宏德居業主立案法團 v. 人人汽車有限公司 AND ANOTHER

LDBM 167/2019

[2023] HKLdT 27

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 167 OF 2019

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BETWEEN

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J U D G M E N T

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Background

1.  The applicant is the owners’ corporation of Walton Estate, Nos 341 & 343 Chai Wan Road and Nos 1 & 3 Yee Shun Street, Hong Kong (“the Estate”).

2.  The 1^st respondent is the owner of Shop No 90, Ground Floor and Shop Nos 1 to 127, First Floor at Block B of the Estate (“the 1^st respondent’s shops”).

3.  The 2^nd respondent is the owner of Carpark Nos 1-19, 21-24, 26-28, 30-37, 39-49, 51-74, 76-87, 89-99, 103-106, 109-113, 115-119, 121, 123-124, 127, 130-131, 133-134, 136 & 138-151 of the Estate (“the 2^nd respondent’s carparks”).

4.  The applicant’s claim against the 1^st respondent is for outstanding management fees in respect of the 1^st respondent’s shops for the period from April 2018 until the date of the order to be made herein, together with interest thereon and collection charge pursuant to clause 2 in section E of Part VI of the Estate’s deed of mutual covenant (“the DMC”).

5.  However, the applicant only provided the amount of the outstanding management fees from April 2018 up to February 2022 totalling $3,087,038 in its closing submissions. It is not clear how much management fees are outstanding from March 2022 onwards. Thus, even if the applicant succeeds in its claim against the 1^st respondent, I will only award the outstanding management fees from April 2018 to February 2022 in the sum of $3,087,038, and the applicant has to claim the outstanding management fees from March 2022 onwards by way of a separate action.

6.  The applicant’s claim against the 2^nd respondent is for outstanding management fees in respect of the 2^nd respondent’s carparks for the period from January 2019 until the date of the order to be made herein, together with interest thereon and collection charge pursuant to clause 2 in section E of Part VI of the DMC.

7.  Likewise, the applicant only provided the amount of the outstanding management fees from January 2019 up to January 2022 totalling $1,217,760 in its closing submissions. It is not clear how much management fees are outstanding from February 2022 onwards. Thus, even if the applicant succeeds in its claim against the 2^nd respondent, I will only award the outstanding management fees from January 2019 to January 2022 in the sum of $1,217,760, and the applicant has to claim the outstanding management fees from February 2022 onwards by way of a separate action.

8.  Both the 1^st and 2^nd respondents do not dispute the amount of the outstanding management fees as submitted by the applicant. They only dispute their liability to pay. The gist of their defence is that the 2018 and 2019 budgets had not been properly prepared in accordance with the DMC and the sums attributed to the owners of Commercial Development and the Car Port were unreasonable. On top of that, both respondents make counterclaims against the applicant.

9.  The 1^st respondent counterclaims for: (1) an order that the applicant do revise the budgets for the financial years from 2018/2019 onwards to make proper adjustment of the management fees of the 1^st respondent’s shops payable by the 1^st respondent in accordance with the Definitions clause in Part I and clauses 6(a) to (d) in section D of Part VI of the DMC; (2) an order that the applicant do within 3 months from the date of the order to be made herein carry out all necessary repair and maintenance works to repair the central air-conditioning system serving the Commercial Development at Block B of the Estate in good condition and working order; (3) loss and damages suffered or to be suffered by the respondent to be assessed; (4) interest; and (5) costs.

10.  The 2^nd respondent counterclaims for: (1) a declaration that the budgets for the yearly period of 2018/2019 and 2019/2020 approved and adopted by the applicant are invalid void and voidable, and the 2^nd respondent is not required to pay management fees which are calculated based on these two budgets; (2) an order that the applicant is to revise the budgets for 2018/2019 and for 2019/2020 in accordance with the DMC to make proper adjustment of the management fees of the 2^nd respondent’s carparks payable by the 2^nd respondent; (3) an order that the applicant is to reimburse the 2^nd respondent any overpaid amount, if any, after the correct management fee for the Car Port are calculated based on the budgets as revised according to (2) above; (4) interest; and (5) costs.

The Estate

11.  The Estate is a mixed commercial and residential development. There are four blocks of residential towers standing over two podiums. Podium A comprises the Ground, Mezzanine, 1^st, 2^nd and 3^rd Floors of Block A, whereas Podium B comprises the Ground, 1^st and Deck Floors of Block B. The Ground and Mezzanine Floors of Podium A, together with the Ground and 1^st Floors of Podium B are used for commercial purpose (ie shops), whereas carpark spaces are located on the Mezzanine, 1^st, 2^nd and 3^rd Floors of Podium A. Of the four blocks of residential towers, two were built above Podium A comprising the 4^th to 26^th Floors, and the other two were built above Podium B comprising the 2^nd to 26^th Floors.

12.  According to the Definitions in Part I of the DMC, various parts of the Estate are defined as follows:-

(1) “The Car Port” shall mean “the spaces for car parks at 1st, 2nd and 3rd Floors of Podium A.”

(2) “Commercial Development” shall mean “such part of the Podiums intended for commercial use in accordance with the Master Plans.”

(3) “Residential Development” shall mean “all the 4 Residential Towers and all parts thereof.”

(4) “Estate Common Areas” shall mean “the Driveway and ramps and the Entrance and Exit thereto, the Pavements Lanes and Pedestrian Ways, the Garden, the Management Officer, the Service Area, the Cleaners Rooms, the Container Chamber, the Refuse Stores, the Guard Rooms (if any), the Maintenance Stores and the Sub-structures and foundations of the Estate and all other parts of the Estate the right to use which is given by this Deed to more than one Owner in accordance with the provisions of this Deed.”

(5) “Residential Common Areas” shall mean “the Swimming Pool, the Lift Motor Rooms, the Lifts in the Residential Towers and the Entrances and their lobbies of all the Residential Towers and any other parts of the Residential Development for the use and benefit of the Residential Development.”

(6) “Commercial Common Areas” shall mean “the Air-Conditioning Plant Room, the Refuse Rooms, the Guard Rooms (if any), the Cleaners Rooms, the Management Offices, the Maintenance Stores, the Cargo Lifts and their lobbies (if any), the Loading and Unloading Areas, the Entrance to Commercial Development and their lobbies and any other parts of the Commercial Development for the use and benefit of the Commercial Development exclusively.”

(7) “Car Port Common Areas” shall mean “the Entrance on the Ground Floor of Block A together with the ramp and the driveway leading to the Car Port.”

Obligation to pay management fees to the Manager

13.  At the material times, the Managers of the Estate (within the meaning of “Manager” in the DMC) were respectively:

(1) From 2016 to 30 June 2018, Creative Property Services Consultants Limited (“Creative Property”);

(2) From 1 July 2018 to 31 December 2020, Easy Living Consultant Limited (“Easy Living”); and

(3) From 1 January 2021, Kong Shum Union Property Management Co., Ltd (“Kong Shum”).

14.  By virtue of clause 4 in section A of Part V of the DMC, each owner shall pay to the Manager on the due date the Manager’s remuneration and Management Expenses as provided in the DMC.

15.  As to the determination and apportionment of the estimated management expenses, section D of Part VI of the DMC provides as follows:-

(1) The Manager shall prepare an annual budget showing the estimated expenditure for the ensuing year for the purpose of determining the contributions payable by the Owners: clause 1.

(2) The budget shall be an estimate by the Manager of the sum which will be necessary to meet all the costs of managing and maintaining, repairing the Estate: clause 3.

(3) Each annual budget shall be divided into four parts:-

(a) The first part shall contain the estimated management expenses which are “attributed solely to all the Owners of the Estate and shall be apportioned to the Owners of the Estate proportionally according to the number of undivided shares in the Land and the Estate held by each of them.”: clause 6(a).

(b) The second part shall contain the estimated management expenses which are “attributable solely to or solely for the benefit of the Owners of the Commercial Development and shall be apportioned to the Owners of the Commercial Shares proportionally according to the gross floor area of the Commercial Unit/or Units held by each of them.”: clause 6(b).

(c) The third part shall contain the estimated management expenses which are “attributable solely to or solely for the benefit of the Owners of the Residential Development and shall be apportioned to the Owners of the Residential Shares proportionally according to the number of Residential Shares held by each of them.”: clause 6(c).

(d) The fourth part shall contain the estimated management expenses which are “attributable solely to or solely for the benefit of the Owners of the Car Port and shall be apportioned to the Owners of the Car Port Shares proportionally according to the number of Car Port Shares held by each of them.”: clause 6(d).

(4) The Manager shall have “absolute power and discretion to attribute the management expenses to either the Estate, the Commercial Development, the Residential Development and/or Car Port.”: clause 6(e).

(5) In addition, the Manager shall also have “absolute power and discretion to stipulate any reasonable additional charges to be payable by an owner having regard to the special use of the premises” and “to add to the amount to be contributed by an owner.”: clause 6(f) and (g).

16.  The respondents agree that they have the obligation to pay the Manager management expenses as stipulated in the DMC as well as pursuant to sections 20, 21 and 22 of the Building Management Ordinance, Cap 344. Their contention is that the 2018/2019 and 2019/2020 budgets were not prepared in accordance with clauses 6(a) to (d) as mentioned above, and the Manager’s “absolute power and discretion to attribute the management expenses to either the Estate, the Commercial Development, the Residential Development and/or Car Port” under clause 6(e) have to be subject to compliance with clauses 6(a) to (d).

17.  The applicant, on the other hand, contends that on a proper interpretation of the DMC, the Manager’s “absolute power and discretion” under clause 6(e) is not constrained by clauses 6(a) to (d), which only concern with “apportionment” process. The applicant further contends that there were logical and reasonable bases for the Manager’s attribution of various heads of expenses to the four parts of the Estate in the 2018/2019 and 2019/2020 budgets. Thus, there is no basis to suggest that the Manager and/or the applicant had exercised the discretion in an arbitrary, capricious and/or unreasonable manner.

18.  The main issue in this case is therefore how clause 6(e) should be interpreted together with clauses 6(a) to (d).

The law

19.  The applicable principles regarding interpretation of the DMC are not in dispute. In fact, they have been more recently summarised in 黎偉雄 v 信和物業管理有限公司 [2020] HKCA 448 at §§26-28:

“26. This Court (differently constituted) recently examined the relevant case law on the construction of a deed of mutual covenants in Sino Channel Holdings Ltd v Vast Faith Investment Ltd [2020] HKCA 311 at [19] to [21] and there is no need for us to repeat the citation of the authorities here. In a nutshell, the DMC must be construed in the context of the document as a whole and in light of the factual and legal background (which also provides the context) to its execution, and having regard to the practical objects which it was intended to achieve. The overriding objective in construction is to give effect to what a reasonable person would have understood the parties to mean. Instead of focusing on the ordinary and natural meanings of a few words in a clause, very often the broader context provides surer guide. But textual analysis and contextualism are both tools in the exercise of construction and the utility of each tool will vary according to the circumstances of each instrument. Thus, construction is a unitary exercise involving an iterative process.

…

28. Further, an estate development has many communal facilities and common areas. The management and expenses concerning such management have to be agreed upon between the co-owners of the land. The obligations and rights of the owners concerning communal facilities and common areas have to be regulated. Thus, another purpose of a DMC is to set out the agreed arrangement in these respects which would be binding on the owners (and every successor in title) and the manager.…” (emphasis added)

20.  In Sino Channel Holdings Ltd v Vast Faith Investment Ltd [2020] HKCA 311, which was cited in 黎偉雄 at §26, the Court of Appeal (differently constituted) set out uncontroversial principles of contractual construction at §§19-21. The Court of Appeal further made two observations which are highly relevant to the interpretation of the DMC in the present case.

(1) First, at §§43-46, the Court of Appeal observed that:

“43. On the other hand, Mr Pao submitted that the DMC is a bespoke contract and the presumption against surplusage is relevant, see Achieve Goal Holdings v Zhong Xin Ore Material Holdings [2020] HKCA 51 at [16(6)].

…

45. The cases cited by Mr Wong are mostly judgments concerning the construction of standard form contracts or commercial documents. We respectfully agree with Kwan VP’s view at [16(6)] of Achieve Goal Holdings v Zhong Xin Ore Material Holdings, supra, that the presumption against surplusage can carry greater weight in a bespoke contract in the context of a clause designed to meet the exigencies of a particular arrangement.

46. In the present appeals, we are concerned with a special arrangement concerning the exclusive right to use occupy and enjoy of all four sides of the exterior walls of a multi-storey building. As we have seen, the default position under the general law as laid down in the Multi-Storey Buildings (Owners Incorporation) Ordinance was that the external walls would form the common parts of the building. Thus, special arrangement had to be made to reserve such walls (or some of them) to the exclusive use occupation and enjoyment of the Developer.” (emphasis added)

(2) Second, the Court of Appeal cited with approval at §60 Kwan VP’s remarks in Achieve Goal Holdings v Zhong Xin Ore Material Holdings that:

“Reliance placed on commercial sense and surrounding circumstances should not be invoked to undervalue the importance of the language of the provision which is to be construed. Except in a very unusual case, the parties have control over the language they use in a contract and must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision. A court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. (Arnold v Britton at §§17 and 20, per Lord Neuberger of Abbotsbury, PSC)” (emphasis added)

21.  The following two canons of construction are also pertinent:-

(1) In interpreting a contract, all parts of it must be given effect where possible, and no part of it should be treated as inoperative or surplus: Lewison, The Interpretation of Contracts (7^th ed), §§7.24-7.25. This is sometimes referred to as the presumption against surplusage. Under this principle, each part of the contract is taken to have been deliberately inserted having regard to all the other parts thereof, and thus the proper mode of construing the contract is to give effect to every part of it and not to nullify one clause in a deed. As accepted by the Court of Appeal in Sino Channel Holdings Ltd (supra.), the DMC is a bespoke contract and the presumption against surplusage is relevant.

(2) The reasonableness of the result of any particular interpretation is a relevant consideration in choosing between rival interpretations: Lewison, The Interpretation of Contracts (7^th ed), §§7.161-7.162.

Interpretation of clauses 6(a) to (e)

22.  Applying the principles of law as stated above, the applicant contends that clause 6(e) is concerning “attribution” whereas clauses 6(a) to (d) are concerning “apportionment”. Clause 6(e) gives the absolute discretion to attribute management expenses without any constrains from clauses 6(a) to (d), and the first half of each of clauses 6(a) to (d) are only “description” of the nature of the estimated expenses in each part of the annual budget.

23.  The applicant further relies on Promising Realty Ltd v Lam Wai Shan, CACV 120/1988, which concerned the same DMC and the same Estate, to support its contention that clause 6(e) gives the absolute discretion to attribute, and once clause 6 is complied with by making the basic division of the annual budget into four parts, the apportionment thereafter required is a matter of arithmetical calculation.

24.  I do not agree with this interpretation. To me, it is plain and obvious that clause 6(e) is subject to clauses 6(a) to (d). First of all, clause 6(e) comes immediately after clauses 6(a) to (d), and it would be absurd to suggest that the attribution into the four parts are not constrained or guided by the first half of each of clauses 6(a) to (d). To interpret it that way, it is taking clause 6(e) out of the context, and would make the first half of each of clauses 6(a) to (d) surplus.

25.  Just take an obvious example, if there is a water tap in the Car Port which is designated only for the car park owners to wash their cars. The expenses incurred in relation to this water tap must be attributed solely to or solely for the benefit of the owners of the Car Port. If the applicant’s interpretation is correct, it can attribute these expenses to say the owners of the Commercial Development instead of the owners of the Car Port because it has absolute discretion to do so and does not need to follow the categorisation in clause 6(d). This is plainly absurd.

26.  The applicant may say that there is an implied duty for the Manager to act rationally or reasonably, and hence it cannot attribute the expenses arbitrarily as suggested above. However, what is rational or reasonable must be construed according to the circumstances of the case (see Lee Yin Hong v Serenade Cove (IO) [2011] 5 HKLRD 660). In the present case, there are clauses 6(a) to (d) defining four categories of expenses. It is just inconceivable that the Manager can ignore these clauses and treat them as just “description” instead of “constrains”.

27.  In this connection, clause 3 in section B of Part VI of the DMC expressly provides that “All acts and decisions of the Manager arrived at in accordance with the provisions of this Deed shall be binding in all respects on all the Owners”, and clause 3 in section A of Part VI also provides that the Manager shall be bound by the Conditions, duties and obligations set out under the DMC.

28.  The case authority on this point is Silver Triumph Holdings Ltd v Guardian Property Management Ltd, HCMP 566/2012, where the Court of Appeal dismissed the building manager’s application for leave to appeal and held that his right of control over the common areas and facilities was subject to the owners’ right to have access to the machine room via the refuse store chamber. In rejecting the building manager’s argument that it had “full and unrestricted authority” under the DMC, the Court held that the construction adopted by the trial judge “struck the right balance between the Owner’s right and the Manager’s right and is plain good sense” (at §16, per Kwan JA).

29.  The Court of Appeal then declared that “it is trite, in a building management context, the rights of parties under a deed of mutual covenant are “not absolute and must as a matter of construction be subject to an element of reasonableness and also must coexist with other provisions in the DMC unless specifically excluded” (Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041 at 1048 para 14(a))”.

30.  In the light of the above distilled principle which applies equally to the present case, it is clear that the applicant’s purported interpretation of the DMC could not possibly be proper or correct because it would only result in an unlimited power vested in the Manager in preparing the budget disregarding other express provisions in the DMC, and there would be no recourse available to the aggrieved owners.

31.  This is against the practical objective intended to be achieved by a DMC in “facilitating the management of the building by reducing conflicts among co-owners on the one hand and preventing abuse by the manager and the majority owner on the other” (see Grande Properties Management Ltd v Sun Wah Ornament Manufactory Ltd (2006) 9 HKCFAR 462), and it also flouts business common sense in having one single party to an agreement vested with an unlimited discretion without any check and balance and which is not subject to any challenge as apparently suggested by the applicant.

32.  Accordingly, on a proper construction of the provisions in the DMC, I am of the view that the 2018/2019 and 2019/2020 budgets were not prepared in accordance with the DMC as they were arbitrarily determined by the applicant in that many categories of expenses were arbitrarily apportioned before they were attributed, instead of being attributed to one of the four categories first, before they were apportioned.

The 2018/2019 budget

33.  Between July 2016 and June 2017, the applicant had suffered a deficit amounting to around $900,000. Under these circumstances, the then Manager, Creative Property prepared the annual budget for the year 2018-2019 allegedly in accordance with the provisions in the DMC.

34.  The 2018/2019 budget contains four parts, being “住宅公用” (RCA), “停車場公用” (CPCA), “商業公用” (CCA) and “屋苑公用” (ECA).

35.  The estimated management expenses of the following items were provided for under the 2018/2019 budget:-

(1) Staff costs and administrative expenses (員工及行政開支), which were estimated based on the Management Agreement with Creative Property for the years 2016 to 2018:

(a) Manager’s remuneration (經理人酬金), management office staff remuneration (管理處職員薪金), wages of technicians (維修技工薪金) as well as the wages of the head of security guard and patrol guards (主管及巡邏) were attributed to “屋苑公用”.

(b) As for the wages of stationed security guards (保安員薪金(崗位)), 57% of the total estimated wages were attributed to “住宅公用”, 14% to “停車場公用” and 29% to “商業公用”, based on the estimated allocation of security guards provided by Creative Property.

(2) Projects and services expenses (工程及服務), including:

(a) Cleaning fees (清潔服務費), which were estimated based on inter alia the cleaning tender document for the years 2017 to 2019. 56.6% of the cleaning fees were attributed to “住宅公用”, 10.6% to “停車場公用” and 32.8% to “商業公用”. The attribution was made with reference to the labour allocation provided by the contractor.

(b) Maintenance and repair of the Estate (大廈維修及保養費), legal and professional fees (法律及專業收費), auditing fees (核數收費), insurance (保險) were attributed to “屋苑公用”.

(3) Utilities (公用事業設施費用), including electricity charges which were attributed to “住宅公用” (43.8%), “停車場公用” (0.5%) and “商業公用” (55.7%). The attribution was made with reference to the four meters installed in the Estate and the ratio which had been adopted over the past decade.

(4) Maintenance expenses (保養開支), amongst which:

(a) Expenses for maintenance of the lifts in the Residential Towers were attributed to “住宅公用” (90.25%), “停車場公用” (9.75%). It was based on the total number of floors which the lifts service in connection with the Car Port (ie the Mezzanine, 1^st, 2^nd and 3^rd Floors of Podium A).

(b) Expenses for maintenance of the central air-conditioning (中央冷氣系統保養) were attributed solely to “商業公用” since the system only supplied air-conditioning to the Commercial Development or any part thereof.

(5) Finally, repair expenses (維修開支), amongst which the expenses for lift repairs (升降機/電梯維修), in the sum of $5,900, were attributed to “住宅公用” (84.7%) and “停車場公用” (15.3%).

36.  Furthermore, for the purpose of apportionment in accordance with clause 6(b) in section D of Part VI of the DMC, the then Management Committee also engaged chartered surveyor to calculate the gross floor area of the Commercial Development and the Commercial Units of the Estate. Eventually, a Mr Au Kin-wah (who is a member of the Royal Institute of Surveyors and a member of the Hong Kong Institute of Surveyors) prepared the gross floor area calculations of the Commercial Development of the Estate dated 27 November 2017.

37.  On 16 January 2018 and 30 January 2018, meetings were held during which the draft annual budget of 2018-2019 were explained to the owners of the Estate. The said draft annual budget was then revised and posted in the lobbies of the Residential Towers (including the lobbies of the Ground, Mezzanine, 1^st, 2^nd and 3^rd Floor of Podium B) for no less than 14 days.

38.  On 25 February 2018, the Extraordinary General Meeting of the Incorporated Owners (特別業主大會) was held during which resolutions were passed for inter alia the increase in management fees payable by each owner of the Estate effective from 1 April 2018. For owners of Car Port shares, there would be an increase of monthly management fees from $185 per share to $390 per share. For owners of Commercial Unit(s), the monthly management fees would be adjusted pursuant to the apportionment in clause 6(b) in section D of Part VI of the DMC.

The 2019/2020 budget

39.  Notwithstanding the increase in management fees payable for the year 2018-2019, the applicant still suffered a deficit of around $2.47 million from 1 April to 31 December 2018. In the circumstances and taking into account the actual expenditure in the year 2018/2019, the then Manager, Easy Living prepared the annual budget for the year 2019-2020 allegedly in accordance with the provisions in the DMC.

40.  Similar to the 2018 Annual Budget, the 2019/2020 budget contains four parts, entitled “住宅”, “車場”, “商場” and “公共”. There is also an additional spreadsheet showing the total estimated management expenses of the Estate.

41.  The estimated management expenses of the following items were provided for under the 2019/2020 budget:-

(1) Staff, Manager’s Remuneration and Expenditures, which were estimated based on the Management Agreement with Easy Living for the years 2018 to 2020:

(a) Manager’s remuneration, staff costs (行政費) were attributed solely to “公共”.

(b) As for direct on site management staff, 56.25% were attributed to “公共”, 25% to “住宅”, 6.25% to “車場”, and 12.5% to “商場”.

(2) Maintenance and repairs, including:

(a) Expenses for air-conditioner maintenance and ventilation system maintenance, which were attributed solely to “商場”.

(b) Expenses for lift maintenance, which were attributed to “住宅” (90.28%) and “車場” (9.72%). The attribution was based on the number of floors the lifts serviced in the Car Port (ie the Mezzanine, 1^st, 2^nd and 3^rd Floors of Podium A).

(3) Public expenditure, amongst which electricity charges were attributed to “住宅” (37.5%), “車場” (0.5%) and “商場” (62%). The attribution was made with reference to the four meters installed in the Estate and the ratio which had been adopted over the past decade.

(4) Other expenditure, including cleaning fees of which 20.25% were attributed to “公共”, 43% to “住宅”, 10.13% to “車場” and 26.58% to “商場”. The estimate and attribution was based on inter alia the cleaning contract for the years 2017 to 2019, taking into account inflation.

42.  Easy Living submitted the 2019/2020 budget in the meeting of the Management Committee of the applicant on 18 April 2019. After discussion, the then Management Committee resolved to increase the monthly management fees payable by each owner of the Estate effective from 1 June 2019.

Is it rational or reasonable for the applicant to apportion the expenses before attribution?

43.  As can be seen from the two budgets mentioned above, the applicant had actually “apportioned” some of the expenses first and then attributed the “apportioned” expenses to the four categories. The applicant contends that there are logical and rational basis for the attribution so made in the two budgets as aforesaid, and the Tribunal should be slow in intervening the Manager’s exercise of its discretion.

44.  However, I agree with the respondents that it is irrational and unreasonable to “apportion” the expenses first before attribution.

45.  First of all, the non-compliance of the two budgets with the DMC can be illustrated in the treatment of the expenses for cleaning services under the 2018/2019 budget. In 2017, the applicant entered into a lump sum contract with a new cleaning contractor, namely Fai Kee Cleaning Company Limited. The monthly cleaning expenses for the whole Estate was set at the level of $158,000. However, the applicant apportioned this lump sum into various parts and then treated that the sum of $16,000 (ie 10.1%) as attributable to the Owners of the Car Port only.

46.  The basis for such apportionment was unclear. According to the information filled in by Fai Kee in its tender form for the cleaning contract, a manpower of 0.6 person would be required for cleaning the Car Port area per day. However, the basis on which this new contractor arrived at the fictional figure of 0.6 person was highly questionable. Furthermore, the sum of $16,000, which was equivalent to the monthly salary of 1 rather than 0.6 cleaning worker, was eventually used in calculating the monthly cleaning expenses for Car Port owners. Such arbitrary apportionment by the cleaning contractor was adopted by the applicant and/or the Manager at all material times without any scrutiny.

47.  The problem with such kind of apportionment was highlighted by the Tribunal in Century Globe Ltd and Others v Incorporated Owners of Fu Loy Garden, LDBM 24/2015 (“Century Globe”), where the car park owners prevailed in their claim against the incorporated owners on the ground that the latter’s fixing of management fees was inconsistent with the DMC.

48.  At paragraph 59, the Tribunal remarked that “the fact that an expenditure item needs be apportioned before a so-called "user-to-pay" amount can be arrived at shows, prima facie, that that item is not for the sole benefit of an owner, or category of owners otherwise that item needs not be apportioned. That is why this Tribunal considers the adoption of the "user-to-pay" label dangerous, and can be totally misleading. Needless to say, the IO is not, under the pretext of "user-to-pay", entitled to apportion every expenditure item at a proportion it deems appropriate for payment by a certain category of owners.”

49.  The Tribunal also indicated that “It does not follow that every expenditure must then be split and be apportioned to each category of owners to satisfy the so-called "owner-to-pay" principle, even though it is incurred generally or charged indiscretely as a lump sum for the entire Estate. To do so requires a quantum leap.”

50.  As such, the Tribunal concluded that “the IO is obviously misguided by the "user-to-pay" label and applies a common sense approach in fixing the management fee. From the analysis above, the concluded amount of management fee for the CPS owners, no matter based on the 98/99 Budget or the 2014 Budget, is obviously premised on a wrong conception that every expense must be split in order to fit in their understanding of "user-to-pay". The amount arrived at must be wrong”.

51.  I agree with the Tribunal’s reasoning in Century Globe and apply with full force to the present case. The apportionment made by the applicant before attribution is in breach of the DMC.

52.  The applicant, however, contends that practically, it is not preferrable to divide the services such as cleaning works of the Estate into four parts to be conducted by four contractors just for the sake of easy attribution of management expenses. As such, it is necessary to apportion the expenses under one single contract (eg cleaning, security guard, maintenance of passenger lifts) for the whole Estate into different components before they are attributed to the four categories.

53.  However, as can be seen from the 2018/2019 and 2019/2020 budgets, such process of apportionment before attribution was so arbitrary, inconsistent, irregular, and irrational that they result in serious unfairness. These could not have been the intention of the drafters of the DMC. Instead, the DMC specifies that they must be attributed to Category 6(a), because they are not solely attributable or solely for the benefit of the Owners in Categories 6(b) to (d).

54.  It should also be noted that in practice, grouping a particular type of service for the Estate to be conducted by one single contractor will have the benefit of avoiding duplication of overhead fixed costs and saving of time in managing interfaces amongst different contractors, thus leading to cheaper prices for carrying out the services, which is beneficial to the Estate as a whole. This practical aspect further justifies the DMC’s requirement for attributing the whole expenses under that one single service contract to Category 6(a), ie the Estate, without prior apportionment.

55.  Further, even if the applicant is entitled to make apportionment prior to attribution of expenses, the two budgets were invalid for the reason that the expenses attributed to a particular group of owners under Category 6(b) to (d) were not “attributable solely to or solely for the benefit of” that group of owners, thus violating the requirements stipulated in the DMC.

56.  This point was directly addressed by the Tribunal in Century Globe, where it was held that the services such as security booths were for the benefit of the whole estate rather than the car park only, namely those booths serve the function of stopping trespassers from gaining access to the estate via the car park by taking vehicles or gaining access to the residential flats, and “the car park security is part and parcel of the security system of the entire Estate”.

57.  The Tribunal also held in Century Globe that the facilities such as the fluorescent tubes and other lighting installed at the car park, the CCTV, which was defined as the Estate's Common Facilities, the cleaning of the car park common area as well as other miscellaneous expenses are for the benefit of the whole estate.

58.  I agree and adopt the above reasoning in the present case. Thus, the following heads of expenses under the two budgets should be attributed to Category 6(a), ie all owners of the Estate, having regard to the particular nature and utility of them:

(1) Expenses for security guard services: The security guards who station at the security booth located on the ground floor of Block A of the Estate would help preventing trespassers from gaining access to the Estate. The guards would also have to watch over the parking of refuse collection trucks and the collection of the refuse bins which are habitually placed at the car port entrance/exit and ramps.

(2) Expenses for the maintenance and repair of the lifts which are defined as part of the “Residential Common Areas” under the DMC and are, inter alia, deemed to be for the benefit of the residential unit owners.

(3) Cleaning service expenses.

(4) Water charges under the 2019/2020 budget.

(5) Electricity charges.

(6) Expenses for pump plumbing and drainage under the 2019/2020 budget, in particular, such expenses concern “sewers, drains watercourses cables pipes” which were defined as “Common Service Facilities” under the DMC. Moreover, there is only one single integrated drainage system which serves the whole Estate, but the applicant arbitrarily apportioned some of the maintenance costs and allocated them to the Car Port category based on the alleged justification that part of the drainage system is located at the Car Port. It is clearly incorrect to say that the facilities are for the benefit of the carport just because of their location. As stated by the Tribunal in Century Globe, the fact that other co-owners use less such facilities does not mean that the facilities are for the sole benefit of the more frequent users. In fact, the expenses for changing pipes was attributed to the Estate Common Areas under the 2018/2019 budget rather than to the car port owners;

(7) The expenses for the repair of materials under the 2019/2020 budget, but there is no breakdown of this item.

59.  Furthermore, the above reasoning is fortified by the provisions concerning the common areas in the DMC in that:-

(1) The car port entrance, the driveway and ramps are included both in the definition of “Car Port Common Areas” and “Estate Common Areas”. There is only one set of carpark entrance/exit, driveway, and ramps within the Estate, and it is covered in the definitions of both the Car Port Common Areas and Estate Common Areas;

(2) There are provisions stating that the Owners of Residential Units shall have full right and liberty to have access to and to use and enjoy the Estate Common Areas in addition to the Residential Common Areas (see clauses 1 and 2 in section A of Part III of the DMC). Similarly, for Owners of Commercial Units, they shall have full right and liberty to have access to and use and enjoy the Commercial Common Areas as well as the Estate Common Areas (see clauses 1 and 2 in section B of Part III of the DMC).

(3) On the other hand, for the Car Port Owners, there are no similar provisions in the DMC which allow them to have access to and to use and enjoy the Residential or Commercial Common Areas.

(4) In fact, clause C of Part III of the DMC stipulates that “the Owner shall have no right to enter upon any part of the Land or the Estate save as expressly herein provided”.

(5) All the above support the conclusion that the DMC has a coherent and consistent scheme concerning the use of the common areas, in that the Owners of Residential Units and Commercial Units can all have access to and use of the Car Port Common Areas because such areas also fall within the definition of Estate Common Areas.

(6) Such access to and use of the Car Port Common Areas allow the Owners of the Residential Units and Commercial Units to go, pass and repass from the car park to other parts of the Estate, including:

(a) to the residential blocks and shops at Block A (through the staircases in Block A);

(b) through the footbridge connecting Block A and B to the Garden, Management Office and Swimming Pool situated at Block B, and also to the residential blocks and shops at Block B.

(7) The access to and use of the Car Port Common Areas by the Owners of the Residential Units and Commercial Units can also serve the purpose of facilitating fire escape, parking of refuse collection trucks, and siting of security kiosks manned with security guard for overwatching security of the whole Estate.

60.  The Carport Common Areas, also being defined as the Estate Common Areas, are deemed for the benefit of the whole Estate rather than just for the Car Port Owners. Thus, the management expenses incurred at the Car Port Common Areas, including cleaning, security guard, drainage and electricity should all be attributed to Category 6(a), ie the owners of the Estate.

61.  As held by the Tribunal in Century Globe, “cleaning or patrolling of car park common areas is no different from cleaning and patrolling of the common areas of the Estate”, and “[even] the staffs are cleaning and patrolling the common parts situated in the car park, such works are not for the sole benefit of those CPS owners. Alternatively, material benefits will be gained by other owners.”

62.  I totally agree with the decision in Century Globe and the reasoning stipulated therein is equally applicable in the present case.

63.  Furthermore, the Manager set the management fees for lift maintenance based on the serving floors of the lifts, and it deems that the Car Port owners would use a particular number of floors.

64.  However, even on the applicant’s own case, it was inconsistent in calculating the number of serving floors for the Car Port under the 2018/2019 Budget. It first alleged that the number of lift serving floors for the Car Port owners and Residential owners was 21 floors and 194 floors respectively. The calculation was thus $432,000 (ie annual lift maintenance fees) x 21/(21 + 194) = $42,195.35, which was near the sum of $42,120 eventually allocated to the Car Port owners.

65.  However, the applicant later corrected that the number of serving floors for the Car Port Owners and Residential Owners should be 18 floors and 208 floors respectively. The calculation of management fees to be allocated to the Car Port Owners was thus $432,000 x 18 / (18 + 208) = $34,407.08. It is his further explanation that the Manager took into account that the Car Port Owners would use the lifts in Block A and Block B, and it allocated a further sum of $7,710 to the Car Port owners as lift maintenance expenses based on the user-to-pay principle.

66.  Even assuming that what the applicant alleged in December 2021 really represented the Manager’s actual calculation method, it is entirely unclear how the Manager could reach the figure of $7,710. No breakdown of calculation has been provided by the applicant from 2018 until now, nor was there any explanation on how the Manager quantified the Car Port owners’ usage of the lifts in both Block A and Block B of the Estate.

67.  It is clear that the said figure of $7,710 is arbitrarily fixed by the Manager without any solid basis. Secondly, it reflects the Manager’s misconception in fixing the management expenses, namely it had to follow the so-called user-to-pay principle to split the expenses rather than attributing the management expenses according to the express requirements set out in the DMC.

68.  In this regard, the Tribunal has reiterated in Century Globe the following: “it has to be emphasized the so-called "user-to-pay" principle is a generalized term capable of very wide meaning. Clause D5(a) happens to fit in such label when certain criteria are satisfied. However, its meaning must be qualified and defined by Clause D5(a), but not the other way round. The IO is not entitled to substitute Clause D5(a) with the label "user-to-pay", and thereafter let the label dictate its meaning without reference to Clause D5(a) again. This is totally wrong. The adoption of a generalized label does not entitle the IO to import common sense meaning into it. Neither is the IO entitled to include in its meaning what it considers to be morally or politically correct”.

69.  Thus, it is wrong for the applicant to adopt the “user-to-pay” principle and ignore the DMC.

70.  There are also manifest anomalies in the allocation of the cleaning, electricity and water charges over the years from 2016 to 2020, including:-

(1) the cleaning expenses jumped sharply from zero expenditure in 2016/2017 to $539,400 in 2017/2018, which then dropped back to zero expenditure in 2018/2019 and then rebounded up to $427,800 in 2019/2020;

(2) from 2016 to 2019, the electricity expenses for the Estate category have remained at zero, despite that there are at least the Garden, the Management Office, and the meeting room for the applicant on the Deck Floor of Block B which inevitably would consume power to operate;

(3) from 2016 to 2018, the water charges have stayed at zero level for the Estate category, but it increased to $7,200 per year in 2019/2020.

71.  There is simply insufficient information disclosed by the applicant both to the owners and even in the present proceedings to explain and justify the way that the expenses were attributed and apportioned in the two budgets.

72.  For instance, when the applicant’s witness Mr Choi was asked why there were expenses attributed to the Estate Common Areas in the 2019/2020 budget but none in the 2018/2019 budget despite that it was the same cleaning contractor - 輝記環保清潔有限公司that was providing the service, he responded that the expenses that should have been attributed to the Estate Common Areas in the 2018/2019 budget had already been spread to the other three categories and therefore by just looking at the budget 2018/2019, apparently there were none of the cleaning expenses so attributed to the ECA.

73.  As a matter of fact, there is no way at all to verify the correctness and truthfulness of what Mr Choi has said by just looking at the documents disclosed by the applicant so far, and it seems that such kind of answers to the apparent anomalies in the budgets only exist in the mind of Mr Choi, but not recorded on any papers, nor known to other members of the applicant, such as another witness of the applicant, Ms Fong.

74.  It is wholly unreasonable and unconceivable that the common parts of the Estate would incur no electricity, water, and cleaning expenses at all. Such unexplained and irregular allocations of water and electricity charges and cleaning expenses strongly suggest that they were arbitrarily fixed.

75.  If such expenses were attributed in accordance with the correct and proper interpretation of the DMC as discussed above, the water charges, electricity, and cleaning expenses were incurred for the benefit of the whole Estate, and therefore they should be solely attributed to the Estate category to be borne by all the owners proportionally according to the undivided shares respectively owned by them rather than being apportioned arbitrarily before attribution.

76.  Apart from the above, there is another salient issue regarding the management expenses for security guard, namely the Manager in the 2019/2020 budget arbitrarily allocated 6.25% of the total monthly expenses for the whole Estate to the Car Port category. No breakdown or explanation has been given by the applicant as to the basis for such allocation, even though the Car Port owners’ undivided shares in the Estate only account for 2.2% of the total shares. This is another example of the Manager’s allocation of the expenses to the Car Port owners being done unreasonably and arbitrarily without justification, and contrary to the express provisions in the DMC.

77.  In view of the above analysis, in addition to the patent contravention of the express terms of the DMC, it is clear to me that the two budgets were prepared in an arbitrary and unreasonable manner. They should therefore be quashed.

78.  Based on the respondents’ calculations, there should be significant difference between the amounts that the respondents were charged and the actual amounts that they were liable to pay. Thus, the de minimis principle does not apply in this case.

The applicant’s claims

79.  As the applicant or the Manager has not prepared the two budgets according to the DMC, and the attribution of some of the expenses to the 1^st respondent’s shops and the 2^nd respondent’s carparks were not reasonable or rational, the 1^st and 2^nd respondents are not liable to pay the applicant the management fees so claimed in this application.

80.  Thus, the applicant’s claims for management fees, interest and collection charge must fail accordingly.

The 2nd respondent’s counterclaim

81.  It follows that the 2^nd respondent is entitled to a declaration that the two budgets for the years 2018/2019 and 2019/2020 are invalid and void, and the 2^nd respondent is not required to pay the management fees based on these two budgets.

82.  The 2^nd respondent is also entitled to an order that the applicant is to revise the budgets for the years 2018/2019 and 2019/2020 in accordance with the DMC to make proper adjustment of the management fees payable by the 2^nd respondent.

83.  However, assuming there are any overpayments, I am of the view that the 2^nd respondent is not entitled to be reimbursed by the applicant for the overpaid amounts as they were paid voluntarily by the 2^nd respondent and have been used for the management expenses. It is not equitable to ask the applicant to repay the 2^nd respondent the amounts that have been used for the management of the Estate. In any event, the amount paid by the 2^nd respondent is only at the level prior to the 2018/2019 budget, it is unlikely that there will be any overpayment. Likewise, the counterclaim for interest is not allowed.

The 1st respondent’s counterclaim

84.  The 1st respondent is also entitled to an order that the applicant do revise the budgets and make proper adjustment of the management fees payable by the 1st respondent.

85.  However, the main counterclaim made by the 1st respondent is for an order that the applicant do carry out all necessary repair and maintenance works to repair the central air-conditioning system serving the Commercial Development at Block B of the Estate in good condition and working order, as well as loss and damages suffered or to be suffered by the 1st respondent to be assessed.

86.  In this regard, it is clear that the relevant principles regarding the nature of obligation under section 18(1) of the Building Management Ordinance and the relevant provision under the DMC have been summarised in Lee Ming Yueh v Broadway-Nassau Investments Ltd and Anor [2012] 5 HKLRD 208 at §§23-25:

“23. In Lo Yuk Chu v Hang Yick Properties Management Ltd [1996] 4 HKC 278, the Court of Appeal considered the following provisions in a Deed of Mutual Covenant

‘1. During the said term…the Manager will manage the Building and the Land in a proper manner and in accordance with the provisions of this Deed and the Manager shall be responsible for and shall have full and unrestricted authority to do all such acts and things as may be necessary or requisite for the proper management of the Building and the Land. Without in any way limiting the generality of the foregoing the Manager shall perform the following duties:

…

(10) To keep all the common sewers, drains, watercourses and pipes free and clear from obstructions.

(12) To keep all Common Facilities in good condition and working order.’

24. The Court of Appeal held that

‘The overall duty imposed on the respondent by the Deed of Mutual Covenant is one of “proper” management. Such management entails doing all that is reasonably required of a manager in the circumstances. Things like keeping drains clear are specific aspects of a building manager’s overall duty. But the mere fact that such a thing is listed without being qualified by expressions such as “take reasonable steps to” does not turn a manager into an insurer against the consequences of a drain becoming obstructed through no failure on its part to act reasonably as a manager should.’ (at 282 D to E)

25. In Lau Chun Wing Rod v. The Incorporated Owners of Po On Building CACV 20/2007, the Court of Appeal considered the provisions of section 18(1) of the BMO. It held that :

‘12. This sub-section does not provide an insurance to the extent that if some part of the building becomes in disrepair the Incorporated Owners automatically and necessarily become liable. Nevertheless, liability may arise if there is fault. It also arises if, having been made aware of a defect which requires remedy, the Incorporated Owners fail to take appropriate steps. On the judge’s finding the defendant did so fail to take appropriate steps. Likewise it would seem that the case in negligence and nuisance is, on the facts, clear.

13. In view of the way in which the appeal was presented, it was pointed out that the judge had not held that the defendant was liable simply because there was some defect that became apparent in the premises. He held the defendant was liable because it failed to act effectively when it should have taken action. What is required to be done in carrying out the duty will differ according to the circumstances but in this case the judge clearly held that the defendant failed to take proper and necessary steps at a time when it had been alerted that it was necessary to do so and that it continued to fail in that regard for a very lengthy period.’” (emphasis added)

87.  In gist, neither the relevant provisions in the DMC and/or section 18 of the Building Management Ordinance gives rise to any strict liability on the part of the applicant. It is wrong for the 1^st respondent to suggest that the DMC gives rise to a strict liability or responsibility. What this Tribunal needs to examine is whether the applicant has failed to take appropriate steps having regard to the circumstances.

88.  From the evidence before me, it is clear that the applicant has at all material times discharged its duty and taken appropriate steps for the maintenance of the air-conditioning of the Commercial Development. It is not disputed that various resolutions have been passed for the maintenance of the air-conditioning system between 2018 and 2021. Receipts of the maintenance services had also been produced which were not challenged. Apart from arranging for maintenance and repairs, the applicant had also taken other measures such as purchasing portable air cooling units in 2019.

89.  It is the applicant’s evidence that (i) the applicant would handle the complaints from owner; (ii) the applicant had arranged for maintenance and repairs after receiving the complaints; (iii) the condition of the air-conditioning system was improved after each repair, and the applicant would ensure such improvement before paying the contractors; (iv) over the years, the condition of the air-conditioning system had been improving.

90.  On the other hand, the 1^st respondent did not produce any documentary evidence of complaints between late 2019 and 2021. The last complaint from “Kelvin百佳” was made in August 2019, and the last letter sent from the 1^st respondent’s representatives to the applicant on this issue was in March 2019. Should the problem persist to the same extent, no doubt “Kelvin百佳” would complain to the 1^st respondent repeatedly, and the 1^st respondent would have written to the applicant in turn. There was no such correspondence. It is consistent with the applicant’s evidence that the air-conditioning systems had been improved gradually.

91.  On the issue regarding the doors of air-conditioning room, it is salient to note that (i) the 1^st respondent’s witness, Mr Leung, admitted he had no expertise in engineering and/or air-conditioning repairs, and thus the assertion that the air-conditioning issues were caused by the doors being left open was no more than a mere speculation; and (ii) the applicant’s witness, Mr Choi, explained the necessity of leaving the doors open before other repair works to the air-conditioning were carried out to reduce noises generated by the air-conditioner.

92.  In the 1^st respondent’s closing submissions, it was suggested that an appropriate step was to completely replace the air-conditioning system in the Commercial Development of Block B. However, I agree that it is not an appropriate step to be taken in the circumstances:-

(1) As Mr Choi explained, replacement of the air-conditioning system would cost several millions. The applicant, being a responsible manager, had a duty to manage and use its expenses with reference to its income (“量入為出”).

(2) At the material times (late 2018 to 2019), there were outstanding management fees from the 1^st respondent. Given that the gross floor area of the commercial units owned by the 1^st respondent amounted to one-fourth of the total gross floor area, the applicant was unable to make sure that sufficient funds would be raised (and paid by the 1^st respondent) for replacement of the air-conditioning units.

(3) As a matter of fact, it is not disputed that the applicant had been experiencing deficits in the financial years of 2016/2017, 2017/2018 and 2018/2019.

(4) In the circumstances, replacement of the air-conditioning system was not an appropriate step to be taken.

93.  In any event, replacing the central air-conditioning system is completely different from repairing and maintaining it. There is no duty under the DMC or the Building Management Ordinance for the applicant to replace the system. It is also not the term of the order sought by the 1^st respondent. Thus, it is not something that the 1^st respondent is entitled to seek for in this application.

94.  In the circumstances, I find that the applicant has duly discharged its duty under the DMC and section 18(1) of the Building Management Ordinance.

95.  Moreover, I agree with the applicant that the 1^st respondent had failed to prove sufficiently the causation of the alleged breach, if any, and the loss.

96.  First of all, there is no evidence showing the rents paid by PARKnSHOP for the period between 2018 and 2021 when that was the period when PARKnSHOP was supposedly most seriously affected by the air-conditioning issue (if at all). If, during this period, PARKnSHOP did not pay the 1^st respondent lower rents, it would suggest that that the alleged air-conditioning issue had no causation whatsoever to the amount of rent payable.

97.  There was also no evidence showing the course of negotiation between the 1^st respondent and PARKnSHOP. The unequivocal fact is that PARKnSHOP had never terminated its tenancy with the 1^st respondent. There was no other complaint from PARKnSHOP after 2019 and it is uncertain whether the air-condition was still a live issue in the course of negotiation for the 2021 tenancy. Mr Leung did not give evidence on the details of the negotiation, save his assertion that PARKnSHOP had threatened to move to Block A. While Mr Leung admitted that the commercial units owned by the 1^st respondent had been rented to various lessees including JHC, it is intriguing that no other tenants of the 1^st respondent similarly demanded for a cut of the rent during the course of 2018 and 2021. It shows that the alleged threat of PARKnSHOP to move to another place may not necessarily or solely be due to the air-conditioning issue.

98.  Thus, I am not satisfied that the 1^st respondent has established its counterclaim in respect of the air-conditioning issue against the applicant.

Conclusion

99.  In the circumstances, I make the following orders:-

(1) The applicant’s claims against the 1^st and 2^nd respondents be dismissed;

(2) An order that the applicant do revise the budgets for the years 2018/2019 and 2019/2020 to make proper adjustments of the management fees payable by the 1^st and 2^nd respondents;

(3) The 1^st respondent’s counterclaim in respect of the central air-conditioning system including the counterclaim for loss and damages and interest be dismissed;

(4) The 2^nd respondent’s counterclaim inspect of overpayment of management fees and interest be dismissed;

(5) Costs order nisi: The applicant do pay the 1^st respondent costs of the application with certificate for counsel to be taxed on District Court Scale if not agreed;

(6) Costs order nisi: The 1^st respondent do pay the applicant 80% of the costs of its counterclaim with certificate for counsel to be taxed on District Court Scale if not agreed;

(7) Costs order nisi: The applicant do pay the 2^nd respondent costs of the application and 50% of the costs of its counterclaim with certificate for counsel to be taxed on District Court Scale if not agreed; and

(8) The aforesaid costs order nisi shall become absolute if there is no application for costs within the next 14 days.