Chinese New Year and Christmas, as pointed out by Mr Hunsworth in his written submission, the applicant appears now to suggest that the Manager was in breach of section 34I of the BMO in including these expenses in the budget.  Although the basis of the applicant’s arguments is not entirely clear from his written submissions, it seems that what the applicant is saying is that the organisation of the activities somehow constituted an improper conversion of the common parts of the building or use of the common parts in a way which either unreasonably interfered with the owners’ enjoyment of the common parts or caused a nuisance[10].  This however is an argument which was not run and relied upon by the applicant in the Amended Notice of Application of LDBM 196/2018 and at the trial before the Judge.  It is therefore not open to the applicant to advance this as a ground in the intended appeal to challenge the Judgment, in particular when the allegations are fact sensitive.

30.  As to the item of meal subsidy of $40 provided to certain staff of the Manager, the applicant’s contention is that the inclusion of this item in the 2018 budget is unlawful as this had been objected to by some owners at the owners representative meeting on 6 October 2016 and the owners meeting on 4 November 2016[11]. This contention is entirely without any merit.  The mere fact that there were some objections raised at the relevant meetings cannot amount to a valid basis to say that the approval passed and given eventually is unlawful.  The Judge is thus clearly right in so holding at [94] of the Judgment.

31.  As to the expenses for the 6% pay-rise of management staff, the applicant’s present complaint is that this item had not been approved by the owners’ meeting as provided under paragraph 5(3)(b) of Schedule 7 of the BMO, which has been implied by statute to become a mandatory term of the DMC[12].  See paragraphs 11 and 13 of the applicant’s written submissions.

32.  As to the applicant’s complaint relating to the upgrading of the accounting and management system as well as the engagement of a project manager, he now submits that the inclusion and approval of this item in the 2018 budget is not made in compliance with the terms as implied under Schedule 7 (but without identifying which paragraphs of Schedule 7).  See paragraph 13 of the applicant’s written submissions.

33.  In relation to these contentions, Mr Hunsworth submits that the Judge accepted at [93] of the Judgment the Manager’s evidence that the 2018 budget was properly consulted and duly approved in accordance with the prescribed procedures under the DMC.  Mr Hunsworth further says this finding of fact is not open to and cannot be challenged in the appeal and thus the applicant’s arguments must fail.

34.  At [93] of the Judgment, the Judge said she accepted Mr Cheung’s evidence for the Manager that the prescribed procedures had been complied with in approving the budget:

“93. As for the other expenses, they are related to the employment of the Respondent’s staff and should fall within Clause 8(a)(A)(iv) of the DMC. It is Mr Cheung’s evidence and the Respondent’s case that these expenses were included in the operating budget for 2018 and that operating budget was, as in every year, the subject of consultation and subsequent approval by the MLC in accordance with the prescribed procedures.”

35.  The relevant part of Mr Cheung’s evidence in his witness statement appears to suggest that the procedures said to have been complied with were in relation to the approval given by the Management Liaison Council (“the MLC”) established under Clause 6C of the DMC[13].

36.  For the following reasons, we are of the view that these intended challenges against the approval of these two items in the 2018 budget not being in compliance with the terms of the DMC are also without merit.

37.  First, in relation to the contentions relating to the 6% salary rise for the staff of the Manager:

(1)  Paragraph 5(3)(b) of Schedule 7 of the BMO provides as follows:

“where there is no corporation, if—

(i) the relevant supplies, goods or services are of the same type as any supplies, goods or services which are for the time being supplied to the owners by a supplier; and

(ii)  the owners decide by a resolution of the owners passed at a meeting of owners convened and conducted in accordance with the deed of mutual covenant that the relevant supplies, goods or services shall be procured from that supplier on such terms and conditions as specified in the resolution, instead of by invitation to tender.”

(2)  In this respect, it is noteworthy that this was not relied on by the applicant in the Amended Notice of Application or at the trial as the basis to challenge this item.  Further and in any event, the applicant has also simply failed in this application to explain why and on what basis he says the 6% pay-rise for the management staff falls within the scope of this paragraph.  In the premises, there cannot be any arguable merit in this intended ground of appeal as the applicant has failed to show the applicability of paragraph 5(b)(3) of Schedule 7 in the present case.  There is thus also no basis to show that the Judge was wrong in accepting the Manager’s evidence that the approval of the budget in this respect was made in compliance with the DMC.

38.  Second, in relation to the argument relating to the upgrading of the accounting system:

(1)  It is again noteworthy that this was not relied on by the applicant in the Amended Notice of Application or at the trial to advance his case in relation to this item.  Further, and in any event, the applicant has not even under this ground identified the particular paragraph of Schedule 7 which he says the approval of this part of the 2018 budget was not in compliance with.  In the premises, there is no merit at all for the applicant now seeking to contend that the approval was not made in compliance with the DMC with terms implied by Schedule 7.  A fortiori, he cannot even start to contend that the Judge was wrong, let alone plainly wrong, to have accepted the Manager’s evidence to find that the approval of the 2018 budget was made in compliance with the terms of the DMC.

39.  Finally, as to the Mid-Autumn festival variety show, for the reasons we have explained above under Ground 1 in granting leave, it is reasonably arguable that the expenses incurred for this item should not be regarded to be for the management of Stage III, and thus the Manager could not properly include them in the relevant budget.  However, as we have already granted leave to appeal under Ground 1 (which includes a complaint that the inclusion of the expenses for this item is in breach of the DMC), it is not necessary at all and will not serve any useful purpose to also grant leave under Ground 3 for the applicant to challenge this item, as the applicant will only be repeating his contentions made under Ground 1.  For this reason, we would also not grant leave under Ground 3 in relation to this item.

40.  In the circumstances, we will not grant leave to appeal under Ground 3.

C.  CONCLUSION

41.  For the above reasons, we will only grant leave to appeal under Ground 1 (but not for challenge against the Tower Festive Decorations), and refuse to grant leave to appeal under Grounds 2 and 3.

42.  We will reserve the costs of this application to be dealt with in the appeal.