CHOW CHUI CHUI AND OTHERS v. KAFULL INTERNATIONAL LTD AND OTHERS

LDBM 299/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 299 OF 2012

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D E C I S I O N

[Leave to Appeal & Stay of Execution]

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1. After hearing evidence and submissions on the two actions, judgment was handed down on 4 September 2014.  In short I found that there was insufficient quorum at the 4 August Meeting and as a result the Former MC Members should resume office.

2. Now two of the Substituting MC Members intend to appeal against my decision.  The law applicable to leave application is governed by section 11AA of the Lands Tribunal Ordinance.

The Intended Grounds of Appeal

3. In a nut-shell, the Substituting MC Members’ case is that I have erroneously failed to give sufficient regard to the following:

1.	The first purchaser and the subsequent purchasers would have the same unfettered right to sub-divide the undivided shares assigned to them;
2.	The subdivided units in the Non-Domestic Portion fall squarely within the definition of “flats” under section 2 of the Building Management Ordinance; and
3.	Each subdivided unit owner should therefore be entitled to cast one vote under schedule 11.

4. Such contention although appears to be logical, fails to, in my view, circumvent the difficulty that owners in the Main DMC not being bound by the Sub-DMCs.  It is true that the subdivided units were created by individual assignments specifying the undivided shares to be in the exclusive possession of owner and such assignments were duly registered in the Land Registry.  The rights and obligations among the sub-divided unit owners are no doubt governed by the Sub-DMCs.  This evidenced that subsequent purchasers had an unfettered right to subdivide their undivided shares.  It did not however go so far as to bind the owners in the Main DMC to accept the change of number of flats or units since the execution of the Main DMC.

5. Further, one must not ignore or overlook the actual wording in the definition of “flat”.

“flat” means:

any premises in a building which are referred to in a deed of mutual covenant whether described therein as a flat or by any other name and whether used as a dwelling, shop, factory, office or for any other purpose, of which the owner, as between himself and owners or occupiers of other parts of the same building, is entitled to the exclusive possession.

6. At the time of the Main DMC, there were no subdivided units.  Paragraph (4)  in the Preamble says the following:

“For the purpose of this Deed, unless the context shall otherwise require
(a)	the word “unit” where hereinafter used shall include any flat, shop or other area of non-domestic accommodation in the said building and where applicable, the flat roof held and enjoyed therewith, intended for separate use and occupation.
(b)	the ground to third floors inclusive shall hereinafter be collectively referred to as “the non-domestic units.”

7. By Paragraph (3) in the Preamble, the Building had been divided into 155 equal parts with 48 parts or shares allocated to the shop on the Ground floor; 12 parts or shares allocated to each of the non-domestic accommodations on the 1^st to 3^rd Floors inclusive.

8. Clause 4(d) is a further indication that one floor is taken as one unit/flat in the non-domestic accommodation.  It says:

“If at any time, the non-domestic units are in different ownership, the owner of each shall be responsible for the obligation hereunder in respect of his own unit and all joint obligations shall be shared in the proportion of 48 shares for the owner of ground floor and 12 shares for the owner of each of first to third floors (inclusive).”

9. The definition of “share” in section 2 of the Ordinance is:

“the share of an owner in a building determined in accordance with section 39.”

10. Section 39 provides that:

“An owner's share shall be determined:-
(a)	in the manner provided in an instrument including a deed of mutual covenant (if any) which is registered in the Land Registry; or
(b)	--”

11. In the present case, the share of the owners in the subdivided units had not been provided in the Main DMC.  The ground floor was allotted 48 undivided share and 12 were allotted for each of 1^st to 3^rd floors.  Each lot of undivided share, meaning 48 or 12 shares in their respective cases, denote one floor.  If there were more than one owner in each of them, they are co-owners to be counted as 1 under Schedule 11.  Likewise, subdivisions within that undivided share of 48, for instance, would be in the situation of co-ownership co-owning the 48 shares in the circumstances of ground floor.  This applies to the upper floors.  The owner of a residential flat holds 1 undivided share.  If for some reasons the 1 undivided share was subdivided and sold separately to another owner by a separate assignment, that 1 flat could not, in my view, become 2 and allow 2 owners to be counted as 2 under Schedule 11.  It was because under the Main DMC, 1 share was allotted to 1 unit/flat.

12. For the above reasons, I am not satisfied that the intended appeal has a reasonable prospect of success; or there is any reason in the interests of justice why the intended appeal should be heard, I dismiss the application of the Respondents.

13. As to the application for stay of execution, I have granted interim stay pending determination on the application for leave to appeal, the parties had come to certain terms as to what duties the Former MC Member could carry out to keep the management and maintenance of the Building in good order.  I understand from legal representatives of the parties that this Tribunal does not have to give consideration to those terms of agreement reached before.

14. I have heard Mr Poon saying that if there is no stay of execution, the appeal will be rendered nugatory because the renovation project will go ahead.  I am of the view that since the tender procedures had yet to be started, the owners of the Non-Domestic Portion could still take part in safeguarding a fair tender procedure.  I see no reason to grant any stay of execution in the circumstances.

Conclusion

15. The application for leave to appeal is dismissed.  The application for stay of execution is also refused.

Costs

16. The 1^st and 3^rd respondents in the action LDBM 299/2012, i.e., Kafull International Limited and Firm Home Properties Limited, should jointly and severally pay the Former MC Members’ costs of these interlocutory applications with counsel certificate, to be taxed at District Court Scale if not agreed.  This is an order nisi to become absolute if no application is made to vary the same within 14 days from the date of this decision.