The Incorporated Owners of Kenbo Commercial Building v. Lau Wing Cheung and Another

IN THE LANDS TRIBUNAL OF

THE HONG KONG SPECIAL ADMINISTRATIVE REGION

Building Management Application No. LDBM 153 of 1998

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J U D G M E N T

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1. The Applicant is the Incorporated Owners of Kenbo Commercial Building (A).

2. The Respondents are the owners of Shop B , G/F of the same building (R).

3. A Deed of Mutual Covenant dated 28th October 1982, in relation to the building, was registered at the Land Office by Memorial No. 2340432. (DMC).

4. On 17th April 1996 the Building Authority issued an order that "all loose and defective external rendering and mosaic tile " should be removed. (the works order).

5. On 5th September 1996, at an extraordinary general meeting (EGM) of the A, it was resolved that the costs of complying with the works order and other additional works should be shared by the owners according to the undivided shares assigned to each of the units in the building. The total costs is $2,200,000. There is no dispute as to the extent of the works nor the quantum of the total works costs.

6. A contended that, as the works costs is a special fund, paragraph 4(2) of the Seventh Schedule to the Building Management Ordinance Cap.344 (BMO) should apply. In that case, the A's resolution at the EGM should take effect over the stated calculation method under clause (d) and (e) of the Third Schedule to the DMC. Based on the R's undivided shares, the A claims against R for a sum of $247,200. R's counterclaim was adjourned sine die with liberty to restore, on R's application.

7. R accepted that under S.18 (1) of BMO, A has a duty to carry out work as may be ordered by any public officer, as in this instance, the works order.

8. Under S.20(2) (a) A may establish and maintain a contingency fund to provide for any expenditure of an unexpected or urgent nature.

9. .Under S.22(1), the amount to be contributed by an owner towards the amount determined under S.21 shall be as fixed by the management committee in accordance with the DMC. Under subsection (2), where there is no DMC, or if the DMC does not provide for the fixing of contributions, the amount shall be fixed by the management committee in accordance with the respective shares of the owners.

10. Under S.39 of the BMO, an owner's share shall be determined in the manner provided in an instrument, including a deed of mutual covenant, which is registered in the Land Registry. Only when there is no such instrument, or if the instrument contains no such provision, would shares be determined in the proportion which an owner's undivided share in the building bears to the total number of shares into which the building is divided.

11. Under the DMC, the "Agent" is empowered to carry out various management duties, and vested with corresponding powers. The term "Agent" is defined under paragraph ( c ) of the Third Schedule of the DMC to mean the person for the time being managing and providing services in respect of the said building or the Corporation incorporated under the Ordinance. In the present case, A is the Agent under the DMC.

12. Under paragraph 1 (1) ( c ) of the Third Schedule to the BMO, the management committee shall convene a general meeting of the corporation at any time and for such purposes as the management committee thinks fit.

13. The calling of the extraordinary general meeting (EGM)in relation to the works costs and contribution is within this Schedule. It is a procedurally correct step. However, where the DMC is not inconsistent with BMO, an EGM has no power per se to override the DMC. The intention of the majority of the owners, as shown by the resolution at the EGM, can only take effect where it is in compliance with the DMC. Unless the terms of the DMC have been formally amended or varied and registered, the DMC remains the deed binding on all owners, and its terms must be adhered to.

14. Looking at paragraph 4 (2) of the Seventh Schedule to BMO, the special fund is a permanent fund to be established and maintained by the manager, to meet expenditure not expected to recur every year, with the owners incorporation by resolution, deciding on the contribution in any financial year. The manager is to maintain an account under this item, paying all money so received into it, and making payment out only in an emergency, or for a purpose approved by the management committee.

15. This present contribution is not for the setting up or contribution to the special fund under paragraph 4 (2) of the Seventh Schedule to the BMO. It is a contribution towards the costs of special items of works ordered by the Building Authority, and other works approved by the A, on an one-off basis. Paragraph 4 (2) of the Seventh Schedule to the BMO does not apply. A's approach using the undivided shares as the basis for the calculation of the contribution required from each owner is not correct.

16. The contribution must be apportioned in accordance with the ratio under clause (d) and (e) of the Third Schedule to the DMC.