WING KWAI INVESTMENT CO LTD AND ANOTHER v. KAR MING MACHINE WORKS CO LTD

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 93 OF 2007

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JUDGMENT

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The Claim and the Status of the Applicants

1.  The first Applicant (‘WK’) was the developer of the building in question. By the deed of mutual covenant WK was appointed manager of the building for a term of 5 years. Upon expiration of this 5 year term, WK carried on with the management of the building without proper re-appointment.  There is no dispute that by a resolution of the owners’ meeting in November 2007 WK was re-appointed manager of the building with retrospective effect from the expiry date of the first appointment some 20 years ago. Before this resolution the second Applicant (‘MM’)had already entered into a management agreement with WK for a two year term commencing on 1^st January 2007.

2.  The Respondent became the owners of the shops on the ground floor in 1987. He did not pay any management fees when asked and challenged the authority of the Applicants’ status. The Applicants must be taken to know his objection for a long time. Nothing was done to rectify the matter by WK.

3. . Initially the Applicants sought to ask for injunction in order to claim for management fees outstanding for more than 6 years. This obviously they could not succeed in and therefore they eventually abandoned the claim for injunction. They now restrict the cause of action to a monetary claim for management expenses which is not time-barred.

Status of the Applicants

4.  The crux of the argument of the Applicants depends of the validity of the resolution in November 2007. Two cases are cited in support: The Incorporated Owners of Finance Building V Bright Hill Management Consultants Company Limited (CACV 386/2000); and The Grande Properties Management Limited V Sun Wah Ornamental Manufactory Limited (FACV 2/2006).

5.  The Bright Hill case has no application in this case. The case only relates to the management committee. The term of its office does not expire together with the expiration of the statutory to hold re-election.  No parallel should be drawn between a manager and a management committee. The Building Management Ordinance (and its predecessor, The Multi-storey Building Ordinance) was enacted to prevent the abuse of power by developers and or managers holding on to the management of the building. On the true interpretation of the Deed of Mutual Covenant, and the provisions of the Building Management Ordinance, carrying on with the management of the building does not give rise to a reappointment for a indefinite term or any term at all. A fortiori when an owner expressly challenged its status and power to collect management fees.

6.  In the case of The Grande Properties Management Limited, a resolution with retrospective effect was held to be valid because the work had been properly sanctioned. The resolution was merely to rectify an irregularity in raising funds and the rectification was fair and proper. It is expressly stated that it would be otherwise if it would be unfair or amount to oppression on the minority.

7.  In the present case WK is the developer. It is to its advantage to run the building in the manner commensurate with his market strategy to sell off its units. It is desirable to have absolute control of the management. When its witness said in effect that in the past when the deficit is not much his employer would not mind losing out, this is not a slip of tongue. It exactly reflects the attitude of the developer, WK.  That explains why no active action to rectify  the matter. I do not accept the argument that it is not possible to form the management committee. Be that as it may, an application to the Tribunal for appointment of a management agent is easy enough and an obvious course.  Even if the resolution could have retrospective effect, I do not find it fair. I find it amounts to oppression. It is because WK has enjoyed the absolute control of the management of the building deliberately with benefit all these years. The challenge of the Respondents was ignored without any good cause. If the resolution was to allow its retrospective effect, it would be unfair and oppressive to the Respondents, especially when it would be difficult for him, if possible at all, to scrutinise the spending of the Applicants all these years. On this ground alone I should dismiss the claim.

Budget and Apportionment

8.  Even if I was wrong in holding that the appointment could not be made retrospective, the duty of the Applicant to prepare a budget and to apply a correct formula for apportionment has to be observed before they can properly demand payment.

9.  The evidence of budgets in the years in question has been demonstrated to be so unreliable that I can only accept the criticisms on behalf of the Respondent. Similarly, apportionment of expenses, was in flagrant breach of the provisions of the Deed of Mutual Covenant. I find that Applicants have not proved the basis for requiring the Respondent to pay the management fees as claimed.

Orders

10.  The claim be dismissed and there be an order nisi for costs to the Respondent on High Court scale to be taxed if not agreed. The costs order be made absolute in 6 weeks.