THE INCORPORATED OWNERS OF PO LOK MANSION v. RICHARDS CO LTD

CACV282/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO.282 OF 2004

(ON APPEAL FROM LDBM 36 and 37 OF 2004)

---------------------

----------------------

-------------------------

J U D G M E N T

-------------------------

Hon Yam J (giving judgment of the court) :

Background

1. Po Lok Mansion at Nos.154-156 Woosung Street, Kowloon, Hong Kong (“the building”) was built in 1973.  The Deed of Mutual Covenant dated 23 June 1973 (“the DMC”) bound all owners of the building.  The first three floors of the building are commercial units and together they are called Bowring Centre whereas the fourth floor upwards are domestic units. 

2. However, some years later all owners of the commercial units except one unit entered into another deed of mutual covenant called the Sub-Deed of Mutual Covenant which was dated 21 September 1981 (“the Sub-DMC”).  The Sub-DMC was entered into in 1981 when the commercial centre was redecorated and more units were carved out from the original units.

3. Whilst the DMC provided for the proportion of undivided shares in respect of each unit including the domestic and commercial units, the Sub-DMC provided a different ratio for the purpose of collection of management and other charges from owners who were parties to the Sub-DMC.

4. The application in the Lands Tribunal was concerned with the application of the Incorporated Owners of the building against the respondent for its share of the renovation charges of the building, as the owner of two units in the commercial centre, i.e. Room S5 on the 2/F and Room 11 on the 3/F.  HH Judge Chow found for the Incorporated Owners of the building.  The respondent now appeals.

The issue

5. The dispute between the parties is simply this : whilst the Incorporated Owners pursue their claim for the respondent’s share of the renovation charges of the building in respect of the two units according to the proportion of the undivided shares as provided under the DMC, the owner of the two units contended that its shares should be calculated according to the agreed proportion as provided under the Sub-DMC.  The respondent has been paying other charges in the commercial centre according to the proportion in the Sub-DMC to the management of the commercial centre.  The difference was about $1,000 odd.  However, this court gathered from counsel for the owner that it was disputing the claim as a matter of principle.

6. It is trite law to say that whilst the DMC binds all the owners, the Sub-DMC only binds the parties to the Sub-DMC, i.e. all units of the commercial centre except the one who did not enter into this Sub-DMC.  

The legal position

7. The DMC provided that each of the owners shall pay his due proportion of a number of items which include the cost of repair of the common parts of the building under clause 3(b) thereof.

8. The question before the court is : what is the due proportion? 

9. Under the Building Management Ordinance, Cap.344, it is provided in section 22(2) that :

“If there is no deed of mutual covenant, or if the deed of mutual covenant does not provide for the fixing of contributions, the amount to be contributed by an owner towards the amount determined under section 21 shall be fixed by the management committee in accordance with the respective share of the owners.”

10. Counsel for the appellant submitted that since the Sub-DMC has already provided for the proportion to be contributed by each of the owners to the commercial centre, thus the share to be shouldered by the appellant should be the amount according to the proportion as provided under the Sub-DMC.

11. We do not agree with this submission.  The Sub-DMC does not bind all the owners of the building.  It is just an agreement entered into by a deed among nearly all of the owners of the commercial centre.  The binding deed for all the owners is the DMC from which the Incorporated Owners of the whole building received their power.  Thus the Incorporated Owners should collect its charges according to the DMC and not the Sub-DMC.  In other words, section 22(2) would have an effect of empowering the Incorporated Owners to pursue its claim for the due proportion of each owner’s share according to the share of the owner or the proportion of the undivided shares of the owners as provided under the DMC. 

12. Otherwise, the Incorporated Owners would face a difficult situation and that is those who would pay less under the Sub-DMC would obviously pay less but those who would have to pay more under the Sub-DMC might argue that he should pay less under the DMC.  Eventually there would be a deficit in the collection of charges.

13. It may well be a matter for all the owners of the commercial units who are bound by the Sub-DMC to collect all the charges according to their agreed proportions and hand it up to the Incorporated Owners.  If that is the case the Incorporated Owners could accept one lump sum from all the owners who were bound by the Sub-DMC.  Even then the Incorporated Owners are not accepting the proportion provided under the Sub-DMC.  They are only accepting the total lump sum provided under the DMC.  In any event, this is not the case here.  Thus the Incorporated Owners would have to pursue their claim against each individual unit of the commercial centre.  In that case the Incorporated Owners could only pursue its claim according to the DMC and not the Sub-DMC which does not bind the other owners of the building.

14. The aforesaid position can be further explained in the following example : Suppose there are two Units A and B in Po Lok Mansion and they entered into another agreement between themselves.  Under the original DMC, they should each pay 50% of one undivided share of the building.  They then agreed that between them, Unit A should pay 40% and Unit B should pay 60%.  Does it mean that the Incorporated Owners, because of the new agreement of Units A and B, could only pursue against Unit A for 40% of one share and 60% against Unit B?  Certainly not.  If Units A and B paid their one share together and no matter what proportion they have agreed between themselves, it would not be the concern of the Incorporated Owners.  But when the Incorporated Owners pursue the charges against Unit A, Unit A cannot say that he has already agreed with Unit B to pay for 40% only whereas Unit B would have to pay 60%.

15. Similarly, the effect of the Sub-DMC in respect of all the owners of the commercial centre (except one who did not enter into this Sub-DMC) would be in the same situation.

Conclusion

16. Accordingly, for a different reason, we have come to the same conclusion as the Presiding Officer, HH Judge Chow.  This appeal is therefore dismissed with an order nisi of costs to the respondent herein to be taxed if not agreed.