WAH SING PROPERTY MANAGEMENT LTD. v. SIU WAI YIN AND OTHERS

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J U D G M E N T

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Fuad, V. -P.:

1. This is an appeal, pursuant t to leave granted by a member of this Court, by the Plaintiffs, Wah Sing Property Managment Ltd. from a decision given by Judge Roy in the District Court on 22nd December 1987. They succeeded in part of their Claim for money due against the three Defendants who trade as the Pao Sun Furniture Company and they seek, by this appeal, to recover all that they claimed in the action.

2. The Plaintiffs are the managers of the Dominion Centre at 45-59A, Queen's Road East. The Defendants own and occupy shops No 2 and 3 on the ground floor, which they bought in April 1987.

3. The Particulars of Claim, read with the Further and Better Particulars supplied at the Defendants' request, show that the total amount claimed by the Plaintiffs ($13,320) was made up as follows:

(a) $5,335.64 as their share of the expenses of the maintenance, repair or replacement of the central air conditioning system for the months of April to September 1987, and

(b) $7,984.36 as their share of the water and electricity charges for the air conditioning system for the period.

4. The Plaintiffs were awarded sum (a) but denied sum (b). The Defendants' case was that ever since they bought and occupied the shops they had used their own air conditioning plants and had not utilised the central air conditioning system. Therefore, they said, upon the true construction of the Deed of Mutual Covenant ("the Deed"), by which they admitted they were bound, they were not liable to pay either sum (a) or sum (b). They have not cross-appealed against the judgment entered against them.

5. The clause in the Deed under which sum (a) was claimed is in these terms:

"16. Each of the owners of an unit in the said building shall in respect of each unit owned by him pay in each calendar month in advance on or before the 1st day of each and every month to the Manager his share of the maintenance expenses hereinafter mentioned as contribution towards the costs of the following:-

(i) - (x)......

(ix) Maintaining, repairing or replacing the central air conditioning system or any part thereof.

The amount which each owner shall contribute shall be in proportion to the respective shares in the said premises and the said building for the time being vested in his".

6. Reliance was placed upon clause 46 of the Deed by the Plaintiffs in claiming sum (b). This is what the clause says:

"46 The water and electricity charges for the air conditioning system shall be apportioned and paid by the owner of the units on the basis of the area occupied by each unit and the method of apportionment shall be determined fairly by the Manager at its sole and absolute discretion and the decision of the Manager shall be final and binding on the owners."

7. The judge noted that different formulae were prescribed for calculating the sums due under clause 16 "in proportion to the respective shares in the said premises and the said building ... " and under clause 46 "on the basis of the area occupied by each unit ...". I mention here that he accepted the evidence given by the Plaintiffs that they assessed charges under clause 16 also on the basis stipulated in clause 46, i.e. on the basis of the area occupied, and that the charges under clause 16 would be greater if they were assessed in proportion to the owner's respective shares in the building. About this, the judge said:

"So although the Manager has not adopted the correct method as long as all unit owners are treated on the same basis, and the defendants are not objecting I likewise do not see any reason to quarrel with the actions of the Manager in this respect."

8. After explaining why he held that the Defendants were liable to pay sum (a) under clause 16 of the Deed the judge said that there was an ambiguity in clause 46 both as to who was liable to pay (each owner or just some owners) and secondly whether the apportionment was to be upon the basis of the area occupied or on the basis of some other method to be determined fairly by the Manager at its sole discretion.

9. He found it significant that clauses 16, 17, 19, 25, 42, 44 and 48 all used the term "owner of each unit" while clause 46 employed the term "the owner of the units" He also noted that in clause 41 the term "the owners of the units" was used when not all owners were obliged to pay. He therefore accepted the Defendants' submission that clause 46 was to be read as if it said: "owners who according to the method of apportionment determined fairly by the Manager." This led to a fairer result and was also consistent with the rest of the Deed.

10. As regards the method of apportionment used by the Manager, the judge said that he was unable to accept that every owner should pay for water and electricity whether or not he used the built-in air conditioning system, because the question whether an owner was liable to pay would depend on a method of apportionment fairly determined by the Manager. He was of the opinion that the exercise by the Manager of its absolute discretion would only be valid if it resulted in a method of apportionment which was fair since the Manager was required to act fairly. In his view, it could not be fair to charge owners for water and electricity they did not use. Therefore a charge against owners which had this effect was not the result of a valid exercise of discretion under clause 46. The evidence showed that this interpretation had already been adopted by the Manager in relation to shops 1 and 4 on the ground floor.

11. The judge also expressed his agreement with the Defendants' submission that such an interpretation of clause 46 was consistent with the user-payer principle exemplified in clauses 19, 20 and 21 of the Deed and with the emphasis on impartiality and fairness displayed in clauses 20, 41 and 46.

12. In the result, the judge concluded that the charges under clause 46 could only be imposed upon those owners whose units were connected to the central air conditioning system and those owners would pay on the basis of the area occupied by their units. He concluded his judgment as follows:

"It seems to me that my decision in this case also accords with common sense in that a central air conditioning system is provided in the building for the benefit of all unit-owners so all should contribute to its maintenance. If on the other hand any owner opts out of the system he still ought to pay his shares of the maintenance and up-keep of the system provided for all but ought not to be responsible for any part of the cost of water and electricity consumed in the running of the system."

13. With respect, in my view, the judge was persuaded to find a distinction without a difference in the use of the expression "owner of the units" in clause 46 and the expression "each of the owners of an unit" in clause 16 and certain other clauses.

14. No doubt clause 46 could have been better worded but I, for my part, find no ambiguity in its terms. The first part of the clause: "The water and electricity charges for the air conditioning system shall be apportioned and paid by the owner of the units on the basis of the area occupied by each unit" determines both the liability to pay and the basis upon which the amount due is be calculated. When the clause is read as a whole, "the method of apportionment [which is to] be determined fairly by the Manager" is a reference to the actual apportionment carried out by the Manager in accordance with the first part of the clause. The Manager must use the basis laid down in the first part of the clause and to make sense of the clause as a whole and to reflect the obvious intention of the parties by the words that they used in the Deed, the words "method of apportionment" in the second part of the clause must, in my judgment, be read as addressing the mode or manner of effecting the actual apportionment, that is to say the procedure by which the actual sums due is to be worked out.

15. I do not read clause 46 as containing the implication that payment of the charges covered by the clause is dependent upon the use of the central air conditioning system. When the parties to the Deed wished to stipulate that certain charges were not to be paid by everyone, they made it clear. For example, the owners of certain units are expressly exempted for the payment of maintenance and operating costs of the lifts in clauses 19 and 23, and see the proviso in clause 41 and also clause 21.

16. Despite the elaborate arguments pressed upon us by Mr. Johnny Mok for the Defendant, which found favour with the judge, I entertain no doubt that upon the true construction of the Deed the Defendants were bound to pay the charges sought to be exacted from them under clause 46.

17. I would allow the appeal and enter judgment in favour of the Plaintiffs for the full amount they claimed: $13,320 in substitution for the order made by the judge.

Kempster, J.A.:

18. I, too, would allow the appeal for the reasons given by my Lord the Vice-President.

Hunter, J.A.:

19. I agree.