The Incorporated Owners of Arts Mansion v. Hon Empire Investments Ltd

LDBM 50 OF 2004

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT Application No. 50 of 2004

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J U D G M E N T

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1.  With the consent of the parties, I deliver this judgment in English.

2.  The 2^nd Respondent (“the Hon Empire”) is the owner of 13 car parking spaces in Arts Mansion.  It is being sued by the Applicant, the Incorporated Owners (“the IO”), for payment of arrears of management fees for these parking spaces from March 2003 to March 2004.

2.                                         These parties have sued each other a number of times.  Their first litigation was in DCCJ No. 13675 of 1989 which was tried by H. H. Judge W. Wong.  The subject matter there was the trespass by the IO into several parking spaces owned by the Hon Empire. 

3.  Their next litigation was in LDBM196 of 1999, which was tried by Deputy Judge Lee.  In that case, the IO sued the Hon Empire for arrears of maintenance fees for the parking spaces it owned.

4.  Their third case was LDBM338 of 2001, which was decided by His Honour Judge Lam, as he then was.  In that case, the IO sued the Hon Empire for arrears of management fees for these parking spaces.

5.  The same subject matter was litigated again in LDBM140 of 2003 before His Honour Judge Chow.  In that case, the Hon Empire was again sued for payment of management fees for the carparks.  It filed a counterclaim in that case for trespass by the IO into one of its carparks.  The Hon Empire lost both the claim and the counterclaim.  These matters are now pending in the Court of Appeal in CACV No. 112 of 2004.

6.  In this application, the IO again claims against the Hon Empire for management fees for these carparks, but for a different period.  The Hon Empire again raises the same counterclaim for trespass and, in addition, another counterclaim for a declaration on management fees which is consequential to its defence on liability to pay the same.

7.  Since all the issues in the counterclaim for trespass are identical with those in LDBM140 of 2003, which are pending before the Court of Appeal, the parties consented to the stay of this part of the counterclaim pending the decision of the Court of Appeal.

8.  The Hon Empire, in its Notice of Opposition here, refers to clauses 3 and 4 of the DMC.  Clause 3 provided for the sharing of various management costs and expenses by all the owners of the flats and parking spaces, according to their respective shares of and in the building.  Clause 4(i), however, provided as follows: -

“4(i)  Subject to the proviso last mentioned, the following costs and expenses shall be paid by the owners of the 1st to the 12th Floors of the said building on the basis of one share by the owner of each flat, totalling 144 shares:-

(a) the costs and expenses of insuring, operating, servicing, maintaining, repairing and replacing the water pumps for the flush system of the said building including the wells and water tanks. 

(b) the cost and expenses of insuring, operating, servicing, maintaining, repairing and replacing the lifts of the said building including electricity charges for operating such lifts.”

9.  The Hon Empire says that only those costs and expenses specifically listed under clause 3 should be paid by all the owners of the building in proportion to their respective shares of and in the building.  In particular, clause 3 does not include expenses for maintaining a television antenna in the form of a dish for receiving television signal from satellite, because there is no television in the parking spaces. The representative of the Hon Empire Mr. Lam says that such expenses should be borne by the flat owners to the exclusion of the carpark owners.

10.  The next complaint in the Notice of Opposition is that the budget for 2003 to 2004 did not provide for breakdowns of the figures.  There was, in fact, a breakdown of figures.  The Hon Empire’s true complaint is that there was no breakdown for the expenditure in relation to the flush system and the operation of the lift, as referred to in clause 4(i) of the DMC.  He, therefore, says that the management committee was ultra vires in fixing the management fee for the parking spaces.

11.  At the trial, Mr. Lam for Hon Empire raised a further ground that the budget for 2003 to 2004 was excessive and should be reduced.  He said that the provision for contingency regarding future maintenance should be $170,000 and not $270,000.

12.  On the satellite maintenance cost, it was not expressly referred to in either clause 3 or 4 of the DMC.  I, therefore, hold that it is within the power of the IO to provide for this service under section 18(2)(g) of the Building Management Ordinance, Cap. 344, which says: -

“(2)a corporation may, in its discretion -

...

(g)  act on behalf of the owners in respect of any other matter in which the owners have a common interest.”

13.  I further hold that it is legitimate for the management committee to include the cost for maintaining the satellite dish in the general fund established under section 20(1) of the said ordinance.

14.  Regarding the argument on the breakdown in the budget for 2003/2004, the IO, at my request, provided figures for the operation of the flush system and the lifts, which were obtained from the budgets for the period from 2000 to 2004 and the audited accounts for these years.  There was no separate billing for electricity and insurance for the lifts, and estimates were made by the management committee in the budget of 2000/2001.

15.  There is evidence that such budget and the amount of management fees payable, as calculated from the budget, had been approved by the management committee and also by the 28th AGM of the IO, which was held on 25^th August 2000.  The calculation for the management fees shows that the flat owners have to pay for the expenses for operating the flush-water system and the lift, but not the carpark owners.  I accept such evidence which is corroborated by a set of minutes of the 28th AGM.

16.  I find that there has been fluctuations in the individual items as actually incurred for operating the flush system and the lift but, as a whole, these expenditure remain fairly constant.  There was in fact a small reduction of the total expenditure.

17.  Since the overall estimates of expenditure for the lift and flush system had been approved by the management committee and the AGM, and there is no evidence showing that they were blatantly wrong, I would accept that they were proper estimates.  The actual expenditure, in fact, shows that the estimates were not unreasonable. 

18.  Since the actual amounts incurred for the lift and the flush system had, at times, been slightly reduced and were less than the estimates, the lack of corresponding adjustment to the management fees payable by the flat owners for them resulted in extra contributions by the flat owners.  The reserve fund now contains some extra contributions by the flat owners.

19.  I, therefore, cannot find any reason that the Hon Empire can make use of to complain about the setting of the amounts of management fees in relation to the operation of the flush system and the lift.

20.  On the amount of the budget for 2003/2004, I am of the view that it is the discretion of the management committee on how much reserve should be collected for the contingency fund set up under section 20(2) of the said Ordinance.

21.  Though, in a previous year, the management committee had resolved to collect only $170,000 for contingency, it was open for them to resolve to collect $270,000 in the year 2003/2004.  This is so, despite an existing reserve of over a million.  It is not a matter that the tribunal can intervene.  If such policy cannot find favour with the majority of the owners, they can appoint another management committee in accordance with the procedure contained in the Building Management Ordinance.

22.  I note that the Hon Empire has repeatedly argued that, on the basis of the actual expenditure, the amount of management fee levied on the carparks was excessive.  I have explained to Mr. Lamthat management fees are not collected to cover actual expenditure but collected on the basis of the estimates in the budget.  They are collected to pay for anticipated expenses and not the actual expenditure already incurred.

23.  I, therefore, find for the IO and order the 2^nd Respondentthe Hon Empire to pay the IO the sum of $21,125 as management fees for the 13 carparks from March 2003 to March 2004, with interest at the judgment rate from time to time when the fees fell due until payment.

24.  I also order the 2^nd Respondent to pay the IO ²/₃ of the costs of this application.  I do not order the usual full amount of costs because the IO should have provided the breakdown for the expenditure in relation to the lift and the flush system in this application. I, therefore, reduce the usual costs to ²/₃ of the costs to take into account of an application by the Hon Empire for the provision of these figures.

25.  Finally, I also note that there is no separate electricity meter for the running of the lift or separate premium demand note for the insurance of the lift.  I suggest that a separate electricity meter should be installed and the insurer be requested to provide a separate premium demand note for the lift.  Such will certainly facilitate the calculation and future revision of the management fees payable by the flat owners and the carpark owners.