LAM FOO KUI AND OTHERS V. HOP ON MANAGEMENT CO. LTD.

1993, NOS. SCT 10-35

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

SMALL CLAIMS TRIBUNAL APPEAL

(CLAIM NOS.8679-8681, 8683-8685, 8687-8689, 8693, 9325-9326 & 9328-9341 OF 1992)

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J U D G M E N T

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1. This is an appeal against part of the decision of the learned Adjudicator of the Small Claims Tribunal in favour of the respondent (which was the claimant) against the appellants (who were the defendants). The respondent was the developer of a site on which an industrial building was erected. After the completion of the building, various units therein were sold to individual owners including some of the appellants. The respondent remained as the owner of several units including four carparking spaces on the ground floor.

The management of the building was however given to the respondent for a number of years pursuant to the provisions of the Deed of Mutual Covenant. The owners subsequently formed an Owners Incorporation in respect of the building pursuant to the Multi-Storey Owners Incorporation Ordinance. Management was handed over by the respondent to the Owners Incorporation with an account made up to the date of the handover. According to the accounts rendered, there was a deficit incurred by the respondent arising from the management. The respondent claimed before the Small Claims Tribunal against some of the owners (altogether 28) for their respective shares of such deficit. Apart from those items which had been accepted and agreed, the learned Adjudicator gave judgment for the respondent in respect of all the disputed items. In this appeal, the appellants conceded all items except one which had been awarded by the learned Adjudicator. The only item of dispute was that part of the deficit representing the rentals for the four carparking spaces. This is the subject matter of the present appeal.

There was also evidence before the Tribunal to the effect that before the units in the industrial building were sold to the various owners, the original plans appearing in the sale brochure showed that there was a space outside the lifts on the ground floor which was supposed to be common area. However, upon completion of the building, it was discovered that the space was then turned into four parking spaces which quite unfortunately were not subject to any assignments to the individual owners or had not been reserved and excepted as common area. It was therefore arguable that ownership in these four parking spaces still remained the property of the respondent. For all these years, these four carparking spaces had been used by owners of the building as temporary parking spaces for their vehicles for the purpose of loading and unloading goods. Before the Tribunal, there was no dispute as to the ownership of these four carparking spaces. The respondent had included in the regular accounts given to the owners an item representing the rental for the four carparking spaces. The monthly or annual accounts had been sent to the owners but no one had ever challenged the items regarding such rentals. It was when the final accounts were rendered by the respondent upon handover of management that the dispute arose as to why this item should be payable.

2. The learned adjudicator dealt with this item in the judgment in the following way :

" The last item in dispute was the rent for carparking spaces 1-4 on the ground floor.

Defendant produced exhibits D13 and 14 - sale catalogue of the property and asserted that it had misled the owners into thinking that the carparks were common area, and they were not liable to pay for use of these carparks.

Defendant conceded that such charges had been stated in the monthly statements from beginning of claimant's management, but none of the owners realised it, since no one bothered to read the statements.

Claimant referred to the management agreement (exhibit C26) and the Deed of Mutual Covenant (exhibit C27) to show that as manager, Claimant was entitled to charge for the use of the carparks.

The plan in the catalogue (exhibit D13) was specifically marked as '... subject to the amended plans to be approved by the Building Authority.'

According to Defendant's evidence, the approved plans showed the carparks as Claimant's property (exhibit D14) (exhibit C23(1)-(4)). The Land Office records were produced by Claimant to show its ownership.

Defendants are estopped from denying Claimant's ownership and its right to charge for use of the carparks."

3. Counsel for the appellants submitted that neither the Management Agreement nor the Deed of Mutual Covenant conferred upon the respondent the right to charge the owners rent for the use of the four parking spaces. He argued that none of the provisions in the Management Agreement related to any carparking spaces. It was accepted that the owners were liable to pay for the expenses and costs of the management but these expenses and costs should not include the rentals. He pointed out that the respondent as managers could only recover costs which were incurred in the performance of its duty or in the exercise of any power under the Management Agreement. It was not a duty of the respondent to rent the carpark for the use of the owners. Furthermore, he submitted that the carparks were not reserved as common area within the provisions of the DMC and the respondent had no power to deal with them. It was also argued that none of the provisions in these two documents empowered the respondent to enter into a contract for the renting of these carparking spaces and then charged the owners for the rentals. It was emphasised that the respondent could not enter into an agreement for the lease of the carparks with itself being the owner.

4. On the other hand, the respondent submitted that the court should not put too strict an interpretation on the provisions of the Management Agreement or the DMC, otherwise the manager would have difficulty in the management of the building. He argued that the Management Agreement and the DMC gave the respondent power generally to manage and provide services for the owners. He said that the renting of the carparking spaces was part of the management for the benefit of all unit owners. The respondent as manager had wide powers under various provisions of these documents. In the present action, the respondent was simply claiming for reimbursement for expenses incurred in the management for the benefit of the owners and not as the owner of the carparking spaces. It made no difference if the respondent rented the carparking spaces from itself or from outside so long as the rentals were reasonable. In the present case the appellants never disputed that the amount charged was unacceptable or unreasonable.

5. The relevant provisions in the Management Agreement are as follows :-

2 The duties of the manager shall be generally to manage and provide services for the whole of the said building to the satisfaction of the owners ...

(18) To pay the following charges and expenses :-

(d) the cost of any other matters and things which the manager is required to do under this agreement,

(g) such legal or other fees and costs which may be incurred by the manager in performance of any duty or in the exercise of any power hereunder,

(20) To demand and receive from each owner on account of his share of the cost charges and expenses the sum of $900 per calendar month for each unit of the said building payable monthly in advance but so that if the total contributions payable to the manager by such owners as aforesaid shall be insufficient to cover all or any of the said charges and expenses then the manager shall collect from such owners further contributions towards such charges and expenses to be paid by the owners in proportion to the number of shares in the said building for the time being owned by them ...

6. The Deed of Mutual Covenant is binding on all owners. It provides for the appointment of the respondent as the manager for a number of years to manage and provide services in respect of the whole building. The owners are also under an obligation to pay for the various costs, charges and expenses in the management of the building. Under Clause 4(f)(ix) of the DMC, such costs charges and expenses shall include such legal or other fees and costs which may be incurred by the manager in the performance of any duty or in the exercise of any power thereunder. Clause 4(k) confers upon the manager wide powers and authority to do certain acts and things in relation to the management and these include, among other things, the power under (v) to repair, renew, maintain, service, clean and paint the said building or any of the common areas and common facilities thereof and for such purpose to engage and enter into contracts with any person, firm or corporation.

7. A manager of a building is under an obligation to manage the whole building properly and in order to do so he must be given certain powers under the provisions of the Management Agreement. Some of the powers are clearly and expressly stated in the agreement. However, many matters, be they big or small, will no doubt arise from time to time in the course of the management. These may not be set out in detail in the Management Agreement. It is obviously impossible to do so. On the one hand, the powers of a manager should not be unduly restricted, otherwise he would find it difficult to carry out his job. On the other hand, however, if there are important matters which may involve a large operation or heavy commitment on the part of the owners, I should think that such matters ought to be referred to the owners for decisions. Whether any matter is important and hence requires the consultation of the owners or whether it is something in the ordinary course of management is, in many cases, a matter of judgment.

The four carparking spaces in question were outside the common lifts at the building. When the owners' goods vehicles came to load or unload their goods from and into the lifts, these vehicles had to be parked somewhere near the lifts and the most convenient place would be the four parking spaces. It would be in the interest of all the owners to utilize these spaces for loading and unloading purposes. Hence, it would be sensible for the manager whoever he was to rent these carparking spaces. I take the view that renting these spaces for common use was well within the powers and authority of the manager of the building under the provisions of the Management Agreement and the DMC. In any event, the rentals of the carparking spaces had clearly been spelt out in the regular accounts rendered to the owners. None of them had raised any objection to this item. It appears that none of them had ever looked at the accounts and realized this particular item. It is true that the respondent as manager had rented the four carparking spaces from itself. The question as to whether the respondent as manager could enter into an agreement with itself as owner of the carparking spaces is a redherring. It had the power and authority to enter into contracts in the course of management of the building. If it happened to be the owner of the carparking spaces one would expect it to notify the owners of this. This was apparently not done but the leasing of these spaces was stated in the accounts. They should be aware of this item if they had read the accounts. It would have been better if the respondent had openly declared interest and consulted the owners about leasing the carparking spaces from itself. This might prevent any further dispute as to such necessity or the amount of the rent. However, the spaces were indeed used by the owners. There was no suggestion that the amount charged for these carparking spaces was unreasonable. I do not think the owners including the appellants can now complain.

8. The root of the problem was that when the units in the building was offered for sale, there was a brochure which stated that the area where the four carparking spaces now stand was in fact common area. And yet at the time of completion, it turned out that the building plans had been changed and that this common area had been converted into four carparking spaces which was supposed to be owned by the respondent. Understandably the owners felt aggrieved. But I do not think the Small Claims Tribunal is the proper forum to ventilate such grievances. The appellants could, if they wanted, have applied to the High Court for remedy. However, they did not.

9. In the circumstances, I see no merit in this appeal and I would dismiss it with costs to the respondent.