VINCENT IP & ASSOCIATES LTD v. THE INCORPORATED OWNERS OF KAM MING COURT AND ANOTHER

[English Translation – 英譯本]
CACV 143/1999

 HEADNOTE

Section 17(1)(b) of the Building Management Ordinance, Cap. 344 – Section 48 of the District Court Ordinance, Cap. 336 – Section 32 of the Small Claims Tribunal Ordinance, Cap. 338

Enforcement by creditor of a judgment of the court against the incorporated owners of a building – enforcement of the judgment against an individual owner – must apply to the Lands Tribunal and not the District Court for leave – factors the Lands Tribunal should consider when granting leave

FOR REFERENCE
CACV 143/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

HIGH COURT CIVIL APPEAL NO. 143 OF 1999

(ON APPEAL FROM DCMP NO. 1430 OF 1998)

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BETWEEN

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Before: Hon Chan CJHC, Leong and Wong JJA

Date of Hearing: 25 November 1999

Date of Judgment: 25 November 1999

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JUDGMENT

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Hon Leong JA:

1. The Appellant Mr. Wong Man Yin was the first Chairman of the Incorporated Owners of Kam Ming Court (hereinafter called the Corporation).  In February 1995, the Corporation decided to carry out maintenance and repair works to the said building, and in January 1996 the Respondent Vincent Ip & Associates Limited was engaged to supervise the maintenance and repair works and ensure that the works would proceed properly.  The maintenance and repair works to the said building commenced in May 1996.  The Respondent signed the certificate of satisfactory completion of works for the contractor in November 1996.  However, the Corporation was not satisfied with the result of the maintenance and repair works because a number of items had not been completed properly.  The Corporation was of the view that the contractor had not discharged its duty to complete the works and that the Respondent should be held responsible for failing to supervise the works properly.  According to the contract, the Respondent was entitled to a service charge of $39,595.  The Corporation had, in line with the progress of the works, paid a substantial portion of the said charge, i.e. $23,757, leaving an outstanding balance of $15,839.  Both parties had a dispute over the balance.  The Respondent subsequently lodged a claim in the Small Claims Tribunal against the Corporation for $15,000, being the balance of the service charge.

2. On 27 November 1997 the Small Claims Tribunal ruled in favour of the Respondent and ordered the Corporation to pay the Respondent $15,000 plus costs of $300.  At that time, the Corporation did not send any representative to attend the hearing.

3. On 10 August 1998, on the basis that the Corporation had not yet paid the sum of $15,000 awarded by the Small Claims Tribunal, the Respondent applied to the District Court for leave to execute the said award against the Appellant Wong Man Yin, who was the owner of shop premises on Ground Floor, Block H, Kam Ming Court.  Deputy Judge Jenkins granted leave on 28 August 1998.  The Respondent proceeded to apply to the District Court for a charging order against the Appellant’s property at shop premises at Block H of Kam Ming Court for the sum of $15,000 awarded by the Small Claims Tribunal.  The charging order was made absolute on 9 November 1998.

4. On 13 May of this year the Appellant was granted leave by Her Honour Judge Barbara Chan to appeal out of time against the order made by Deputy Judge Jenkins on 28 August 1998 and to apply to set aside the said order.  The ground of appeal is straightforward.  The Appellant contends that the Respondent’s application on 10 August 1998 was not made in accordance with section 17(1)(b) of the Building Management Ordinance (Cap. 344).  The Appellant argues that the award of the Small Claims Tribunal was made against the Corporation and should therefore be satisfied jointly by all the owners of Kam Ming Court, and that the Respondent should not enforce the award against the Appellant alone.

5. I am of the view that the two parties to the present proceedings were the Respondent and the Corporation, and judgment was granted against the latter.  The Appellant was not a party to the proceedings.  Unless there is an express provision, the Appellant is not liable for the sum awarded in the proceedings.  Section 32 of the Small Claims Tribunal Ordinance (Cap. 338) provides that an award of the Small Claims Tribunal may be enforced in the District Court in the same manner as a judgment of that Court.  If a judgment creditor intends to enforce the award of the Tribunal by way of a charging order, he may apply to the District Court for that order.  However, the charging order can only be made against the losing party in the proceedings, which in this case is the Corporation.  Section 32 does not allow the judgment creditor to enforce the award against the chairman, other officers, committee members etc. of the Corporation.  There is nothing to show that the Respondent has enforced or attempted to enforce the award against the Corporation.  The Respondent has not proved that the Corporation is unable to pay the said $15,000 because of financial difficulty.  On the contrary, the Corporation has paid a substantial portion of the Respondent’s service charge.  There is no problem with the Corporation’s financial situation.  The reason why it did not pay the said sum may well be that it considered the Respondent’s service poor.  In my view, the sum awarded is not enormous, and the Respondent should enforce it against the Corporation.  It was not necessary to enforce, by the draconian means of a charging order, an award of the Small Claims Tribunal against someone who volunteered to serve on the Corporation.  The only way in which one can make sense of what the Respondent did is that the Appellant had blamed the Respondent for failing to supervise the works properly and therefore the Respondent acted against the Appellant.

6. The legal basis on which the Respondent relied in taking out its application of 10 August 1998 was section 17(1)(b) of the Building Management Ordinance.  This section provides that where a judgment is given against an owners’ incorporation, leave of the Lands Tribunal has to be obtained before the judgment can be enforced against an individual owner.  This is a mandatory provision.  Without leave of the Lands Tribunal, any enforcement of judgment against an individual owner is invalid.

7. Citing authorities in support, Counsel for the Respondent submits that the jurisdiction of the Lands Tribunal can be exercised by the High Court.  He takes the view that, by virtue of section 48 of the District Court Ordinance (Cap. 336) and section 32 of the Small Claims Tribunal Ordinance, the Respondent could apply to the District Court for leave to enforce the award of the Small Claims Tribunal against the Appellant, and such procedure had sufficiently complied with section 17(1)(b) of the Building Management Ordinance.  In my view, the Lands Tribunal and the District Court are courts of the same level, but the former is a specialist court which deals exclusively with matters related to land, including disputes involving incorporated owners, whereas the latter is a court having jurisdiction over general civil and criminal matters.  Not being a higher court, the District Court cannot exercise any jurisdiction of the Lands Tribunal.  This has been expressly provided for in the relevant legislation.  Section 17(1)(b) aims to protect individual owners and prevent a creditor of a corporation from abusing the right to enforce a judgment by arbitrarily picking innocent owners to shoulder the debts of the corporation.  Section 17 stipulates that this course can only be adopted with leave of the Lands Tribunal, and the District Court cannot take its place in granting leave.  For this reason, the application of 10 August 1998 was contrary to Section 17(1)(b), and the ensuing order could not take effect.  It follows that the charging order obtained pursuant to that order was also ineffective.

8. I allow the appeal and set aside the order of Deputy Judge Jenkins made on 28 August 1998 as well as all charging orders made pursuant thereto.

Hon Chan CJHC:

9. I agree with the Judgment of Mr. Justice Leong JA.

10. I would like to add some observations on section 17 of the Building Management Ordinance.  This section confers upon the Lands Tribunal the exclusive power to grant leave to a judgment creditor to enforce against an individual owner a judgment granted against an owners’ incorporation.  An order against an owners’ incorporation can be made by any other court, but only the Lands Tribunal is empowered by the law to grant leave to claim against an individual owner.  The Ordinance aims to protect not only the creditor, but also the individual owner. If a creditor is unable to obtain satisfaction of the judgment debt from an owners’ incorporation, he may in certain circumstances claim against an individual owner of the building, but he must obtain leave of the Lands Tribunal to do so.  Since the creditor provided service to the entire building, common sense dictates that he should claim against the owners’ incorporation in the first place.  If the owners’ incorporation has no assets and is unable to repay the judgment debt, it will become necessary to claim against an individual owner.  Generally speaking, an owners’ incorporation does have assets, including bank accounts (to facilitate periodic payment of management fees by the owners), to repay the debt.  Moreover, both the Deed of Mutual Covenant and the law contain provisions on the collection of management fees by an owners’ incorporation from individual owners in order to satisfy outstanding sums.  It should therefore be rarely necessary for a creditor to claim against an individual owner directly.  In deciding whether leave should be granted to a creditor to claim against an individual owner under section 17(1) of the Ordinance, the court should consider a number of factors, including: the steps taken by the creditor to enforce the judgment against the owners’ incorporation; the financial position of the owners’ incorporation and the assets it owns; whether any particular owner has benefited from the service provided by the creditor to the building; the reason(s) for claiming against a particular owner and not other owners; and so on.  Injustice may be caused if, in the absence of sufficient grounds, leave is granted to a creditor to claim against any individual owner.  If the chairman or other officers of an owners’ incorporation could easily be made subject to creditors’ claims, no one would volunteer to serve on the incorporation.  This certainly cannot be the intention of the legislature in enacting section 17.

11. It is worth noting that Mr. Wong has complained to and sought assistance from the relevant departments in relation to the present case.  The replies he received were “… [we] fully understand the distress that the owners’ incorporation and Mr. Wong are facing …”, “… [we] appreciate Mr. Wong’s enthusiasm in taking part in the work of the owners’ incorporation.  We hope that the owners’ incorporation and Mr. Wong can resolve at an early stage the dispute over the contract in question …”, “Mr. Wong and the owners’ incorporation may try to reach a consensus with the creditor as soon as possible to resolve the dispute …”, “… the departments concerned will keep an eye on the development of the matter and try their best to offer assistance …”.  In my view, if the relevant authorities are to encourage owners to actively participate in the matters of their owners’ incorporation, they should provide more positive and effective assistance.  If the relevant authorities consider that there are problems with the legislation, they should look into those problems and put forward remedial measures including legislative amendments.

12. For the above reasons, I agree that the appeal should be allowed.

Hon Wong JA:

13. I agree with the judgments of and the orders made by Mr. Justice Leong JA and the Chief Judge.

Hon Chan CJHC:

14. This Court unanimously allows the appeal and sets aside the order of 28 August 1998 made by Deputy Judge Jenkins and all charging orders made pursuant thereto.