SAM WOO MARINE WORKS LTD v. THE INCORPORATED OWNERS OF PO HANG BUILDING

LDBM 252/2014 & LDBM 255/2018 (Heard together)
[2021] HKLdT 35

LDBM 252/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 252 OF 2014

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BETWEEN

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LDBM 255/2018

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 255 OF 2018

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BETWEEN

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(Heard together)

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D E C I S I O N

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INTRODUCTION

1.  This case concerns two sets of proceedings between the same parties which were ordered to be tried together. Sam Woo Marine Works Ltd (“Sam Woo”) is the registered owner of shop 1 on the ground floor of Po Hang Building (“the Building”) and is represented by Ms Queenie Ng. The Incorporated Owners of Po Hang Building (“IO”) is represented by Ms Becky Wong.

2.  In LDBM 252/2014, Sam Woo seeks certain reliefs against IO based on the contentions that the respective accounts of each class of owners should be considered separately and only if there is insufficiency of funds in the account of a particular class of owners, then IO may seek contributions from that class of owners. For the purpose of and in the course of ascertaining whether there is insufficiency, IO shall apportion the surplus attributable to different classes of owners. Interpretation of Clauses 3(h), 3(i) and 3(j) of the DMC was involved.

3.  In LDBM 255/2018, IO sues Sam Woo for outstanding management fees which remains owing from year 2012. Sam Woo refuses to pay and basically repeats their arguments concerning the interpretations of the relevant clauses in LDBM 255/2014.

4.  The background of the two sets of proceedings and parties’ respective cases are set out in the Judgment in greater detail which shall not be repeated here.

5.  After the trial in October and November 2020, on 24 December 2020 I gave a judgment in favour of IO in both applications (“the Judgment”). Sam Woo applied for leave to appeal against the Judgment on 20 January 2021.

6.  This decision deals with Sam Woo’s leave application. I shall refer to both the intended grounds of appeal stated in the draft Notice of Appeal (“DNOA”) attached to the affirmation of Lau Chun Kwok dated 20 January 2021 and also the arguments set out in Ms Ng’s skeleton submissions dated 27 April 2021 (“Sam Woo’s Skeleton”).

7.  Sam Woo has 7 grounds of appeal.

GROUND 1

8.  It is submitted that I erred in law in finding in paragraphs 25 and 35 of the Judgment that Deputy District Judge Kent Yee’s (as he then was) interpretation of Clauses 3(i) and (j) in DCCJ 1271/2011 is applicable in LDBM 252/2014 and that Sam Woo shall be estopped from reopening and/or challenging the said interpretation in the present case.

9.  To deal with this point, some elaboration on what were argued and ruled in DCCJ 1271/2011 is required.

10.  DCCJ 1271/2011 was an action brought by IO to recover from Sam Woo their share of contribution in the sum of $211,407[1] towards the repair/renovation costs of the building together with a collection charge of HK$300 plus interest thereon. IO applied for summary judgment against Sam Woo which application was refused by Master Tracy Chan. Sam Woo appealed which was heard before Deputy District Judge Kent Yee. At the conclusion of the hearing, the learned judge dismissed the appeal with costs.

11.  Sam Woo’s defence in DCCJ 1271/2011 was that on a proper construction of Clauses 3(h), 3(i) and 3(j) of the DMC, each of the individual owners’ account should be considered separately and if there is sufficient unused fund in his account, no further contribution should be demanded from him. Accordingly, due to the alleged overpayment/surplus in the account of Sam Woo over the years, IO was not entitled to demand any further contribution from Sam Woo towards the charges under the DMC.

12.  Their fall-back position was that in the event the alleged overpayment/surplus of Sam Woo was not sufficient to cover its share, there was at least a defence of set-off available to Sam Woo and Sam Woo would only need to pay the balance.

13.  In DCCJ 1271/2011, the learned judge had some concern about the term “overpayment” used by Sam Woo as it normally means that one has paid more than what he is obliged to pay and if the extra amount is paid under a mistake, he may have a common law claim to recover the amount overpaid. But on the evidence of Sam Woo, it was not really a case of overpayment by mistake. Ms Ng clarified to the learned judge that by “over-payment”, she actually meant “the monthly management charges previously paid by Sam Woo which has not yet been used by the IO”.

14.  The learned Judge did not accept Ms Ng’s argument. He found that the obligation to make further contributions under Clause 3(i) falls upon all owners but not any individual owners. The learned judge accepted Mr Johnathan Chang[2]’s submission that Ms Ng’s construction of Clause 3(i) would lead to an absurd result. If her construction were right, then IO must first exhaust the management fund contributed by an individual owner before he is required to contribute additional funds or even to continue to pay the monthly payment under Clause 3(h). If that is the case, there would be not much point in requiring the owners to make payments on a monthly basis and instead management fees should be collected on a need basis only. The Judge then went on to explain why Ms Ng’s contention is unworkable in the real world.

15.  The following paragraphs in the learned Judge’s reasons for judgment dated 19 December 2011 (“the Reasons”) are particularly relevant:-

“23. Clause 3(i) first sets out the condition under which further funds will have to be contributed by owners. It refers to the total monthly payments payable to the Manager by the owners of the Building under Clause 3(h). Clause 3(h) sets out the amount of monthly payment of each owner has to pay and it is applicable to all the owners. The total monthly payments payable to the Manager in Clause 3(i) clearly refers to the total amount of monthly payments payable by all the owners of the Building.

24. Worthy of note in Clause 3(i) are the words “total”, “payable” and “under Clause 3(h)”. They clearly refer to the total monthly payments which are to be paid by all the owners under Clause 3(h). The construction advocated by Ms. Ng actually entails a substantial rewriting of Clause 3(i): “those unused portion of the total monthly payment payable which have already been paid by an owner to the Manager by the owners.” The word “total” is then rendered otiose too. This cannot be right.

25. The purpose of Clause 3(i) is very clear. If the manager finds that the total monthly payments payable by all the owners under Clause 3(h) is not sufficient to cover any costs, charges or expenses, he can make a collective fund-raising exercise by either (a) requiring all the owners to make further contributions in the shares as provided in Clause 3(h) or (b) revising the monthly payment payable to the manager by all the owners provided that such increase shall be in the proportion to the shares as provided in Clause 3(h). The obligation to provide further contribution by either way falls upon all the owners and not any individual owners.

26. In fact, as submitted by Mr. Chang, counsel for the IO, Ms. Ng’s construction of Clause 3(i) would lead to an absurd result. If her construction were right, the IO must first exhaust the management fund contributed by an individual owner before he is required to contribute additional funds or even to continue to pay the monthly payment under Clause 3(h). If that is the case, there would be not much point in requiring the owners to make payments on a monthly basis and instead management fees should be collected on need basis only.

27. This is for obvious reason unworkable in the real world. Of course the manger requires some surplus in the management fund to allow flexibility and cover all the possible contingencies. Moreover, Clause 3(j) plainly envisages surplus in the management fund and dictates how it should be applied. Similarly, Clause 3(k) prescribes how the unused portion of the management fund contributed by a former owner should be applied after he ceases to be an owner.

28. Ms. Ng accepted that there was no provision in the DMC for the refund/release of any unused portion of management fees previously paid by an individual owner. Yet she contended that Clauses 3(j) and 3(k) dictate that any such surplus or unused fund must be held and applied for payment of all those necessary costs, charges and expenses by the manager. I accept for the present purpose there was indeed surplus in the management fund. Nevertheless, there is no suggestion, let alone evidence, that any surplus of the management fund would be applied for other purposes.

29. As regards the resolutions passed at the Meeting, admittedly, as pointed out by Ms. Ng, the exact amount of shares by each owner was not specified therein. The purpose and effect of the resolutions were however clear. The owners by a majority agreed to incur the Charges and they were to contribute towards the Charges by 3 instalments. The Charges did fall within the ambit of Clause 3(f) and in accordance with Clause 3(i), the IO asked Sam Woo to make further contributions in addition to its monthly payments made under Clause 3(h) whilst any unused portion of the monthly payments previously made in the global management account will be used in accordance with Clause 3(j). I cannot see any merit in the contention that the resolutions were inconsistent with Clause 3(i) and hence rendered invalid by virtue of Clause 13(k) of the DMC.”

16.  Turning to the present case, Ms Ng contended that IO is not entitled to demand further contribution from Sam Woo (being one of the ground floor owners) if there is sufficient unused fund in the account of ground floor owners. In the current proceedings, instead of placing their focus on Sam Woo’s identity as an individual owner, Ms Ng now places their focus on Sam Woo’s identity as a member of ground floor owners.

17.  But despite the shift of focus, Sam Woo is invoking the same DMC provisions and is essentially running the same argument which promotes the concept of no further contribution be made unless in situation of insufficiency of funds.

18.  In my view, no matter the applicant is putting arguments from the perspective of an individual owner or as a member of a class of owners, and regardless they are seeking refund and set-off in DCCJ 1271/2011 or seeking other reliefs in the current proceedings, all these do not detract from the fact that Sam Woo is involved in the DCCJ proceedings and the current proceedings in their own capacity, invoking the same DMC provisions (Clauses 3(h), 3(i), 3(j) etc) and making the same contentions based on the same concept of pegging IO’s power to levy contributions with insufficiency of funds.

19.  As stated in paragraph 34 of the Judgment, I was not persuaded by Ms Ng’s attempts to differentiate the present case from DCCJ 1271/2011 at all, the reasons are set out in paragraphs 27 to 33 of the Judgment which shall not be repeated here.

20.  I see no reason why the learned judge’s interpretation of the same provisions in DCCJ 1271/2011 could not be applied here. It certainly was within my liberty to agree to the learned judge’s interpretation of the relevant DMC clauses which was upheld by the Court of Appeal[3]. I do not consider myself erred in law in adopting the learned judge’s reasoning nor do I consider myself wrong in agreeing to Ms Becky Wong’s res judicata argument in relation to the DMC provisions that had already been construed and ruled by the learned Judge Yee in DCCJ 1271/2011[4].

21.  About res judicata, it should be noted that I did not rule that Sam Woo shall be estopped from commencing the current proceedings. The concern was about parties’ re-litigating over the same DMC provisions based on essentially the same reasoning that has already been rejected and ruled by the court before in another set of proceedings between the same parties.

22.  Anyhow, despite the concern in paragraph 21 above, as stated in paragraph 35 of the Judgment, I actually proceeded my analyses on the assumption that res judicata did not apply and the Lands Tribunal was to rule on the interpretation of the DMC provisions afresh but even so, I still was not persuaded by Sam Woo’s interpretation, and the full analyses were set out in paragraphs 36 to 67 of the Judgment.

23.  Ms Ng’s reliance on the res judicata point to constitute a ground of appeal is inapt and totally unnecessary.

24.  Concerning Ground 1(b) of the DNOA, I am afraid Ms Ng has distorted the meaning of paragraph 28 of the Judgment. I did not suggest that the applicant needs to commence class action in order to raise the issue concerning “classes of owners”. The applicant’s application was dismissed not because they had not commenced class action. My ruling was that there is no distinction between individual owner or a class of owners when it comes to the interpretation of Clauses 3(i) and (j) of the DMC.

GROUND 2

25.  Sam Woo opines that it was incorrect for me to state in paragraph 36 of the Judgment that the combined effect of their Contention 2 and Contention 3 is that only when there is a shortfall in the fund of a particular class of owners, then management fees could be collected from that class of owners. Ms Ng says the combined effect I described was wrong because they did not use the term “management fees” but used the term “further contribution and/or revised monthly payment” in paragraph 5(g) of their Application.

26.  I do not think I have misunderstood Sam Woo’s case which have been summarized and discussed in various paragraphs of the Judgment[5]. Ms Ng has not challenged that those summaries are incorrect or that my analyses throughout the Judgment was based on a misunderstanding of their case.

27.  As I see it, what Ms Ng is doing is nitpicking one particular paragraph of the Judgment, identifying one difference in the term used in that paragraph as compared with the term used in one paragraph in Sam Woo’s Application, taking it as evidence of my misunderstanding of their case or my error in law and mounting it as a ground of appeal.

28.  To answer this, I shall point out three things.

29.  First, paragraph 36 of the Judgment does not purport to describe Sam Woo’s case. It merely states a combined effect of Contention 2 and Contention 3 as I observe, that is – the surplus of (or up to) a particular financial year resulting from a particular class of owners must be used towards paying the expenses of that particular class of owners in the next financial year and, only when there is a shortfall, then management fees could be collected from that class of owners.

30.  Secondly, I do not think Ms Ng could sensibly deny that the above is indeed one of the combined effects of the two contentions. As a matter of fact, Ms Ng did tell this court repeatedly that Sam Woo’s position was that as long as there was no separate account and no proper allocation of surplus/funds among different classes of owners, IO had no right to claim management fees. That was precisely the position taken by Sam Woo in defending against IO’s claim for management fees in LDBM 255/2018.

31.  Thirdly, Ms Ng herself also appears to have used the term “management fee” and “further contribution and/or revised monthly payments” interchangeably in her oral submissions. I have no intention to waste resources in commissioning the transcript of the entire trial just to illustrate this point but according to the audio record of proceedings on 14 October 2020 (1^st-day trial) between 1054 hours to 1122 hours, Ms Ng orally used the term “management fee(s)”, instead of the term “further contribution and/or revised monthly payments” for no less than 7 times in her oral submissions.

32.  Ms Ng’s attempt to nitpick one term in one paragraph of the Judgment and to elevate it as a ground of appeal is disingenuous.

33.  Incidentally, I have another observation when studying the last sentence of Sam Woo’s Ground 2, which states that:-

“… Therefore, when the IO prepared the annual budget account for the current financial year, which did not show valid separate accounts thereby indicating no accurate figure of shortfall/insufficiency and decided to levy further contribution and/or revise monthly payment, it was not made by reference to any insufficiency (hence, contrary to Clause 3(i)).”

34.  Sam Woo relies on Clause 3(i) to form the basis of the contention that there should be insufficiency before IO could levy contributions from the owners. However, I now have serious doubts whether it is appropriate at all for Sam Woo to invoke Clause 3(i) in the present circumstance of the Building.

35.  Clause 3(i) provides that :-

“If the total monthly payments payable to the Manager by the owners of the said premises under sub-clause (h) hereof shall be insufficient to cover all or any of the said costs charges and expenses then :-

(a)	Such owners shall make further contributions towards such expenses in the shares as provided in sub-clause (h) hereof; or
(b)	Pay to the Manager such revised monthly payment as the Manager shall think fit provided that such increase shall be in the proportion to the shares as provided in sub-clause (h) hereof.”

36.  Clause 3(h) stipulates the exact amount of monthly management fees payable by each and every units:-

“3.	Each owner shall be bound by and shall observe and perform the following covenants provisions and restrictions:-
	(h)	Each owner shall pay to the Manager on account of his share of the said costs charges and expenses the following sum:-
		(1)	$1,000.00 for Shop 1 on the ground floor per calendar month payable in advance;
		(2)	$150.00 for Shop 2 on the ground floor per calendar month payable in advance;
		(3)	$120.00 for Shop 3 on the ground floor per calendar month payable in advance;
		(4)	$150.00 for Shop 4 on the ground floor per calendar month payable in advance;
		(5)	$150.00 for Shop 5 on the ground floor per calendar month payable in advance;
		(6)	$150.00 for Shop 6 on the ground floor per calendar month payable in advance;
		(7)	$150.00 for Shop 7 on the ground floor per calendar month payable in advance;
		(8)	$150.00 for Shop 8 on the ground floor per calendar month payable in advance;
		(9)	$150.00 for Shop 9 on the ground floor per calendar month payable in advance;
		(10)	$150.00 for Shop 10 on the ground floor per calendar month payable in advance;
		(11)	$120.00 for Shop 11 on the ground floor per calendar month payable in advance;
		(12)	$150.00 for Shop 12 on the ground floor per calendar month payable in advance;
		(13)	$1,000.00 for Shop 1 on the first floor per calendar month payable in advance;
		(14)	$150.00 for Shop 2 on the first floor per calendar month payable in advance;
		(15)	$200.00 for Shop 3 on the first floor per calendar month payable in advance;
		(16)	$200.00 for Shop 4 on the first floor per calendar month payable in advance;
		(17)	$150.00 for Shop 5 on the first floor per calendar month payable in advance;
		(18)	$150.00 for Shop 6 on the first floor per calendar month payable in advance;
		(19)	$150.00 for Shop 7 on the first floor per calendar month payable in advance;
		(20)	$200.00 for Shop 8 on the first floor per calendar month payable in advance;
		(21)	$200.00 for Shop 9 on the first floor per calendar month payable in advance;
		(22)	$200.00 for Shop 10 on the first floor per calendar month payable in advance;
		(23)	$200.00 for Shop 11 on the first floor per calendar month payable in advance;
		(24)	$200.00 for Shop 12 on the first floor per calendar month payable in advance;
		(25)	$200.00 for Shop 13 on the first floor per calendar month payable in advance;
		(26)	$200.00 for Shop 14 on the first floor per calendar month payable in advance;
		(27)	$80.00 for Shop 15 on the first floor per calendar month payable in advance;
		(28)	$80.00 for Shop 16 on the first floor per calendar month payable in advance;
		(29)	$180.00 for each unit on the second to twenty fifth floors (both inclusive) per calendar month payable in advance;
		PROVIDED ALWAYS that such owner shall be personally liable to make such monthly payments whether or not his part of the said building is vacant or occupied and whether it has been let or leased to a tenant or is occupied by the owner himself or any other person.”

37.  Self-explanatorily from the wording of Clause 3(h), this clause was to set the monthly management fees payable by each unit at the time of execution of the DMC in 18 January 1983. By mathematical calculation, the total amount of monthly payments receivable by the Manager from all owners under Clause 3(h) was about $57,990.

38.  In my view, Clause 3(i) is to cater for the situation where the costs and expenses of managing the Building inflate as time goes by, and when the original level of monthly management income collectible under Clause 3(h) in the total sum of $57,990 become insufficient to defray all management expenses of the Building, then IO shall not be bound by the rates fixed under Clause 3(h) in year 1983 but shall be entitled to require further contribution or to adjust the rates of monthly management fees.

39.  It should be noted that the monthly management fee payable by Sam Woo (re Shop 1) under Clause 3(h) was $1,000 back in 1983. Evidence shows that the monthly management fee payable by Sam Woo was about $2,434 in September 2012; $3,161 in September 2013; $2,808 in September 2014; and $3,208 in September 2018.

40.  From the various accounting and financial records adduced, it appears that between the execution of the DMC in 1983[6] and up to the time when LDBM 252/2014 was commenced by Sam Woo in 2014[7], the monthly management fees payable by owners should have been adjusted for a number of times already. The first adjustment was probably a result of the Manager or IO’s exercising their power under Clause 3(i) to break through the fixed rates under Clause 3(h) upon realizing that the total monthly management income receivable thereunder in the sum of $57,990 became insufficient to cover all the management expenses of the Building.

41.  Therefore, by year 2014[8] or year 2020[9], we should no longer be concerning the question of whether the total amount payable under Clause 3(h) in the sum of $57,990 was sufficient or not because in year 2014 or year 2020, the monthly management income should far exceed the sum of $57,990 already. In my view, it is not appropriate for Sam Woo to still invoke Clause 3(i) in these proceedings when the particular circumstance contemplated by Clause 3(i) has become bygone and historical. It is even more absurd for Sam Woo to make use of Clause 3(i) to put forward the contention that “insufficiency” is the everlasting pre-requisite for IO to levy financial contributions from the owners.

42.  In my opinion, unless for the specific situation provided in Clause 3(i) which has already become historical by now, IO’s levying contributions or management fees from owners, whether at the prevailing rate or a revised rate, actually has nothing to do with Clause 3(i). IO could levy contributions based on various provisions in the DMC which obliges the owners to pay management-related expenses and empowers the manager to enforce the same. Clauses 2(f)[10], 3(f)[11] and 3(l)[12] are the examples just to name a few. Nowhere in those provisions or even the entire DMC requires that IO could demand financial contribution or management fees from the owners only when there is insufficiency.

43.  So to conclude, Sam Woo’s reliance on Clause 3(i) is obviously misplaced. Their utilizing this clause to form the foundation of their contention that insufficiency is the eternal prerequisite for IO to levy further contribution or management fees is fundamentally wrong.

44.  The discussion in paragraphs 33 to 43 above are not covered by the Judgment or the learned judge’s reasons in DCCJ 1271/2011. The parties have not attempted arguments on this point in these proceedings, probably not in DCCJ 1271/2011 either. These additional observations, nonetheless, are consistent with my finding/observation in paragraph 30 of the Judgment that whether there was surplus or insufficiency is wholly irrelevant to the owners’ obligation to contribute additional funds or make monthly payment.

45.  These additional observations on Clauses 3(h) and (i) are prompted by the way in which Ms Ng formulated her second ground of appeal and are prompted in the course of my dealing with such ground.  They are set out here for the sake of completeness in dealing with Sam Woo’s second ground of appeal.

46.  The reasoning in the Judgment was premised on the assumption that Clause 3(i) was applicable to the present case but even so, I found that a proper construction of Clause 3(i) still do not support the contentions advocated by Sam Woo. I have no intention to add such additional observation to the reasoning in the Judgment which by themselves are sufficient to dispose of Sam Woo’s application and arguments.

GROUND 3

47.  In Ground 3, Sam Woo states that:-

“… while it is accepted that the IO is entitled to maintain a certain level of surplus to cater for contingencies which the IO can properly do so by making all the necessary provisions and allowance as they deemed necessary in the annual budget, it is wrong for the IO to demand further contributions from and/or revise monthly payment of the relevant class(es) of owners when there is surplus in the budget account in the current financial year (as opposed to the actual surplus in the account of the previous financial year as worked out by deducting the total actual expenditures incurred from the actual payment of monthly payments received for that financial year) for the said class(es) which is the only reasonable combined effect and/or interpretation of Clauses 3(i) and (j) …

(a)	It is common ground that under the DMC, there are three types of owners, each of them is responsible for broadly three respectively types of Exercises;
(b)	As a matter of fact, each type of owners have accumulated different level of surplus;
	…” (emphasis added)

48.  This ground is convoluted. Sam Woo’s concession that IO is entitled to maintain a certain level of surplus to cater for contingencies is conceptually contrary to their contention that “only when there is a shortfall/insufficiency, then further contribution and/or revised monthly payment from that class of owner could be collected.”.

49.  It appears that Sam Woo tries to circumvent the contradiction by suggesting that IO could set aside a sum of money for contingency and have an item of “contingency” specifically included in the annual budget. She appears to suggest that the concept of insufficiency under Clause 3(i) shall mean insufficient after setting aside some surplus or money for contingency. To put it simply, Ms Ng is incorporating an element of “surplus” into the definition of “deficit” when the two literally cannot be amalgamated without compromising their true and natural meanings.

50.  To reply this, I would adopt paragraph 31 of the Judgment which states, inter alia, that I heard of no submission from Ms Ng as to the basis for contending that there must be an item described as “contingency” in the annual budgets or financial statements before IO could as a matter of fact and practice allow surplus to remain in their general fund account. Ms Ng’s attempted circumvention of the conceptual fallacy is unintelligent and artificial. She falls back to tendency of rewriting the DMC provision by adding even more words (being her innovative but incoherent definition of the term “deficit/insufficiency”) into Clauses 3(i) again.

51.  Paragraph 16 of Sam Woo’s Skeleton states that “where the wording is not crystal clear … a certain extent of ‘re-write’ is inevitable and hence should not be used as the yardstick in the interpretation exercise.”. It is unclear what “re-writing” Sam Wo is contemplating and such argument has never been put forward before.

52.  In any event, there is no ambiguity in Clauses 3(i) and 3(j). The interpretation contended for by Sam Woo amounts to adding some requirements to the DMC which are not there actually. Paragraphs 24 to 67 of the Judgment are my analyses on this question which I shall not repeat.

53.  As regards the quote in paragraph 47 above especially the underlined part and paragraphs 17 to 20 of Sam Woo’s Skeleton, with respect they are hard to follow both linguistically and conceptually. They are incompatible with reality and common sense.

54.  In relation to the alleged undesirable result or the so-called “awkward result” mentioned in paragraphs 21 and 22 of Sam Woo’s Skeleton[13], those suggestions are simply without evidential basis and are actually contrary to the evidence at trial. IO has already confirmed long time ago that they have prepared budgets/revised budgets in accordance with the requirements under Clause 3(f) such that owners would not be required to bear the management expenses which they are not obliged to bear under Clause 3(f). IO has also adduced budgets and/or accounts prepared or audited by auditors as proof which Sam Woo was not in a position to challenge. In my view, the “awkward result” in applying Clause 3(i) to nowadays situations all the more demonstrates that Clause 3(i) is not meant for application at all times but was designed for the specific circumstance mentioned in paragraph 38 above.

55.  In relation to the indiscriminate use of surplus argument caused by my interpretation of Clause 3(j)[14] as contended in paragraph 23 of Sam Woo’s Skeleton, I would deal with it by four steps.

56.  First, on fact I found no evidence of owners having had a pattern of regularly using ground floor owners’ surplus which caused unfairness to ground floors. Even assuming that there is, the problem could be resolved by the available means under the DMC and/or the BMO instead of rewriting the DMC. I shall not repeat the analyses which are set out in paragraphs 57 to 67 of the Judgment.

57.  Secondly, on law, I discussed the issue of surplus and the interpretation of Clause 3(j) in paragraphs 32-56 of the Judgment. In short, I opine that whether there is surplus or insufficiency is wholly irrelevant to Sam Woo’s liability to pay contribution and management fee (paragraph 30 of the Judgment).

58.  The third point is about implied terms. Clause 3(f) concerns the owners’ obligation to pay and it provides that all owners should contribute to the management expenses subject to certain qualifications[15]. Clause 3(j) concerns how the surplus is to be used. There is no requirement whether in Clause 3(j) or in the entire DMC that the surplus should be apportioned between owners by reference to their payment obligation in Clause 3(f).

59.  In the absence of such a restriction on the use of surplus, the applicant could only contend for the same by persuading the court to imply such a term in to the DMC. For the various reasons explained in paragraphs 50 to 56 of the Judgment which I shall not repeat, I opined that Sam Woo failed to satisfy the legal requirements for the court to imply into the DMC terms requiring the surplus be used in the specific way as they desired.

60.  Last but not least, I shall emphasize that this case has never been about actual unreasonable utilization of surplus by the manager or IO which was already pointed out in paragraph 44 of the Judgment. No evidence was adduced and no argument was made as to how the surplus has actually been used or is intended to be used. Sam Woo’s complaints as to how the surplus is to be used by IO is both irrelevant and highly speculative.

GROUND 4

61.  Sam Woo contends that it is wrong for me to proceed to analyze the figures extracted from the audited accounts, which are incomplete and unreliable, without inviting the parties to make submissions thereof, and that I erred in forming the view that Sam Woo was the one that caused or contributed to the perceived unfairness which view was without evidential basis.

62.  I shall point out that the account documents which have been used in the analysis are already in evidence.  In these proceedings, Sam Woo is the party which alleges that ground floor owners’ accounts always (or usually) have surplus whereas upper floor owners’ accounts always (or usually) have deficit hence there would be indiscriminate use of ground floor’s surplus to subsidize other owners.

63.  Should Sam Woo consider the figures in the existing evidence incomplete and unreliable, it is always up to them to make submissions accordingly and to adduce whichever evidence they consider complete and reliable for the court’s consideration.

64.  In my view, it is within my judicial function to analyze the evidence adduced by the parties in order to assess whether certain allegation is substantiated by evidence or not. Ms Ng’s suggestion that a judge is obliged to have in readiness at trial all intended analyses of evidence and judicial reasoning and to have them rehearsed or revealed to the parties in advance at trial for their comments or else such analyses or reasoning could not be included in his judgment is unorthodox and unheard of.

65.  More importantly, I actually did not conclude or “form a view” that Sam Woo was the one that caused or contributed to the perceived unfairness as alleged by Ms Ng in Ground 4. To the contrary, in paragraph 63, I made clear that the analysis of the data shown in the audited accounts are subject to two qualifications.

66.  The first qualification was that I actually have no definite answer as to whether the protracted litigation between Sam Woo and IO was the actual cause of upper floors’ deficit balance in certain years although that could be a probable cause. I do not think Ms Ng could sensibly exclude this possibility.

67.  The second qualification was that my analyzing the audited accounts shall not be taken as my approval of the microscopic way in dealing with the surplus as contended by Sam Woo. The purpose of my analyses is to illustrate that even if I conceptually buy into Sam Woo’s microscopic approach, as a matter of evidence I still do not observe a consistent pattern of unfair utilization of ground floor’s surplus to subsidize other owners as alleged by Sam Woo at trial.

68.  So to describe the situation more accurately, it is Sam Woo’s allegation as summarized in the second sentence of paragraph 62 above, rather than my observations on the evidence, that is without evidential basis.

69.  In any event, I already made clear in paragraph 67 of the Judgment that my analyses of the factual evidence including the accounting documents is only secondary as Sam Woo’s case shall be defeated as a matter of law because I disagreed with their interpretation of the relevant DMC provisions.

GROUND 5

70.  Sam Woo contends that the ruling that there is no requirement in the DMC for surplus from a particular class of owners be strictly applied only towards the expenditure of that class of owners will result in the use of the monthly contribution from a particular class of owners to defray expenditures of other class of owners is in breach of Clause 3(f) and in contradiction with the ruling about keeping of separate accounts.

71.  This argument in essence is the same or similar to Sam Woo’s argument under Ground 3 as summarized in paragraph 55 above. I shall adopt paragraphs 56 and 60 above to deal with this ground.

72.  In response to paragraph 30 of Sam Woo’s Skeleton in particular, I see no contradiction between my endorsing the need to maintain three separate accounts in order to carry out the payment obligations of the owners under Clause 3(f) and my rejecting the microscopic management of surplus under Clause 3(j) as contended by Sam Woo.

GROUND 6

73.  Ground 6 is that by reasons of Grounds 1 – 5, I was wrong in ruling that Sam Woo is liable to pay to IO the outstanding management fee from September 2012 to December 2018 in the total sum of $237,884.

74.  As I do not accept that Grounds 1 – 5 are convincing or arguable, this ground should also fail.

GROUND 7

75.  Reiterating their arguments in Ground 4, Sam Woo alleges that IO has no basis to claim management fees from Sam Woo and IO’s “attempt to bypass the requirements set out in the DMC by way of resolutions is doomed to fail as this is expressly prohibited by Clause 13(k)(iii).”. It was said that I did not deal with this point in the Judgment.

76.  First of all, this ground is premised on Ground 4. As Ground 4 cannot stand for the reasons set out above, this ground should also fail.

77.  Secondly, as I fundamentally did not agree with Sam Woo’s interpretation of the DMC provisions, I certainly would not and did not agree that the DMC has the particular kinds of requirements which Sam Woo accuses IO as trying to bypass.

78.  I consider that Sam Woo’s contentions in LDBM 255/2018 have been adequately dealt with in paragraphs 90 to 98 of the Judgment.

CONCLUSION

79.  Section 11(2) of the Lands Tribunal Ordinance provides that any party to the proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law, subject to section 11AA.

80.  Section 11AA(1) requires that leave shall be obtained from the Tribunal or the Court of Appeal before an appeal under section 11(2) can be made.

81.  Section 11AA(6) provides that leave to appeal shall not be granted unless the Tribunal is satisfied that:- (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard.

82.  As Sam Woo’s intended appeal does not have a reasonable prospect of success, leave is refused.

COSTS

83.  Parties agreed that costs of the leave application should follow the event. I therefore order Sam Woo to pay IO’s costs of the leave application, to be taxed on the District Court scale if not agreed with certificate for Counsel granted.