FIRM HOME PROPERTIES LTD v. THE INCORPORATED OWNERS OF KA WING BUILDING

LDBM 173/2009

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Building Management Application No. 173 of 2009

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BETWEEN

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JUDGMENT

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Background

1.  This is an application by the Applicant for an order that the Respondent do forthwith disconnect the sewage pipes of the residential units of Ka Wing Building situated at 534 Nathan Road, Kowloon, Hong Kong (“the Building”) from those of In’s Point Plaza (“the Plaza”) and make repairs to the same. The Applicant is the owner of some of the units in the Plaza, whereas the Respondent is the owners’ corporation of the Building.

2.  The Building comprises shops or non-domestic accommodation on the Ground to 3^rd Floors inclusive (“the Commercial Units”) and 70 domestic flats on the 4^th to 21^st Floors inclusive (“the Residential Units”). According to Clause 4(a) of the Deed of Mutual Covenant of the Building (“the DMC”), the management of the commercial units shall be entirely separate and distinct from the management of the Residential Units and, except as otherwise provided in the DMC, shall be undertaken by the owners of the Commercial Units and not by the Managers of the Residential Units.

3.  The sewage pipes of the Commercial Units were separate from those serving the Residential Units, and were connected to a manhole different from the one for the sewage pipes of the Residential Units.

4.  In 1997, the Commercial Units, together with the non-residential units of two adjacent buildings, namely Wing Kiu Building and Cheung Hing Building, were converted into the Plaza, comprising, inter alia, shopping units on the 1^st Floor, shopping units and a food court on the 2^nd Floor and a restaurant on the 3^rd Floor.

5.  After the conversion, the Commercial Units have a new set of sewage pipes and they are also separate from those serving the Residential Units, except that some of the new pipes are now connected to the sewage pipes of the Residential Units before entering into the manhole that served only the Residential Units before the conversion.

6.  The parties have no dispute that all the sewage pipes, whether they serve the Commercial Units or Residential Units, are common parts of the Building.

7.  There is also no dispute that in about December 2006 the Respondent did cause the sewage pipes of the Residential Units to be connected to a sewage pipe serving the Commercial Units, but the Respondent did that upon the advice of an engineer so as to solve the problem of a clogged sewage pipe serving the Residential Units.

8.  The Applicant, as an owner of some of the Commercial Units, claims that the Respondent is in breach of the DMC in connecting the sewage pipes of the Residential Units to a sewage pipe of the Commercial Units as aforesaid. The Applicant has confirmed repeatedly at the trial that its cause of action is only based on the Respondent’s breach of Clause 7(IV)(B)(k) and paragraphs 4 and 13 of the Second Schedule of the DMC and nothing else.

9.  The Respondent’s defence is simply that it is not bound by the covenants of the DMC as alleged by the Applicant. The Respondent further submits that even if it is bound by the DMC and has been in breach of the same, the Tribunal should not grant any injunction because of the following matters:-

(a)  The Applicant and/or its predecessors in title have been in breach of Clause 4 of the 2^nd Schedule of the DMC, by cutting and altering the sewage pipes and even connecting the same to the manholes serving the domestic units only;

(b)  There was an urgent necessity for the Respondent to alter and connect the blocked sewage pipe to the Plaza’s pipe (as there were repeated incidents of toilet overflow and/or flooding happened to Flat 5B, causing much concern about personal health and hygiene);

(c)  There was a necessity to make such connection to pipes because the Respondent, or its contractor, had been deterred from entering into the Plaza for the purposes of repairing and/or replacing the part of the pipe inside the Plaza;

(d)  The said alteration and connection of the pipe was carried out pursuant to opinion given by a qualified contractor in the trade;

(e)  The said alteration and connection of the pipe had so far caused no damage or inconvenience to anyone (including the Applicant) for the past three years;

(f)  The said alteration and connection of the pipe indeed cause no or insignificant risk to the Plaza’s users (including the Applicant);

(g)  On the other hand, any order to disconnect the pipe will cause great hardship to owners and/or occupiers of 17 domestic units to the extent that they could not use their toilets or discharge any sewage from their units.

Whether the Respondent is liable under the DMC

10.  The Applicant submits that it is a preposterous defence for the Respondent to contend that it does not have to comply with the DMC. In this regard, the Applicant seeks to rely on the authorities in Chi Kit Co. Ltd. & Anor. v. Lucky Health International Enterprise Ltd. [2000] 3 HKC 143, Fan Tony v. Incorporated Owners of Kung Lok Building [2006] 3 HKC 240 and Incorporated Owners of Sincere House v. Sincere Co. Ltd. [2005] 2 HKC 424, as well as sections 16 and 18(1)(c) of the Building Management Ordinance, Cap. 344 (“the BMO”).

11.  However, the Respondent is not contending that it is not bound by the DMC at all. What the Respondent is contending is just that it is not bound by the DMC as an individual owner, and I agree with this contention.

12.  The Respondent, as an owner’s corporation, has a distinct legal entity, whose rights and liabilities are separate from those of the individual owners. No doubt, by virtue of section 16 of the BMO, the rights and liabilities of the owners in relation to the common parts of the building shall be exercised and performed by, and be enforceable against, the corporation to the exclusion of the owners. This, however, only means that the corporation shall take over the rights and liabilities of all the owners collectively as a whole, and not those of an individual owner in his own individual capacity.

13.  Just to take an example, when an individual owner is liable to pay management fees under the DMC, it does not mean that this liability would be passed to the corporation by virtue of section 16 of the BMO and the corporation has to pay the management fees for the owner in question. On the other hand, in performing its duty under section 18(1)(c) of the BMO, the corporation has to observe the obligations contained in the deed of mutual covenant. For instance, the corporation has to collect management fees from the owners in accordance with the shares stipulated in the deed of mutual covenant. Thus, the corporation is in that sense bound by the deed of mutual covenant.

14.  However, in arguing that the Respondent is liable under paragraphs 4 and 13 of Schedule 2 of the DMC, the Applicant is in fact contending that the Respondent is liable like an individual owner. It is clear to me that paragraphs 4 and 13 are only applicable to the individual owners, and not applicable to the Respondent representing all the owners as a whole.

15.  Clause 5 of the DMC stipulates that “The owner or owners for the time being of each undivided share in the said premises and building shall (so far as applicable at all times hereafter be bound by and shall observe and perform the covenants provisions and restrictions set out in the Second Schedule hereto.” The phrase “The owner or owners for the time being of each undivided share” shows clearly that the covenants, provisions and restrictions in the Second Schedule are for the individual owners to observe.

16.  In fact, if one looks at the Second Schedules, it can be seen that all the covenants, provisions and restrictions contained in the Second Schedule are for the individual owners of the Building to observe. The provisions in the Second Schedule are as follows:-

“1.  To pay the due proportion herebefore mentioned of all costs, charges and expenses which may be or become payable for or in connection with the management of the said premises and building in accordance with the provisions of this Deed including but not limited to :-

(a)  Crown Rent …

(b)  Premium, if any.

(c)  Electricity, water, caretaker’s telephone and other similar charges for or in connection with the said premises and building as a whole and not being in respect of the use of or consumption in any particular unit or other area enjoyed exclusively by one owner.

(d)  Remuneration for caretakers, watchmen, cleaners, attendants and the like.

…

(g)  The cost of operating, maintaining, repairing, servicing and renewing the lifts (subject as hereinbefore mentioned) and communal lighting.

…

2.  To pay and discharge all existing and future taxes, rates assessments and outgoings of every kind and description for time being assessed or payable in respect of each unit of which he is the owner and to indemnify the other owners from and against all liability therefor.

3.  To keep the interior of each unit of which he is for the time being the owner in good repair and condition …

4.  Not to make any structural alteration to any unit of which he is the owner nor cut, maim, injure, damage, alter or interfere with any part or parts of the said premises or building in common use or any of the sewers, drains, watercourses, conduits, pipes, cable, wiring, fixtures,equipment, apparatus or services of the said premises and building.

5.  Save as provided …, no owner of any unit in the said building shall display paint or affix any sign notice or other thing in or repaint or … unless he has obtained the previous written consent of the Managers …

6.  Not to place, install, exhibit or affix any flower-pot, frames or cage on or at any window or …save only children’s safety guards and then only with the written approval of the Managers.

7.  The owner of any unit in the said building shall not make any structural alterations to the exterior of his unit …

8.  The owner or occupiers of any unit shall not cause or permit any water pipes to be connected to the water pipes in his unit for the purpose of supplying water to any other unit …

9.  (a)  No owner or owners shall place any furniture or object in or to occupy any part of the said building not included in his unit and …

(b)  No owner or owners shall use or permit or suffer any unit on the 4^th to 21^st floors … to be used otherwise than for residential purposes.

(c)  No owner or owners shall take or permit any dog to be taken into the said building…

(d)  The 4^th to 21^st Floors inclusive … shall be used for private residential purpose only and the owner thereof shall not use or cause … to be used as an inn …

10.  Not to do anything in those parts of the said building intended for common use which may be a nuisance or cause an annoyance to the occupiers …

11.  Not to dirty or damage the lifts apparatus equipment or services or other parts of the said premises and building in common use.

12.  Not to hang up clothing or laundry outside the said building other than in the spaces … specifically provided therefor …

13.  Not to do anything whereby the flush or drainage systems of the said building may be clogged or the efficient working thereof may be impaired.

14.  Not to throw out or drop or permit to be thrown out or dropped from any unit of which he is the owner any rubbish …

15.  Not to attach or put up or hang or install any radio or television aerial … except …as the Managers shall approve or direct.

16.  To be responsible for and to indemnify the Managers and all other owners and occupiers against all actions proceedings, claims and demands whatsoever arising out of or in respect of any loss or damage to any person or property caused by or as the result of the act or negligence of any occupier of any unit of which he is the owner …

17.  To be responsible to the Committee and the other owners for the time being for the acts and omissions of all persons occupying any unit of which he is the owner …

18.  Not at any time to exercise or attempt to exercise any statutory or common law right to partition the said premises and building.

19.  To be responsible to the Managers and the other owners for the time being for the acts and omissions of all persons occupying any unit of which he is the owner or using the same …” (emphasis added)

17.  It is clear and plain that the Respondent would not be liable for any of the aforesaid covenants in the Second Schedule including paragraphs 4 and 13 therein, as they are intended for individual owners only.  The Applicant’s reliance on paragraphs 4 and 13 of the Second Schedule is simply misconceived and must fail entirely.

18.  As to Clause 7(IV)(B)(k) of the DMC, the Applicant has not pleaded clearly in what way the Respondent is liable under this clause.  In paragraph 1.i of the Amended Notice of Application, the Applicant merely states that ‘By Clause 7(IV)(B)(k) of the DMC, the Managers of the residential units also owed a duty to the owners “To keep in good repair and condition all water pumps, tanks, pipes, sewers, drains, watercourses, cables, wiring, transformer room and machine rooms in the said building which are for the common use of all the occupants of the said building, and not just the owners of the residential units.’  There is no reference to the Respondent’s duty in this paragraph at all.

19.  Assuming the Applicant is saying that “the Managers” in this paragraph refers to the Respondent, it is still not clear how the Applicant could rely on this clause.  As aforesaid, Clause 4(a) of the DMC stipulates that the management of the commercial units shall be entirely separate and distinct from the management of the Residential Units and the owners of the Commercial Units are responsible for the management of the Commercial Units.  Thus, the Respondent is not responsible for the management of the Commercial Units under the DMC.  Indeed, Clause 7(IV)(A) of the DMC also stipulates that “The Managers shall (subject as herein otherwise specifically provided) have full and unrestricted authority to do all such acts and things as may be necessary or requisite for the management of the said premises and building (other than the non-domestic units) and anything reasonably incidential thereto.”  It is clear that the Managers or the Respondent only has authority for the management of the Building “other than the non-domestic units” under the DMC.  As the alleged breach in question concerns the Commercial Units or “the non-domestic units” and it is not the Respondent’s duty to manage this part of the Building under the DMC, it is just inconceivable for the Applicant to rely on Clause 7(IV)(B)(k) of the DMC to lay a claim against the Respondent.  Thus, the Applicant’s claim based on Clause 7(IV)(B)(k) of the DMC must also fail.

20.  The Respondent may well have a duty to manage the Building under section 18 of the BMO, but the Applicant has confirmed that it is not relying on any breach of the BMO, but just the DMC, to make this application, and the Respondent has not prepared itself for any case against it under the BMO. It is therefore not right for me to consider whether there is any breach of section 18 of the BMO.

21.  It is therefore my finding that the Respondent is not liable under those provisions of the DMC relied upon by the Applicant, and the application must fail in its entirety.

Whether injunction ought to be granted

22.  As the Applicant fails to establish its case against the Respondent, I will not grant any injunction against the Respondent. It is not necessary and in fact undesirable for me to assume that there were breaches of the DMC and go on to consider whether injunction ought to be granted on hypothesis.

Conclusion

23.  In the circumstances, I order as follows:-

(1)  The application be dismissed.

(2)  Costs Order Nisi: The Applicant do pay the Respondent costs of the application with certificate for counsel to be taxed on District Court Scale if not agreed, and if there is no application for costs within 14 days from today, the costs order nisi shall become absolute.