BARNES & NOBLE PROPERTY MANAGEMENT LTD. AND ANOTHER v. HODSUN LTD.

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. LDBM 355 OF 1999

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DECISION

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1. This is an application by the Respondent for the dismissal of the Notice of Application on the ground that Clause 2(c)("Clause 2(c)") of Part 3 of the Deed of Mutual Coverant ("DMC") dated 9.6.93 is void ab initio, in view of the provisions of Section 22(3), and of related sections, of the Building Management Ordinance, Cap. 344 ("BMO").

2. The approach taken by the Respondent to determine this preliminary point is inappropriate. It relies on his legal representative, Mr. Chu, to make submissions, to support its application in this summons. There are no agreed facts and no affidavit to establish the facts relied on by Mr. Chu. The proper step is to establish the material facts first.

3. The Respondent alleged that the claim by the 1st Applicant, the former building manager of Billion Terrace, was said to be for the recovery from the Respondent, one out of many owners of Billion Terrace, of a share in a deficit in the management expenses thereof. It sought to support its application, by relying on Clause 2(c), the particulars of which are as follows :-

"(c) All amounts which may be or become payable by any owner for the time being of any undivided shares in the Unit and the Building in accordance with the provisions of this Deed together with interest thereon as aforesaid and the said collection charge and all other expenses incurred in or in connection with recovering or attempting to recover the same shall be recoverable by civil action at the suit of the Manager. The claim in any such action may include a claim for the solicitor and own client costs of the Manager and the defaulting owner shall in addition to the amount claimed in such action be liable for such costs. In this such action, the Manager shall conclusively be deemed to be acting as the agent or agents for and on behalf of all the owners other than the defaulting owner and no owner under the provisions of this Deed shall raise or be entitled to raise any defence of want of authority or take objection to the right of the plaintiff to sue or to recover such amounts as may be found to be due."

4. The Respondent relies on the combined effect of sections 8(2)(a) and 22(3) of the BMO to contend that an owner is liable only to the corporation. Section 8(2)(a) provides that "the owners for the time being shall be a body corporate with perpetual succession and shall be in the name of the corporation ...... be capable of suing and being sued ......". Section 22(3) of the BMO provides that "The amount payable by an owner under this section shall be a debt due from him to the corporation at the time when it is payable." Mr. Chu contended that by this sub-section the owners are made to lose their individualistic and separate identity and to hide behind a corporate front such that no owner may be sued singularly; this sub-section thus provides the backbone in laying the incidence of liability by and to whom contributions are to be made and received.

5. Clause 2(c) only refers to the power cast upon the manager, who was conclusively deemed to be acting as the agent for and on behalf of all the owners other than the defaulting owner, to recover by civil action at the suit of the manager the amounts payable by any defaulting owner. If an owner is default of payment of management fees, he is liable to be sued as a defaulting owner by the manager. He does not lose his individualistic and separate identity under section 8(2)(a) so that he cannot be sued. Section 8(2)(a) only provides that the owners from the date of issue of the certificate of registration shall be a body corporate, and in the name of the corporation it is capable of suing and being sued. It goes no further than that. If Mr. Chu's argument stands, it means that, in order to recover from a defaulting owner arrears of payment of management fees, the corporation could only sue itself; it cannot sue the defaulting owner. In that case, it can never recover the amounts in arrears. That cannot be the intention of the legislature, and that is not the effect of this sub-section. If an undivided owner is in default of paying his due share of management fees, it is his individual liability to pay the amount; it is not the liability of the corporation to pay. The corporation is entitled to recover such amount through its agent, the manager, to commence proceedings to recover the same by instituting a civil action, and the amount so recovered, shall be applied for the management purpose of the building.

6. Clause 3(a) of the DMC provides that "The Manager shall be deemed to be a trustee for and on behalf of the owners in respect of all moneys and deposits received on their behalf and unless otherwise authorized by the Owners Committee shall pay these monies ........ into a specially designated interest bearing account in respect of the Property and the Building at a Licensed Bank." The amount recovered by the Manager in a civil unit is the amount which ought to have been received by the manager on the behalf of the owners. Thus it is covered by Clauses 3(a). The Manager is only a trustee of the money so recovered at the litigation. The debt due to the owners has not been shifted to the manager as alleged by Mr. Chu.

7. Section 18(1) of the BMO sets out the duties and powers of the corporation, namely, to maintain the common parts and the property of the corporation in a state of good and servicable repair and clean condition, and to do all things reasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant (if any) for the control, management and administration of the building, and section 18(2)(c) gives a discretion to the corporation to retain and remunerate a manager to carry out on its behalf any of the duties or powers of the corporation under the BMO or the deed of mutual covenant (if any). Thus, in this case, if the manager is suing on behalf of the corporation to cover the "share of deficit", (if this is in respect of management fees), it is doing an act not contrary to the provisions in sections 8 and 22(3).

8. Mr. Chu also referred to section 16 of the BMO to support his contention that the liability of an owner shall be enforceable against the corporation to the exclusion of the owner. Section 16 provides that "When the owners of a building have been incorporated under section 8, the rights, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by, and the liabilities of the owners in relation to the common parts of a building shall, ........., be enforceable against the corporation to the exclusion of the owners ......". But here, the liabilities are the collective liabilities of the owners of the building as a whole, in relation to the common parts of the building. This section does not apply to the individual liability of an owner. Accordingly this section is of no assistance to Mr. Chu.

9. For all these reasons the Respondent's application must be dismissed.

10. I make an order nisi for costs, to be made absolute in 14 days' time, in favour of the Applicants, for the hearing of this summons, to be taxed, if not agreed.