Universal Property Management Services Limited v. The Incorporated Owners of Ying Ga Garden

For Circulation

Building Management Case No. 33 of 1997

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HEADNOTE

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Building Management - Contract - Management Agreement - Deed of Mutual Covenant - Termination of Contract - Notice of Termination - Locus Standi - Right to Commence Action - Meaning of "Manager" - Section 45, Building Management Ordinance, Cap. 344 - Seventh Schedule, Building Management Ordinance, Cap. 344.

The applicant took over management of the respondent's building from the original manager appointed by the deed of mutual covenant. The deed of mutual covenant provided for termination of the manager's service by three months' notice. When the applicant's management service contract came to an end after two years due to effluxion of time, the applicant was retained for a further period of three months by mutual agreement through correspondence. The initial management service contract provided for termination at any time after the first year by giving three months' notice. The correspondence for the extended period of three months contained no express terms and conditions of engagement. When the extended period expired, the applicant continued to provide service for some months without any express agreement or formal arrangement. The respondent eventually appointed a new service company to replace the applicant and give the applicant one month's notice to terminate its service. The applicant, relying on the deed of mutual covenant, the terms of its initial management service contract with the respondent, the length of the extended term upon termination of the initial management service contract and the provisions in the Seventh Schedule to the Building Management Ordinance, Cap. 344, contended that three months' notice of termination should be given and applied to the Tribunal under the Building Management Ordinance, Cap. 344 for relief. The Seventh Schedule to the Building Management Ordinance, Cap. 344 provides for an elaborate procedure including the giving of three months' notice of termination for removal of a building manager.

Held: (1) S. 45 of the Building Management Ordinance, Cap. 344 provides that the a limited category of persons including building managers may commence proceedings at the Tribunal. On the true construction of Section 34D, Part IVA of the Building Management Ordinance, Cap. 344, only a manager who is for the time being managing the building in question may commence proceedings. (2) The Building Management Ordinance, Cap. 344 deals solely with on-going building management problems. Once a party has ceased to be the manager, right of action pertaining to service contract cannot be based on the Ordinance, but on general law relating to, say, breach of covenant, breach of contract, amount due or tort and action should lie in a conventional court instead of the Tribunal. The applicant's application to the Tribunal is misconceived and may be dismissed forthwith. (3) On the true construction of deed of mutual covenant, the need to give three months' notice of termination applies only to the first manager of the building appointed by the deed of mutual covenant. In any event, notice of termination is not required when the management service contract terminates by effluxion of time. By the same token, the agreement for extension of service by three months came to an end by effluxion of time. (4) The relationship between the applicant and the respondent after the agreement for extension of service for three months had expired should be determined by looking at the intention of the parties objectively. In the absence of express agreement or formal arrangement, the continuation of service after the agreed extended time expired may be regarded as either supply of service under a contract implied by conduct or gratuitous supply of service with entitlement to quantum meruit. In either case, there is no need for notice longer one month to terminate the arrangement. (5) According to Paragraph 7(4), the provisions for removal of a building manager under that Paragraph in the Seventh Schedule to the Building Management Ordinance, Cap. 344 do not prejudice any other power to terminate a manager's appointment. The appointment of a manager may be terminated in accordance with the contract or other arrangement between the manager and the employer. (6) Accordingly, application dismissed with costs.

L.T. Case No. BM33 of 1997

IN THE LANDS TRIBUNAL OF HONG KONG

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JUDGMENT

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The Applicant used to be the building manager of Ying Ga Garden situated at No. 34 Sands Street, Kennedy Town, Hong Kong ("the Building"). The Respondent is the collective body of owners of the Building incorporated under the Building Management Ordinance, Cap. 344 ("the Ordinance").

2. The sequence of events leading to the present dispute is this. The management of the Building was originally entrusted to a service company specifically named in the Deed of Mutual Covenant in force for the Building ("the DMC"). The Applicant became the manager of the Building for a term of two years commencing 1^st June, 1994 by virtue of a written Management Agreement dated 26^th April, 1994 ("the initial Agreement"). The Applicant was remunerated at the rate of $14,000 per month net. Although the initial Agreement terminated by effluxion of time on 31^st May, 1996, the Applicant was retained for another 3 months ending 31^st August, 1996 by virtue of a letter from the Respondent to the Applicant dated 29^th June, 1996 ("the Extension Agreement"). Thereafter, the Applicant continued to provide the same kind of service at the Building without express agreement with the Respondent. On 28^th December, 1996, the Respondent through its solicitors served notice of termination of engagement upon the Applicant to take effect one month thereafter. In due course, the Applicant withdrew from the Building and another service company has taken over management of the Building. On 31^st January, 1997, the Applicant applied to the Tribunal under the Ordinance for determination on the question of length of notice required to terminate the engagement. Both parties agree that the question of length of notice required to terminate the engagement is the only issue for the Tribunal.

3. With respect, I suggest neither party has addressed an essential preliminary point of law. The jurisdiction of the Tribunal over building management matters is defined by s. 45 of the Ordinance. There it is provided that:-

"(2)No person other than a person to whom this section applies shall be competent to commence any proceedings referred to in subsection (1).

(4)This section applies to the following persons, namely---

(e) a manager within the meaning of Part IVA;"

In s. 34D, Part IVA of the Ordinance, we find that "manager" in respect of a building:-

"means the person who for the time being is, for the purposes of the deed of mutual covenant in respect of the building, managing that building."

4. The Applicant assumes that having provided manangement service at the Building it is the manager within the meaning of the Ordinance and therefore entitled to apply to the Tribunal for relief. I have no doubt that the Applicant cannot be regarded as for the time being managing the Building. Once the Applicant for whatever reason, due to fault or no fault of its own, has ceased managing the Building it is no longer entitled to apply to the Tribunal under the Ordinance for relief. It would be different if, for instance, the words at the material time were used instead in the definition of "manager". There is a very simple reason for the definition as it is. The Ordinance deals solely with on-going building management problems. Once a party has ceased to be the manager, right of action pertaining to the service contract cannot be based on the Ordinance, but on general law relating to, say, breach of covenant, breach of contract, amount due or tort and action should lie in a conventional court instead of the Tribunal. In LUK Chi-wing v. Incorporated Owners of Mandarin Building, BM137 of 1996, the Tribunal has already held that, by the same token and on the true construction of s. 45(4) of the Ordinance, once a party has ceased to be an owner of property in the building in question, proceedings by that party that would otherwise fall within the jurisdiction of the Tribunal would have to be brought under general law to a conventional forum instead of the Tribunal. In the premises, this application herein is misconceived. For want of jurisidiction, I may dismiss this application without further ado.

5. In case I am mistaken on the jurisdictional point, I proceed to consider the substantive merits of the Applicant's case. The Applicant contends that the length of notice of termination should be 3 months by virtue of the DMC, the Extension Agreement and the Ordinance. I shall deal with the matter under these heads.

The DMC

6. The Applicant relies on SECTION VI Clause A of the DMC the relevant parts of which are set out below:-

"2.(a) The Manager PK PROPERTY MANAGEMENT LIMITED is hereby appointed the first manager to manage the said Building for ther term of TWO years from the date of the Occupation Permit of the said Building and thereafter shall continue to manage the said Building until either its appointment is terminated by effluxion of time or by resignation from such appointment by the Manager giving three months' notice in writing to the Owners' Committee or by the Owners' Committee gving the Manager 3 months' notice to remove the Manager or to terminate the service of the Manager upon and by virtue of a Resolution of the Meeting of the Owners under Section VIII hereof..

(b)Upon termination of the Manager's employment in whatever manner this may occur, the following provisions shall apply, viz :-

(i) The Owners' Committee shall immediately thereafter appoint another service company or agent as Manager in its stead and on appointment thereof the Owner's Committee shall on behalf of the Owners enter into a Management Agreement with such service company or agent defining the rights, duties and obligations of the Manager;"

The Applicant further refers to the definition of "Manager" in SECTION I of the DMC which says,

"In this Indenture the following words and expressions shall have the following meanings ascribed to them except where the context otherwise requires:-

"Manager" PK PROPERTY MANAGEMENT LIMITED or any other manager (whose principal business is that of estate management) for the time being appointed as Manager of the said Land and the said Building pursuant to the provisions of this Indenture."

7. Counsel for the Applicant contends that the Applicant is "other manager for the time being appointed as Manager" within the meaning of "Manager" as defined by the DMC and hence Clause A 2(a) in SECTION VI of the DMC applies to the Applicant just as it applied to PK Property Management Limited. Counsel for the Respondent argues that Clause A 2(a) in SECTION VI of the DMC applies to PK Property Management Limited only. Since the definition of "Manager" in the DMC is subject to exception as the context otherwise requires, Clause A 2(b) in SECTION VI of the DMC is of particular importance. Clause A 2(b)(i) clearly provides that the rights, duties and obligations of a subsequent manager must be defined in a management agreement. In the premises, I have no hesitation to hold that the context requires that "Manager" in Clause A 2(a) in SECTION VI of the DMC refers to PK Property Management Limited solely. It follows that the Applicant cannot claim entitlement to 3 months' notice of termination under Clause A 2(a) in SECTION VI of the DMC.

The Extension Agreement

8. Both parties agree that the initial Agreement binding on them earlier expired by effluxion of time. Nonetheless, the Applicant contends that the Extension Agreement for a further period of three months incorporated the same terms and conditions in the initial Agreement. There is a proviso in Clause 1 of the initial Agreement which reads:-

"either party shall have the right to terminate this agreement upon or at any time after the first year of the said term by giving to the other party three months' prior notice in writing."

9. A moment's reflection should reveal that the Applicant's case here cannot be tenable. Assuming the proviso formed part of the Extension Agreement, one must remember that the initial Agreement between the parties expired by effluxion of time, not by notice of termination. Once the Applicant accepts that the initial Agreement expired on its contractal termination date without need for the Respondent to give three months' notice of termination, the Applicant must see that the Extension Agreement could also die of natural death, as it were, upon expiry of the three months' extension period. There is no need for the Respondent to serve any notice for the Extension Agreement to expire by effluxion of time. After all, that is the whole point of a fixed period contract.

The Ordinance

10. The Applicant refers to Paragraph 7 in the Seventh Schedule to the Ordinance which provides for an elaborate procedure, including 3 months' prior notice, for termination of the appointment of a building manager. I see no need to go into the details of the termination procedure laid down in that paragraph. I have in fact at the trial referred the parties to Paragraph 7(4) which says that,

"This paragraph operates without prejudice to any other power there may be to terminate the manager's appointment."

11. Obviously, any other power to terminate a manager's appointment within the meaning of Paragraph 7(4) may be contractual. As a matter of broad principle, I find that the appointment of a manager may be terminated in accordance with the contract or other arrangement between the manager and its employer. No one can seriously suggest that a fixed period management agreement cannot be terminated except by following the elaborate statutory procedure laid down in Paragraph 7 in the Seventh Schedule to the Ordinance. I hold that the statutory procedure for termination does not apply in this case.

12. What remain to be considered then are the relationship, rights and duties of the parties after the Extension Agreement expired by effluxion of time. Clearly, the proper test should be the intention of the parties as viewed objectively. The Respondent did not offer an extension for a fixed duration. The Applicant did not press for protection of an express contract either. So, putting the Applicant's case at its highest, the parties had a contract by conduct whereby the parties impliedly agreed for the Applicant to provide services on the same terms and conditions as the Extension Agreement which in turn incorporates the terms and conditions of the initial Agreement so long as they are relevant and applicable. Since the parties did not see fit to agree on a specific duration for provision of services, and the remuneration of the Applicant was calculated on monthly basis, an objective bystander would agree that the duration of the service contract by conduct would be monthly and automatically renewable until termination by reasonable notice. Reasonable notice in the circumstances would be one month because the service contract had become monthly by implication.

13. Another equally tenable proposition, I should think, is that since the parties did not see fit to enter into an express contract, there was no intention to create a binding legal relationship and the Applicant was entitled to only quantum meruit for valuable services rendered without a contract. In the circumstances, there is not even the requirement of notice to terminate for either party was entitled to part company at any time.

14. Whether on the basis of service contract by conduct or gratuitous services with entitlement to quantum meruit, I hold that the Applicant could not expect from the Respondent longer than one month notice to withdraw its services at the Building.

15. Accordingly, there is judgment for the Respondent. The Respondent in its Amended Notice of Opposition seeks an order by way of counter-claim that the Applicant complies with Paragraph 8 of the Seventh Schedule to the Ordinance. There has been no opposition to such counterclaim. Even though the Applicant's application has been held to be outside the jurisdiction of the Tribunal, I see no reason not to make such an order to enforce Paragraph 8 of the Seventh Schedule to the Ordinance to ensure complete handover of management to the new manager already in place. The order is hereby made with time for the Applicant to comply extended to within two months after the date of this judgment. There is also order nisi for costs to the Respondent with certificate for counsel, such costs to be taxed if not agreed unless application is made within 21 days from the date of judgment to vary the order.

Dated this day of July, 1997.