ROTH & SONS ESTATES MANAGEMENT LIMITED v. THE INCORPORATED OWNERS OF CARSON MANSION, KING'S ROAD

1995, No. A11511

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. The Plaintiff is a Limited Company incorporated in Hong Kong carrying on the business of building management. The Defendant is the Incorporated Owners of a composite building known as Carson Mansion, who were duly incorporated on 19 September 1984 under the Multi-Storey Buildings (Owners Incorporation) Ordinance, Cap.344. The premises consist of a commercial podium on the basement, ground floor, the 1^st and 2^nd floors and a portion of the 3^rd floor ("the Shopping Centre") and the remainder of the building is given over to residential units.

2. The co-owners of the undivided shares in the said Carson Mansion, in order to define and regulate their respective rights, interests and obligations in the said building, entered into a Deed of Mutual Covenant dated 20 July 1979, and subsequently into a further Deed of Mutual Covenant dated 8 April 1980 (the Second Deed of Mutual Covenant).

3. The Defendant first appointed the Plaintiff as the manager of the Shopping Centre on 6 August 1987, and the Plaintiff served continuously in that capacity until it was subsequently re-appointed as the manager in terms of a fresh agreement dated 1 January 1992.

4. It is common ground that the Defendant terminated the Plaintiff's employment as manager on 15 March 1995, which termination the Plaintiff claims was unlawful, and it sues for a declaration to that effect, damages for breach of contract and in addition for payment of the sum of $396,861.50 being monies which the Plaintiff claims were owed to it by the Defendant prior to the termination of the parties' agreement.

The Terms of the Plaintiff's Appointment as Manager

5. The Plaintiff's appointment as Manager was in the following terms under the provisions of the parties' agreement dated 1 January 1992 :

"A. the Owner appoints and authorises the Manager in accordance with the Deed of Mutual Covenant (registered by Memorial No._______) to manage Carson Mansion (Seven Seas Shopping Centre) (hereinafter called 'the Building') ... from 1 January 1992 to 31 December 1993, for the period of 2 years. If no notice is issued one month before the expiration of this contract, then automatically renewed for another year."

6. In the event, the Defendant did not issue any notice at the end of 1993, and the Plaintiff's appointment as manager was thereupon duly renewed for a further year, until 31 December 1994, as provided for in the Agreement, on the same terms, save that the Plaintiff's management fee was increased from $9,000 to $10,000 per month.

7. At no time during 1994 did the Defendant issue notice to the Plaintiff to terminate the Agreement, and the Plaintiff contends that thereupon its appointment as manager was duly extended for a further year until 31 December 1995, in terms of the aforesaid terms of the 1992 agreement.

8. The Defendant however contends that the automatic renewal provisions of the 1992 agreement provided for only one automatic renewal, which took effect for the year 1994, and that in the absence of any notice issued by it to terminate the agreement, the Plaintiff's appointment as manager was not renewed for a further year, but continued on a monthly basis, on the same terms and conditions as previously.

9. The aforesaid provisions in the1992 agreement as to automatic renewal of the Plaintiff's appointment referred to renewal for "another year" (singular), and neither state nor imply that such renewal provisions were intended to apply on a "roll-over basis" at the end of each renewed year of service. In these circumstances, in my view, in the absence of notice to terminate issued one month before 31 December 1994, the Plaintiff's appointment as Manager continued after 31 December 1994 on a monthly basis, bearing in mind that in terms of the agreement only one month's notice was required to terminate the Plaintiff's appointment, and also that the Plaintiff's management fees and expenses were payable by the Defendant on a monthly basis.

The termination of Plaintiff's appointment

10. The Seventh Schedule of the Building Management Ordinance Cap. 344 is incorporated into every Deed of Mutual Covenant by operation of law, and clause 7 of the Seventh Schedule provides as follows:

"7. Termination of manager's appointment by owners' corporation

(1) subject to sub-par (5), at a general meeting convened for the purpose a corporation may, by a resolution of the owners of not less than 50% of the shares, terminate by notice the manager's appointment without compensation.

(2) a resolution under sub-paragraph (1) shall have effect only if :

(a) the notice of termination of appointment is in writing;

(b) the length of notice specified therein is for a period of not less than 3 months;

(c) the notice is accompanied by a copy of the resolution terminating the manager's appointment; and

(d) the notice and the copy of the resolution is served upon the manager not more than 14 days after the date of the meeting."

11. The Defendant's solicitors wrote to the Plaintiff on 15 March 1995 alleging various breaches of its duties as manager of the Shopping Centre, purporting to terminate the Plaintiff's appointment "forthwith", without any compensation, and requesting it to hand over all the keys to the Shopping Centre. The Plaintiff contends that such purported termination of its services was unlawful and invalid in that the Defendant had failed to comply with the aforesaid provisions of the Seventh Schedule of the Ordinance which were binding upon it, and in particular :

(1) the Defendant failed to hold any general meeting at all;

(2) no valid resolution at all was passed;

(3) the termination was stated to the "forthwith", in contravention of the requirement of not less than three months' notice;

(4) no resolution was ever served upon the Plaintiff.

12. By letter dated 17 March 1995 from the Plaintiff to the Defendant's solicitors, the Plaintiff rejected the allegations that it had not properly carried out its management duties, and alleged that the dismissal was unlawful for the reasons given above, pointing out that the agreement provided for automatic renewal for a further year in the absence of one month's notice prior to the end of the previous year, warning the Defendant of possible massive future claims arising out of its purported early termination of the contract, at the same time stating its willingness to accept an early termination of the contract provided that it enabled the Plaintiff to fulfill its commitments to existing staff and other contractors working for it at the Shopping Centre, and asking the Defendant to "mediate" a satisfactory and amicable solution.

13. The Defendant's solicitors replied by letter dated 22 March 1995 that their instructions were that the management contract had been terminated, and demanding that the Plaintiff vacate the Shopping Centre management office immediately.

14. The Defendant does not dispute that it did not adopt the procedures required by the Seventh Schedule of the Ordinance to terminate the Plaintiff's employment without compensation; it contends that the aforesaid provisions of the Seventh Schedule do not constitute the only circumstances in which a manager's appointment can be terminated since clause 7 of the Seventh Schedule goes on to provide in paragraph 4 that : "this paragraph operates without prejudice to any other power there may be to terminate the manager's appointment".

15. The Defendant relies upon its right at common law to summarily terminate the agreement, on the basis that the Plaintiff's alleged breaches of its obligations under the agreement went to the root of the parties' contract and amounted to a repudiation by the Plaintiff of the agreement, which repudiation the Defendant in effect accepted by its solicitors letters of the 15 and 22 March 1995 (although not stated in such terms), thus terminating the parties' contractual relationship without any right by the Plaintiff to compensation.

The Plaintiff's alleged breaches of contract

Failure to keep books and records on account

16. The most serious breach alleged by the Defendant concerned the Plaintiff's failure to keep books and records of account as it was allegedly required to do. The Seventh Schedule of the Ordinance, incorporated into the parties agreement by operation of law, provides in clause 2 thereof as follows:

"(1) That the manager shall maintain proper books or records of accounts and other financial records and shall keep bills, invoices, vouchers and other documents referred to in those books and records for at least 6 years.

(2) Within one month after each consecutive period of 3 months, or such shorter period as the manager may select, the manager shall prepare a summary of income and expenditure in respect of that period and shall display a copy of it in a prominent place in the building.

(3) Within 2 months after the end of each financial year, the manager shall prepare an income and expenditure account and balance sheet for that year

...

(5) The manager shall :

(a) permit any owner, at any reasonable time, to inspect the books or records of account and any income and expenditure account or balance sheet; and

(b) on payment of a reasonable copying charge, supply any owner with a copy of any record or document requested by him."

17. Furthermore the Second Deed of Mutual Covenant provides as follows:

"3(1) The manager shall be responsible for and shall (subject as herein otherwise specifically provided) have full and unrestricted authority to do all such acts and things as may be necessary or requisite for the management of the Shopping Centre and without in any way limiting the generality of the forgoing the manager shall have the following powers and duties namely :

(XVII)

to keep proper accounts of all expenditure incurred and of all payments made to the manager in respect of carrying out its duties hereunder and to permit each owner or its authorised agent at any time during office hours to inspect such accounts and to take extracts therefrom."

18. Further, the parties' agreement of 1 January 1992 provides as follows:

"B. Responsibilities and duties of the manager:

(9) to prepare monthly report of the income and expenditure of the building, actual accounting items of income and expenditure, and prepare accounting statement to the Owner for auditing."

19. The Plaintiff does not dispute that it did not in fact prepare or maintain books or records of account or other financial records, and did not comply with the aforesaid provisions relating thereto. Its case, as expounded by Madam Lisa Wong who testified on its behalf, is that the Defendant waived compliance with such provisions on the Plaintiff's part, since the Defendant at all material times employed its own accountant to prepare and maintain the necessary books and records of account, and it had never at any time prior to the termination letter of 15 March 1995 required the Plaintiff to comply with the aforesaid provisions.

20. Mr Yip who appears for the Defendant rightly takes the point that the Plaintiff was obliged to specifically plead waiver or variation if it intended to rely upon them, which was never done : the Plaintiff did not file any Reply to the Defendant's defence. The first time the point was taken was during the evidence of the Plaintiff's witness Miss Wong. Nevertheless, there was no objection to the evidence being led, nor to the Defendant's witness Madam Yu Oi-ling being cross-examined to the same effect.

21. It was clear from the evidence that the Defendant has never in fact required the Plaintiff to comply with the aforesaid provisions in respect of keeping records of account, since the Defendant has at all at material times employed its own accountant to do so. It is telling that - as conceded by Madam Yu - the Defendant at no time prior to the letter of 15 March 1992 made any complaint to the Plaintiff in this respect, nor demanded that the Plaintiff rectify the situation and comply with its aforesaid alleged obligations. It is also relevant to note Madam Yu's evidence that the position is precisely the same in relation to the present management company which is employed by the Defendant to manage the Shopping Centre : namely it is also required by the terms of the parties agreement to keep proper books and records of account, but in practise it has never done so since it took over from the Plaintiff in March 1995, and the Defendant has never complained nor required it to keep such records, since these matters are handled by an accountant who is employed directly by the Defendant.

22. Since it was clear that the Defendant had in practice waived compliance by the Plaintiff with any of its obligations in relation to keeping books and records of account, there was no merit whatever in its seeking to rely upon the Plaintiff's alleged breach of such obligations as a basis for summarily terminating the Plaintiff's management contract.

(I should add that Mr Yip did seek to put in a letter of complaint which was written by several of the shop owners at the Shopping Centre to the Defendant requesting the Defendant to ensure that the Plaintiff did post up accounts on a central notice board so that the owners could study them. However the Defendant's witness Madam Yu was not a party to this letter, which is clearly hearsay and not admissible for the purpose of substantiating this complaint - in any event even if it had been admissible it would not have affected my finding on all the evidence that the Defendant had waived compliance by the Plaintiff with its obligations in this regard.)

Further alleged/breaches of Plaintiff's duties

23. The further alleged breaches by the Plaintiff of its duties and obligations which were relied upon by the Defendant as constituting a repudiation of the agreement on the Plaintiff's part are pleaded in paragraphs 24 to 27 of the Defence, including its failure to keep various facilities at the Shopping Centre (such as toilets, pumps, tanks, pipes, sewers, drains, escalators) in good repair and condition; its failure to remove unlawful structures and installations in the Shopping Centre; its failure to prevent certain shop owners (and particularly the owner of Shop B39, Mr Wong Fuk-wah, who it is admitted is the brother of Madam Lisa Wong) from unlawfully occupying or using part of the common areas of the Shopping Centre and from unlawfully altering the common air-conditioning system to his own advantage.

24. Madam Yu Oi-ling, who was the only witness to give evidence on behalf of the Defendant, has been a shop owner in the Shopping Centre since 1993, and became a member of the Management Committee only with effect from early March 1995. Since the Plaintiff's alleged breaches of duty were said to have occurred almost entirely prior to January 1995, insofar as she was able to testify at all about any of such breaches, Miss Yu could only do so in her capacity as one of many shop owners at the Shopping Centre, and not with the authority of a member of the management committee at the relevant times. I had no doubt as to her honesty and integrity; the fact remains however that she was quite unable to establish any of the alleged breaches by the Plaintiff of its duties. She gave some evidence about some of the things that she as a shop owner was unhappy about at the Shopping Centre during the Plaintiff's ten years as manager which was entirely anecdotal, and in her capacity simply as a shop owner at the Centre she was not in a position to know what steps the Plaintiff had taken to try to address the problems in question.

25. Some of the Plaintiff's Working Reports were produced, which it had addressed to the Defendant over the relevant period of time and in which it specifically dealt with problems and matters which required attention in the Shopping Centre, and reported to the Defendant on the steps that it had taken to address these matters, the difficulties that it had encountered and sometimes pointing out to the Defendant that the solution to a particular problem required an investment by the Defendant in new materials or appliances or in paying contractors to rectify the problems. Madam Yu frankly admitted that she had never seen any of these working reports, nor had she any idea of their existence.

26. The fact is that the Defendant set itself an impossible task in attempting to establish any of the breaches alleged against the Plaintiff through the evidence of Madam Yu, since she was not in a position to give authoritative evidence in respect of any of these matters.

27. The Defendant sought to put in several letters of complaint written by several shop owners in the Shopping Centre who were unhappy about various aspects of the Plaintiff's management of the Shopping Centre. These letters are clearly hearsay, and the Plaintiff had specifically required the Defendant to call one or more of the authors of such letters in its counter-notice to the Defendant's hearsay notice served upon it, which the Defendant has failed to do, except insofar as Madam Yu may have been a party to them. In the event only two of the letters, to which Madam Yu was a party in combination with other shop owners, were admitted into evidence. Madam Yu was only able to give evidence as to some of the complaints raised therein insofar as they affected her personally, and as I have already indicated she was quite unable to establish any breaches of duty on the part of the Plaintiff. The remainder of the complaints and allegations in the letters are clearly hearsay and the letters are not admissible to establish any of them, although they are admissible to show that many of the shop owners were unhappy and did address such complaints to the Defendant, which however is a long way from making good any such allegations.

28. In sum the Defendant has failed to establish any of the breaches of its duties and obligations which it alleges against the Plaintiff, and it follows that it has failed to establish that the Plaintiff repudiated the management agreement.

29. Since the Plaintiff was - as I have found - employed on a monthly basis as from 1 January 1995, the Defendant could terminate the Plaintiff's employment on one month's notice.

30. At a meeting of the Incorporated Owners held on 16 December 1994 one of the agenda items was to discuss the "question of the management company", and it was announced that the Plaintiff's contract as manager of the Shopping Centre had expired and that no written renewal had been effected; further, that after the election of the new committee in January 1995 the position of Manager of the Shopping Centre would be put out to tender.

31. Mr Yip has suggested that this constituted due notice of termination to the Plaintiff of its appointment as manager. Although there was no evidence that this decision was formally communicated to the Plaintiff, I accept that the Plaintiff probably knew about it since it invariably sent a representative to attend at such committee meetings on its behalf. It is nevertheless fanciful to suggest that this constituted notice of termination to Plaintiff : it was nothing more than a statement of intent that Plaintiff's contract had not been renewed and that in due course the position of manager would be put out to tender.

32. In the meantime the Plaintiff continued to perform its duties as manager until it received the letter from the Defendant's solicitors dated 15 March 1995. I accept Madam Wong's evidence that the locks to the doors of the Plaintiff's offices were changed, and it was effectively excluded from the premises as from 15 March 1995. There is no dispute that subsequently, with effect from 1 April, the Defendant installed a new management company in the premises.

33. In these circumstances the Defendant was in breach of its obligation to give the Plaintiff one month's notice of termination of its appointment as manager.

Damages

34. The Plaintiff claims that it suffered damages in consequence of the Defendant's wrongful summary termination of the contract. Madam Wong testified that following the receipt of the letter of termination on 15 March 1995, the Plaintiff dismissed five of its staff members whom it employed at the Shopping Centre, and to each of whom it had to pay one month's salary in lieu of notice. She could not recall the salaries of each of the five employees, whom she named, however I accepted her evidence that the Plaintiff paid altogether something in excess of $24,000 for the five of them in lieu of one month's notice. The Plaintiff is entitled to that sum by way of damages, since it was incurred as a direct result of the Defendant's wrongful summary termination of the contract.

35. The Plaintiff is in addition entitled to a further one month's management fees in the sum of $10,000, which it would have earned if the Defendant had given it the one calendar month's notice to which it was entitled.

Payment for services rendered and reimbursement of expenses incurred by Plaintiff

36. Quite apart from the issue as to the alleged wrongful termination of the management contract, the Plaintiff claims that the Defendant is indebted to it in the sum of HK$396,861.50, by way of $30,000 unpaid management fees for the months January to March 1995, and the balance by way of payment for services which had been rendered by the Plaintiff and reimbursement of expenses incurred by the Plaintiff in the course of discharging its management duties prior to the termination of the management contract, all of which were payable in terms of the parties' agreement of 1 January 1992.

37. Paragraph 5 provided that "the Incorporated Owners shall reimburse the Manager the management expenses and its remuneration every month in the first year". The Defendant does not dispute that it is liable to pay Plaintiff the manager's fee which had been agreed with effect from 1 January 1995 at $10,000 per months, for the months of January to March 1995, and further that it was liable to reimburse the Plaintiff all expenses which it had legitimately incurred in the course of performing its duties as manager.

38. Annexed to the agreement of 1 January 1992 were a number of documents headed "Carson Mansion (Seven Sea Shopping Centre) Monthly Management Expenses Budget", and certain Schedules attached to it. This document set out the sums which were payable to the Plaintiff in a fixed amount each month against various heads such as Caretakers' Salary, Cleaning Charges, Water Pump/Electric Appliance Maintenance and Manager Service Fee. Against the other items listed, (items 4 to 12) namely Maintenance of Fire Equipment, Maintenance of Electronic Equipment, Maintenance of Escalators, Minor Repair of Public Equipment and Miscellaneous, it was stated that the actual payments made by the Plaintiff would be reimbursed.

39. Madam Wong testified that the system which had pertained between the parties ever since the Plaintiff was first appointed as manager in 1987, was that the Plaintiff would submit debit notes to the Defendant every month which detailed the expenses which it had incurred in the course of exercising its duties, and that these debit notes had always been settled by the Defendant until about September 1994 when the Defendant started looking for reasons not to pay them. The Plaintiff's claim in the sum of HK$366,861.50 is detailed in a large batch of such debit notes relating to expenses incurred and services rendered from September 1994 to 15 March 1995, which Madam Wong testified had been duly submitted to the Defendant at the end of the respective months in which they were incurred, together with the original receipts and supporting documents, and the Defendant had simply refused to pay them (This must be seen in the context of the deteriorating relationship between the parties as from about that time).

40. The Defendant's witness Madam Yu testified that the Defendant submitted the debit notes in question in one large batch towards the end of March 1995, after its services had been terminated, and that the management Committee's attitude was that it was willing to pay the expenses which had been incurred during 1995 but asked the Plaintiff to verify the expenses which had been incurred in the last four months of 1994, and to produce original receipts and documents in support. She said that the Plaintiff was unable to produce any original receipts or documents, and simply asserted that the jobs in question had been done and the expenses incurred.

41. Madam Wong explained that after the Defendant's summary termination of the Plaintiff's appointment, the Plaintiff re-submitted all the unpaid debit notes in one large batch for payment.

42. I accept Madam Wong's evidence : generally speaking I had no reason to doubt her credibility. The Defendant's difficulty was that Madam Yu only became involved in the management committee in early March 1995, and was therefore unable to speak with any authority at all on behalf of the Defendant in relation to matters which transpired before that date, and was not in any position to gainsay Madam Wong's evidence that the debit notes had been previously submitted as they were incurred. (Indeed, it was surprising that the Defendant did not lead evidence from a person who had been serving on the management committee at the relevant times, and who could speak with authority about the dealings between the parties at such times).

43. Mr Yip submitted that in any event even if the Plaintiff did submit the debit notes in question to the Defendant for reimbursement at the time that they had been incurred, this did not of itself entitle the Plaintiff to reimbursement thereof: the Defendant was entitled to demand proof from the Plaintiff that the service in question had actually been performed or that the expense had actually been incurred.

44. It is of course correct that the Plaintiff was only entitled to reimbursement for expenses genuinely and bone fide incurred and services genuinely performed for the Defendant in the course of carrying out its management duties under the Agreement, since the Plaintiff could otherwise take advantage of this system as a "license to print money".

45. In this connection, I accept Madam Wong's evidence that the debit notes were duly supported by original receipts and original documentation when they were submitted, and I am satisfied that the Defendant is in principle liable to pay the Plaintiff for the services thus rendered and to reimburse it for the expenses thus incurred on its behalf, subject only to proper proof in relation to individual debit notes which were challenged.

46. Madam Wong was cross-examined in detail on various individual debit notes, and challenged to produce supporting documentation to justify the items raised therein. She responded that such supporting documentation did exist, and on the second day of the hearing she produced a batch of such documents, which were then duly incorporated into the agreed bundles. These documents had not been discovered, as they should have been in view of their materiality to the issues in this case. Mr Yip submitted that the belated production of them by the Plaintiff cast considerable doubt on their authenticity and reliability. However, reprehensible though it is that these documents were not discovered as they should have been, they appear to me to be entirely authentic, and do support the items raised in the various debit notes which were challenged.

47. For example in relation to the debit note numbered 0337 dated 30 January 1995, concerning repairs which were effected by the Plaintiff to the water storage tank in the water tower for which the Plaintiff claimed payment of $5,800, Madam Wong produced a Quotation which had been submitted by the Plaintiff to the Defendant on 26 October 1994, in the sum claimed, and duly endorsed and authorised by the Defendant.

48. Another item which she was strongly challenged to justify was reflected in debit notes numbers 281 and 283 which claimed the second and third instalments, each in the sum of HK$32,385, claimed to be payable in respect of consultancy services provided by the Plaintiff, calculated on a basis of 5% of the total construction costs of the project in question, amounting to almost two million dollars. When she was challenged to substantiate these claims, Madam Wong said that the fees were payable in respect of services which the Plaintiff provided in relation to renovation works done to the building by the construction company Shing Kee Limited, who was engaged by the Defendant : the Plaintiff's role was to supervise the workers involved in doing this renovation work, and to liaise with shop owners and to attempt to mitigate the inconvenience to them involved in doing the works.

49. As part of the batch of documents which she brought to court the following day she produced a copy of Minutes of a meeting of the Defendant dated 26 October 1994 which reflected that a resolution was passed that the Plaintiff was to act as a manager of this renovation contract and be responsible for engaging surveyors and overseeing and examining all the works, and its fee would be 5% of the total contract price. She also produced a bank pay-in slip dated 1 December 1994 showing that a sum of $32,385 was paid into the Plaintiff's account on that day, which she explained was the first of the three instalments which were due in respect of the said consultancy fees. It was clear on this evidence that the claimed consultancy fees had indeed been duly authorised by the Defendant, and further, that the Defendant had paid the first instalment thereof.

50. Insofar as she was able to shed any light at all on the matter, Madam Yu testified that the Defendant had been dissatisfied with various aspects of the renovation works, and that she had seen some minutes of meetings (dating from before she became a member of the committee) which indicated that Shing Kee had agreed to do additional works. However in this respect also Madam Yu was unable to give evidence from her own first-hand knowledge of the situation. A number of letters were put into evidence which had been written by the Plaintiff to Shing Kee Construction Company, and copied in each instance to the Defendant, which clearly demonstrated that the Plaintiff was performing its supervisory duties in relation to the renovation works, chasing up Shing Kee to rectify defects in the works which had been identified by an architect, itemizing the defects in question and reporting the progress of the works to the Defendant. It also transpired from the documents that the Plaintiff had engaged the services of Kamyin Consultancy Limited to oversee the works, as required of it by the Defendant. (When these matters, and particularly the extent of the services that had been provided by the Plaintiff in relation to these renovation works were put to Madam Yu in cross-examination, she frankly conceded that she had never seen any of the documents and had no knowledge at all of such matters.)

51. I was satisfied on the evidence that the renovation works had been duly completed, even if not entirely to the satisfaction of the Defendant in every respect, and that the Plaintiff had discharged the consultancy role which the Defendant had engaged it to provide, and was entitled to be paid the agreed consultancy fees as reflected in the debit notes.

52. I agree with Mr Ng who appeared on behalf of the Plaintiff, that Madam Wong's credibility was only enhanced by the various challenges to her to justify individual debit notes, since in relation to each such debit note (except Nos 202 and 203 which are dealt with postea), she was able to justify the amount claimed as having been duly authorised by the Defendant, and to establish that the services in question were duly rendered by the Plaintiff and the expenses in question duly incurred. Such approval invariably took the form of a signature which Madam Wong identified as the signature of Mr Lam, the Chairman of the committee; it was put to her in cross-examination that this was not in fact Mr Lam's signature, and that there appeared to be at least three different versions of it, and that in addition it was not accompanied by the Defendant's formal seal or chop which would indicate its authenticity. Madam Wong however insisted that the signature was that of Mr Lam, and that such signature, unaccompanied by any seal or chop, had always been accepted in the past by the Defendant as sufficient, and the Defendant had always paid the sum in question. I accept Madam Wong's evidence in this regard; there was no evidence forthcoming from any other source which caused me to doubt her assertions.

53. It was clear that the Defendant's witness Madam Yu had no real knowledge of, nor was she in any position to comment on, the Plaintiff's response to such problems and the steps that it took to deal with them, as reflected in the working reports. It follows that her evidence did not raise any doubts in my mind in relation to Madam Wong's testimony to the effect that the Plaintiff did indeed deal with such problems properly and conscientiously in terms of its duties as manager of the Shopping Centre. I repeat that I had no doubt whatever as to the honesty and integrity of Madam Yu: she was simply "miscast" as the Defendant's sole witness, since she quite lacked the necessary first-hand knowledge to advance the Defendant's case.

54. It is necessary to bear in mind, nevertheless, that the onus remains on the Plaintiff throughout to establish on a balance or probabilities that it is entitled to the relief which it claims, including the payments as set out in the Debit Notes in question.

55. In respect of one or two of the debit notes Madam Wong testified that she had been unable to find the written authorisation given by the Defendant, although she insisted that the Plaintiff would not have done the work nor presented the debit notes in question to the Defendant without such authorisation. Again, I accept her evidence in that regard.

56. Some of the other items in the debit notes were in relation to repairs which had been performed by the Plaintiff on an emergency basis, when they arose in circumstances where the Plaintiff judged that they had to be immediately attended to without the delays involved in getting authorisation from the Defendant to proceed, although in each instance the Plaintiff had immediately reported back to the Defendant what it had done. She said that the Plaintiff was authorised in terms of the parties' agreement to perform such emergency work, and had in fact done so as and when the need arose since the inception of its appointment as Manager, and that the Defendant had always reimbursed it for its expenses and paid for its services rendered in that respect.

57. I note that in terms of the parties' agreement of 1 January 1992 under paragraph B that it is one of the responsibilities and duties of the Manager : "to manage all the common area of the Building according to the terms in the Deed of Mutual Covenant".

58. Paragraph (1) of the Second Deed of Mutual Covenant dated 8 April 1980 provides for the duties and responsibilities of the Manager as follows:

"The Manager shall be responsible for and shall (subject as herein otherwise specifically provided) have full and unrestricted authority to do all such acts and things as may be necessary or requisite for the management of the Shopping Centre and without in any way limiting the generality of the forgoing the Manager shall have the following powers and duties ..."

59. It is clear in my view that the Manager was impliedly vested with the power to perform necessary repairs and remedial works on an emergency basis without having to first obtain the approval of the Defendant in each instance, and that provided the provision of the emergency services in question fell outside the categories of its duties for which in terms of the parties' 1992 agreement the Plaintiff was paid a fixed sum every month to perform, the Plaintiff was entitled to be paid its reasonable fees and reimbursed its reasonable expenses incurred in connection therewith. (I note that under item 3 of the Budget "Water Pump/Electric Appliance Maintenance", that the Plaintiff was required to provide 24 hours emergency repair service as part of its duties for which it was remunerated in the fixed sum of $5,880.70 per month.) Madam Wong testified that the emergency services in question upon which she was cross-examined were indeed "extra" to the Plaintiff's normal duties and that the Plaintiff was by long course of dealing between the parties entitled to be paid and reimbursed for such. Again I accept her evidence in this connection.

60. She was also challenged in relation to the claim for "Secretary's salary and allowance" in the sum of $1,252.80 in debit note number 103. She referred to the Budget incorporated in the parties' 1992 agreement, and the Defendant's agreement therein to pay the Plaintiff a fixed sum of $1,252.80 per month by way of salary and allowance for a Secretary; this clearly did not envisage the appointment of a full-time secretary by the Plaintiff, but was rather the parties' agreed estimation of the remuneration to be paid by the Defendant for secretarial services rendered by the Plaintiff. The issue in this respect was whether the Plaintiff did in fact provide any such secretarial services during January 1995 so as to justify its claim for such, and I accept Madam Wong's evidence that such secretarial services were indeed provided.

61. She was further challenged to justify the debit note number 106 dated 31 January 1995 for payment of $3,000 for "contracting to clean the residue in the septic tank in basement". She produced a written Quotation submitted by the Plaintiff to the Defendant and signed by three members of the Management Committee, authorising the payment of $3,000 per month for "contracting to maintain the two septic tanks in the basement ... to clean the residue every month regularly ..." Madam Wong testified that this work was done by one of the Plaintiff's employees every month, and that the Defendant had paid the agreed monthly fee throughout 1994 without question. I accept her evidence that this service was duly provided in January 1995 - again there was no evidence to contradict her on this point - and that the Defendant is therefore liable to pay the Plaintiff the agreed fee of $3,000 as claimed.

62. In debit note number 202 dated 28 February 1995, the Plaintiff claimed reimbursement of $25,343.90, being the "day-shift watchman salary" of three named employees namely Chiu Man-yui, Lee Kam-ying and Ng Kam-chiu. Madam Wong referred to the Budget incorporated in the 1992 agreement, which provided for payment to the Plaintiff in respect of care-takers' salaries in a fixed monthly sum (which was calculated on the basis of the actual salaries paid to four named day-shift caretakers in the total sum of $27,097.50). Under cross-examination Madam Wong testified that Chiu Man-yui received a salary of $7,000 a month plus, Lee Kam-ying received $6,000 a month and Ng Kam-chiu received the balance claimed. She produced a copy of an autopay statement from the bank showing the sums paid from the Plaintiff's account each month by autopay for the salaries of its employees, which reflected that in February 1995 the sum of $5,200 was paid to Cheung Kam-ying (she said that Lee Kam-ying was a typing error). When she was asked to provide similar proof in relation to the other two named day-shift watchmen however she said that the fact that their names appeared on the debit note did not necessarily mean that they were on duty at the Centre at the time : the Plaintiff's duty was to provide three day-shift watchmen, and the identity of such watchmen was of no importance. It was put to her that the other two named day-shift watchmen were not in fact working at the Centre at all in February 1995, which she denied.

63. In the same debit note a reimbursement in the sum of $10,758.20 was claimed in respect of salaries for two named night-shift watchmen, namely Yeung King shui and Abdul Malik. When she was asked to provide proof that Abdul Malik was employed by the Plaintiff in February 1995 by reference to the autopay statements, Madam Wong said that he had been in service in 1992 but had left by 1995, however the Plaintiff continued to use the "standard form" debit note which contained his name when claiming reimbursement from the Defendant (which was explained to the Defendant at the time). She said that Abdul Malik had in fact been replaced by Mohammed Ayub in 1995, and produced a bank autopay statement showing that Mohammed Ayub was paid $3,400 in February 1995.

64. Although I accept that in terms of the parties' agreement what was important was the provision by the Plaintiff of the services in question, in particular the number of employees stipulated for, and that the identity of such employees was not material, and while I accept that Madam Wong's explanations for the amounts claimed and the names against which they were claimed in this particular debit note may well be correct, the evidence does not in my view constitute proof to the required standard that the Plaintiff is entitled to be reimbursed the amounts claimed in the debit note, bearing in mind that specific employees were named in the debit note, and when challenged to substantiate these claims it transpires that several of such named employees were no longer in fact employed by the Plaintiff in February 1995.

65. In my view the Plaintiff has established its entitlement, in relation to the salaries of the day-shift watchmen, only to the salary of Chiu Man-yui in the sum of $7,000, and the balance claimed in the sum of $18,343.90 must be disallowed.

66. In relation to the night-shift watchmen the Plaintiff has established its entitlement only to the salary of Yeung King-shui in the sum of $4,703.30, and the balance in the sum of $6,054.90 must be disallowed, namely a total disallowance from this debit note of $24,398.80.

67. A similar situation prevails in respect of the claims for reimbursement of the salaries of cleaning workers in debit note number 203 dated 28 February 1995. The sum claimed is $12,111.30 in respect of three named cleaning workers, namely Lee Mo-wan, Li Kwai-hang and Tang Shuet-ying (Tang Wan Ying being a typing error). Under cross-examination Madam Wong stated that Lee Mo-wan had in fact left the Plaintiff's employment in 1994 and his place had been taken by Yeung Mui-chai, and that Li Kwai-hang had also left the Plaintiff's employment before 1995, and his place had been taken by Cheung Yiu-chung. Both these alleged replacement cleaning workers do feature in the Plaintiff's autopay statement as having been paid in February 1995, however for the same reasons which I expressed in relation to the previous debit note, while Madam Wong's explanation may indeed be true, I do not consider that the Plaintiff has discharged the onus upon it of proving its entitlement to be reimbursed the salaries of workers who were specifically named in the debit note submitted to the Defendant, and yet who, as it transpires, were no longer in the Plaintiff's employment at the time. It is not good enough for the Plaintiff to lamely explain that it used "old" debit notes in submitting these claims to the Defendant, especially in the light of the Defendant's case that no such cleaners were in fact provided by the Plaintiff in February 1995. In my view all the Plaintiff has established its entitlement to in this respect is to be reimbursed the salary of Tang Shuet-ying in the sum of $4,000, and the balance of the sum claimed under this item, namely $8,111.30, must be disallowed from this debit note.

68. Madam Wong was also challenged on the claim for $6,897.30 for the salaries for a plumber and electric technician in the same debit note. However I accept her explanation that this was a fixed monthly payment provided for under item 3 of the Budget incorporated in the 1992 agreement : the agreed amount payable by the Defendant had increased from $5,880.70 to $6,897.30.

69. It follows that a total of $32,510.10 must be disallowed from debit note number 203.

70. I have not traversed every single item in the debit notes which was challenged in cross-examination: suffice to say that apart from the amounts which I have disallowed as unproven above, I was satisfied on the evidence that the Plaintiff did establish its entitlement to be paid the sums set out in these debit notes, namely in the total sum of $364,351.40.

Deposit Paid by the Defendant

71. After the matter had been adjourned for verdict, it came to my attention that paragraph C(4) of the parties' 1992 Agreement provides as follows :

"The Incorporated Owners shall pay Hong Kong Dollars Fifty Thousand to the Manager as management fee deposit in order to protect the Manager who makes advanced payment of the expenses on behalf of the Owner in relation to the management of the Building."

72. Upon inquiries being made of the parties' solicitors it transpired that it is common ground that the Defendant did pay such a deposit in the sum of $50,000 to the Plaintiff at the time of signing the Management Agreement on 1 January 1992, which is still in the Plaintiff's possession. It would appear that this matter has simply been overlooked heretofore.

73. The Defendant (not surprisingly) does wish it to be taken into account for the purposes of these proceedings; the Plaintiff submits that it should not be taken into account, since it has never been pleaded (by way of set-off or counterclaim or at all), nor ever raised at any stage of the trial.

74. In my view the matter of this deposit should be taken into account for the purposes of the present proceedings, notwithstanding that it was not pleaded nor raised at any stage of the action prior to the Court raising the matter mero motu as aforesaid. The nature of these proceedings is essentially a settlement of account between the parties following the termination of the Plaintiff's appointment as Manager of the Shopping Centre, and the deposit is one item that clearly ought to be considered in settling that account; it would be perverse to ignore it, now that it has been "unearthed".

75. The position is a straightforward one : the Defendant must be given credit for this deposit in the amount of $50,000 in settling the account between the parties. It must accordingly be set off against the sum of $364,351.40 which I have found to be payable by the Defendant to the Plaintiff, with the result that the amount payable by the Defendant is reduced to $314,351.40.

Costs

76. As far as costs are concerned, Mr Yip submitted that even if the Plaintiff succeeded in its claims, it should be penalised in costs in view of its failure to discover the batch of documents which Madam Wong brought to court only on the second day of the trial when she was challenged under cross-examination to justify the various debit notes upon which the Plaintiff claimed reimbursement.

77. There is no doubt that these documents should have been discovered. After they had been brought to court, if Mr Yip felt that he needed time, it would have been open to him to apply for the proceedings to be adjourned at the Plaintiff's expense to enable him to study these documents and take instructions upon them. In the event however, he asked for only a few hours' adjournment, which was granted, whereafter he continued to cross-examine Madam Wong. Mr Yip submitted that apart from anything else it might have led to a settlement of at least this part of the case if these documents had been timeously discovered by the Plaintiff. In this connection also however, if he had applied for an adjournment as he was entitled to, and after studying the documents the Defendant had felt obliged to concede the Plaintiff's claim in respect of the debit notes, it is inconceivable that the Plaintiff would not have had to bear the costs thus wasted by its failure to discover the documents as it was obliged to do.

78. The fact is that following the adjournment for a few hours to enable the Defendant and its legal advisers to study the documents, Mr Yip elected to proceed, whereafter he continued to challenge Madam Wong to justify the debit notes in question. If it were possible to quantify any costs as having been wasted by the few hours adjournment which was necessitated by the need for the Defendant to examine the documents belatedly produced by Madam Wong, I would unhesitatingly have ordered the Plaintiff to pay those wasted costs. It seems to me however that it is not possible to thus quantify any such wasted costs.

79. Nevertheless, I consider that any costs order should at least to some extent condemn the Plaintiff's failure, in blatant disregard of the rules of court, to discover the aforesaid documents. Since the Plaintiff has been substantially successful in its claims it would in the normal course be awarded its costs; however for the reasons given above, I propose to order that it bear 25% of its own costs.

80. In the result I grant judgment to the Plaintiff as follows :

(1) damages in the sum of $10,000;

(2) damages in the sum of $24,000;

(3) payment of the sum of $314,351.40;

(4) interest on the sum of $314,351.40 at the investment rate from 1 April 1995 to the date of judgment.

(5) an order nisi that the Defendant is to pay 75% of the Plaintiff's costs of these proceedings, to be taxed if not agreed.