HO WING v. THE INCORPORATED OWNERS OF TUEN MUN ROSEDALE GARDENS

LDBM 289/2004

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT Application No. 289 of 2004

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REASONS   FOR   JUDGMENT

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1.  The Applicant Madam Ho sues the Respondent The Incorporated Owners Of Tuen Mun Rosedale Gardens (“the IO”) for refund of excessive management fee at $99 per month that she had paid the IO since May 2001 in respect of her car parking space in the building.  Before May 2001, the management fee levied on her parking space was $297 per month.  In July 2001, the fee was increased by $99 to $396 per month with retrospective effect from May 2001.  She did not pay the increased portion and was sued by the IO at the Small Claims Tribunal.  She then paid up but did not express any protest when tendering payment.  She now sues the IO in this Tribunal for refund of the $99 per month that she had paid since May 2001. 

2.  The Rosedale Gardens is divided into 3 parts.  They are referred to in the Deed of Mutual Covenant (“DMC”) as the Residential Accommodation, the Commercial Accommodation and the Parking Spaces (“the car parks”). 

3.  Madam Ho has 4 grounds in support of her application.  She says that on these 4 grounds, the management fees were wrongly apportioned amongst the owners of different parts of the estate. 

First Ground

4.  On the first ground, she says that the DMC only required all the car park owners to bear 2.5% of the global sum of management fees, but the IO is demanding them to bear 6.9% of the global sum.  However, the basis of this complaint is not correct.  The relevant provisions in the DMC are as follows: -

“ 13.	For the purpose of fixing the contributions payable by the Owners an annual budget showing the estimated management expenditure of the Development for the ensuing year shall be prepared by the Manager.  ……  After the formation of the Owners’ Committee in accordance with the provisions of this Deed, such annual budget shall be prepared in consultation with the Owners’ Committee prior to the commencement of the ensuing year.  Such annual budget shall be in two parts: -
	(a)	The first part shall cover all expenditure which in the opinion of the Manager (whose decision shall be conclusive save for manifest error) is to be expended for the benefit of all Owners as essential or required for the proper management, cleansing, security and maintenance of the Lot and the Development Common Areas and Facilities including but without prejudice to the generality of the foregoing: -
		(i)	the maintenance, operation, repair and cleansing of the Development Common Areas in Facilities and the lighting thereof; ……
		(iv)	the cost of all electricity, gas, water and other utilities serving the Development Common Areas and Facilities;
		(v)	the provision of security guard services solely for the Development; ……
		(vii)	the Government rent (unless apportioned and charged by Government against each Owner) and all sums (other than the premium) payable under the Conditions;
		(viii)	the remuneration of the Manager calculated in accordance with Clause 12 of this Deed for providing its services hereunder; ……
		(xiii)	the cost of purchasing or hiring all necessary plant, equipment, apparatus and machinery for common use of the Development;
		(xiv)	any other expenditures which are in the absolute discretion of the Manager necessary for the good estate management of the Development.
	(b)	The second part shall cover expenditure which in the opinion of the Manager (whose decision shall be conclusive save for manifest error) is specifically referable to different parts of the Development and shall be divided into three sections: -
		(i)	The first section shall cover all expenditure which in the opinion of the Manager (whose decision shall be conclusive save for manifest error) is specifically referable to the Residential Accommodation including …… lighting, and security of the entrance lobbies and lift halls and such proportionate part of the general expenditure for cost of staff and security forces …… as the Manager shall consider fair and reasonable;
		(ii)	The second section shall cover all expenditure which in the opinion of the Manager (whose decision shall be conclusive save for manifest error) is specifically referable to the Commercial Accommodation including …… such proportionate part of the general expenditure for cost of staff and security forces, the charges for the supply of electricity, …… as the Manager shall consider fair and reasonable;
		(iii)	The third section shall cover all expenditure which in the opinion of the Manager (whose decision shall be conclusive save for manifest error) is specifically referable to the Parking Spaces including …… such proportionate part of the general expenditure for cost of staff and security forces and for …… lighting of the driveways and the Parking Spaces …… as the Manager shall consider fair and reasonable;
14.	The annual budget shall be prepared by the Manager in consultation with the Owners’ Committee …… and the budget as prepared as aforesaid shall be deemed adopted.
15.	The Manager shall fix the amount to be contributed to the annual budget by each Owner in respect of the Development managed by the Manager in accordance with the following principles: -
	(a)	Each Owner shall pay for every Management Share allocated to any part of the Residential Accommodation, Commercial Accommodation or Parking Spaces of which he is the Owner a fraction of the total amount assessed under the first part of the annual adopted budget in which the numerator shall be one and the denominator is equal to the total number of Management Shares in the Lot and in the Development;
	(b)	Each Owner in addition to the amount payable under (a) above shall in respect of each Management Share allocated to a Residential Unit of which he is the Owner pay a fraction of the total amount assessed under the first section of the second part of the annual adopted budget in which the numerator shall be one and the denominator is equal to the total number of Management Shares which represent Residential Units in the Development;
	(c)	Each Owner in addition to the amount (if any) payable under (a) and (b) above shall in respect of each Management Share allocated to a Commercial Unit of which he is the Owner pay a fraction of the total amount assessed under the second section of the second part of the annual adopted budget in which the numerator shall be one and the denominator is equal to the total number of Management Shares which represent Commercial Units in the Development;
	(d)	Each Owner in addition to the amount (if any) payable under (a), (b) and (c) above shall in respect of each Management Share allocated to a Parking Space of which he is the Owner pay a fraction of the total amount assessed under the third section of the second part of the annual adopted budget in which the numerator shall be one and the denominator is equal to the total number of Management Shares which represent Parking Spaces in the Development.

Allocation of Management Shares
Summary:
Residential Accommodation	134,864 shares
Commercial Accommodation	30,914 shares
Parking Spaces (42 Nos. x 100)	4,200 shares
Common Areas and Facilities	0 shares
	169,978 shares”
(emphasis supplied)

5. No doubt, the management shares for all the car parks constitute about 2.5% of all the management shares.  These owners should together bear about 2.5% of the first part of the annual adopted budget under clauses 13(a) and 15(a).  In addition, they together should also bear the third section of the second part of the annual adopted budget under clauses 13(b)(iii) and 15(d).  The total of 2.5% of the first part and the whole of the third section of the second part of the annual adopted budget in fact constitute about 6.9% of the global sum of management fees.  It is unfortunate that Madam Ho has misread the relevant clauses of the DMC.  I do not think her first ground has merit. 

Second Ground

6. The second ground of complaint is that “the driveways” and the “loading and unloading areas” are defined in the DMC as part of the Development Common Area and Facilities.  The costs for managing them should be shared among the owners of the Residential Accommodation, the Commercial Accommodation and the car parks.  However, such costs are being shared by the car park owners only and not by the owners of the Residential Accommodation and the Commercial Accommodation.  She says that this arrangement is unreasonable.

7. There is only one loading and unloading area on the ground floor of the estate.  The car parks are all on the second floor.  The driveway goes from outside Rosedale Gardens to a car park control room.  It then goes past the control room along a driveway to the loading and unloading area.  After passing by this area, it then goes all the way up to the car parks on the second floor. 

8.  In order to understand this complaint, it is necessary to look into the definitions of the Development Common Area and Facilities and the car parks in the DMC.  They are as follows: -

“ Common Areas and Facilities

means collectively the Development Common Areas and Facilities, the Commercial Common Areas and Facilities and the Residential Common Areas and Facilities;

Development Common Areas and Facilities

means and includes such of the passages, entrances, walkways, stairways, landings, platforms, loading and unloading areas, open spaces (including the non-building areas as defined in the Conditions), …… service areas, driveways, roadways and pavements, ramps, refuse storage chamber, entrances halls, …… car park control room, management room and counter, …… such of the lifts, …… and any other mechanical systems, devices all facilities and stalled or provided in the Development intended for common use and benefit of the Development, …… in accordance with these presents but EXCLUDING the Commercial Common Areas and Facilities, the Residential Common Areas and Facilities and such areas within the Development the exclusive right and privilege to hold, use, occupy and enjoy which belongs to any particular Owner ……

Parking Spaces

means such spaces or car ports provided in or upon Lot or the Development or structures erected or to be erected on the Lot the use of which is or will be set aside or reserved for the parking of licensed private motor vehicles registered under the Road Traffic Ordinance and belonging to the residents or occupiers of the Development and their bona fide guests, visitors or invitees or for the manoeuvering, parking, loading and unloading of service vehicles in accordance with Special Condition No. (27) of the Conditions;”  (emphasis supplied)

9.  Special Condition No. (27) is contained in New Grant No. 3053 which contained all the terms and conditions of the grant of the lot upon which Rosedale Gardens stands.  It is as follows: -

“ Special Condition No. (27) of the Conditions of New Grant No. 3053
27.	(b)	Space shall be provided within the lot to the satisfaction of the Director for the loading and unloading of vehicles:
		(i)	at the rate of one space for every 800 residential flats or part thereof subject to a minimum of one loading/unloading bay for each residential block, such loading/unloading bay to be located adjacent to or within each residential block; and
		(ii)	at the rate of one space for every 1,000 square metres or part thereof of gross floor area to be used for commercial purposes;
		in the building or buildings erected or to be erected on the lot, all excluding any floor area used for loading and unloading purposes.  ……  The space so provided shall not be used for any purposes other than for the loading and unloading of vehicles in connection with the said building or buildings;”

10.  The only loading and unloading area for service vehicles on the ground floor is obviously the area provided for in accordance with Special Condition No. (27).  The definition of Development Common Area has included loading and unloading areas, …… driveways, roadways and pavements, ramps.  These are general words included in a very exhaustive definition.  If the definition of Parking Spaces has not included a specific definition of the area for loading and unloading of service vehicles by reference to Special Condition No. (27), then the loading and unloading area on the ground floor must be included as part of the Development Common Area.  However, in the light of the specific reference in the definition of Parking Spaces, the loading and unloading area in question must be treated as part of the Parking Spaces and not the Development Common Area.  Regarding the driveway from the control room on the ground floor to the second floor, Madam Ho seems to accept that it should form part of the Parking spaces.  In any case, it seems clear that the driveway from the point when it passes the control room all the way to the second floor and including the loading and unloading area on the ground floor should be part of the Parking Spaces as it is only used by vehicles going to the car parks and the service vehicles going to the loading and unloading area.  The costs for managing “the driveways” and the “loading and unloading areas” should thus be borne by the car park owners to the exclusion of the owners of the Residential Accommodation and the Commercial Accommodation. 

Third Ground

11.  Madam Ho’s third complaint is that the salary of one security guard at $81,000 per annum has been included under the third section of the second part of the annual adopted budget so that the owners of the 42 car parks have to share it.  There is however no similar treatment for the first or second section of the second part of the budget. 

12.  The undisputed evidence is that a security guard has to be stationed inside the car park control room round-the-clock.  There is a rope hanging across the driveway next to the control room.  Whenever there is ingress or egress of vehicles, the guard has to lower the rope to permit the vehicle to pass along and then to tighten it up again.  Thus, 2 security guards are required to serve the car parks round-the-clock as they work on a 12-hour shift.  In fact, whenever this guard goes away for meals or to answer the calls of nature, another guard would have to be deployed to assume this duty.  It is thus necessary to provide more than 2 security guard man-days every day to serve the car parks.  Therefore, the salary of more than 2 security guards is paid to manage the car parks. 

13.  Madam Ho however points out that the guard sitting inside the control room in fact has to monitor the close circuit television monitors which are linked to cameras installed at various parts of the estate.  He also has to man a telephone line which is used by the owners to make complaints.  The duty to monitor the television monitors is subsidiary to the work of guarding the ingress and egress of vehicles.   The occasional telephone call also does not constitute a significant portion of the guard’s work.  When he receives a complaint, he is only required to relay it to the other guards or the management staff.  He has to remain in the control room.  If he should leave the control room to deal with the problem, another guard would have to take his place in the control room. 

14.  On the whole, the allocation of the salary of just 1 security guard to the third section of the second part of the annual adopted budget is a generous measure to the car park owners.  It may not be wrong to allocate a significant part of the salary of one more guard to the car parks.  Madam Ho feels aggrieved in that there is no similar allocation of salary to the first or second section of the second part of the budget.  However, if such allocation is carried out to the extreme, the car park owners will have to shoulder the additional burden of a significant portion of the salary of another guard in addition to that already allocated.  The reduction in the 2.5% share of the first part of the budget by reason of the allocation of the salary of some other guards to the Residential and Commercial Accommodations will not offset the additional burden.  

15.  In any case, it cannot be said that the Manager has committed a manifest error in allocating the salary of just 1 guard to the third section of the second part of the budget to be borne by the car park owners.  I consider such allocation as more than fair and reasonable and find that this complain has no merit. 

Fourth Ground

16.  There is only 1 electricity meter to measure the amount of electricity used to light up all the common areas in the estate.  The electricity charge is shared among the Residential and Commercial Accommodations and car parks according to the number of fluorescent tubes installed in these areas.  Madam Ho’s fourth complaint is that the car park owners are paying too big a share of the electricity charge because most of the tubes in the car parks are switched off during the daytime. 

17.  The IO has called a technician of the manager Mr. Yick Ping Man to testify on the electricity consumed by the lighting in the common areas.  Mr. Yick is responsible for all the maintenance works in the estate.  He has counted the number of fluorescent tubes in the car parks.  He says that the lighting of the car park area is controlled by a timer which switches off the lighting in that area during daytime.  There is also a meter installed by the previous manager to monitor the amount of electricity used by the lighting in the car park.  He has checked the meter on a number of occasions and found that the car park lighting consumes on the average 132 units of electricity every day.  The annual charge for that should be about $47,000.  In addition, about $2,000 would have to be incurred every year for replacing the old and defunct tubes.  He knew that the budget has provided for $55,000 as the share of electricity charge attributed to the car parks. 

18.  I accept Mr. Yick’s evidence.  There is thus an over-estimate of $6,000 per year for the electricity for the car parks.  This $6,000 is however dwarfed by the by the generosity in the allocation of security guard salary.  I therefore also find that there is no merit in this complaint.  

No prior notice for increase in July 2001

19.  Madam Ho also complains that the increase was not levied with prior notice as provided in clause 16 of the DMC.  This clause provides: -

“16.      In the event of the Manager finding at any time that the annual budget is insufficient to cover all expenditure it shall prepare a revised budget in consultation with the Owners' Committee and the provisions of Clauses 13 - 15 shall apply mutatis mutandis to the revised budget as to the annual budget.  The adjusted monthly management contribution under the revised budget shall be payable by the Owners after the Manager giving to each Owner not less than one month’s prior notice in writing. ……  ”

20.  She said that the increased was levied in July 2001 with retrospective effect to May 2001.  There was thus not only no prior notice, she was in fact asked to pay the increase immediately and for the previous months of May and June 2001. 

21.  The problem with this complaint is that she had already paid the increase as demanded when she was sued in the Small Claims Tribunal by the IO.  She paid all the increase that was due on 24^th December 2001, but had not reserved her position or raised a protest when she paid.  She also wrote a letter of 11^th January 2002 to the management committee to signify the peaceful resolution of the matter.  The increase without prior notice thus ceased to be a matter of dispute between her and the IO since then.  She therefore cannot raise it again in this application.  If she thought that the IO and/or the manager had failed to comply with clause 16 in imposing the increase, she should have raised this issue in the claim brought by the IO in the Small Claims Tribunal.  I would therefore not entertain this complaint either. 

Why was the increase in July 2001?

22.  Though I have found that Madam Ho’s complaints on the amount of management fee levied on the car park owners have no merit, I should also go into the cause for the increase of the fees from $297 per month to $396 per month imposed in July 2001.  There are 42 parking spaces in the car parks.  Four of them are owned by individual owners and the remaining 38 are owned by the developer Far Gain Limited (“Far Gain”).  These 38 spaces have been let to the owners in the estate.  Prior to the appointment of the current manager in early 2001, the then manager used to collect the monthly rental from the tenants of the spaces on behalf of Far Gain.  In return for such service from the manager, Far Gain used to pay the IO about $60,000 to $70,000 as administration charge.  The service to Far Gain was provided by the management staff of the estate, but the administration charge paid by Far Gain was treated as the management income of the car parks.  It was not applied to defray the first part of the annual adopted budget, but was applied wholly for defraying part of the expenses in the third section of the second part of the budget for the benefit of the car park owners. 

23.  When the old manager was replaced by the new manager in about April 2001, the developer did not make use of the service of the new manager to collect rental from its car park tenants and stopped paying the administration charge.  The shortfall in management fund thus created had to be shared by all the car park owners.  Hence, the increase of $99 per month for the owners of the 42 car parks which gives rise to a yearly sum of $49,896 per annum.  Madam Ho does not challenge this evidence.  I am of the view that the increase was inevitable as there was no other means to cover this shortfall.  Indeed, it is arguable that the administration charge paid by Far Gain should have been applied to defray the first part of the annual adopted budget and to benefit all owners of the estate. 

Promise of no increase

24.  Madam Ho has also said in her evidence that there was a promise by the IO in an owners meeting in March 2001 that there would not be any increase of management fees.  I am doubtful of whether such promise had been made, and if so, its terms.  It does not appear to be a wise promise to make if the payment of administration charges by Far Gain was to cease.  Perhaps it was made before Far Gain had stopped paying this money if it had indeed been made.  If so, there was an underlying assumption for the promise that the administration charge would continued to be paid by Far Gain.  If there was such underlying assumption, the cessation of this funding could have defeated the promise.  In any case, the promise, if made, does not appear to be a contractual promise between the IO and Madam Ho and Madam Ho cannot rely on it to insist on paying the old rate of $297 per month. 

25.  In the premises, I dismiss Madam Ho’s claim for a declaration that she had been overcharged in the management fee payable for a parking space in the Parking Spaces or for refund of any overpayment.  I further make an order nisi that Madam Ho to pay the IO the costs of this application at the District Court Scale with certificate for counsel.  This order nisi will become absolute unless either party to this Application would apply within the next 14 days for a variation.