Grace International Ltd. v. The Incorporated Owners of Fontana Gardens and Other

1995, No.A13338

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The Plaintiff is a limited company which owns three units in Fontana Gardens, Causeway Bay, namely Unit G/24A (Ground Floor, No.24 Block A), Unit 1/3B (1st Floor, No.3 Block B) and Unit 8/11D (8th Floor, No.11 Block D) which are occupied by Mr K.C. Chow. The 1st Defendant was incorporated on 7 December 1995. The 2nd Defendant is an association of owners and occupiers of Fontana Gardens. Since its formation in 1970 and until the incorporation of the 1st Defendant in December 1995, the 2nd Defendant through its Executive Committee ("Exco") has been the de facto manager of Fontana Gardens. The 3rd Defendant has been and continues to be the managing agent appointed as such by the 2nd Defendant and subsequently the 1st Defendant and runs the estate or management office which deals with day-to-day matters arising and including the receipt of complaints from the owners and occupiers of the units in the estate. References hereafter to the Defendants mean those responsible for managing Fontana Gardens from time to time, namely the 1st Defendant or the 2nd Defendant (depending on whether it was before or after 7 December 1995) and the 3rd Defendant.

2. Until the incorporation of the 1st Defendant, Exco has been discharging and recognised as discharging the functions of the 11-member Committee provided for in the relevant Deeds of Mutual Covenants ("the DMCs"). Mr Chow was the secretary of Exco for about 10 years until 1994. In practice, however, it appears that in addition to the 11 members from the various blocks, there were an additional 3 members who were co-opted by the other members. Nothing turns on this as it is common ground that the 2nd Defendant had throughout that time been accepted by all the owners as their representative in all matters concerning the common parts and the DMCs. For present purposes, "Exco" and "the Committee" are synonymous.

3. In this action, the Plaintiff seeks to restrain the Defendants from cutting off the water supply to the units that it owns. It is the Defendants' case that the Plaintiff is in arrears with payment of management charges as well as various sums that have been levied upon the owners of the units in the blocks in question. They claimed that the House Rules permit the Defendants to cut off an owner's water supply for non-payment of such charges.

4. On 22 December 1995, on an ex parte application by the Plaintiff, I granted an injunction restraining the Defendants from interfering with the water supply to the units owned by the Plaintiff. Thereafter the injunction was continued by consent and a speedy trial was ordered. On 4 January 1996 the Plaintiff offered to pay management charges and other sums that have been withheld and to deposit the amounts into an escrow account upon the Defendants' undertaking to effect certain repairs. This offer was repeated on 10 January 1996.

5. As will become apparent, the problems that gave rise to the present proceedings may in part be attributable to the fact that the DMCs that apply to the various buildings forming Fontana Gardens Estate are not uniform, with provisions that are ill-suited to a development that is now over 25 years old. The result is the absence of a coherent and clear framework for managing the estate and the individual buildings.

The Injunction

(1) The facts

6. The Plaintiff's unit in Block A (G/24A) has its own separate water meter whereas its units in Blocks B and D (1/3B and 8/11D) share a communal service and are charged by the 3rd Defendant for its pro rata share of water consumed by the relevant block.

7. There is, in evidence, a quotation from Technique Engineering Company in respect of engineering work for the stoppage of water supply to all three units. The work to be undertaken was to disconnect all water supply to the Block A unit and to disconnect all fresh water and flush water supply to the units in Blocks B and D at a discounted price of $14,600. But the invoice/receipt from Technique Engineering Company dated 30 December 1995 related only to engineering work for reconnexion of water supply to the units in Block A and Block B and not Block D. There is no doubt the supply of water to the Plaintiff's units in Blocks A and B was interrupted for several days over the Christmas period notwithstanding the injunction granted. What is less clear from the evidence is whether the water supply to Block D was also affected. The evidence of Mr Tam, the manager of the 3rd Defendant, is that Technique was paid approximately $14,000 for disconnecting the water supply to all three units. If so, no charge appears to have been made for reconnecting the water supply to Block D unless Technique was paid for work that it did not actually carry out (i.e. disconnecting the water supply to Block D). Quite why there should be any confusion on this straightforward question is not apparent. It must inevitably reflect on the administrative efficiency of the Defendants.

(2) The relevant provisions

8. The Third Schedule to the Deed of Mutual Covenant ("the DMC") of Block A contains House Rules. Para.(j) provides as follows:

"(j) If any of the owners shall fail to make any such contributions or further contributions as aforesaid which he is liable to make on or before the due date specified in the written notification from the Manager calling upon him so to do, a surcharge of 5% will be imposed and if he still falls to make such contributions plus the surcharge within seven days after the due date stated above the Manager shall be at liberty to disconnect all water supply to the defaulting owner's flat until such contributions and/or further contributions plus the surcharge shall have been made by such defaulting party all such contributions plus the surcharge shall without prejudice to any other remedy exercisable hereunder be recoverable by the Manager or other person appointed by the owners to manage operate and service the said building or by any one or more of the owner suing on behalf of himself and his co-owners by civil action and the defaulting owner shall not be entitled to dispute the right of any such person aforesaid to sue and recover the unpaid contributions plus the surcharge."

9. The DMCs for Blocks B and D in their original form do not contain a provision similar to that for Block A relating to the disconnexion of all water supply. For Block B, under clause 11 of both the DMC and Sub-DMC (Memorial Nos.552924 and 574997), non-payment by an owner of his share of costs and expenses for re-instatement or repairs after due demand has the effect of creating of charge upon the share of the defaulting party of and in the Land and his Apartment. Under House Rule 20 (contained in the First Schedule to the DMC and the Sub-DMC) the owners are obligated to make provisional payments of sundry out of-pocket expenses and disbursements and actual expenses in specified proportions which are payable to the Agent on demand in writing and

"in the event of non-payment... for 7 days after the date of demand it shall be lawful for the Agent to recover the same as a debt by action or any other proceedings against any parties hereto in default."

Block D has a House Rule which, for practical purposes, is identical. It also has a provision that replicates Clause 11 of the DMC of Block B except that there are additional provisions providing for the sale of the Land and Apartment if the owner continues to be in default one month after the demand.

10. A certificate of incorporation was issued pursuant to s.8(1) of Cap.344 to the 1st Defendant on 7 December 1995. Its management committee held its first meeting on 15 December 1995 when a resolution was passed replacing the House Rules, inter alia, of Blocks B and D by, inter alia, those of Block A. It is the Defendants' case that as a result, the 1st Defendant had power to disconnect all water supply where an owner in any of Blocks A, B and D is in default with management charges and contributions.

(3) The power (if any) to disconnect the water supply

11. There is a four-pronged challenge by the Plaintiff to the 1st Defendant's power to disconnect the water supply. This is considered below:

(a) Waterworks Ordinance

12. It is the Plaintiff's case that the effect of the Waterworks Ordinance Cap.102 is that without the written permission of the Water Authority, no person is empowered to connect or disconnect or interfere with the water supply of a consumer. If the Plaintiff's submission is correct, it must follow that it would be entitled to the injunction sought because any provision in a DMC purporting to confer a power on the management company to cut off the water supply would be contrary to Cap.102.

13. The supply of water is of course one of the essential services. The Waterworks Ordinance regulates the supply of water : it is a single comprehensive framework dealing with the supply of water provide from "waterworks" which is defined as meaning "any property occupied, used or maintained by the Water Authority for the purposes of [Cap.102] and any gathering ground." "Inside service" is defined as meaning "pipes and fittings in premises, and any pipes and fittings between the premises and connexion to the main.... which are used or are intended to be used."

14. The statutory duties of the Water Authority are to be found in section 4 and includes, inter alia, the duty to supply water from the waterworks in accordance with the Ordinance . Under section 7, a consumer has to be approved and he is also required to give an undertaking for the custody and maintenance of the inside service. Sections 8 to 11 deal with the Water Authority's powers to refuse a connexion or reconnexion, to restrict, suspend and disconnect inside services. Section 10 deals specifically with disconnexion. It is to be noted that non-payment of management fees is not one of the eight situations in which disconnexion by the Water Authority is permissible. Section 12 contains the Water Authority's power to enter premises to disconnect the inside service. The power is exercisable in strictly circumscribed conditions. Section 14 regulates the construction, installation, alteration, or removal of an inside service which cannot be carried out without the prior written permission of the Water Authority although it has power to waive the requirement of permission for alterations to an inside service which are of a minor nature.

15. Pursuant to the powers conferred on it by section 37(b)(c) and (i), the Water Authority has made regulations to regulate the alteration, connexion or reconnexion or the disconnexion of an inside service. Where an alteration requires permission, the regulations provide for the application of such permission in prescribed form. Even the consumer who wishes to have his water supply disconnected has to apply to the Water Authority (Regulation 17).

16. Leading Counsel for the Plaintiff submitted that any disconnection or recollection of supply must involve an alteration of the inside service. There is no evidence that the Water Authority granted any permission under s.14 and in any event, there is no power for the Water Authority to authorise a disconnexion of services for non-payment of management fees. Nor, it was submitted, would the exemption in s.14(2) assist the Defendants. Given the costs and time involved for the connexion and disconnexion of the supply to the units in question, the work could not conceivably be described as "minor".

17. Having regard to the comprehensiveness of the framework of the Ordinance and the statutory duties imposed on the Water Authority, the Plaintiff's submission that there is no room for any outside power or party to connect or disconnect or interfere with the water supply or inside service without the written permission of the Water Authority has considerable force. As a matter of statutory interpretation, a provision such as section 10 which authorises the Water Authority to disconnect an inside service in strictly circumscribed situations would serve no purpose if a third party has untrammelled power to interfere with the water supply and disconnect a service.

18. Section 14 effectively prohibits any person, unless authorised in writing by the Water Authority, from "altering" any inside service. Leading Counsel for the Defendants submitted that since section 14 does not expressly refer to connexion and disconnexion, it should not be construed as extending to connexion and disconnexion. I do not see the logic of so limiting the ambit of the section if in effecting any connexion or disconnexion, an "alteration" is involved. Moreover, section 14 has to be read in conjunction with section 10 and the Ordinance as a whole. Prima facie, the disconnexion and reconnexion of a water supply must entail an "alteration" as envisaged and prohibited by section 14, in any event, in the absence of evidence that such disconnexion or reconnexion could be effected without involving an alteration to the inside service.

19. For these reasons, I hold that House Rule (j) of the Third Schedule to the DMC for Block A of Fontana Gardens cannot authorise the managing agents to disconnect all water supply to the flat of any owner who is in arrears with his contributions towards the common expenses. Having reached that conclusion, it follows that the Plaintiff is entitled to an injunction to restrain the Defendants from disconnecting the water supply to the units owned by the Plaintiff. Although it is not strictly necessary to address the other submissions of the Plaintiff, I will do so in case I am wrong on the interpretation of Cap.102.

(b) Incorporation of the 1st Defendant

20. Unless the 1st Defendant was duly incorporated, it would not have had authority to exercise the power in House Rule (j) (assuming, contrary to my view, the rule to be valid). Section 13 of the Building Management Ordinance Cap.344 provides that :

"A certificate of registration issued under s.8(1).... of a corporation shall be conclusive evidence that such corporation is incorporated under Cap.344."

21. There is a certificate of registration issued in respect of the 1st Defendant pursuant to s.8(1) of Cap.344 dated 7 December 1995. It was submitted on behalf of the Defendants that the certificate is conclusive and that it is not possible to go behind the certificate to challenge the fact of incorporation. The challenge to the due incorporation of the 1st Defendant arises in the following way.

22. Leading Counsel for the Plaintiff submitted that the 1st Defendant cannot legitimately represent all the owners of Fontana Gardens. She submitted that its alleged incorporation under Cap.344 was not permissible under the terms of that Ordinance because only owners having a common ownership in land can form an owners incorporated contemplated by Cap.344. That Ordinance does not permit nor authorise the incorporation of owners of different blocks unless there is common ownership of the blocks in question and where there is not more than a single DMC governing those blocks. This was not the case with Fontana Gardens : whilst there was common ownership amongst owners of each individual block, there was no common ownership between the owners of the different blocks. Further there were no less than six different DMCs governing the different blocks.

23. Whilst I agree with Miss Eu that the absence of common ownership and the existence of different DMCs appear to be insurmountable obstacles for incorporation under Cap.344, whether or not the Land Registrar exceeded his powers under Cap.344 by issuing a certificate of incorporation for the 1st Defendant is not a matter that can properly be determined in these proceedings. The conclusiveness of a certificate of incorporation, that is to say, whether there are situations or circumstances in which its validity could be questioned or challenged by way of judicial review is a controversial issue. Arguably, on the basis that it only deals with ministerial acts and as such cannot validate any ultra vires exercise of the powers contained in Cap.344, s.13 would not necessarily preclude proceedings for judicial review. But the question whether on the facts of this case it was within the power of the Land Registrar to incorporate the 1st Defendant is not the subject-matter of this action. The present action is not the proper forum for determining that issue, not least because the Land Registrar whose decision is under attack is not a party to the proceedings.

24. In view of the conclusion I have reached under (a) above, the fact that I decline to go into the due incorporation point would not, of course, affect the Plaintiff's right to an injunction.

(c) The resolution of 15 December 1995

25. The Plaintiff's third area of attack is whether the management committee of the 1st Defendant was constituted in accordance with section 3(2) of Cap.344. If, as is the Plaintiff's submission, it was not, it would render the resolution of 15 December 1995 invalid.

26. In order to comply with section 3(2), the management committee has to be appointed "by a resolution of the owners of not less than 50% of the shares". Under section 39(b), an owner's share shall be determined "in the proportion which his undivided share in the building bears to the total number of shares into which the building is divided." On the evidence of Mr Mao, the Chairman of the 1st Defendant and of Mr Tam, the manager of the 3rd Defendant, the management committee was elected by voting by 50% of all owners in Fontana Gardens and not 50% of the owners of the individual blocks forming the estate.

27. Given the absence of common ownership of all the blocks, the only common ownership being of undivided shares in each of the individual blocks, I accept the submission that the constitution of the management committee of the 1st Defendant was irregular in that the requirements of section 3(2) of Cap.344 were not complied with. That being the case, it follows that the resolution of 15 December 1995 purporting to alter the House Rules, inter alia, of Blocks B and D, was invalid.

28. Nor could the amendment to the House Rules be saved as having been effected pursuant to the original provisions of the DMCs. Although under the original House Rules of Blocks B and D, the Rules could be amended upon due notice and the requisite percentage of votes, those requirements have not been met. So, as regards Blocks B and D, the challenge to the Defendants' alleged power to disconnect the water supply also succeeds because the resolution of 15 December 1995 was invalid.

(d) Notice under House Rule (j)

29. The Plaintiff also submitted that even assuming that the power in House Rule (j) is valid, its exercise was bad in that no proper notice as required by House Rule (j) had been given to the Plaintiff. The only notices given are the letters dated 16 December 1995 from Messrs Kwok & Ng, the solicitors for the Defendants. Given the draconian nature of the power, I agree that the provisions of House Rule (j) must be strictly adhered to if the power is to be activated. They were not in the present case. No surcharge had been mentioned in any of the payment advices requesting payment of management fees etc. from the Plaintiff. The first reference to a surcharge was in Kwok & Ng's letters. I find that no notice conforming to House Rule (j) had been given. It must follow that the power to disconnect (assuming that contrary to my holding it were valid) had not become exercisable on the date the Defendants purported to exercise the power.

(3) Non-disclosure

30. The Defendants submitted that the injunction ought to be discharged because the Plaintiff failed to exhibit the DMC for Block A or otherwise bring to the Court's attention House Rule (j) at the time of the ex parte application.

31. I accept the Plaintiff's explanation for its mistake which is to be found in the 2nd affirmation of Miss Shek filed on 27 December 1995. Given the urgency of the application, the nature and seriousness of the threat, the similarity of the DMCs for Blocks B and D, and the fact that Block A is part of the same development, the mistake was understandable. I do not think that in the circumstances, it was incumbent on the Plaintiff to have obtained a copy from the Land Registry before making the application. The Defendants were asked by letter dated 20 December 1995 to identify the provision empowering them to cut off the water supply as the Plaintiff was unable to find such a provision but they did not reply. I also note that the application, though ex parte, was made with due notice.

32. Accordingly, the Defendants have not demonstrated that, in this case, there was such non-disclosure as would warrant the discharge of the injunction.

The Defendants' Counterclaim

33. The Defendants counterclaim for unpaid contributions and management fees/charges from the Plaintiff. I will deal first with contributions in respect of Blocks A and B before dealing with the question of unpaid management fees for the Plaintiff's units in Blocks A, B and D.

Contributions

(1) Block A

34. The Defendants' claim is as follows :

Pipe and lift renovation contribution $45,000.00

Surcharge $2,250.00

35. The relevant DMC is dated 8 November 1971, Memorial No.849880. The material provisions, for present purposes, are as follows :

Clause 6 provided for the cost of keeping in good and tenantable repair the common parts to be borne by the owners in proportion to their respective shares in Block A for the time being vested in them except that the owner for the time being of the developer's share would be exempted.

Clause 14 dealt with meetings of owners "to discuss and decide matters concerning the said building". In summary, a meeting may be convened by the owners of half of the flats, the necessary quorum being the owners (present in person or by proxy) who in the aggregate have vested in them not less than half of the flats. Sub-clause (k) provided that any resolution on any matter concerning Block A passed at a duly convened meeting by a majority of the owners present in person or by proxy in voting "shall be binding on all owners" provided, inter alia, that the notice convening the meeting specified the intention to propose a resolution concerning such matter and that no resolution should be valid if it was contrary to the provisions of the DMC.

Clause 15 provided for the representation of the owners by two block representatives to serve on the Committee consisting of 11 members to take charge of the management and operation or the supervision of the management and operation of Fontana Garden Estates. It provided for the delegation of the powers of the owners to these persons and the Committee was to have power to decide monthly maintenance expenses payable as mentioned in the House Rules in the Third Schedule to the DMC. It further provided for the parties to abide by, perform and observe all resolutions passed by the Committee on all matters concerning the management and operation or supervision of management and operation of Fontana Garden Estates.

Clause 16 dealt with the situation where any of the owners failed to contribute his due proportion of expenses to be incurred in accordance with resolutions validly passed under Clauses 14 or 15. Failure to pay within 14 days would enable the owner or the manager serving the notice to proceed to carry out the work resolved to be done and until such repayment by the defaulting owner, the amount unpaid was to be a charge upon the share and interest of the defaulting owner of and in the said premises in the building.

36. The Third Schedule to the DMC contained the House Rules. The effect of House Rules (d) and (i) was that the owner of a ground floor flat did not have to contribute towards the expenses in respect of the lifts including the cost of operating, maintaining and repairing them and charges for electricity used for operating them and for lighting corridors, lifts, lobby, staircases and other common parts in the building. The House Rules also provided that the owner of each flat should pay to the manager on demand 1/282 part or share of expenses relating to the upkeep of the repair and condition of roads, gardens, lawns, open spaces and carparks within Fontana Garden Estates. They further provided that each owner should in addition pay a sum called the management fee to the manager as remuneration of the manager in the management of the building.

37. It is in that context that the validity of the demand for pipe and lift renovation contribution of $45,000 is to be considered.

Pipe and lift renovation contribution

38. The Defendants' demand is based on the following :

(i) At a special meeting of the owners of Block A held on 24 March 1994, it was resolved that "the maximum contribution for lobby renovation was HK$45,000 for each unit." At that meeting, the owners also agreed that roof waterproofing and water pipes maintenance work be done and that the contribution of each unit in Block A was to be for (a) the full cost for the replacement of all water pipes; (b) half the cost for removing the water pipes together with the water meter; and (c) half the cost for roof waterproofing work. The calculation for (a), (b) and (c) was based on the assumption that the total cost did not exceed $800,000. Cost in excess of that figure would be shared by the four units on the upper floor. It is unclear from the minutes whether the $45,000 was inclusive of each unit's contribution towards the roof and waterpipes maintenance work.

(ii) A meeting of Block A Owners' Sub-Committee was held on 28 February 1995. It was recorded in those minutes that

"6.1 It was resolved at 1994 Annual Owners meeting to call for contribution from each owner of HK$45,000 for Block A lobby renovation purpose. Formal notice of payment will be issued to each owner shortly and payments are to be collected and deposited on behalf of [the 2nd Defendant]."

(iii) On 27 March 1995, a notice entitled "Contribution for the renovation work of Block A" was sent to all owners of Block A. It referred to the meeting held on 28 February 1995 where

"It was resolved as follows :

i) Carry out the lobby decoration work.

ii) To repair the public pipe.

Meantime, each unit is required to make the contribution $45,000 on or before 30 April 1995 so as to facilitate the work."

This notice was issued by the Renovation Sub-Committee of Block A.

(iv) On 18 April 1995, Block A Maintenance Group issued a circular letter notifying the owners of Block A inter alia that "In order to facilitate the maintenance of the lobby after the decoration, we decided to instruct Schindler to lower the lift for one floor." It also referred to the decoration fee for the lobby as ranging from $2.1 million to $2.3 million, that the renewal of the water pipe at the roof and the refilling of the leakage at the roof floor costs about $700,000 - $800,000, and that the renewal of the drainage at the amah's toilets costs about $800,000 to HK$1 million.

39. The first question is whether there was a resolution that was binding on all the owners of Block A. The meeting held on 24 March 1994 was an owners' meeting and as such would be governed by Clause 14 of the DMC. Whilst the quorum provision in para.(c) appears to have been satisfied, the resolution is not binding on all the owners unless the provisions set out in sub-clause (k) of Clause 14 were satisfied.

40. There was no evidence as to whether the requirements of sub-clause (k) were complied with. In particular, unless the notice of the meeting to the owners specified the intention to propose a resolution for lobby renovation, the resolution would not be binding on all the owners. There is the further point that it is arguable that such a resolution is invalid "as being contrary to the provisions of [the DMC]". There is no reference whatsoever in the entire DMC to the improvement or upgrading of the building. To pass a resolution that would effectively require owners to contribute to effect improvements would fundamentally alter their obligations under the DMC. (See the Bayview case discussed below.) This would be contrary to the provisions of the DMC. Moreover, even assuming the resolution to be binding on all the owners, $45,000 was the maximum contribution that could be required. This is not necessarily the same as saying that each owner must contribute $45,000 or that that amount has to be levied. Rather, the amount to be levied must depend on the cost of the work and until tenders have been invited and decided on, the precise amount would not be known. The resolution could reasonably be interpreted as authorising such an amount to be levied when ascertained provided it does not exceed $45,000. For these reasons, the Plaintiff's obligation to pay the $45,000 has not been made out.

41. As to the meeting held on 28 February 1995 of Block A Owners' Sub-Committee, it is unclear if this is the same as Renovation Sub-Committee of the 2nd Defendant for Block A. In any event, it purported to implement the owners' resolution passed on 24 March 1994 by issuing formal notices of payment to each of the owners. If, however, there was no valid resolution under Clause 14 binding on all the owners of Block A to contribute $45,000 each towards lobby renovation, the "implementation" of the resolution could not validate what was invalid in the first place. For the same reason, the notice sent by the Renovation Sub-Committee of Block A was no more effective.

42. As regards the circular letter dated 18 April 1995 from the Block A Maintenance Group, it is to be noted that by April 1995, it transpired that the lobby renovation works were to cost less than originally envisaged, and according to Mr Mao, the Chairman of the 1st Defendant and prior to its incorporation, the Chairman of Exco, this was the result of his renegotiating the contract with the contractors. The Sub-Committee therefore decided to apply the "surplus" of the renovation funds to lower the service lift by one floor.

43. The Plaintiff submitted that as ground floor owner, it is not liable for any contribution attributable to the lift. Under the Deed of Mutual Covenant, the ground floor owners are exempt from contributing towards the cost of maintaining and repairing the lifts for obvious reasons. It is the Plaintiff's case that the Sub-Committee has no power to extend the lift to the basement and to require the ground floor owners to contribute to the cost of the work. For this proposition, it relied on The Incorporated Owners of Bayview Mansion SCTPO No. 32, 1994. In that case, the DMC provided for the "cleansing" of the Building and "keeping in good and tenantable repair" the common parts; the owners had to contribute "towards the cost of servicing maintaining and repairing the lifts" and various common parts including staircases and landings and amenities of the building. The works actually carried out were partly of a cosmetic nature to enhance the appearance of the building, and partly to improve the amenities, making the building look "a lot more attractive and classy". J. Chan J. found that all owners would benefit from such improvements, and the value of their flats would probably benefit as well. Nevertheless he held that :

"[t]hese, however, could not provide the legal foundation for the respondents' conduct. There is no power or authority in the Deed of Covenant for the respondents to improve the amenities or up-grade the condition of the building. There is only power to maintain and keep the existing amenities and condition of the building in a good and tenantable condition. Any attempt to improve the amenities or to up-grade the building must be blessed with the consent of all owners. No unwilling owner can be forced to contribute to any such improvement or up-grading against his wishes. The resolution purporting to authorise the renovation works was without lawful foundation and the acts of the respondents in carrying out the said works void of any legal authority."

44. Whilst it would enhance the amenities of Block A, the extension of the lift to the basement can by no stretch of the imagination be regarded as "maintenance of the lobby" despite the efforts of Mr Mao to so characterize it. Having regard to the provisions of Block A's DMC which in substance are similar to those of Bayview, I agree with the learned Judge's decision in Bayview that where there is no power in the DMC to effect improvements or upgrading. This can only be done with the consent of all the owners.

45. An alternative analysis is that the 1994 meeting was a sub-sub-delegation by Exco. Mr Mao's evidence is that for major repairs and work to the buildings themselves, this was entrusted to Renovation Sub-Committees for each block which would report back to Exco. Such an analysis has its difficulties because the DMC plainly contemplated the delegation of powers to Exco rather than by Exco back to the owners. That apart, the powers of Exco are not unlimited. These appear, not in the DMC of Block A, but in the DMCs for Blocks B and D : see, for example, Clause 17(j) of the DMC for Block B in the section below. It is not binding "concerning any matters other than those mentioned in the DMC". As noted above, any resolution by Exco for the upgrading and renovation of the common parts, and the extension of the lift to the basement would not be binding on the owners of Block A.

46. In conclusion, there was no valid resolution that obligated the Plaintiff to contribute $45,000 for pipe and lobby renovation except insofar as any part of the $45,000 was expended on repairs such as the need to replace the pipes. This is because the Plaintiff is liable to bear its share of the cost of repairs under Clause 6 of the DMC. Whilst the Plaintiff is in principle liable to pay its share of those costs, the obligation does not arise until it is given notice of its share of the cost of those repairs. No question of any surcharge arises.

(2) Block B

47. The Defendants' claim is as follows :

Pipe and lift renovation contribution $48,000.00

Surcharge $2,400.00

48. The Plaintiff's unit in Block B is subject to a DMC dated 1 October 1966, Memorial No.552924 as well as a Supplemental Deed of Covenant dated 1 February 1967, Memorial No.574997. Save as hereinafter appears, the clauses in the DMC and the Supplemental Deed are for practical purposes identical. The material provisions, for present purposes, are as follows :

Clause 3(c) provided that the owner of every apartment except Fontana Estates Limited should pay such part of the costs as included and indicated in Rule 20 of the House Rules contained in the First Schedule of keeping in good and tenantable repair the common parts and "in operating, repairing, replacing, maintaining and servicing the elevators."

Clause 11 provided that if repairs should become necessary and any party who had failed to fulfil his share of repairs or shall fail to pay his share of the costs and expenses of the repairs within 2 months from the date of any notice from any other owner requiring the same to be done or paid, then the party serving the notice may at his own absolute discretion proceed to carry out the repairs and the defaulting party shall on demand pay to the other party his share of the costs incurred in such repairs and until repayment the costs and expenses as remained unpaid shall be a charge upon the share of the default party and in the land and in his apartment.

Clause 14 provided for the employment of an agent by the parties for the purpose of more efficiently maintaining buildings and their curtilage.

Clause 15 provided for the appointment of an agent by a Committee consisting of 11 members as thereinafter mentioned.

Clause 16 of the Supplemental Deed provided for the election of 2 block representatives for Nos.3, 4, 5 and 6 and for one block representative for Nos.7, 8, 9 and 10 to the Committee.

Clause 17 dealt with meetings of the Committee "to discuss and decide matters concerning the said buildings and their curtilage". There followed detailed provisions governing such meetings. A meeting could be validly convened by 2 members, the necessary quorum for the meeting being 5 members of the Committee.

Sub-clause (j) provided that the resolution passed at a validly convened meeting by at least three quarters of the total number of the Committee concerning any matters contained in the DMC such as the appointment of an agent mentioned in Clause 14, the enactment of new House Rules and the amendment thereof shall be binding on all the parties provided that notice concerning the meeting specified the intention to propose the resolution and further that any resolution passed concerning any matters other than those mentioned in the DMC or the Supplemental Deed should not be binding.

49. The House Rules are set out in the First Schedule. It provided for the provisional payments of sundry out of pocket expenses and disbursements in regard to the buildings and their curtilage in specified proportions with a mechanism for adjustment by chartered accountants. Where the actual expenses exceed the provisional payments, the deficiency is to be paid and borne in the same proportions. It further provided that each of the owners

"shall on demand in writing of the Agent pay to the Agent his remuneration as set out in Rule 19 and all monies expended by him ... and that in the event of non-payment of the said remuneration and/or the said expenditure for 7 days after the date of demand, it shall be lawful for the Agent to recover the same as a debt by action or any other proceedings against any parties in default."

Rule 21 provided that the House Rules may be altered from time to time on the authority of a resolution passed by at least three quarters of the total number of the Committee in a validly convened meeting under Clause 17.

Surcharge

50. Unlike the House Rules for Block A, the House Rules for Block B contain no provision that authorises any surcharge and as I have found that the resolution of 15 December 1995 purporting to amend the House Rules of Block B was invalid, the claim for surcharges is without any legal basis.

Pipe and life renovation contribution

51. As regards the pipe and lift renovation contribution, the demand is based on the following :

(i) By an undated circular from the 2nd Defendant to all owners of Block B, they were notified that at the meeting of the owners of Block B held on 19 February 1995, it was resolved :

a) To replace the four lifts at Block B.

b) To replace and relocate one set of water pipes at kitchen and servant's area.

All owners were required to make a contribution of $48,000 on or before April 8, 1995. The circular provided additional information to the following effect : each new elevator would cost $1.1 million, and the estimated cost for the new water pipes was $700,000. It was proposed that the shortfall between the estimated cost and the amount of contributions at $48,000 per unit, namely $1,308,000, would be taken from Block B's reserve.

(ii) A circular dated 25 May 1995 was sent to all the owners of Block B who were asked to send in their contribution of $48,000 by 2 June 1995.

(iii) A meeting of owners of Block B was held on 23 July 1995. At that meeting, the Sub-Committee proposed that there should be a complete overhauling of the lifts (including the lowering of the service lift to the basement level) at a cost of $2.6 million rather than replacing them with new lifts which was estimated to cost $6.2 million because of the appreciation of Yen and inflation. The owners were also notified that the water pipe replacement would take place not only in the kitchen and servant's area but also in the master bathroom and children bathroom area. In the minutes of that meeting, details were given about the financial position of Block B which included a "breakdown" of the four items of work to be undertaken, namely :

* Complete overhaul of four lifts	$2,585,000.00
* Water pipe replacement (all areas)	$2,000,000.00
* Pump room repair and replacement	$75,000.00
* Building works and professional fee	$180,000.00

to lower the goods lift to basement

52. Much was made of the fact that Mr Chow was on the Renovation Sub-Committee of Block B. Nevertheless it is clear from both his evidence and that of Mr Mao that Mr Chow ceased to be a member from about October 1994. The first issue is whether the resolution passed at the owners' meeting on 19 February 1995 was binding on all the owners of Block B. The minutes show that owners of 21 out of 79 units attended the meeting which was convened by the 2nd Defendant. Unlike the DMC for Block A, the DMC and Supplemental Deed for Block B do not contain any provision for a meeting of the owners of the block. So, unless there was a 100% attendance at the owners' meeting when the resolution was passed and the resolution was unanimous, it cannot bind on the owners of Block B. In other words, in the absence of a provision for majority decision of owners present in person or by proxy as in Clause 14 of the DMC for Block A, the resolution, even of a majority of the owners, is of no effect. The same observations apply to the resolutions passed at the meeting of owners held on 23 July 1995.

53. To the extent that expenditure intended to be covered by the contribution of $48,000 per unit is attributable to "repairs" within Clause 3(c), the Plaintiff is obviously liable for its pro rata share. Of the four items, the fourth item i.e. the lowering of the goods lift to the basement is plainly not within the "repairs" provision for the reasons already explained in relation to Block A.

54. As regards the first item, namely the complete overhaul of the lifts, the Plaintiff is of the view that an overhaul was not necessary. Mr Chow gave evidence to the effect that the lifts were refurbished in 1993. The work required was divided into three categories or phases. According to the quotation dated 28 May 1993 from Schindler Lifts, work was to commence 2 months after the receipt of the order and down-payment and that the work for each lift would take approximately 3 weeks to complete. Category 1 repairs were regarded as essential to the proper and smooth operation of the lifts; category 2 repairs were recommended to comply with lift safety regulations and category 3 were repairs expected within 11/2 years for preventive purposes. Each unit contributed towards the lift repairs at the time. By the time the owners' meeting was held in February 1995, not all three phases had been completed and there was a balance of some $730,000 that had not yet been used. Mr Chow's position was that unless Schindler were to advise that the lifts should be "dumped", neither replacement of the lifts nor the overhaul that was subsequently adopted was justified. In Mr Chow's view, the overhaul was simply to improve the speed of the lifts.

55. Mr Mao explained that although Schindler was the original supplier, it was not the maintenance contractor for some 15 to 20 years. Some smaller company had been used and in 1993 Schindler was re-engaged. As some of the parts were not genuine, to take over the maintenance of the lifts selective replacements had to be made. It is his evidence that after carrying out the first phase of the work, frequent lockouts occurred. His evidence was that Schindler had to be telephoned 10 times over a 3-month period to deal with lockouts. The owners found the situation unsatisfactory and wanted to replace the lifts. It was against this background that the resolution of 19 February 1995 took place. By July 1995, the replacement cost had risen dramatically due to exchange rate fluctuations. It was then that the Renovation Sub-Committee proposed a complete overhauling of the lifts.

56. Mr Mao did not agree that the overhaul was for the purpose of increasing the speed of the lifts. There is a record of lift breakdowns for the period May to July 1994. Whilst part of the record is illegible, it would appear that breakdowns did occur on many occasions, including several occasions when passengers were trapped in the lifts. Although the Plaintiff appeared to suggest that the breakdowns during these months were due to the fact that the Phase 1 work was being carried out, there is no evidence that this was the case. Based on Schindler's quotation of 28 May 1993, the time-frame for Phase 1 work would more likely have been the second half of 1993 rather than mid-1994 as is the Plaintiff's suggestion.

57. It is Mr Mao's evidence that Exco's decisions came in two forms : (a) insofar as work involved the public area outside the 7 blocks, Exco makes the decisions; (b) where the work is inside a block, major maintenance and renovation issues are entrusted or delegated to the Renovation Sub-Committee for the relevant block. Where members of the Renovation Sub-Committee were not formally elected, the block representatives would organise meetings and seek group decisions which would then be passed onto Exco for execution or the management for the collection of monies. Whilst the recommendations of the Renovation Sub-Committee or the decision of the owners at owners' meetings may be adopted by Exco as its own, the obligation of the owners to contribute is contingent on the work to be done being within the provisions of the relevant DMC. Moreover, the management functions and duties remain with Exco notwithstanding any delegation to a Renovation Sub-Committee.

58. In my judgment, the overhauling of the lifts of Block B falls within the scope of Clause 3(c) of the DMC and the Supplemental Deed and Exco was entitled to adopt the decision of Block B's Renovation Sub-Committee made after the matter had been ventilated at an owners' meeting held on 23 July 1995. Whilst only 19 out of 79 owners attended the meeting, due notice was given of matters to be discussed and decided at the meeting in the notice of 8 July 1995 convening the meeting. Owners who chose not to attend (whether in person or by proxy) can hardly complain if the decision is not one that they would have supported.

59. It is, I think, common ground that the second and third items, viz. pipe replacement and pump room repair and replacements are "repairs". A separate issue has arisen over the question of pipe replacement for Block B. It is the Plaintiff's case that the pipes in or to its unit have not been replaced. The Defendants' evidence is that pipe replacement work (which entailed going into the individual units) was carried out by the contractor commencing in September 1995 and was completed by the end of the year.

60. The Defendants are satisfied that the work has been completed. They base this belief on a list supplied by the contractor supposedly containing the signatures of all the owners/occupiers of the flats in Block B, No.3. These signatures were obtained on 2 and 3 January 1996. It is evident that the list does not contain the signatures of the owners/occupiers of the ground, 1st and 3rd floors of No.3. There is thus an on-going dispute between the parties as to whether the Plaintiff had in fact refused to permit the contractor to enter into its unit to carry out pipe replacement work. This is an issue that arose in the course of the hearing and it was agreed that its resolution had to be the subject of separate proceedings.

61. In conclusion, the resolution of 19 February 1995 requiring a $48,000 contribution from each owner was invalid. The Plaintiff is prima facie liable to pay a pro rata share of the cost of the first three items of work referred to in the minutes of the meeting of 23 July 1995. To the extent that reserves of $1,308,000 are applied towards the cost of the work, the Plaintiff's contribution must, proportionately, be reduced. For reasons appearing below, in ascertaining the Plaintiff's share, the calculation cannot be based simply on the "breakdown" appearing in the minutes of the July 1995 meeting.

62. Exh D7 is a letter dated 21 August 1995 from the 2nd Defendant to the contractor. It was an acceptance of the contractor's tender for "Water Supply and Drainage Pipe Replacement Works for Block B Kitchen and Servant Areas" and "Water Supply and Drainage Pipe Replacement Works for Block B Master Bathrooms and Children's Bathrooms". The price agreed was $760,000 plus $750,000, totalling $1,510,000. This is to be contrasted with the so-called "breakdown" contained in the minutes for 23 July 1995 which referred to pipe replacement work as costing $2 million, which is approximately 25% more than the actual cost. The Plaintiff is not obligated to pay a pro rata share of costs that are not actually incurred or to be incurred. The amount an owner is liable to pay must be based on actual quotations, estimates or tenders obtained and not on speculation, however "informed" it is, on the part of management, nor an amount voted on at owners' meetings unless there is unanimous consent by all the owners.

Management fees

63. The Plaintiff has been withholding management fees since October 1994. The Plaintiff claims that the Defendants are not entitled to those fees because they have failed to properly manage Blocks A, B and D and in the alternative that it is entitled to set off any sums due to the Defendants against the Plaintiff's loss resulting from the Defendants' failure to manage the properties.

64. The amounts claimed are as follows :

Block A Management fees	$22,845.00
Surcharge	$1,124.25
Block B Management fees	$27,825.00
Surcharge	$1,391.25
Block D Management fees	$27,825.00
Surcharge	$1,391.25
	$82,401.75

As I have held that there is no power to levy surcharges for Blocks B and D, the figure claimed should be revised to $79,619.25.

65. The DMCs for Blocks B and D are similar and provide for the employment of an agent for the purpose, inter alia, of generally taking care of the buildings and their curtilage and for decisions concerning the buildings and their curtilage to be made by the Committee of 11 members from the different blocks. The House Rules provide for the payment by each of the owners of a monthly sum to the agent as remuneration for services rendered in the management of the buildings and their curtilage and for provisional payment of sundry out-of-pocket expenses and disbursements in specified proportions. The agent is specifically authorised by House Rule 20 to demand payment of his remuneration and "all monies expended by him as mentioned herein". The agent is also specifically authorised to recover unpaid management fees and any shortfall between the provisional payment and actual expenses incurred from the owners. Although the DMC for Block A is somewhat different, there are similar provisions relating to the payment of monthly fees to the manager appointed to manage and provide services in respect of the building. Thus based on the provisions of the DMC, the Defendants are entitled to the management fees claimed.

(a) The lack of repair

66. The first limb of the Plaintiff's defence is that the Defendants have failed to carry out necessary repairs and that constitutes a failure to manage thereby disentitling the Defendants to management fees. There is a series of letters from the Plaintiff to the Defendants commencing 6 April 1995, complaining about dangerous water damage, torrential downpours from the roof, parapet and exterior walls and communal ducts causing serious structural defects, falling debris, dry rot, pest/termite infestation, damage to the building fabric and electrical/mechanical systems, regarding Blocks A and D. It was alleged that the lives and well being of the owners/occupiers and visitors of Fontana Gardens were threatened as a result. It would appear from the letter of 6 April 1995 that complaints had been made over a period of several months preceding April 1995. Subsequent letters of complaint are dated 20 April, 22 April, 19 June, 3 October, 24 November and 10 December 1995, and as from 19 June, the complaints extended to Block B.

67. That work is required to Blocks A and D cannot be disputed. Even the Defendants' surveyors have recommended rectification works to Block D (consisting of re-waterproofing the roof, roof retiling and cement sand screeding, refurbishment of the external walls by retiling) and to Block A (replacement of plumbing and drainage systems.)

68. Mr Tam acknowledged that the secretary of the Plaintiff, Rita Shek, had been making complaints to the management office about the lack of repairs over a number of years. In his view, the complaints became more frequent after April 1995. In fact, his superior, a Mr Paul Ho, had been to the Plaintiff's flat in Block D to see the condition for himself and that Mr Tam had accompanied Mr Ho on that occasion to view the damage caused by serious water leakage and termite infestation. Mr Tam recalled receiving complaints about tiles and other debris falling off Block D onto cars. He accepted that the tiles are aging and need to be replaced. He also agreed that there are cracks in the parapet walls.

(b) The duty to repair

69. The Plaintiff submitted that the duty to repair is on the Defendants. The Defendants deny that there is such a duty and even if there were, it is conditional on funds being provided.

70. Mr Tam acknowledged that the 2nd Defendant did have a fund for emergency repairs but that has never been applied to carry out repairs to the Blocks in question. Mr Tam explained that normally a general meeting of owners is required to pass a resolution that items of renovation be done. They would also resolve that a certain amount of money be contributed towards that work by the owners of that block. So in the case of roof repairs to Block D, notwithstanding that complaints have been made since 1994 and that the 3rd Defendant had been to the flat and had seen the leaks, and notwithstanding that the surveyor has recommended re-waterproofing because the life span is normally only of 15 years, it was Mr Tam's position that a meeting of owners and a resolution was required before the 3rd Defendant would act on repairing the roof. It was also Mr Tam's position that unless all the owners contributed, the roof would be allowed to continue to leak. His explanation was that the 3rd Defendant did not have the means to front-up the fees. Baldly stated, the 3rd Defendant's position was : "no funds, no repairs". For the reasons set out below, the 3rd Defendant's position is untenable.

71. In my judgment, the duty to repair the common parts of the building must fall within the management functions of those responsible for managing the buildings. The duty to repair is integral to and cannot realistically be divorced or carved out from management functions. Mr Mao acknowledged that the 3rd Defendant did have authority to carry out repairs up to a cost of $2,000. Implicit in this is a recognition that it was the duty of the Defendants to effect repairs to the common parts. The existence of that duty cannot turn on the cost of the repairs in question. It is absurd to say the duty exists only if the cost of the repairs is under $2,000. Moreover, as submitted by Miss Eu, the Defendants cannot deny their duty to carry out repairs when they are asserting the right to sue the Plaintiff for contributions to repairs.

72. The Defendant's stance that if such duty existed, it was conditional on funds being provided. Mr Mao denied that the 2nd and 3rd Defendants had any responsibility to raise the necessary funds. I disagree. The DMCs contain provisions which empower the agent or manager to recover fees or contributions that are properly payable by the owners. Implicit in this is the duty to raise the necessary finance, which is concomitant to the duty to repair. The two go hand-in-hand, as it were. Otherwise the duty to repair is meaningless. What this entails is for management first of all to make a decision regarding the repairs that are necessary. The next step is to obtain quotations or tenders and having made a decision thereon, proceed to collect the necessary contributions from the Owners.

73. There was much argument as to the need for management to provide "breakdown". The Defendants now acknowledge that the Owners are entitled to disclosure of all relevant information. Mr Tam's evidence was that the practice of the 3rd Defendant was to send quotations and tenders obtained to the Renovation Sub-Committee concerned. A copy was kept in the management office but in the early days, Mr Tam's evidence is that it was not easy to inspect them. There had to be an application in writing and permission had to be obtained from the Renovation Sub-Committee and the 2nd Defendant before any inspection would be allowed. There have been occasions when inspections were refused. That coupled with Mr Tam's evidence that the 3rd Defendant did not reply to Owners' letters on these matters because it did not have the facilities to enter into such correspondence meant that the Owners could not get meaningful information. That is plainly wrong. Owners must be entitled to know the broad categories of work to be undertaken and the cost thereof. There can be no question of Owners choosing and picking what they will pay for if, in truth, what is being done comes squarely within their obligations under the relevant DMC. For recalcitrant payers, it is up to the Defendants to activate the procedures set out in the DMC to recover unpaid contributions.

74. A great deal of evidence was given regarding the question of repairs (or the lack thereof) to Block D. I will set out the material events as they offer an insight into the problems that have arisen.

75. Estimates for roof and waterproofing work had been obtained in March and May 1993. An owners' meeting was convened for 15 October 1993. It appears to have been convened under the auspices of the 2nd Defendant. At this point and time, it would not appear that there was any Renovation Sub-Committee for Block D, there being only 16 units in the entire block. The agenda consisted of four items, namely :

(1) Maintenance of lifts;

(2) Renovation work of lobby;

(3) Roof and exterior wall waterproofing work; and

(4) Any other business.

14 out of the 16 owners attended the meeting. Mr Chow was one of the two block representatives. He attended the meeting at the end of which he was asked to opine (which he did) on the likely cost of the work. His estimate was $128,000 per unit. It is recorded in the minutes that the sum of $128,000 per unit be paid by each owner on or before 15 November 1993 although at least one of the owners at the meeting had suggested that the owners should be consulted first regarding the amount of contribution before it was implemented. The owners were encouraged to invite quotations from firms that they knew for the proposed work. These minutes were signed by a Mr Tsang, the chairman of the meeting.

76. On the following day, a notice to this effect was sent to the owners by the 3rd Defendant for and on behalf of Block D. The sum was allegedly sought for "maintenance and decoration work, repair of exterior wall and roof waterproofing work". It omitted any specific reference to the renovation of the lobby. Mr Chow said that he requested the 3rd Defendant to itemise the work to be done and the cost of each item but the 3rd Defendant denied that such a request was ever made.

77. Nothing happened for about 9 months. On 24 July 1994, a meeting was allegedly held between Mr Chow, Mr Tsang and Mr Tam. The minutes described the meeting as that of the "Lobby Maintenance and Rooftop Small Group of Block D". It referred to two quotations obtained as a result of referrals. Each quotation set out the cost of the items of repairs as well as the cost of lobby renovation. In broad terms, a little less than half the total cost was for repairs. It was recorded in the minutes that the design and cost of Superior Interior Limited was considered the more suitable subject to one matter which Mr Chow was to follow up. Pausing here, the Plaintiff does not accept that any Renovation Sub-Committee for Block D was in existence prior to 9 January 1995 or that he was a member of it. The minutes of the meeting held in January 1995 certainly supports the Plaintiff's position.

78. On 26 July 1994, a notice issued by the Renovation Sub-Committee of Block D and the 2nd Defendant was sent to the owners. It notified the owners that Superior Interior Limited and its subsidiary had been selected for the work at a cost of $1.996 million and that the contract would be signed by the 2nd Defendant. It sought contributions of $128,000 from owners that had not paid. A further notice to the same effect was sent on 2 September 1994. This notice referred to each owner's responsibility for the maintenance fee under the DMC and noted that tiles had been falling off the external wall, that water leakage was becoming serious and that maintenance work should be carried out as soon as possible.

79. Only 4 out of the 16 owners ever paid the contribution sought. On 21 June 1995, eleven months after the contractor had supposedly been selected, the five member Renovation Sub-Committee of Block D resolved to return the $128,000 contributed by the four owners towards "lobby renovation" together with interest. The circular also referred to a resolution of the Sub-Committee of 12 May 1995 at which it was resolved that the $208,500 of excess funds that was not required for lift maintenance would be used instead for emergency repairs. It also listed out what it considered to be in need of urgent attention, including changing the waterpipes on the roof and repairing the parapet wall, but no mention whatsoever was made of the need to waterproof the roof. On 29 June 1995, at the 23rd Exco Meeting of the 2nd Defendant, the request by the Renovation Sub-Committee of Block D to refund the $128,000 plus interest to each of the four owners for their contributions to the lobby renovation (that was still pending) was approved. It is to be noted that through some process of metamorphosis, the contributions of $128,000 collected from the four units after the meeting of October 1993 became transformed into contributions for "lobby renovation work" by June 1995.

80. It is the evidence of Mr Tam that 3rd Defendant took no steps to obtain estimates or quotations for the repairs that had been decided upon after the meeting on 15 October 1993. Although he agreed that owners are prima facie entitled to a breakdown as to what is attributable to each item of work, he took the view that once the owners had decided on the figure, it was no longer necessary for the 3rd Defendant to give any breakdown to owners who had taken part at arriving at the decision. As already stated above, that position is untenable.

81. It is plain that the amount of $128,000 per unit was an estimate for work which not only encompassed "repairs" but also the renovation of the lobby. As the October 1993 meeting was not attended by all the owners of Block D, the decision to renovate the lobby was clearly not binding unless the consent of the absent owners was subsequently obtained.

82. The appalling delay that has occurred in repairing and remedying water leakage and repairs to the parapet walls is inexcusable. The Defendants' position vis-à-vis the need to provide information to the owners as to the categories of work to be done and the cost thereof as well as their refusal to apportion repairs from renovation created an impasse which should never have been allowed to occur. Certainly by July of 1994, some 9 months after the owners' meeting, at least that part of the estimate relating to repairs could and should have been accepted and implemented. Through inertia on the part of management if nothing else, it was not.

83. Having said that, based on the minutes of the meeting of 24 July between Mr Chow, Mr Tsang and Mr Tam and the quotation of Superior Interior Ltd., Mr Chow's assertions as to the absence of any "breakdown" for the repairs after 24 July appear to be unfounded. The categories of work and the cost of each item are no less detailed than the "breakdown" provided by Mr Chow in relation to Block B (Exh.P2). Granted, the Defendants did not "invoice" Mr Chow for the pro rata share of this amount. But if the Plaintiff had reservations about contributing towards the renovation aspect of the project, it could still have proffered its pro rata share of the $904,000 : that it did not do. Whether such a step would have eased the parties out of the impasse into which they have been trapped will never be known but the Plaintiff's conduct in this sorry saga is not beyond reproach.

84. Assuming that the Defendants have not discharged their duty to effect necessary repairs to the common parts of the Buildings, would this fact debar them from recovering management fees? Bearing in mind that effecting repairs was not the only duty of the Defendants and in respect of which management fees are paid, I am not prepared to hold that because of this breach they are not entitled to any management fees. Nor would it be either feasible or realistic to apportion the fees. Rather, if the Plaintiff has a valid claim against the Defendants, a question of set-off would arise. Accordingly, I will now consider whether the Plaintiff has established a valid claim in respect of damage sustained because of the failure to repair.

Counterclaim to Counterclaim

(a) Cost of repairs to the Plaintiff's properties

85. The Plaintiff claims the cost of repairs to its three units as follows :

Unit G/24 Block A:	$74,000
Unit 1/3 Block B :	$34,000
Unit 8/11 Block D :	$582,000
Total :	$690,000

86. The Plaintiff's expert is a chartered quantity surveyor with 18 years working experience, 15 of which were gained in Hong Kong. Mr Hui submitted a report consisting of cost estimates for repairs to each of the three units. Included in each of the cost estimates is a contingency allowance for possible repair works to be carried out to the electrical installations. It is Mr Hui's evidence that the contingency allowances are provisional in nature, based on experience gained as a quantity surveyor. It is Mr Hui's evidence that it is not unusual for surveyors to differ where it concerns redecoration and repair work. Essentially, this requires an exercise of judgment as to the true extent of the damage. Whilst damage may on the surface appear to be 1 sq.m., to repair that 1 sq.m. may require 4 - 5 sq.m. of work. The unit rates he has adopted are in the middle range and in estimating work of this nature, it is not a question of simply looking at the quantities but also at the total amount. It is not purely a quantity/unit rate calculation. These merely give an indication of the magnitude of the work involved. In estimating the cost of repairs, one has to look at the productivity rate as well as the man-days required.

87. The Defendants' expert was not a quantity surveyor but a chartered building surveyor. Mr Yau only qualified in 1994 and has worked for his present employers, Samson Wong & Associates for three years or so. Mr Yau carried out the inspection and prepared the report which was signed by his principal. Although Mr Yau had with him the Plaintiff's initial cost estimates when he carried out the inspection, he did not verify those figures because his instructions were different. He was apparently instructed to carry out a condition survey to identify the causes of the damaged parts of the three units. Pausing here, I note that the Defendants chose to present an expert's report that was wholly different in nature to the report that had been supplied to them by the Plaintiff. They made no attempt to reach some common agreement with the Plaintiff or indeed to seek the directions of the court. Such a course was hardly designed to facilitate the efficient disposition of these proceedings. Not only did the Defendants proceed in this unilateral fashion, they also failed to comply with the court's directions that the experts attend a meeting prior to the hearing. No explanation has been forthcoming for this state of affairs. Suffice to say that the Defendants' conduct in this regard was ill-advised.

88. The Defendants' challenge was two-fold : causation and quantum.

89. The damaged items appear in the cost estimates of Mr Hui. In broad terms, Mr Yau opined that as regards damage to the ceiling and wall surfaces of the unit in Block A, the most probable cause was leakage of the branch pipe above the relevant unit in the pipe duct. He expressed a similar view as regards damage to the ceiling, wall surface and floor boarding of the unit in Block B. As regards the damaged cupboard in Block B, Mr Yau opined that it was not caused by water seepage. Rather, the damage was caused by "rising damp" which was caused by dampness resulting from water being trapped under the void of the cabinet. It was Mr Yau's opinion that the source of this water was water used in cleaning the parquet floor immediately adjacent to the cupboard. As regards the damage to the ceiling in Block D, Mr Yau opined that part of it was due to "structural cracks" attributable to the structural failure of the roof slab. He noted that some load bearing wall column may have been removed in the past. As regards the damage caused by termite infestation, in Mr Yau's view, it is not common for high rise flats to be attacked by insects and he therefore concluded that the insects had to come from elsewhere and was not caused by dampness.

90. How reliable was Mr Yau's evidence? Mr Yau was not an impressive witness. His conclusions do not appear to have been well-founded. This is borne out by the following examples :

(a) He opined that the cracks found in the ceiling of the unit in Block D were caused, inter alia, by the sagging of the roof. Yet, he took no steps to measure or otherwise verify that the ceiling was indeed sagging. Rather, he relied solely on his visual inspection. Mr Yau readily acknowledged that there are simple methods to ascertain whether or not a ceiling was sagging, such as using equipment consisting of two pieces of glass with some marks on each side to check any movement or increase in the size of the crack. Mr Yau admitted that he did not carry out any tests or any measurements.

(b) The report referred to the possibility of the removal of a load bearing wall. Although it was cast as a possibility rather than a fact, it was not a particularly responsible remark when Mr Yau had not bothered to obtain and check the as-built plans before making such a remark.

(c) Mr Yau spoke about alterations that caused structural cracks to the ceiling of Block D. Although he was careful to refrain from describing the alterations as "structural", again Mr Yau reached his conclusion without the benefit of an as-built plan in order to verify exactly what alterations had been made.

(d) Nor did he explain why the alteration(s) (which if not "structural" would not have required the prior consent of the Building Authority and are also permissible under the DMC) could possibly result in "structural" cracks.

(e) Another glaring example of the lack of a proper basis for reaching conclusions is the rising damp theory for the water damage to the cupboard in the unit in Block B. Mr Yau did not bother to remove what was stored in the cupboard to have a better view of the condition of the cupboard in relation to the pipe ducts which he said were situated at the back of the cupboard. He did not bother to verify what he described as a "void" or an empty space beneath the floor of the cupboard. In fact, it was a concrete slab. He did not bother to inspect other cupboards to see if they were similarly constructed. His theory that the source of the dampness was water used to clean the parquet floor in front of the cupboard is "incredible".

(f) Mr Yau readily attributed the cause of the damage to the units in Blocks A and B to defective branch pipes notwithstanding his admission that he had not bothered to check the branch pipe connection. When one looks at the photographs attached to the Plaintiff's surveyor's reports relating to Block A, Mr Yau's theory could hardly account for all the damage that is visually apparent from those photographs.

(g) As to his statement on the subject of termite attack that "no insect specimen was observed or collected", it is unclear what that statement was meant to convey given that it was accepted that the insect is not visible to the naked eye. Given his admission that he is not a termite expert, little weight can be attached to his theories for termite attack.

91. I do not find Mr Yau's evidence at all reliable on causation and I have no hesitation in rejecting his evidence. Based on evidence of the Defendants' own surveyor as to the need for remedial work, the photographs attached to the reports of the experts and the nature of the damage in question, the irresistible inference is that the damage to the Plaintiff's units was attributable to the Defendants' failure to keep the common parts in repair and I so find.

92. I now turn to the other aspect of Mr Yau's evidence which concerns the cost of repairs. Mr Yau also did not accept that contingency allowances should be made on the basis that Mr Hui did not clearly indicate the nature and quantity of fixtures and fittings. Mr Yau sought to challenge both the quantity and the unit rate for certain items of repair. The main difficulty with accepting his evidence was his admission that he did not carry out any on-site measurements to ascertain the exact quantity. In other words, his challenge to Mr Hui's evidence regarding the size of the damaged area is entirely based on his recollection of the site inspection. The reliability of that recollection is open to serious question. For example, Mr Yau could not even remember that there was a bald spot on the carpet of the sitting room of the unit in Block D. He only noticed the damaged part of the carpet in the bedroom.

93. Mr Yau is not a quantity surveyor and in any case, compared to Mr Hui, has relatively little professional experience. Mr Yau's evidence does not begin to dent the solidness of Mr Hui's evidence having regard to the latter's evidence concerning his methodology and overall approach. For completeness, I would mention that I have not paid any regard to Exhibit D8 which is a comparison of cost estimates relating to the cost of repairing the build-in hardwood cupboards and shelves for the unit in Block D. Although this was tendered as an exhibit, Mr Yau failed to attend court to complete this part of his evidence.

94. I prefer the evidence of Mr Hui. He was an articulate witness and his evidence was solid, reasoned and clear.

95. In the result, I accept the Plaintiff's evidence as to the cost of repairing the damage to its units and hold that it has established its entitlement to damages of $690,000.

(b) Cost of repairs to the common parts

96. The Plaintiff also seeks damages in respect of work to the common areas of Blocks A, B and D insofar as such work is necessary to stop water from leaking into the Plaintiff's units as particularised under para.10(g)(iv), (v) and (vi) of the Reply and Defence to Counterclaim. No mandatory injunction is sought. The damages claimed correspond to the aggregate of the cost of effecting repairs to Blocks A and D which have been recommended by the Defendants' surveyor and the cost of relocating the pipes on the roof of Block D. The Defendants' surveyor has submitted an estimate (Exh D9) in the sum of $56,020 to do this work. The Plaintiff seeks an additional allowance of 20% to the estimate for pipe replacement to cover insurance costs and contingencies. The amount claimed is, of course, subject to the deduction of the Plaintiff's pro rata share.

97. The basis of the Plaintiff's claim as pleaded is "loss and damage by reason of the 2nd and 3rd Defendants' failure to properly manage Fontana Gardens". This claim for damages is different from the claim for the cost of repairs to the Plaintiff's units because the repairs in question relate to common parts rather than to the Plaintiff's property. As the Plaintiff has not yet expended monies in effecting repairs to the common parts, the claim for damages does not appear to be sustainable.

98. The Plaintiff has offered the Defendants two options in respect of the cost of repairs to the common parts, depending on whether the Defendants are willing to undertake to carry out such repairs within a reasonable time themselves. At the hearing, this offer was rejected by the Defendants on the basis that it is a question of future repairs to common parts, an issue which is not within the court's remit. Having considered the matter, I have come to the view that the damages sought are in respect of repairs that have not yet been carried out and in this sense, they are future repairs but they relate to existing damage.

99. Unless the approach of the Defendants in terms of decision-making and implementation were to alter radically, it may be many months before anything is done. Continuing delay by the Defendants to carry out repairs will undoubtedly exacerbate the damage being sustained by the Plaintiff, and may lead to further claims and/or proceedings. As the repairs are long overdue, an order that would ensure that the repairs are carried out within a reasonable time and so address the cause of damage to the units is desirable for obvious reasons. The Plaintiff's proposals are, in that context, attractive.

100. Regrettably, there appears to be no jurisdiction to make either of the orders proposed. I am therefore compelled to dismiss this part of the Plaintiff's claim.

Order

101. The Plaintiff is entitled to an injunction restraining the Defendants, whether by their servants, agents or otherwise, from disconnecting or interfering with the water supply to the three units of the Plaintiff in Blocks A, B and D respectively of Fontana Gardens other than for temporary disconnexion necessitated by pipeworks to the entire blocks.

102. The Plaintiff is liable to the 1st Defendant in respect of the arrears of management fees which, including the surcharge insofar as it relates to the management fees of Block A, amount in the aggregate to $79,619.25. Its pro rata contributions for repairs to Blocks A and B only become due upon being advised by the 1st Defendant of the amount. The Plaintiff is entitled to set-off and extinguish the amount found due to the 1st Defendant against the sum of $690,000 due to the Plaintiff.

103. I make an order nisi that the Plaintiff is entitled to the costs of this action.

104. Liberty to apply.