THE INCORPORATED OWNERS OF ONE BEACON HILL v. MATCH POWER INVESTMENT LTD

HCA 2562/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2562 OF 2009

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BETWEEN

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J U D G M E N T

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I. INTRODUCTION

1.  The Incorporated Owners came into existence on 3 January 2009.

2.  Match Power (a subsidiary of Cheung Kong (Holdings) Ltd.) was the developer of the estate known as One Beacon Hill.  The estate comprises 604 units, 604 car parking spaces and 35 motorcycle parking spaces. The occupation permit for the estate was issued on 9 February 2004.  The certificate of compliance was issued on 29 July 2004.

3.  The Incorporated Owners allege that, in the construction of the estate, Match Power employed substandard materials and allowed poor workmanship.  The Incorporated Owners claim damages of about $27 million as the cost of rectifying Match Power’s defective work.

4.  The obligations which the Incorporated Owners are seeking to enforce are said to arise out of consent scheme contracts made between Match Power and the initial purchasers of the 480 units of the estate sold before issuance of the certificate of compliance.  The Incorporated Owners plead that the consent scheme contracts contain express and implied terms whereby Match Power undertook that the estate would be built properly and be fit for human habitation upon completion.  Match Power is said to have breached those express and implied terms.

5.  Following issue of the certificate of compliance, Match Power entered into standard sale and purchase contracts with the initial purchasers of the estate’s 604 car parking spaces, 10 of the estate’s 35 motorcycle parking spaces, and the estate’s remaining 124 units.  The Incorporated Officers do not allege the breach of any terms (express or implied) in these standard sale and purchase contracts.

6.  As at 16 February 2011, of the 480 units sold by way of consent scheme contracts, 254 units have been on-sold by the initial purchasers to others.  As at the same date, of the 124 units sold by way of sale and purchase contracts, 77 units have been on-sold by the initial purchasers to others.  The on-sold units may themselves have been further resold by the buyers who acquired the units from the initial purchasers.

7.  The Incorporated Owners is not a party to the consent scheme contracts.  Only some of the current owners in the estate ever entered into agreements (whether consent scheme or standard sale and purchase contracts) with Match Power for their units.  The Incorporated Owners nonetheless has pleaded that it is entitled to bring this action in its own name on behalf of individual owners by reason of Building Management Ordinance (Cap. 344) (BMO) ss. 16 or 18(2)(g).

8.  Match Power says that neither section authorises the Incorporated Owners to bring the present action.  Match Power contends that the Incorporated Owners has no locus to sue for breaches of the consent scheme contracts.  Match Power has consequently applied to strike out the action.  I have to decide whether Match Power is right.

9.  In the alternative, Match Power has suggested that the Court determine 3 questions by way of preliminary issue.  The 3 questions are effectively a re-statement of Match Power’s strike out arguments.  I will deal with the 3 questions at the end of this Judgment in light of my conclusions on Match Power’s strike out application.

10.  In the course of oral submission, Mr Ian Pennicott QC (appearing on behalf of the Incorporated Owners) conceded that, if the Incorporated Owners had no locus to sue under BMO s. 16, then it would also fail on locus under BMO s. 18(2)(g).  I shall therefore focus on the question of locus to sue under BMO s. 16.  I cannot, however, forget about BMO s. 18(2)(g) entirely, as Mr Edward Chan SC (appearing for Match Power) says that I can draw inferences about the ambit of BMO s. 16 from the scope of s. 18(2)(g).

II. BACKGROUND

11.  According to its long title, the BMO is intended:-

“[t]o facilitate the incorporation of owners of flats in buildings or groups of buildings, to provide for the management of buildings or groups of buildings and for matters incidental thereto or connected therewith”.

12.  Save where context requires otherwise, BMO s. 2 defines “corporation” to mean Incorporated Owners; “owner” to mean “a person who ... appears from ... the Land Registry to be the owner of an undivided share in land on which there is a building”; and “tribunal” to mean the Lands Tribunal.

13.  BMO s. 16 provides:-

“When the owners of a building have been incorporated under section 8, the rights, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by, and the liabilities of the owners in relation to the common parts of the building shall, subject to the provisions of this Ordinance, be enforceable against, the corporation to the exclusion of the owners, and accordingly:-

(a)  any notice, order or other document which relates to any of the common parts of the building may be served upon the corporation at its registered office; and

(b)  any proceedings in the tribunal in respect of any of the common parts of the building may be brought and pursued by or against the corporation.”

14.  BMO s. 18(2) provides:-

“The corporation may, in its discretion:-

...

(g) act on behalf of the owners in respect of any other matter in which the owners have a common interest.”

III. DISCUSSION

A.      Match Power’s 1^st argument: “Owners” in BMO ss. 16 and 18(2)(g) refers to “all the owners at the time when the Incorporated Owners sues in relation to common parts”

15.  Mr Chan observes that the word “owners” appears several times in BMO s. 16.  He submits that, whatever the word “owners” means when first used in the section, the word when subsequently used must refer to rights, powers, privileges of liabilities held by all owners at the time when the Incorporated Owners purports to exercise any such rights, powers or privileges or when a third party purports to enforce such liability against the Incorporated Owners.

16.  Mr Chan stresses that the Incorporated Owners are only suing Match Power in relation to breaches of the consent scheme contracts.  Of the present owners in the estate, 226 (that is, 480 minus 254) unit-holders entered into such consent scheme contracts with Match Power. Thus, the Incorporated Owners (Mr Chan argues) are seeking to enforce the rights of some (but not all) current owners.

17.  That (Mr Chan says) is not permissible under BMO ss. 16 or 18(2)(g) because the word “owners” in those provisions must be construed to mean “all owners at the time when the Incorporated Owners bring suit in respect of the common parts of an estate”. Where only some members’ contractual rights in respect of common parts are in question, the BMO does not authorise the Incorporated Owners to act on behalf of those members alone even if the subject matter of the intended suit affects the estate’s body of owners for the time being.

18.  By Interpretation and General Clauses Ordinance (Cap. 1) (IGCO) s. 7(2), when construing a statute, unless the context requires otherwise, words and expressions in the plural shall be deemed to include the singular.  But Mr Chan says that reading the plural “owners” in BMO s. 16 as including a single owner or only some owners would “defeat the purpose of s. 16 altogether, as s. 16 is aimed at avoiding multiplicity of actions by different owners”.

19.  In support of his argument, Mr Chan cites a number of cases.

20.  First, in Chi Kit Ltd. v. Lucky Health International Enterprises (2000) 3 HKCFAR 268, X obtained a personal injury judgment against the Incorporated Owners.  Under BMO s. 17 such judgment may be enforced “with the leave of the tribunal against any owner”.

21.  The Court of Final Appeal (CFA) considered whether X could enforce the judgment against a person who had become a unit owner in the estate after the personal injury had occurred.  It was contended that the judgment was only enforceable against a person who had been an owner at the time of the injury.  The CFA disagreed.

22.  The CFA held (Litton NPJ at 277D-E), applying the definition of “owner” in BMO s. 2, that the reference to “owner” in BMO s. 17 “must mean owners for the time being”.  This construction (Litton NPJ at 278B) “accords with the scheme in the Deed of Mutual Covenants applicable in the present case -- and perhaps countless others -- where the rights and liabilities of owners generally pass with the land”.

23.  The CFA further stated (Litton NPJ at 278C-F) that “[i]f the position were otherwise, the management of multi-storey buildings particularly in large estates, would be a highly complex affair”. This is because claims would arise against the Incorporated Owners at all points of time in the course of the management of an estate.

24.  Litton PJ explained:-

“Some of these claims might be contested, others settled. Eventually judgment of one kind or another might be entered against the corporation. Plainly, the management committee would treat them alike and would seek contribution from the owners for the time being to satisfy the liabilities as they arise, if the funds established for the purpose were insufficient or if they needed topping up. Hence, liability would fall on the owners for the time being as a matter of course: It would be an odd thing, in these circumstances, if the recourse to the owners under s. 17(1)(b) should be treated differently.”

25.  Mr Chan infers from Chi Kit that, “for the same reasons,” where the Incorporated Owners sue a person, they can only do so in respect of a right pertaining to “all the owners ... at the time when the Incorporated Owners purported to exercise such right”.

26.  Second, there is Grenville House Ltd. v. Incorporated Owners of Grenville House [1978] HKLR 235 (CA).  That dealt with s. 16 of the Multi-Storey Buildings (Owners Incorporation) Ordinance (MSBO), the predecessor of the BMO.  For the purposes of the discussion here, however, MSBO s. 16 may be regarded as identical in practical terms to BMO s. 16.

27.  In Grenville, the Incorporated Owners sued the developer in negligence and breach of statutory duty for damage to common parts arising from a landslide.  The alleged cause of action arose in August 1972 (after the Incorporated Owners had come into existence).  But the composition of unit owners had changed between the time when the cause of action arose and the time when the writ was issued.

28.  The Court of Appeal held (McMullin J at 239) that MSBO s. 16 had “the effect of vesting permanently in the corporation a right of suit which may accrue to an individual owner as a result of tortious acts relating to the common parts of property”.

29.  The Court pointed out (McMullin J at 240) that, where common areas were concerned, the MSBO vested individual owners’ rights of suit (as opposed to causes of action) in the Incorporated Owners.  That vesting in the Incorporated Owners by MSBO s. 16 was coupled with a statutorily-imposed exclusion preventing individual owners from separately pursuing their causes of action in relation to the common parts.

30.  McMullin J continued (at 241):-

“Clearly the [MSBO] is intended to supply to the corporation a variety of powers and to confer upon it a variety of duties for the general convenience of persons who own such multi-storey buildings as well as for the general convenience of the public at large who may have to deal with them. Thus, if some third party, let us say a stranger or visitor to the premises, were injured by some dangerous object on the common parts he would presumably be entitled to join the owners of the common parts together with any other persons whom he thought might be responsible for the tort. If he did so it would clearly be highly impractical and inconvenient to have to join 120 individual persons as defendants.... I think the purpose of [MSBO s. 16] is reasonably plain and that we should be doing no injustice to give effect to that purpose. I can see no abiding objection which would prevent that course. I think what we are confronted with should be regarded as an exceptional statutory right. It is not ... a right of action. It is a right to pursue a cause of action deriving from such an interest in common even after the owner’s particular interest has ceased. There can be no question of a new owner acquiring the cause of action possessed by the old owner merely by the assignment of the old owner’s interest in the land. The personal cause of action remains with the old owner even after he has ceased to be the owner. The corporation is the persistent persona of all the owners of the premises at any moment of time but in respect only of one part of all possible actionable damage which derive from a tort affecting the common parts. In regard to that type of damage the right of suit is vested permanently in the corporation. That type of damage would include any pecuniary loss suffered by all the individual owners in common deriving from damage to the common parts.”

31.  McMullin J also considered MSBO s. 18.  That is similar to BMO s. 18.  But MSBO s. 18 referred to the Incorporated Owners acting on behalf of owners in respect of any matter in which “the owners as tenants in common have a joint interest or liability”.  BMO s. 18 only speaks of the Incorporated Owners acting in matters in which “the owners have a common interest”.  McMullin J said (at 242):-

“The emphasis I find there [that is, MSBO s. 18] on the joint interest of the tenants in common, in the matter which is placed in the care of the corporation to pursue on their behalf, is to my mind some indication that the intention of the Legislature is to restrict the agency of the corporation on behalf of the owners to such matters only as show a joint interest in them all. In this regard I believe Mr. Swaine [acting on behalf of the Incorporated Owners] is right to maintain that ‘joint interest’ is not there employed as a term of art importing considerations relevant to the idea of joint tenancy but is intended simply to convey the idea of a common interest[,] the term ‘joint’ being employed perhaps to avoid what the draftsman may have felt to be an inelegant repetition of the word ‘common’.”

32.  Mr Chan submits that the 2 passages cited from McMullin J’s judgment bolster his case.  Mr Chan adds that, since BMO s. 18 has now amended the expression “joint interest” in MSBO s. 18 to “common interest,” it must be clearer that an Incorporated Owners is only entitled to sue in relation to a cause of action in favour of all owners for the time being.  If so, Mr Chan argues that it would be odd if BMO s. 16 were construed as allowing the Incorporated Owners to sue or be sued where there was no common interest among all the owners for the time being because only some owners enjoy the cause of action being asserted by the Incorporated Owners.

33.  Third, in Jikan Development Ltd. v. Incorporated Owners of Fortune Industrial Centre (2003) 6 HKCFAR 446 the defendant D argued that the Incorporated Owners had no locus to sue for a wrong committed prior to the latter’s coming into existence.

34.  The CFA rejected that argument.  It held instead that, prior to the Incorporated Owners coming into being, the owners for the time being of undivided shares enjoyed a right to enforce the terms of the DMC relating to the common parts against D.  Thereafter, upon the Incorporated Owners coming into existence, the right to enforce the terms of the DMC relating to the common parts “passed to the corporation and became exercisable by the corporation, in terms of [BMO] s. 16” (Litton NPJ at para. 57).

35.  Mr Chan suggests that Jikan demonstrates that s. 16 only allows the Incorporated Owners to sue under BMO s. 16 “in relation to matters to which all the owners [have] a common interest and in respect of which all the owners for the time being would be entitled to sue but for s. 16.”

36.  It should be observed that in Jikan (at para. 62) Litton NPJ commented that BMO s. 18(2) “deals with management matters such as the employment and remuneration of staff, the insurance of the building, acquisitions of property for use in connection with the common areas”.  The judge stated that s. 18(2) “does not confer power where none existed”.  Thus, “[i]f the right of action against an owner, in relation to the common parts, was in law exercisable by the corporation in terms of s. 16, then s. 18(2)(g) empowers the corporation to engage solicitors to institute proceedings”.

37.  By this I understand Litton NPJ to mean that merely focusing on s. 18(2) as the source of a right to sue would be wrong.  Such an approach would “beg the very question” (Litton NPJ at para. 62).  A corporation would have to point to some source other than s. 18(2) for an alleged right to sue.  Only then might BMO s. 18(2) be relied upon as authorising the corporation to engage in matters ancillary to the exercise of that independent right to sue.

38.  Fourth, in Hang Yick Properties Management Ltd. v. Incorporated Owners of Tuen Mun Kar Wah Building [2005] 2 HKLRD 499 (CA) the estate’s former manager claimed expenses from the Incorporated Owners.  The expenses had been incurred before the corporation had come into being.  It was argued that the corporation was accordingly not liable.

39.  Woo VP rejected the argument:-

“20. But are the liabilities of the owners in relation to the common parts limited to those incurred before incorporation? .... I consider that the answer depends on the facts of each particular case. Sometimes, the liability of an individual owner in relation to the common parts is personal, and thus such liability should not be covered by [BMO] s. 16, or else the other owners would be unfairly prejudiced by the corporation being sued and if the suit is successful, for the judgment being enforced against them or each of them pursuant to s. 17. This kind of personal liability, depending on the facts of each case, can be tortious or contractual, it matters not. But where the liability is that owed by the owners as a whole, then the liability of suit passes onto the incorporated owners. This is clear from the words ‘owners’ in the plural used in s. 16, as opposed to the singular.

21.    There is no question that s. 16 covers the liabilities of the owners as a whole in relation to the common parts after incorporation…  The parties do not argue against this proposition.”

40.  Mr Chan submits that, although Woo VP was referring to the assumption of liability by an owners corporation, an analogy must apply to the enforcement of rights by a corporation once it has come into existence.  It must (Mr Chan contends) be the rights and liability of the owners “as a whole” which would become exercisable by or enforceable against the Incorporated Owners.

41.  While on Hang Yick, it is worth noticing Stone J’s concurring judgment (to which I will return below).  Stone J stated:-

“53. Thus, ... as from the date of incorporation, any liability accruing to the owners for the time being in respect of the management contributions henceforth is to be enforceable against the defendant to the exclusion of the individual owners.

54. In my view, however, it does not follow ... that by reason of this assumption by the defendant, upon incorporation, of the liability of the owners for the time being for such management expenses as have been incurred, that any such liability which arose prior to incorporation remains irrecoverable save by suit against the individual owners.

55. Depending upon the circumstances in any given case this approach potentially would be to subject the plaintiff ... to a multiplicity of suit which it is precisely the object of the Ordinance so to avoid.

56. Indeed, within the framework of the present argument the fact of incorporation strikes me as a conceptual red-herring.

57. The right of indemnity vested in the erstwhile manager is a right which it enjoyed against all the owners for the time being. Such right does not cease to subsist merely by reason of the incorporation of the unincorporated body of owners into the entity now intituled ‘the incorporated owners’.

58. All that has changed is that, upon such incorporation, the manager seeking appropriate reimbursement has the advantage of one defendant within its litigation sights rather than many.

59. Conversely, upon incorporation the undoubted right of the owners qua principals to proceed against their manager agent for an account, if such were to be necessary, becomes a right vested in the ‘incorporated owners’ as opposed to such right hitherto residing in, and being enforceable by, the owners individually. Once again, such right simply does not evaporate upon incorporation of the body of owners; it now vests in ‘the incorporated owners’.

60. ....

61. All that has occurred is that the agent manager’s erstwhile unincorporated principals, that is, the body of individual owners, has assumed a single corporate identity.

62.    The respective rights and liabilities continue, but there is a fundamental alteration in terms of the mode of pursuit and enforcement of such rights and liabilities by virtue of the mechanism within the Ordinance [that is, the BMO].”

42.  Fifth, in Incorporated Owners of Mirador Mansion v. Tecowin Development Ltd. [1994] HKC 113, the corporation sued D to enforce a restrictive covenant in an assignment by the developer to D.  D challenged the corporation’s right to sue.  The restrictive covenant dealt with the user of the roof (which was not a common part).

43.  Recorder Tang SC held (at 121F-H) that the corporation would have locus to sue under BMO s. 18(2)(g) if the covenant was “enforceable by all the owners”.  But, in that case, the covenant was expressed to be enforceable only by the developer and its successors in title.  Accordingly, the corporation lacked locus because the cause of action that it was seeking to enforce (breach of covenant) was not one vested in all the owners.  The cause of action in respect of the covenant would only be vested in some owners (the developer’s successors in title).  This would be despite the fact that all owners for the time being had a “common interest” in the proper user of the roof as a means of fire escape in keeping with the DMC of the building.

44.  Mr Chan argues that Mirador is authority for the following proposition:  Assume that an agreement is one which all owners for the time being have an interest in enforcing.  If the agreement is not one which those owners could individually enforce, the Incorporated Owners will not have the locus to enforce the agreement.

45.  Mr Chan does not limit the foregoing proposition to BMO s. 18(2)(g).  He suggests that, what applies to BMO s. 18(2)(g), must equally be true for BMO s. 16.

46.  I am not persuaded by Mr Chan’s argument.

47.  The starting point for construing BMO ss. 16 and 18(2)(g) is an understanding of how they fit with the objectives of the BMO.  Those objectives are broadly set out in the long title.  Here we are specifically concerned with matters incidental to or connected with the management of a building estate, as the Incorporated Owners are seeking compensation in connection with alleged defective work in the estate’s common parts.  The Incorporated Owners are bound to maintain those common parts.

48.  The authorities (Grenville is an example) are unanimous that the object of BMO ss. 16 and 18 is to facilitate convenience in litigation, so as to avoid a multiplicity of parties and suits involving numerous owners, especially in relation to the common parts of an estate.

49.  For example, it would be impractical if a would-be plaintiff had to sue every owner of a building estate in respect of an obligation (such as the payment of management expenses) relating to the common parts.  By the same token, it would be impractical if every owner in a building estate had to be joined as plaintiff in order to enforce a defendant’s obligations in relation to the common parts of a building.

50.  If Match Power’s argument is right, the consent scheme purchasers remaining as owners would individually have to sue Match Power for alleged breaches of the consent scheme contracts in connection with the construction of the common parts.  This is despite the reality that all owners for the time being would be suffering the consequences of any defective work by Match Power and, if any individual owners succeeded in litigation, all owners for the time being would enjoy the benefit from rectification work which Match Power might be required to fund.

51.  The costs of litigating against Match Power in relation to the common parts would be prohibitive for individual owners.  This alone may deter them from undertaking court action as individuals.

52.  Even if some owners were successful in litigation, it may be unclear what their damages would be.  Their undivided shares in the common parts being joint and several, they might arguably be entitled to the full cost of rectifying defects.  That would mean all owners for the time being would have a free ride.  All owners for the time being would enjoy the benefit of the litigation undertaken by the few, without being under any obligation to bear the risks or costs of those few.

53.  In contrast, if the Court limits the damages of successful individual owners to an amount proportionate (say) to their undivided shares in the estate, Match Power would have a free ride.  It would not be bearing the full cost of any wrongdoing.  Instead, the owners for the time being would have to pay the balance of the cost of rectifying Match Power’s defective work.

54.  Such consequences of Mr Chan’s arguments would truly make the management of a building estate a “highly complex affair”. There could also be much potential unfairness.  In the absence of clear words that the Legislature so intended, I should be loathe to construe the BMO in a manner having that result.  The Court has to read BMO ss. 16 and 18(2)(g) liberally, so as not unnecessarily to fetter the efficient and effective management of common areas by the Incorporated Owners of an estate.

55.  Mr Chan asserts that to apply IGCO s. 7(2) to the construction of BMO s. 18 (reading “owners” as a reference to “one or more owners”) would lead to a multiplicity of proceedings in relation to the common parts of a building.  But I do not see how that would be the case.

56.  On the contrary, it is Mr Chan’s construction that could lead to the bringing of 266 actions in place of the solitary one which the Incorporated Owners wish to pursue.  Individual owners would be barred by s. 16 from bringing suits in relation to the common parts.  Only the Incorporated Owners could do so.

57.  There may, of course, be difficult cases or where the Court (say) would have to determine if a particular cause of action is actually in relation to the common parts of a building or in reality concerns a matter personal to an owner.  The mere possibility of grey areas would not, I think, militate in favour of Mr Chan’s too narrow reading of the BMO.

58.  The word “owners” appears four times in BMO s. 16.  The first occasion plainly refers to the time when the owners for the time being of a building have been incorporated.  On the second occasion, both read in context and with application of IGCO s. 7(2), “the rights, powers, privileges and duties of the owners in relation to the common parts of the building” must refer to “the rights etc. of one or more of the owners comprising the Incorporated Owners in relation to the common parts”.  On the third occasion, again both read in context and with application of IGCO s. 7(2), “the liabilities of the owners in relation to the common parts of the building” must refer to “the liabilities of one or more of the owners comprising the Incorporated Owners in relation to the common parts”.

59.  I say “read in context” because any other construction of “owners” would have the effect of encouraging a multiplicity of actions by the Incorporated Owners or against individual owners in relation to the common parts.  That is undesirable from the point of view of managing a building.  It is far better for one entity to be charged with the exercise of rights in relation to the common parts for the benefit of all owners, and for one readily identifiable entity to be held responsible for any failure properly to use or manage the common parts.

60.  There is no justification for construing “owners” in BMO s. 16 as limited to rights held by “all owners for the time being when an action is brought by the Incorporated Owners” or to liabilities incurred by “all owners for the time being at the time when an action is brought against the Incorporated Owners”.  As Mr Pennicott argues, the words of limitation which Mr Chan wishes to import into BMO s. 16 are just not there.

61.  Moreover, Mr Chan’s proposed construction (Mr Pennicott continues) is problematic.  Suppose a wrong is done by X in relation to the common parts at time t.  The wrong is rectified and the Incorporated Owners now seek compensation from X.  But, shortly before the Incorporated Owners sue X, some owners sell their units to third parties.  The third parties would not have been owners at t, so it might be said that they do not enjoy an individual right of suit against X at the time of suit.  In such circumstance, if Mr Chan is right, the Incorporated Owners could not bring an action against X.  That would defeat the object of BMO s. 16.

62.  Nor do I think that the cases cited by Mr Chan support his contention.

63.  Chi Kit concerned the enforcement of a right against a person who had become an owner after the occurrence of a tort.  It concerned the construction of BMO s. 17(1)(b).  It did not involve the construction of BMO ss. 16 and 18(2)(g) or the question of the Incorporated Owners’ right to bring suit on behalf of individual owners.

64.  If anything, Grenville would appear to be against Mr Chan.  It was common ground there that, since the time of the defendant developer’s wrong and before the issue of the writ, the body of owners had changed.  Thus, not all the owners at the time when suit was brought by the Incorporated Owners would have had a cause of action against the developer.  But this does not seem to have troubled the Court.

65.  Jikan explains that, upon the creation of an owners corporation, the rights of suit enjoyed by individual owners in relation to the common parts pass on to the Incorporated Owners.

66.  It is true that in Jikan Litton NPJ observed that BMO s. 18(2) did not confer a right to suit where no such right otherwise existed.  But that appears to have been an obiter remark.  The dictum contradicts other authority which Litton NPJ did not discuss.

67.  For instance, Incorporated Owners of Pearl Island Holiday Flats v. Incorporated Owner of Pearl Island Garden [1997] 4 HKC 424 (CA) involved a claim by Incorporated Owners to enforce the rights of individual owners in relation to an appurtenant road (which was not a common part of the estate).  Godfrey VP held (at 427D-E) that the language of BMO s. 18(2)(g) was “quite general enough” to enable the plaintiff to maintain an action against the defendants in its own name.  The expression “on behalf of” in BMO s. 18(2)(g) (Godfrey VP said at 427A-B (echoing Barnett J at first instance) “should be construed as enabling the corporation to represent the owners in litigation in their interests and for their benefit”.

68.  I accordingly do not regard Litton NPJ’s remark in Jikan as definitively excluding the possibility of an Incorporated Owners initiating suit in its own name solely by reason of s. 18(2)(g).  But, given Mr Pennicott’s concession recorded above on s. 18(2)(g), I do not have to decide this point today and so I shall say no more.

69.  What is more important is that I doubt that “common interest” in BMO s. 18(2)(g) should be read as narrowly as Mr Chan contends (that is, as only referring to a right exercisable by (or a liability exercisable against) every individual member currently comprising an Incorporated Owners).  Jikan does not say that “common interest” should be read so narrowly.  On the other hand, McMullin J’s dictum in Grenville at 242 (cited above) indicates that “common interest” should be read more liberally.

70.  “Common interest” may merely be referring to a circumstance which is “common” in the sense that it affects all the owners of an estate for the time being.  In so affecting all owners, the latter would together have a shared “interest” in seeing that something was done about the circumstance.

71.  Note that the “common interest” so defined may be the result of something that was done before the Incorporated Owners came into existence or at some previous time when the body of owners comprising a corporation was different.  The relevant question for the application of s. 18(2)(g) would simply be, at the time when the Incorporated Owners purports to act, are the members for the time being of an estate affected in some way by a matter, so that they share a “common interest” in something being done to deal with the matter.

72.  Accordingly, I cannot infer anything about the correct interpretation of BMO s. 16 from the reference to “common interest” in BMO s. 18(2)(g).

73.  Hang Yick would appear to support the Incorporated Owners, more than Match Power.  I am unable to infer from Woo VP’s comments on the assumption of liability by the incorporated owners that Mr Chan must be correct in relation to the assertion of a right by Incorporated Owners.  If anything, Stone J’s judgment (at para. 59) suggests the contrary.

74.  Although not wholly clear on the matter, Stone J can be read as saying that each individual owner’s rights of action in relation to the common parts becomes vested in Incorporated Owners (at least insofar as such individual rights of action touch upon something affecting the body of owners of an estate for the time being).  It would then be for the corporation to assert such rights to the benefit of the common interest of the body of owners for the time being.

75.  Nor do I derive assistance from Mirador. The case is distinguishable.

76.  Mirador concerned the use of a roof which was not a common part.  BMO s. 16 was therefore not in play.

77.  The Court held that the Incorporated Owners did not have locus under BMO s. 18(2)(g) to enforce a restrictive covenant.  However, this was because by its terms the covenant was purely private to the developer and its successors in title (as opposed to the whole body of owners) and the covenant concerned the use of a private area (the roof).

78.  Here, in contrast, we are concerned with consent scheme contracts.  The body of owners before issue of the certificate of compliance could only enter into such contracts.  More importantly, the contracts impose obligations on Match Power in respect of the common parts of a building.

79.  As Mr Pennicott observes, if (adventitiously) the owners had been incorporated at the same time as when the certificate of compliance was issued, the rights of all owners under the consent scheme contracts in relation to the common parts would have vested in the Incorporated Owners pursuant to BMO s. 16.  It would be strange if the Incorporated Owners could not enforce those same rights now, merely because the Incorporated Owners only came into existence at a later date.

B.  Match Power’s 2^nd argument: Claims do not solely relate to common parts

80.  Mr Chan argues that certain complaints by the Incorporated Owners involving alleged defects in the estate’s car parking areas do not involve common parts.  The Incorporated Owners disputes this.

81.  In my view, Mr Pennicott is right in submitting that the question whether an alleged defect is located in whole or in part in a common part or affects a common interest in some way is a fact-sensitive matter.  Such question is best determined at trial.  It is not a matter which can be dealt with summarily.

C.  Match Power’s 3^rd argument: Claims do not fall within the Lands Tribunal’s jurisdiction so that BMO s. 16 is inapplicable

82.  The argument is that MBO s.16 “pre-supposes” that action for the enforcement of rights by the Incorporated Owners may be brought in the Lands Tribunal.  By BMO s. 45(1) the Lands Tribunal “shall have jurisdiction to hear and determine any proceedings specified in Schedule 10”.  Since the claims here (Mr Chan contends) do not fall within BMO Schedule 10, it follows (Mr Chan reasons) that the High Court has no jurisdiction to entertain the claims.

83.  The submission is untenable.

84.  Nothing in BMO s. 16 restricts (much less “pre-supposes”) that the rights exercisable by the Incorporated Owners in the High Court are limited to claims which may be brought before the Lands Tribunal.

85.  It is true that BMO s. 16(b) refers to “proceedings in the tribunal”.  But that does not mean that, if the Lands Tribunal is without jurisdiction, the High Court would equally not have jurisdiction to entertain a claim by the Incorporated Owners.

86.  The word “accordingly” in the main body of BMO s. 16 makes it plain that the possibility of proceedings in the Lands Tribunal by or against an Incorporated Owners is one (but by no means the only) consequence of the rights and liabilities conferred on the Incorporated Owner by the main body of BMO s. 16.

87.  It is also true that formerly MSBO s. 16(b) used the word “court” instead of “tribunal”.  The former word has since been amended to the latter.  But I do not see how the amendment supports Mr Chan’s argument.

88.  In any event, I agree with Mr Pennicott that it is incorrect that the present claims are outside the Lands Tribunal’s jurisdiction as defined in BMO Schedule 10.  The claims fall within BMO Schedule 10.  See, for example, BMO Schedule 10, paras. 1, 3, 5, 7, 8 and 9.

D.  Match Power’s 4^th argument: Claims should have been brought in the Lands Tribunal

89.  The suggestion (advanced as an alternative to Match Power’s 3rd argument) is that the claims alleged by the Incorporated Owners ought to have been brought before the Lands Tribunal.  There is nothing in the BMO which supports this contention.  The Lands Tribunal does not have exclusive jurisdiction over matters falling within BMO Schedule 10.  See Wong Hing Cheong v. Wah E Investment Ltd. [2002] 2HKLRD 175 (CA) (at para. 26).

E.  Match Power’s 5^th argument: Causes of action underlying the Incorporated Owners’ claims pre-date the latter’s existence

90.  Mr Chan suggests that, on the present state of authorities, it is open to this Court to hold that BMO s. 16 does not concern rights and liabilities which accrued before the Incorporated Owners came into existence.

91.  I disagree.  In my view, the Court of Appeal decided in Hang Yick that pre-existing rights and liabilities of individual owners in connection with the common parts vest in (and so became enforceable by or against) the Incorporated Owners upon the latter coming into being.  See, especially, the passages from the judgment of Stone J cited above.

F.  Summary

92.  None of Match Power’s arguments has succeeded.

93.  Let me now answer the 3 preliminary issues which Match Power has proposed.

94.  Question 1 is “Whether the Incorporated Owners has, by virtue of BMO ss. 16 or 18(2), the right to sue on behalf of all the owners in order to enforce contractual (as opposed to property) rights of the owners of the development?”

95.  I would answer Question 1 in the affirmative.

96.  Note that I should not be taken as having accepted that the contractual rights sought to be enforced here do not touch upon property rights or interests of the owners of the development.  It is possible that the contractual rights sought to be enforced involve property rights or interests.  But that is not something which I have to determine today.

97.  I should also add that, as far as I can see, nothing in BMO s. 16 restricts the rights or liabilities being enforced by or against the Incorporated Owners to rights or liabilities which are not contract-based (such as rights in tort).  All s. 16 requires is that a relevant right or liability be something “in relation to the common parts of the building”.

98.  Question 2 is “Whether the Incorporated Owners has, by virtue of BMO ss. 16 or 18(2), the right to sue on behalf of all the owners to enforce the contractual rights of only some (but not all) of the owners of the development?”

99.  I would answer Question 2 in the affirmative for the reasons discussed in connection with Match Power’s 1^st argument.

100.  Question 3 is “Whether the owners of the development who are not privy to the consent scheme contracts can enforce any rights under the same against Match Power?”

101.  I agree with Mr Pennicott that Question 3 is inapposite.  It does not arise in the present case.

IV.  CONCLUSION

102.  Match Power fails.  I shall now hear counsel on costs and consequential orders.