HONG YIP SERVICE CO LTD v. MAURETANIA CO LTD

HCSA 75/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. 75 OF 2003

(ON APPEAL FROM SMALL CLAIMS TRIBUNAL CLAIM NO. 23046 OF 2003)

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J U D G M E N T

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1. This is an application for leave to appeal from the decision of the Small Claims Tribunal given on 3 November 2003.

2. In the proceedings below, the Claimant - a building manager, claimed payment of outstanding air-conditioning charges for December 2002 and January 2003 in respect of certain office units (units 2303 to 2305) in a commercial building known as Hong Kong Plaza, situated at No. 188 Connaught Road West, from the Defendant - the registered owner of the units in question. The Defendant accepted that it had not paid the air-conditioning charges. Its case was that the units were "vacant and unoccupied [for] over 25 days" per month during the relevant period of time, and pursuant to the provisions in the Deed of Mutual Covenant governing the commercial building in question, only 50% of the standard monthly contributions for air-conditioning expenses were payable. The Defendant therefore denied liability in respect of the remaining 50% of the monthly contributions, which thus became the subject matter of the claim.

3. The Tribunal rejected the construction placed by the Defendant on the relevant provisions. The Tribunal also held that the provisions were not "unconscionable" in the circumstances of the case and rejected the Defendant's claim for relief pursuant to section 5 of the Unconscionable Contracts Ordinance (Cap. 458). The Tribunal gave judgment in favour of the Claimant accordingly. Upon the Defendant's application for review, the Tribunal maintained its original decision.

4. The Defendant now applies for leave to appeal from the Tribunal's decision given on review.

5. The Deed of Mutual Covenant in question, to which the Claimant is a party, provides in Section D, entitled "Management Expenses", paragraph 7 as follows:

"7.

The Owners of any part of the Building shall be personally liable if more than one shall be jointly and severally liable to make the above payment to the Manager irrespective of whether his premises are vacant, let or occupied. Provided one half of monthly contribution for the air-conditioning expenses shall be payable by the Owners for their unit(s) which is/are leaving vacant and unoccupied over 25 days for that particular month. For the purpose of this Clause any dispute as to the premises which is vacant or unoccupied the decision of the Manager in this regard shall be final and conclusive."

6. According to the Defendant's case, the office units were fully furnished. Many personal items were kept in the premises, and they were used by the Defendant's director (Dr Chan) and his wife when they attended the premises. However, they only so attended the units several days a month for some miscellaneous purposes. For most of the time, nobody attended the units, and certainly the air-conditioning supply was not turned on when the units were not in use. The Defendant therefore argues in this application (as it did before the Tribunal) that the units have been left "vacant and unoccupied [for] over 25 days" per month during the material time, and thus qualified for 50% payment of the monthly contributions for air-conditioning expenses. The Defendant argues that "vacant and unoccupied" is not equivalent to being empty, but simply means "available for immediate use". It refers to "vacant" lavatories and "vacant" hotel rooms to illustrate its argument.

7. There are quite a few cases on the meanings of "vacant", "occupied", "in occupation of" and "unoccupied": see Stroud's Judicial Dictionary (5th ed.) for the judicial meanings that have been given to these words. But each case must be decided according to its own facts and particular context, and generally speaking, the relevant wording should be understood in accordance with its natural and ordinary meaning.

8. I need not attempt any exhaustive definition of "vacant and unoccupied" here. Suffice to say that on the facts of the present case, I have no doubt that "vacant and unoccupied" does not bear the meaning suggested by the Defendant. In my judgment, on the facts, the units were clearly "occupied" by the Defendant during the whole of the two months in question even though only occasionally did Dr Chan and his wife attend the units.

9. In my view, on the facts, occupation does not mean physical attendance/presence during all or most of the time, and there can be occupation throughout without physical attendance/presence during all or most of the time. Indeed I do not think a temporary physical absence of the owners or occupiers of days, or even months, would make any difference at all in the present context. Here, I am concerned with fully furnished premises in which various items and articles are kept for use by the owner whenever he attends the premises - which the owner does, albeit only infrequently, for his own purposes. I am not concerned with cases like where an owner has vacated the premises, but has simply left a broken and abandoned piece of furniture or two in his premises, or only returns to the premises from time to time to check, for instance, that they are in good condition or have not been trespassed upon by others, or, again for example, to take potential tenants to view the premises.

10. I find the examples of "vacant" lavatories and "vacant" hotel rooms inapt and unhelpful in the present discussion.

11. The provisions in question concern payment of air-conditioning charges. The rationale for the 50% concession is not difficult to discern: if the owners have vacated the premises and nobody is occupying the premises, and the units are not put to any use at all, then quite certainly no air-conditioning supply would be required or consumed, in which case there would be justification - both on the merits and administratively from the angle of the manager - for granting a 50% concession on the monthly contribution for air-conditioning expenses. (The 50% payment may be seen as a contribution to air-conditioning supply in respect of the common parts of the commercial building.)

12. Once one moves away from the above scenario, there can be all sorts of possible situations where the same consideration may or may not apply. There is nothing unthinkable or unreasonable for the parties to agree, for the sake of administrative certainty if nothing else, that in all those other situations - i.e. situations falling short of the first-described scenario, no concession should apply and the full air-conditioning contribution must be paid. In other words, I do not think the construction favoured by the Tribunal would give rise to so absurd, irrational, unduly unfair or unreasonable a result that it could not be ascribed to the objective intention of the parties. (I need not go so far as to say that the first-described scenario is the only case where a concession would apply - as I said, I need not attempt an exhaustive definition of "vacant and unoccupied" here. My instant focus of discussion is on the objective intention of the parties and the avoidance of reaching a construction of the Deed that would give rise to an absurd, irrational, unduly unfair or unreasonable result.)

13. In my judgment, it is plain beyond argument that "vacant and unoccupied" does not apply to the situation of the Defendant's units in the present case.

14. So far as the Unconscionable Contracts Ordinance is concerned, the Ordinance only applies to a contract for the sale of goods or supply of services in which one of the parties deals as consumer. It is true that the manager is a party to the Deed of Mutual Covenant. However, in my view, the Deed is basically a contract under seal (as aided by statutory provisions in the Conveyancing and Property Ordinance, Cap. 219, regarding privity of contract) between the co-owners of the land and commercial building in question regarding, amongst other things, management of the building. In relation to this contract amongst the co-owners, I do not think the Ordinance has any application.

15. The Deed also, given that the manager is a party to the Deed, embodies a management contract between the manager on the one part and the co-owners on the other. In relation to this management contract, the Ordinance may well be applicable.

16. On the facts of the present case, I am inclined to think that the provisions on air conditioning charges relate more (if not solely) to the contract amongst the co-owners inter se, rather than the management contract with the Plaintiff, in which event the Ordinance may not apply at all.

17. But I need not express any definite view on the matter, which may have far-reaching implications. In the absence of elaborate and detailed arguments, I do not think it fair for this Court to express any definite view on the matter.

18. Suffice to say that for the purpose of the present application for leave to appeal, there are two conclusive answers to the argument raised by the Defendant. First, the Ordinance does not apply to contracts made before the commencement of the Ordinance in 1995 (section 4), and the Deed was entered into much earlier in 1983. That the Defendant only purchased the units in 2002 and thus became bound by the Deed is neither here nor there.

19. Secondly, in my judgment, there is nothing unconscionable about the provisions in question. Here, one is ultimately concerned with whether the provisions are "unconscionable". One is not merely concerned with whether the provisions would give rise to an absolutely fair or accurate distribution of the air-conditioning expenses in a particular situation. Something that is not absolutely fair or accurate may nonetheless be not unconscionable in a less-than ideal world.

20. On the material before me, it is plain beyond argument that the provisions are not unconscionable.

21. For all these reasons, no reasonably arguable grounds of appeal have been shown. The application for leave to appeal is therefore dismissed. I make no order as to costs.