NG YUI TONG v. TAIKOO SHING (MANAGEMENT) LTD

LDBM 191/2018, LDBM 196/2018 and LDBM 116/2019
(Consolidated)

[2021] HKLdT 10

LDBM 191/2018

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 191 OF 2018

_________________

BETWEEN

_________________

LDBM 196/2018

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 196 OF 2018

_________________

BETWEEN

_________________

LDBM 116/2019

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 116 OF 2019

_________________

BETWEEN

_________________

(Consolidated pursuant to the Order of His Honour Judge Michael Wong dated 23 June 2020)

_________________

J U D G M E N T

_________________

BACKGROUND

1.  This application concerns a residential and commercial development known as Taikoo Shing.

2.  Taikoo Shing was developed by 12 stages, each stage consists of a number of tower blocks and has its own Deed of Mutual Covenant and management agreement in similar terms, similar forms and the same material clauses.

3.  The Applicant has been a registered owner of Flat H, 10^th Floor, Fu Shan Mansion, Stage III since 1997. Stage III comprises 8 blocks of buildings[1]. The DMC for Stage III is dated 9 January 1978 and is registered at the Land Registry by memorial number 1488926 (“DMC”).

4.  The Respondent[2] was and is the appointed Manager of Taikoo Shing under the DMC.

5.  LDBM 116/2019 originates from HCA 1383/2013[3] under which the Applicant questions the Respondent’s power to organise activities of a social or recreational nature for the residents of Taikoo Shing.

6.  LDBM 191/2018 relates to a decision made by the owners of Stage III resolving to do certain renovation works on the planters outside each of their apartments as part of an overall renovation project of the exterior of the buildings.

7.  The Applicant contends that the resolution is void because the planter is owned by him and is not a common part hence the Respondent has no power to repair the same or to collect contributions for that purpose.

8.  LDBM 196/2018 relates to certain expenses (festive decorations, meal subsidy to the Respondent’s staff, etc.) included in the budget for the estate in 2018 which the Applicant considers objectionable.

9.  At trial, the Applicant appears in person and testifies himself. The Respondent is represented by Mr Hunsworth, solicitor-advocate of Messrs. Mayer Brown with Mr Cheung Lap Ting, the Chief Estate Manager, as their witness.

10.  These proceedings mainly involve dispute of law and the interpretation of the DMC rather than factual dispute between the factual witnesses.

LDBM 191/2018 (POWER TO HOLD ACTIVITIES)

APPLICANT’S CASE

11.  It is the Applicant’s case that since or about 2006, various activities purportedly of a social or recreational nature unrelated to nor requisite for the management of the estate have been organized by the Respondent. Those activities include:

(a)	dragon boat race;
(b)	anniversary dinners;
(c)	activities for senior residents, including but not limited to elderly health check programme;
(d)	special coach to Wo Hop Shek Cemetery at Fanling during Ching Ming Festival;
(e)	tower festive decorations and Mid-Autumn variety shows;
(f)	Chinese New Year tour and Easter tour; and
(g)	summer activities for 2013 and various interest workshops.
	(hereinafter collectively referred to as “the Activities”)

12.  The Applicant contends that:

(a)	the Activities are not necessary or requisite for or in connection with or reasonably incidental to the management of the land and the buildings, hence in breach of Clause 7(a) of the DMC;
(b)	the expenses on the Activities exceeded the scope of the annual budget as prescribed under Clause 8(a) of the DMC, hence in breach of the said provision;
(c)	the Activities do not serve the common interest or benefit of all the owners of the estate, hence the Respondent does not have lawful authority to hold the same;
(d)	by reason of the foregoing, the Respondent is not entitled to withdraw, use or seek reimbursement of monies or expenditures incurred in the Activities out of the management fund of the estate;
(e)	the Respondent stands to unjustifiable gain and profit by receiving remuneration and management supervision fee at 5% of all expenses and expenditure attributable to organizing the Activities under Clause 8(a)A(iv) of the DMC;
(f)	the Respondent shall be estopped from denying that they have no authority to hold the Activities because that was the conclusion made by their own legal advisors,[4];
(g)	the Respondent stands in the position of a trustee with regard to the management fund and therefore owes a fiduciary duty and/or duty of utmost good faith to properly apply the management fund; and
(h)	if the Respondent purports to exonerate its obligations or breaches by reliance upon the DMC provisions, such provisions are unconscionable, oppressive and unreasonable and should not be applied in the Respondent’s favour.

13.  The Applicant seeks the following reliefs:

(a)	an injunction to restrain the Respondent from organizing the Activities or such activities as are not necessary, requisite or reasonably incidental to the management of the estate;
(b)	a declaration that the Activities are not necessary, requisite or reasonably incidental to the management of the estate and that the Respondent shall not pay for the Activities out of the management fund of the estate;
(c)	damages;
(d)	an order that an independent auditor be appointed to examine the books and accounts of the Respondent relating to the Activities and application of the management fund, and submit to the Court income and expenditure report and assessed profits by the Respondent out of the Activities;
(e)	an order for discovery of the profits and gains by the Respondent out of the Activities, and an account thereof be taken and a refund by the Respondent of all profits obtained out of the Activities to the owners of the estate;
(f)	an order for the Respondent to account for, pay and refund all expenditures incurred for the Activities to the owners;
(g)	interest; and
(h)	costs.

RESPONDENT’S CASE

14.  The Respondent admits having organised the Activities.  They consider that such activities were for the benefits of the residents of the estate and were necessary or requisite for the management of the estate, falling within the ambit of what they could do under Clause 7(a) of the DMC.

15.  Disagreeing with the Applicant’s narrow construction of Clause 7(a), the Respondent contends that the management power thereunder shall not be confined to those matters that are “necessary or requisite” but should also cover matters that are “in connection with” the management of the buildings.

16.  The Respondent highlights that since Taikoo Shing opened its first stage in 1976 there has been a history of community activities being undertaken. This was traditionally regarded as being a way of fostering community spirit and promoting harmonious neighbourhood in the estate.

17.  Under the DMC, the Respondent has the overall management responsibility over the entire estate hand in hand with a body called the Management Liaison Council (“MLC”) constituted by the representative owners of the estate. Clause 6C empowers the MLC to monitor and control the budgets of the estate.

18.  Historically, a budget for all the said activities was prepared and included in the overall operating budget for Taikoo Shing for each year.

19.  For year 2013 in particular, the amount spent on community services expenses comprised only approximately 0.5% of the overall management expenditure. In the material years, the MLC approved the organisation of the Activities and also the budget earmarked therefor.

20.  The Respondent considers it impossible to manage a large scale estate such as Taikoo Shing if regard has to be had for individual preferences or choices of each individual owner and, for this reason, the system established in the DMC is a form of “representative democracy”. Individual owners can lobby or speak to the representatives of their block who sit on the Representative Committee. In turn, the members of the Representative Committee who sit on the MLC could raise matters and issues at meetings of the MLC which provides a forum for debate and resolution, and for the Respondent to know and receive the views of their owners as expressed by their representatives.

21.  As a matter of fact, the number of community activities has significantly decreased not least because of the Applicant’s commencement of legal proceedings. Of the various activities mentioned in paragraph 11 above, most of them have been abandoned due to the present litigation, the situation is set out in the table below:

Dragon Boat Race	No Dragon Boat Team has competed since 2013.
Anniversary Dinners	Apart from a dinner in 2017 to celebrate the 40th anniversary of Taikoo Shing, anniversary dinners have been suspended since 2013.
Senior Residents’ Activities	Apart from limited interest classes for senior residents (e.g. pop song classes or Chinese opera classes), all activities have been suspended since 2013. These include the important Health Talks and Health Checks and Anniversary and Christmas celebrations for elderlies.
Coach to Wo Hop Shek Cemetery	Suspended since 2013.
Tower Festive Decorations and Mid-Autumn Variety Shows	Both remain as annual events, save the Mid-Autumn Variety Show was not held in 2014 when District Council funding was not granted.
Chinese New Year and Easter Tour	Suspended since 2013.
Summer Activities	All suspended since 2013.

22.  Whilst the Respondent accepts that there is a contractual obligation upon it to carry out its functions in accordance with the DMC, they consider the Applicant’s assertion of some sort of fiduciary relationship owed to him is legally misconceived.

23.  The Respondent considers the plea in paragraph 12(h) above (i.e. about unconscionable DMC provisions) meaningless as the Applicant fails to identify which DMC provisions are “unconscionable, oppressive and unreasonable”.

24.  As regards the letters of advice from two law firms mentioned in paragraph 12(f) above, the Respondent say that they are no more than opinions which cannot oust or override the Tribunal’s jurisdiction to construe the words of the DMC and to rule the case. The Applicant’s contention that the legal opinions somehow created an estoppel is legal nonsense.

25.  The relief for damages is not supported by particulars. The Applicant claims that he suffered monetary loss of $527.80 presumably being his calculation of his contribution over all those years to the costs of the Activities. Given the triviality of the amount, the Respondent elected not to waste time and costs on auditing this figure.

DISCUSSION

Overview of DMC and Observations

26.  I shall begin by giving an overview of the DMC provisions governing the role of the Respondent vis-à-vis the role of the owners in the management of the estate. This exercise is essential to understanding the Respondent’s power under the DMC.

27.  Preamble (5) of the DMC stipulates that the Respondent:-

“… undertake the management, operation, servicing, maintenance, repair, renovation, replacement, security, and insurance of the said Land and the buildings thereon and their equipment services and apparatus (all or any of which activities are hereinafter included under the word “management”)”.

28.  Clause 6A of the DMC provides that the Respondent shall be the Manager of the entire Taikoo Shing. A similar clause is contained in the DMC for each and every stages. Pursuant to all the DMCs, the Respondent has managed all matters pertaining to the whole Taikoo Shing development since 1976.

29.  Clause 6B provides for the establishment of a “Representative Committee” which is a body having the function of, inter alia, representing all the owners in all dealings with the Manager through a body called “Management Liaison Council” (i.e. the MLC). This provision requires owners to elect two representatives from each block and two representatives from the owners of the shops to serve on the Representative Committee[5]. Clause 12 sets out the membership and meetings of the Representative Committee.

30.  Clause 6C provides for the establishment of the MLC and requires that each Representative Committee shall elect from their number not more than three persons to serve on such MLC which shall have meetings not less than 8 times a year. It further stipulates the powers and functions of the MLC which include, among other things, (a) to liaise with the Respondent in respect of all matters dealing with the management of the Taikoo Shing; and (b) to review the annual budget.

31.  Clause 7(a) of the DMC sets out the powers and functions of the Respondent both in broad term and specific term.

32.  The broad term is contained in Clause 7(a)’s introductory preamble which states that the Respondent:

“… shall have full and unrestricted authority to do all such acts and things as may be necessary or requisite for or in connection with the said Land and any of the buildings thereon and the management thereof including in particular but without in any way limiting the generality of the foregoing…”

33.  Clause 7(a) then sets out the specific powers in its sub-paragraphs (1) to (28). Sub-paragraph (24) provides that the Respondent shall have the power:-

“… to do all such other things as are reasonably incidental to the management of the said Land and the said buildings…”

34.  Clause 7(b) provides that all acts and decisions of the Respondent arrived at in accordance with the provisions of the DMC shall be binding on all owners.

35.  Clause 8 stipulates the preparation of budgets for the estate, to be divided into four parts. The first part covers expenditures on common areas and facilities; the second part concerns non-residential parts expenditures; the third part is about residential parts; and the forth part covers car-parking spaces expenditures.

36.  In my view, it is clear that the DMC envisages the Respondent to have the overall management responsibility over the entire Taikoo Shing. It shall manage the estate in consultation with the MLC which is a body substantially composed of owners’ representatives to represent the interests of all the owners and to exercise budgetary control.

37.  This management style of Taikoo Shing is echoed by what are said in the 65-page[6] celebratory booklet prepared for the Silver Jubilee of Taikoo Shing (“Jubilee Booklet”) in 2001. This booklet gives an overview on how Taikoo Shing had been managed and on the respective roles of the residents’ representatives and the Respondent over the management of the estate including the organization of the Activities. The Jubilee Booklet has some referential values.

38.  Page 7 of the Jubilee Booklet states, inter alia:

“… In offering these services to the residents, the particular style of management that has made Taikoo Shing so special through these years has been the emphasis placed on participation of the residents in the running of their common housing affairs. This participation started at the outset, 25 years ago, with the election of the first Tower Representative for Stage I. Today Taikoo Shing has a Representative Committee for each of its 12 Stages and a Management Liaison Council composed of 33 elected Councillors, representing the entire estate.”

39.  Pages 17 to 19 of the Jubilee Booklet is a summary of the residents’ participation in the management of Taikoo Shing:

Page 17

“Taikoo Shing residents’ representation and participation in estate management can be divided into two groups: the Representative Committees (“RC”) and the Management Liaison Council (“MLC”). According to the Deed of Mutual Covenant (DMC), two representatives will be elected from each tower. The Representative Committee in each stage (there are 12 stages in Taikoo Shing) will elect not more than three Councillors to form the Management Liaison Council. Under the supervision of the Management Company, all representatives and councillors are elected by the residents by secret ballots.

In accordance with the Deed of Mutual Covenant, the Management Company and the MLC have regular meetings at least eight times a year … Under the Management Liaison Council, there are six Sub-Committees. The Management Company encourages participation of the Representative Committees and the Management Liaison Council in these sub-committees.

• Security Sub-Committee…

• Finance Sub-Committee…

• Environmental & General Sub-Committee…

• Recreation Sub-Committee: To organise social, cultural and recreational activities for the residents of the estate

• Scout Sub-Committee: To cater for the children in the estate who cannot join the scout groups in their schools. This Scout Group is the 206^th Hong Kong Group of the Scout Association of Hong Kong.

(emphasis added)

Page 19

“Apart from the Representative Committees and the Management Liaison Council, the residents of Taikoo Shing can also have other channels to voice their opinions. In accordance with the Deed of Mutual Covenant, there is provision for an Annual General Meeting for each of the 12 stages. During these annual meetings, residents of each tower get together and freely discuss items of common interest: from finance to cleansing, from security to maintenance, from recreation to environment, etc. Their opinions are collected, recorded and acted upon to ensure that the management of the estate is carried out both for the well being and in the best interests of the residents themselves.”

40.  As could be seen from the above undisputed evidence, the MLC has 6 sub-committees to specialise and focus on different aspects of affairs of the estate. Of particular relevance to the present case is the “Recreational Sub-committee”.

41.  On page 63 of the Jubilee Booklet is an article written by the then chairman of the Recreational Sub-committee:-

“… I have been here for twenty years. In these years, I have participated in picnics, carnivals, parental talks, various competitions, Mid-Autumn Festival Variety Shows, dinner parties and lots of other activities which cannot be fully listed.

My relationship with Taikoo Shing became closer after I was elected as a Tower Representative a few years ago. Hand in hand, I worked with another lower representative on occasions like Christmas & Lunar New Year Tower Decorations. The results of these decorations were not bad. …

The above-mentioned activities were all organized by the Recreation Sub-Committee with help from the staff of the Community Relations Department^[7]. I learned the details of the operation only after I was elected as Chairman of the Recreation Sub-Committee. Generally speaking, the Committee will convene four to five meetings every year. The Community Relations Department will gather relevant information and execute suggestions from members after the meetings. I would like to take this opportunity to express my heartfelt gratitude to every staff member of the Department. It is my hope that we can organise more meaningful activities with greater variety for the residents, so that life in Taikoo Shing will become even more dynamic. (emphasis added)

42.  From the above contents of the Jubilee Booklet, it appears that the Respondent actually was not the decision-making body that decided whether to hold or not to hold certain activities for the residents. The owners’ representatives in the MLC, or more specifically the Recreation Sub-committee, seem to be the one that made the decision whilst the Respondent was more a facilitator to provide administrative support in the execution of the MLC’s decision.

43.  It should be noted that in the present proceedings, the Applicant has never challenged the power of the MLC or the Recreational Sub-committee to consider, discuss and resolve about recreational activities on behalf of the residents.

44.  But even if such challenge was raised, in my opinion, by reason of Clause 6B[8] and Clause 6C[9] it falls within the power and function of the duly elected residents’ representatives (to be collectively exercised through the MLC and/or the Recreational Sub-committee) to decide whether and what recreational activities shall be held and to recommend the same for the Respondent’s execution.

45.  Although the holding of recreational activities is not acts and things strictly “necessary or requisite for” the management of the land, Clause 7(a)(24) clearly empowers the Respondent to “do all such other things as are reasonably incidental to the management of the said Land and the said buildings”.

46.  I pause to point out that this case does not concern a situation where the manager in the purported exercise of their power carried out or imposed certain things on the owners against their wish. The reality is there has been a long history[10] of community activities being undertaken upon the decision and approval of the MLC with a view to fostering community spirit in the estate.

47.  Bearing that in mind, when the body of duly elected owners’ representatives (i.e. the MLC) having discussed, deliberated and resolved[11] that a modest fraction of the owners’ money shall be spent on providing community activities for the benefits of the residents as a whole, and if such expenditure has been properly approved through the budget approval procedure laid down in the DMC, I just do not see why the Respondent’s offering managerial support to execute such decision should not fall within “the things reasonably incidental to the management” in Clause 7(a)(24) of the DMC.

48.  With that being said, I am not suggesting that the Respondent should blindly carry out whatever decision reached by the MLC without any discretion. Clause 7(a)(24) by the phrase “reasonably incidental to the management” requires some degree of reasonableness and relevance in the exercise of such power. The question of reasonableness are facts sensitive but there is no need for me to embark on this topic because the Applicant’s case is not about the reasonableness of the decisions to hold the Activities. The Applicant’s case is – the Respondent has the power to hold recreational or community activities at all.

Recital (5)

49.  The Applicant contends that the management power under Clauses 7(a) and 7(a)(24) shall be restricted by Recital (5) and cannot be expanded to include recreational activities. The Respondent’s management power shall be limited to that of repair and keeping the main structure of buildings’ common areas in good condition and when necessary replacing the equipment[12] only.

50.  Recital (5) stipulates that the Respondent:-

“…undertake the management, operation, servicing, maintenance, repair, renovation, replacement, security, and insurance of the said Land and the buildings thereon and their equipment services and apparatus (all or any of which activities are hereinafter included under the word “management”)”.

51.  I do not see how on the natural and ordinary meaning of the words used in Recital (5), it could be contended that the management power shall be confined to that of repairing and maintaining the building structures, common area and equipment only.

Clause 7(a)

52.  The Applicant contends that the Activities are not necessary or requisite for or in connection with or reasonably incidental to the management of the land and the buildings, hence in breach of Clause 7(a) of the DMC

53.  Clause 7(a) provides that:

“Except as otherwise expressly provided by these presents, the Management Company shall be responsible for and shall have full and unrestricted authority to do all such acts and things as may be necessary or requisite for or in connection with the said Land and any of the buildings thereon and the management thereof including in particular but without in any way limiting the generality of the foregoing:

(24) To do all such other things as are reasonably incidental to the management of the said Land and the said buildings.”

(emphasis added)

54.  Mr Hunsworth for the Respondent submitted that in the phrase underlined in the quote above, the disjunctive “or” was used. The words “necessary”, “requisite” and “in connection with” are not conjunctive in the sense that they are joined together. Therefore, the Respondent shall have the power to do not only “all such acts and things as may be necessary or requisite for… the said Land” but also “all such acts and things … in connection with the said Land … and the management thereof”, which is broad enough to include the power to organise social and recreational activities.

55.  I agree with Mr Hunsworth’s textual analysis of Clause 7(a).

56.  In addition to such analysis, I also seek to interpret the relevant clauses having regard to the overall context of the deed, which is an approach endorsed by Ma CJ in Fully Profit (Asia) Ltd v Secretary for Justice, as well as the intention of the contracting parties to the deed. In Jumbo King Ltd v Faithful Properties Ltd & Others, Lord Hoffmann NPJ has this to say:-

“The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant. Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. The court is not privy to the negotiation of the agreement – evidence of such negotiations is inadmissible – and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain. The only escape from the language is an action for rectification, in which the previous negotiations can be examined. But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.”

57.  It is stated in the Jubilee Booklet that Taikoo Shing was Swire Properties Limited’s first major development in the early seventies, begun when they took over the former Taikoo Dockyard and obtained permission from the government to transform it into a residential estate. The completion of the first tower block, in December 1976, marked the beginnings of a complex that spreads to 53 acres, and is home to over 12,000 families, living in 61 residential towers. Taikoo Shing was and remains to be the largest private residential development in the Hong Kong Island.

58.  With such scale of development, it is unlikely that the developer and the draftsman of the DMC intended the deed be drawn up in such a way to give the Respondent a very restricted power to do things that are “necessary” or “requisite” for management only (such as structural repair and maintenance as suggested by the Applicant) so as just to meet the basic management needs of the residents but not anything else beyond that primary level.

59.  From the following “message” [13] by the then Managing Director of Swire Properties Limited published in the Jubilee Booklet, one can see the developer’s aspiration to provide an integrated environment for working, living and leisure to the residents:-

“… In Taikoo Shing we set out to create a new landmark in private urban development. We created a model of a comprehensive, self-contained city within the greater city that Hong Kong had become – one that offered its own rationale and set its own standards. We established an integrated environment for working, living and leisure, elevating the art of property management to the point where residents were invited to serve on committees through which they participated in the management process, long before our Government ever legislated for it. As a result, Taikoo Shing has reaped honours, earned awards and attracted envious imitation. …”

60.  To create such a living environment, the provision of some community activities to the residents should be within the scope of what could be done by the Respondent. Although the Jubilee Booklet was not prepared around the time when the DMC was executed, it had been published in 2001, more than 15 years before the present proceedings, and was unlikely a document made for a self-serving and defensive purpose in litigation. I see no reason not to believe in the truthfulness of what are stated therein by the developer with regard to their intended way and style of managing the estate.

61.  In my view, the Applicant’s narrow construction of the relevant clauses in the DMC to give the Respondent only very restricted management powers could hardly achieve the particular style of property management as intended by the developer and the draftsman of the DMC. That narrow construction may even bring about nonsensical result by forestalling activities (such as basic health checkup for elderlies, refuse recycling project or exchange of second-hand items etc.) simply because they are not “necessary” or “requisite” to the management of the estate despite these activities may be non-costly and beneficial to the residents. That does not make sense.

62.  In taking the above view, I am not laying down any general rule that manager of every building or estate must provide community activities or services for the benefits of the residents. Every case must be decided on their own facts with the particular terms of the DMC, the features of and any uniqueness in the subject estate taken into account. There may be situations where the estate or building is small with limited funds and resources and under such circumstance, the provision of recreational activities may not be well justified.

63.  What we concern here is a large urban development housing over 12,000 residential units and the amount spend on community services represents approximately 0.5% of the management of the estate. These may be relevant if one is to assess whether the extent of community activities provided and the expenditure thereon are excessive or just in moderation. But I have no intention to explore this area further as these proceedings are not about the reasonableness of the quantum of expenditures having been spent on community activities but are about whether the Respondent has the power to provide such activities as a matter of principle.

Clause 7(a)(24)

64.  In any event, I consider that the power to hold the Activities shall fall within the “the things reasonably incidental to the management” in Clause 7(a)(24) of the DMC. Paragraphs 26 to 48 are the analysis thereon which shall not be repeated here.

Clause 8

65.  The Applicant contends that the Activities were not within the items of expenditures allowed in the first, second, third and fourth parts of the annual budget prescribed in Clause 8(a).

66.  The short answer to this challenge is, Clause 8(a) is not the provision that governs the powers and functions of the Respondent, the Representative Committee or MLC, nor is it the charging provision in respect of the financial contributions payable by the owners towards the management of the estate.

67.  Clause 8 serves to lay down a four-part[14] framework for the drawing up of the annual budget and to identify the essential items of expenditure that must be covered therein. Clause 8(a)A, in particular, shall not be taken as creating an exhaustive list of expenditure beyond which no financial contribution thereto could be asked of the owners because the items thereunder are obviously narrower in scope than the things that could or should be done by the Respondent under Clause 7(a). I find the Applicant’s argument in relation to Clause 8 unconvincing.

68.  The above discussion should be sufficient to deal with the Applicant’s various contentions as set out in paragraph 12 above. Concerning the Applicant’s contentions in paragraph 12(f), (g) and (h) in particular, I agree with the Respondent’s analysis.

Disposition

69.  The Applicant seeks a declaration that the Activities were not necessary, requisite or reasonably incidental to the management of the estate and an injunction to restrain the Respondent from holding the same. He also asks for independent auditor be appointed to examine the books and accounts relating to the Activities, for discovery of the Respondent’s gain out of the Activities, for a refund of such gain by the Respondent to the owners of the estate and also for damages.

70.  As I fundamentally disagree with the Applicant’s reasoning behind the seeking of such relief, such relief are not granted.

71.  For the relief of damages in particular, the Applicant contends that his monetary loss is about $527[15], presumably being his calculation of his financial contributions to the costs of the Activities over several years.

72.  Clause 7(c) of the DMC is an exemption of liability clause. It provides that the Respondent shall not be liable to the owners or any of them in respect of any act done or omitted in pursuance or purported pursuance of the DMC if the act or omission does not involve criminal liability, dishonesty or wilful negligence.

73.  The Control of Exemption Clauses Ordinance (Cap.71) does not apply to DMCs made before 1 December 1990[16] hence should not apply to the DMC at suit which was executed in January 1978.

74.  At common law, the content of exemption clause is a matter for the parties. The first purchaser is bound by the exemption clause because he signed the DMC and subsequent purchasers including the Applicant are also bound because they buy “subject to and with the benefit of the DMC” or because they “step into the shoes” of someone who was bound.[17]

75.  The Applicant has not particularized or adduced evidence about criminal liability, dishonesty or wilful negligence on the part the Respondent in arranging the community activities. Pursuant to Clause 7(c), no damages shall be awarded even if my ruling on the Respondent’s power to hold the Activities is incorrect.

76.  To conclude, by reason of the above analysis the Applicant’s application in LDBM 191/2018 must be dismissed.

LDBM 191/2018 (PLANTERS)

77.  The Applicant contends that the planter outside his flat is not a common part of the building he lives. He claims that the planter (including its exterior surface and top surface) forms part of his unit because the planter has been exclusively used by him and is only accessible through his unit. Therefore, the Respondent has no right to repair the exterior of his planter or any other planter of the building and it follows that the resolution passed in November 2017 by the owners resolving to replace the mosaic tiles on the top of the planters was void. By this application, the Applicant seeks to recover the contribution which he already paid in December 2017.

78.  The Respondent contends that the tops of the planters form part of the common parts of the building firstly because they are part of the exterior wall and it makes perfect sense for the them to be in uniformed outlook which has been the historical position since the estate was first developed. Secondly, the plan attached to the assignment of the Applicant’s flat actually excludes the planter from being part of the demised area.

79.  It is also the Respondent’s case that by a notice of meeting dated 31 July 2017, the Respondent convened a meeting of owners to be held in November 2017, agenda item 4(iii) thereof proposed the acceptance of “Additional Works B” (which is about the replacement of the mosaic tiles on the top of the planters for each flat) to become part of the renovation project for the buildings.

80.  At the meeting in November 2017, the owners duly passed by a huge majority a resolution to undertake Additional Works B. Pursuant to Clause 13(j) of the DMC, resolutions passed by owners at a duly convened meeting shall be binding on all owners including the Applicant.

81.  I agree with the Respondent’s analysis.

82.  I also note that in the assignment[18] under which the Applicant acquired his property, the assigned property is described as:-

“… ALL THAT FLAT “H” on the “TENTH FLOOR of FU SHAN MANSION, KAO SHAN TERRANCE as shown and coloured Pink on the Floor Plan annexed to an Assignment registered in the Land Registry by Memorial No.1590262 …”

83.  There is no textual description in the assignment to the effect planter was assigned to the assignee thereunder.

84.  In the floor plan annexed to the assignment registered by Memorial No.1590262, the Applicant’s unit (i.e. Flat H on 10^th Floor of Fu Shan Mansion) was coloured pink but the planter outside his unit was not coloured pink.

85.  Section 3 of the Building Management Ordinance, Cap.344 defines “common parts” to mean:-

“… the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner…”

86.  As neither the planter itself nor its outer and upper sides has been specified or designated in any registered instrument for the exclusive use, occupation or enjoyment of the Applicant, it should form the common parts which the Respondent has powers and obligation to repair and maintain under the DMC.

87.  The fact that owners are generally allowed to use the planters constructed outside their premises is neither here nor there because such use was not designated or specified by any registered instrument.

88.  In any event, the owners have not been permitted to use the upper or outer side or surface of the planters. Their de facto use of the void inside the planters should not turn the external surface of the planters into the owners’ property.

89.  By reason of the above analysis, the Applicant’s application in LDBM 191 of 2018 is dismissed.

LDBM 196/2018 (DECORATIONS & OTHER EXPENSE)

90.  The Applicant complained that the following items of expenses should not have been included in the 2018 budget of the estate:-

(a)	festive decorations in the lobbies of the buildings during Chinese New Year and Christmas;
(b)	Mid-autumn festival variety show;
(c)	6% pay-rise of management staff (because such pay-rise allegedly has not been formally “endorsed” by the Swire Properties[19]);
(d)	meal subsidy of $40 to certain staff of the Respondent (because such expenditure had allegedly been objected to in the Representative Committee meeting in 2016 and the owners’ meeting in 2016 and, therefore, should be borne by their employer rather than the owners); and
(e)	upgrading the accounting and management system as well as engagement of a project manager because these expenditures are outside the “management” provision of the DMC.

91.  The analysis in LDBM 116/2019 above could aptly deal with the Applicant’s complaints about the expenses on festival decorations and the Mid-Autumn Festival activity.

92.  As a remark, I simply do not see what benefits or what sensible result could be achieved by the Applicant’s attempt to prohibit the residents from contributing a fractional per capita costs towards festive decorations in Lunar New Year and Christmas to satisfy their humble wish to experience a warm and pleasant festive ambience within their living environment on some special occasions in a year.

93.  As for the other expenses, they are related to the employment of the Respondent’s staff and should fall within Clause 8(a)(A)(iv) of the DMC. It is Mr Cheung’s evidence and the Respondent’s case that these expenses were included in the operating budget for 2018 and that operating budget was, as in every year, the subject of consultation and subsequent approval by the MLC in accordance with the prescribed procedures.

94.  The Applicant’s allegation that certain expenses had been subject to challenge by some owners or their representatives during some stages of budget discussion in 2016 is a non-starter because what matters is the due approval of the 2018 operating budget. There is no suggestion by the Applicant, nor any objective evidence from him, that the 2018 operating budget was not properly passed and approved.

95.  For the above reasons, the Applicant’s application in LDBM 196/2018 is dismissed.

COSTS

96.  At the end of the trial, the Applicant and the Respondent agreed that costs should follow the event and they further agreed to adopt the District Court scale for taxation.

97.  As the three sets of applications are all dismissed, I order the Applicant to pay the Respondent’s costs in these proceedings, to be taxed on the District Court scale if not agreed.