THE INCORPORATED OWNERS OF WING HING BUILDING v. SIU TAI WAH

LDBM197/2005

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LDBM No:197 of 2005

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Judgment

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1.  This is a claim transferred from the Small Claims Tribunal. Surprisingly the issues in dispute have already been clearly defined by the parties themselves in the pleadings before the Small Claims Tribunal.    They expressed clearly at the call-over hearing before me that they were not going to raise any new issue and that they intended not to seek legal representation.     There being no dispute on facts and no further legal argument, the parties agreed to my proposed course of proceeding to judgment to be handed down in writing.  Nevertheless, I gave parties some time to re-consider their position.  I gave them liberty to apply within 7 days to make further submissions by counsel or otherwise.  This period has now expired.    

2.  The Applicant owners incorporation is claiming for the balance of contribution that the Respondent owner is allegedly liable to contribute towards a fund raised for the repair and maintenance work of the building.  The dispute only concerns the correct method of apportionment.

3.  Section 20 of the Building Management Ordinance Cap 344 (“the Ordinance”) has specified two categories of funds which can be raised by an owners incorporation. They are the general fund and the contingency fund.  A third category of funds which can also be raised by an owners incorporation is provided for in the Fifth Schedule of the Ordinance. On the true construction of sections 20, 21(4), 21(5) and 22, the effect of the cross-references therein is that the raising of any of the three categories of funds is governed by these sections.

4.  It may be argued that the three categories are not mutually exclusive.  This argument has not been raised in these proceedings. In any event on the material before me, I am satisfied that the fund in question is the special fund within the meaning of the provisions of the Ordinance.  

5.  The special fund in question totals about 1.8 million and is raised to meet the expenses of a major repair project.  Section 22(2) lays down the principle of apportionment to be applied. It provides that:

“If there is no deed of mutual covenant, or if the deed of mutual covenant does not provide for the fixing of contributions, the amount to be contributed by an owners towards the amount determined under section 21 shall be fixed by the management committee in accordance with the respective shares of the owners.”

6.  The Respondent contends that the deed of mutual covenant does not provide clearly how the fund should be apportioned and therefore by section 22(2) the fund should be apportioned in accordance with the shares of the owners.  On the other hand the Applicant purportedly apportions the fund according to the deed of mutual covenant.  

7.   The main issue is therefore whether the deed of mutual covenant contains provisions for apportionment.  Clause 4 clearly provides that shop owners on the ground floor do not need to bear the costs relating to the lift maintenance, repair, renewal etc. It also provides that apart from these costs relating to the lift, the usual costs of building management shall be contributed to according to the management shares set out in the Third Schedule of the deed.  Clause 4 provides that:

(f)	The following costs, charges and expenses shall be borne and paid by the owners of the said building in the proportion as hereinafter provided:-
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	(iv)	The cost of repairing, renewing, maintaining, cleansing, painting, or decorating the building or any part or parts thereof and all water pumps, tanks, pipes, sewers, drains, watercourse, cable, wires or services therein and all the apparatus equipment and convenience thereof.
	(vi)	The cost of operating maintaining, repairing, servicing, replacing and renewing all the lifts in the building but the owners for the time being of the shops on the Ground floor shall not be liable to pay the same.
(h)	The owner for the time being of the said building shall pay in advance each calendar month to the manager on account of their respective shares of the said costs, charges and expenses the monthly fee or charge more particularly set out in---the Third Schedule hereto---------.
(i)	If the total contributions payable to the Manager by the owners of the said building as aforesaid shall be insufficient to cover the said charges and expenses then such owners shall make further contributions towards such expenses in the shares as above provided.
(j)	If there should be any surplus after payment of all the costs, charges and expenses then the surplus shall be held by the Manager---and shall only be applied towards payment of such costs, charges and expenses thereafter to become due.

8.  The Respondent’s argument is that the above provisions in the deed of mutual covenant only apply to the monthly contributions or management fees and do not apply to the raising of the fund in question.  The obligation to pay monthly charges or management fees is one thing.  How the owners should share the total costs is another. Whether the cost of the repair is paid out of surpluses accumulated over the years or a fund has to be raised does not change the obligation of the shop owners. These provisions in the deed of mutual covenant clearly define which part of the costs of management of the building should be borne by which type of owners and how these costs should be apportioned.  The apportionment method is spelt out in these provisions and the Applicant correctly applies these provisions. Firstly, the shop owners do not have to bear the costs relating to the lift renewals. Secondly they only have to bear the remaining part according to the management shares set out in the Third Schedule of the deed of mutual covenant. 

9.   The apportionment method adopted by the Applicant is correct. I give judgment for the Applicant for the amount claimed.

10.  It is rather unfortunate that it  received wrong legal advice at one time.  The Applicant eventually obtained correct legal advice and followed the advice. However as the minutes of the meetings show, the Applicant follows the advice not because it has been convinced of its correctness.  It has decided to follow the advice with a view to avoid litigation threatened by the shop owners.  In view of this, it is reasonable for the Respondent to contest the claim.  These proceedings should also serve the Applicant a useful purpose, namely to clarify the provisions of the deed of mutual covenant. Therefore I do not think it proper to award interest or costs. There be no order as to costs in these proceedings including proceedings in the Small Claims Tribunal.