THE INCORPORATED OWNERS OF GREENWOOD TERRACE v. U TECK LTD

LDBM 11/2011

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION

NO. 11 OF 2011

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J U D G M E N T

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Background

1.  The applicant (“the IO”) is the Incorporated Owners of the development known as Greenwood Terrace (“the Estate”) in Chai Wan. 

2.  The Estate consists of 8 multi-storey buildings.  Tower 1 to Tower 7 are residential blocks with a kindergarten (“the Kindergarten”) underneath Tower 7. The other building (hereinafter called the “Shop Building”) is one with car parking spaces on Level 1 to Level 4 (“the Car Parking Spaces”) and shops on Level 5 and Level 6.  The floor slab of Level 5 extends horizontally and projects sideways to form a large open area known as the Podium (“the Podium”). Level 4 is directly and immediately below Level 5 and the Podium and the Car Parking Spaces occupied a much larger area than Level 5 (layout plan at page 397 of Bundle B).

3.  There are 18 shops on Level 5 whilst Level 6 is being used as a restaurant.  Level 6 had been assigned with 2,309 undivided shares of the Estate and Level 5 got 1,951 undivided shares (page 67 of Bundle B). 

4.  The respondent was the registered owner of Level 6 and Shop 1A and 6B on Level 5.   Shop 1A is being assigned 156 undivided shares (page 2 of Bundle B) and Shop 6B got 134 undivided shares (page 8 of Bundle B).

5.  In November 2007, the respondent lodged a complaint with the IO about the water seepage problem of the roof slab on Level 6.  In or around February 2008, an architect was being engaged by the IO to look into the water seepage problem. By a written report dated 25 April 2008, the architect advised the IO that the most appropriate method for resolving the water seepage problem is to replace the water proof membrane of the roof slab of the Shop Building (“the Membrane”).

6.  At the Management Committee meeting held on 12 June 2008, it was resolved that the work to replace the Membrane should be carried out (“the Repair Work”).  At another meeting held on 11 September 2008, it was resolved that the total contract price for the Repair Work should be $2,016,630.00 and contributions should be collected in 3 equal instalments, in November 2008, December 2008 and January 2009 respectively (minutes of meeting at page 200 and 219 of Bundle B).

7.  The IO demanded payments from the shop owners of Level 5 and Level 6 as well as from the Kindergarten by issuing 3 debit notes dated 1 November 2008, 23 January 2009 and 19 March 2009 respectively for their share in the Repair Work.  The respondent failed to settle the same.

8.  By a letter from its solicitor dated 2 September 2009, the respondent indicated its stance in refusing to pay is that owners of the Car Parking Spaces should also be required to contribute towards the Repair Work.  The IO took out an action in the High Court on 30 December 2009 (HCA 2557/2009 refers) against the respondent for its share in the Repair Work.  By an order dated 20 December 2010 by Registrar Lung, the action was being transferred to this Tribunal for disposal.

9.  The facts stated above are not in dispute.  The respondent maintained its stance as stated in paragraph 8 above, i.e. whether the owners of the Car Parking Spaces should contribute to the costs of the Repair Work.  On top of this, how the contribution should be apportioned amongst owners of Level 5 is also in issue. These are the issues to be determined in this judgment and both involved the interpretation of the terms of the Deed of Mutual Covenant (“DMC”) governing the Estate. 

Relevant Provisions of the DMC

10.  For easy reference, the relevant provisions of the DMC are copied herein.

11.  Clause 1 of the DMC

“Commercial block - The commercial block in the Estate comprising two storeys of shops, and four storeys of car parking spaces and including the kindergarten in Tower 7 of the Estate. (page 16 of Bundle B)

Common Areas - shall mean Estate Common Areas, Residential Common Areas, Commercial Common Areas and Parking Common Areas and shall, unless the context otherwise requires, include the main roofs of the residential blocks, the external walls, the driveways, the Recreational Areas, the landscaped areas and other areas in the Estate intended for common use and enjoyment of all owners of the Estate. (page 17 of Bundle B)

Estate Common Areas - shall mean those parts of the Estate intended for the common use and benefit of all the owners and/or persons using or visiting the Estate including but not limited to the Landscaped Area, Children’s Play Area, vehicular access roads and the entrance and exit thereto, pavements lanes and pedestrian ways, service area, refuse rooms, guard rooms (if any), maintenance stores and such footbridges and connections as may be constructed pursuant to the Conditions. (page 18 of Bundle B)

Commercial Common Areas - shall mean the air-conditioning plant areas in the commercial block, the service lift and the lift for the handicapped and their lobbies (if any), escalators in the commercial block and lift machine rooms, vehicular access to the parking and service zone, the loading and unloading area on Level 5, the entrances to the commercial block and their lobbies and any other parts of the commercial block for the exclusive use and benefit of the commercial block. (page 18-19 of Bundle B)

Residential Common Areas - shall mean the lifts in the Residential Blocks and the entrances and lift lobbies of the Residential Blocks, lift machine rooms, the main roofs and external walls of the Residential Blocks and any other parts of the Residential Blocks for the exclusive use and benefits of the Residential Blocks. (page 19 of Bundle B)

Parking Common Areas - shall mean all entrances, exits ramps driveways on Levels 1 to 4 of the commercial block and such other common areas designed and intended to be used by owners of the car parking spaces. (page 19 of Bundle B)”

12.  Clause 12 (a) to (c) of the DMC

“(a) For the purpose of fixing the contributions payable by the owners an annual budget showing the estimated expenditure for the ensuing year shall be prepared by the Managers.

(b) The year shall, for the purposes of the annual budget, commence from the date of the occupation permit (whether temporary or permanent) issued for the buildings or any of them and will run for the remainder of year until the 31st day of December of that year and thereafter shall run for each calendar year.

(c) The budget mentioned in Clause 12(a) hereof shall be in three parts:-

A. The first part shall cover all expenditure which in the opinion of the Managers (whose decision shall be conclusive for all purposes) is specifically referable to the commercial block excluding the car parking spaces and Parking Common Areas (hereinafter called “the management expenses of the commercial block”) including in such expenditure the charges for the supply of flushing water, the maintenance, repair, cleansing, lighting, ventilation and security of the common areas within the commercial block excluding the car parking spaces and Parking Common Areas and such proportionate part of the general expenditure provided in Clause 12 (c)(D) hereof as the Managers shall consider fair and reasonable.

B. The second part shall cover all expenditure which in the opinion of the Managers (whose opinion shall be conclusive for all purposes) is specifically referable to the residential blocks (hereinafter called “the management expenses of the residential blocks”) including in such expenditure the charges for the supply of flushing water, the maintenance, repair, cleansing, lighting, ventilation and security of the Common Areas within the residential blocks and such proportionate part of the said general expenditure as the Managers shall consider fair and reasonable.

C. The third part shall cover all expenditure which in the opinion of the Managers (whose opinion shall be conclusive for all purposes) is specifically referable to the car parking spaces and Parking Common Areas (hereinafter called “the management expenses of the car parking spaces”) including in such expenditure the charges for the cleansing, lighting, ventilation and security of the car parking spaces and Parking Common Areas and such proportionate part of the said general expenditure as the Managers shall consider fair and reasonable.

D. The said general expenditure shall cover all expenditure to be expended for the benefit of all owners as essential or required for the proper management cleansing security and maintenance of the Estate as a whole (and not for any particular residential blocks or car parkings spaces or the commercial block) and for the provisions of facilities common to the Estate (hereinafter called “the management expenses of the Estate”) including but without prejudice to the generality of the foregoing:-

(i) The Crown rent and …

(ii) The cost of the maintenance renewal and repair of the Recreational Areas landscaped areas Common Areas roads driveways and footpaths forming part of the Estate and all equipment amenities and facilities therein and thereof PROVIDED HOWEVER THAT damage caused thereto by or resulting from any act default or negligence of any one or more individual owners for which he/they/is/are responsible shall be made good by such individual owner(s).

(iii) The remuneration of the Managers and …

(iv) Premiums payable for the insurance …

(v) The cost of keeping in good and tenantable repair and condition the pavements, main walls, scavenging lane (if any), pipes, gutters, fences and all retaining walls (if any) and all drains, sewers, transformer rooms, and the Common Areas and also the cost and expenses for any re-instatement or replacement or renewal thereof except as regards damage caused by or resulting from any act default or negligence of any individual owner or for which any individual owner is responsible as herein provided.

(vi) – (xiii)   …

(xiv)  A reasonable sum for contingencies.

(xv) – (xix)   …” (page 33-38 Bundle B)

13.  Clause 12 (e)(A) to (C) of the DMC

“(e) Each owner shall bear and pay for a proportion (hereinafter called “the service charge”) of the total sum budgeted by the Managers to cover the said maintenance and management costs. Such proportion shall be calculated in the following manner:-

(A) The owners of the commercial units shall pay and contribute towards the management expenses of the commercial block by reference to the management units set out in the Eighth Schedule hereto and allotted to the commercial units respectively owned by them.

(B) The owners of the domestic units shall pay and contribute towards the management expenses of the residential blocks by reference to the said management units allotted to the domestic units respectively owned by them.

(C) The owners of the car parking spaces shall pay the contribute towards the management expenses of the car parking spaces by reference to the said management units allotted to the car parking spaces respectively owned by them. (page 38 of Bundle B)”

14.  Clause 12 (f) of the DMC

“(f) Notwithstanding the provisions of the last preceding sub-clause:-

(i) All existing and future taxes rates assessments property tax and outgoings of every description for the time being payable in respect of any portion of the buildings in separate occupation shall be borne by the owner of that particular portion.

(ii) The costs and expenses for keeping in good and tenantable repair and condition the interior, fixture and fittings and the windows and doors of any portion of the buildings in separate occupation and the erection, installation, maintenance and renewal thereof and all plumbing, electrical installations, flue-pipes, smoke stacks, chimneys or other plant, equipment, apparatus or services used exclusively by any portion or portions of the buildings, whether situated within the said portion or portions or the common areas, shall be solely borne by the owner or owners for the time being of that particular portion or portions of the buildings. (page 39-40 of Bundle B)”

15.  Clause 12 (i)(ii) of the DMC

“(i) The Managers may at any time if they deem it fit for the proper management of the Estate do the following:-

(i) …

(ii) If the Managers determine that the sum budgeted by them for the said management is or will be insufficient by reason of any further maintenance or management costs whether incurred or to be incurred over and above the said budgeted sum, they shall demand from each owner on giving not less than one month’s prior notice in writing such additional amount as they in their absolute discretion deem fit to meet the said further maintenance or management costs including their remuneration due thereon. (page 41 of Bundle B)”

16.  Clause 13 (a) and (b) of the DMC

“(a) The Company or the Managers shall determine the sum which each owner shall contribute towards the budget on the basis of clause 12(e) hereof and shall determine the time and place of payment and unless so determined by the Company or the Managers as aforesaid each owner shall on the first day of each and every calendar month pay to the Managers a sum representing one twelfth of such owner’s liability to contribute to the budget for that year.

(b) If any owner shall fail to pay any amount payable hereunder within seven days of the due date (in respect of the monthly service charge the due date shall be deemed to be the 1st day of each month regardless of whether any demand for such payments is made) he may be required to pay to the Managers the following liquidated damages:-

(1) Interest calculated at the rate of $1.50 for each $100.00 or part thereof of the amount unpaid for each calendar month or part thereof for which it remains unpaid. (page 42 of Bundle B)”

17.  Clause 21(k)(i) of the DMC

“(i) All owners shall have the right to use the roofs of the buildings only for escape in the event of fire or emergency but subject thereto no owner shall have the right to use the same … (page 58 of Bundle B)”

18.  The Eighth Schedule (page 83 of Bundle B)

THE EIGHTH SCHEDULE ABOVE REFERRED TO  ALLOTMENT OF MANAGEMENT UNITS
	FIRST COLUMN	SECOND COLUMN			THIRD COLUMN
	NUMBER OF MGT. UNITS	MGT. UNITS EACH FLAT			NO. OF FLAT
COMMERCIAL BLOCK & KINDERGARTEN
Commercial Level 5	10,129
Commercial Level 6	13,227
Kindergarten	1,000
RESIDENTIAL BLOCK	396,060	Type A		175	1,050
		Type B		199	840
		Type C		215	210
					2,100
CAR PARK	10,440		24		435

The Applicant’s Contention

19.  The applicant contends that Clause 12(c) required the Manager to divide the Estate’s expenses, including the repair and maintenance expenses, into 3 separate accounts (i.e. Account (A) to (C)).  It also empowered the Manager to quantify and apportion the share for each account according to its own opinion which is conclusive for all purposes.  And according to Clause 12(e), the owners of Car Parking Spaces are being treated as a distinct category completely separated from the owners of Level 5, Level 6 and the Kindergarten. 

20.  As long as the Manager formed the opinion in good faith, it is not open to the owners to challenge the apportionment.  Since the IO and/or the Manager had formed an honest opinion in good faith that the costs for the Repair Work should go into Account (A) to be borne by owners of the Commercial Block excluding the owners of the Car Parking Spaces, such an opinion is conclusive for all purposes and the respondent is not entitled to raise any objection.  And according to Clause 12(i)(ii) of the DMC, the Manager can demand additional amount from each owner by notice in writing should the sum budgeted for the management is not sufficient.

21.  Clause 12(e) stipulated that the management expenses of the Commercial Block should be apportioned by reference to the management units set out in the Eighth Schedule of the DMC.  However, there is no sub-division of management units for the 18 shops on Level 5.  In practice, the Manager had assigned a number of management units to each shop on Level 5 (page 401 of Bundle B) all along in the collection of management fees.  Shop 1A had been allotted 685 management units and Shop 6B had been allotted 590 management units.  This should be the basis for the calculation of the respondent’s share as far as Level 5 is concerned. 

22.  Therefore, the respondent’s share of management units should be :

Level 6 – 13,227

Shop 1A Level 5 – 685

Shop 6B Level 5 – 590

Total: 14,502

23.  And the respondent’s share in the costs of the Repair Work  according to Schedule 8 of the DMC should be :

$2,016,630 ÷ 24,356* x 14,502 = $1,200,737.73

(*the total number of management units for the shops and the Kindergarten)

24.  Should the Tribunal find that the DMC had not provided for the fixing of contributions for Level 5, the contributions should be fixed by the management committee in accordance with the respective shares of the owners in accordance with Section 22(2) of the Building Management Ordinance (“BMO”).

25.  Adopting the undivided shares allotted to Level 5 and those for Shop 1A and 6B, [2,309 ÷ (156 + 134)], the respondent’s share is 12.6% of Level 5.  Applying this share in the tabulation of management units, [10,129 x 12.6%], the respondent should hold 1,276 management units in Level 5.  Hence, the respondent’s share should be :

$2,016,630 ÷ 24,356 x (13,227 + 1,276) = $1,200,820.53

The Respondent’s Argument

26.  As far as the apportionment is concerned, Clause 12(a) and Clause 12(c) of the DMC are not applicable.  The costs for the Repair Work had not been included in any annual budget as required under Clause 12(a), hence the provision of this clause cannot be triggered off and the IO cannot rely on it.  Instead, Clause 12(f)(ii) of the DMC should be the provision to be relied upon in the apportionment, i.e. owners who enjoyed the plant, equipment, apparatus etc shall be solely responsible for the repair costs.

27.  The Membrane serves the purpose of protecting all the levels below it, including Level 5, Level 6, the lift shaft, the staircases and the Car parking Spaces.  It is clear that the Membrane protects facilities that are being used by all owners of the Shop Building and not only serves Level 5 and Level 6.  What’s more, Clause 21(k)(i) of the DMC allows all owners to have the right to use the roofs of the buildings for escape in case of emergency.  The roof and the Membrane are used exclusively by owners of Level 5, Level 6 and the Car Parking Spaces so they should be the one to bear the costs of the Repair Work.

28.  Even if Clause 12(a) and 12(c) are applicable, the Manager is not entitled to adopt a broad-brush approach in determining which item of expenditure falls into which category or simply makes an honest guess which is not so provided in the DMC.  The wordings of Clause 12(f)(ii) laid down the paramount principle that owners who enjoy the benefit shall bear the costs of repair, notwithstanding the provisions in Clause 12(c).  The apportionment stipulated in Clause 12(c)(A) to (C) are not mutually exclusive in the sense that contributions charged by the Manager could in fact contain elements of expenses common for more than 1 group of owners. Clause 12(c)(C) requires the owners of the Car Parking Spaces to contribute such proportionate part of “the said general expenditure” which include costs of repair of the common areas and money for contingencies.  The Membrane no doubt lies in the common area and the Repair Work is a contingency, the Manager should require the owners of the Car Parking Spaces to contribute towards this general expenditure and it would only be fair and reasonable for all owners of the Shop Building to contribute. 

29.  So, the respondent’s share should be :

$2,016,630 ÷ 33,796* x 14,502 = $865,344.07

(*the total number of management units for the Shops and the Car Parking Spaces)

Is a Budget a must before demand of payment

30.  It is true that Clause 12(a) of the DMC required the Manager to prepare an annual budget showing the estimated expenditure for the ensuring year and Clause 12(e) provided that each owner shall bear and pay for the sum budgeted by the Manager to cover the maintenance and management costs.  But this is not the end of the matter.

31.  Clause 12(i)(ii) of the DMC also empowered the Manager to demand further payment of maintenance or management costs should the sum budgeted is insufficient to cover any further costs incurred or to be incurred over and above the said budgeted sum.  So, the Manager may demand further payment from respective owners by written notice without the need of another budget being prepared should there be deficiency in meeting any maintenance or management costs. There is no requirement for the further sum for maintenance had to be originally included in the annual budget.  The fact that the DMC allowed the Manager the absolute discretion to decide on the amount of the further contribution supports such a conclusion.  The Manager is under a duty to “repair and keep in good repair and condition the main structure and fabric of the buildings (including the main roofs)” under Clause 11(c)(7) of the DMC.  The maintenance costs should include whatever sum required for the discharge of such duty.  It would be absurd to require the Manager to include certain item in the annual budget before it can discharge its duty of repair since this may cause unnecessary delay.

32.  In this case, the Manager had already indicated at the Management Committee meeting on 8 May 2008 (page 194 of Bundle B) that the repair costs for the Membrane was about $1.5 million whilst the surplus of the management account for the Commercial Unit was only $300,000 odd.  This is effectively saying that the budgeted sum within the account for the Commercial Unit is not sufficient to cover the repair costs. 

33.  And at the Management Committee meeting held on 12 June 2008, it was resolved that the repair work on the roof should be carried out and the Manager had indicated again that since the surplus in the management account of the Commercial Unit was not sufficient to cover the costs, demand would be made to owners of the Commercial Units for advance payment for such purpose (page 203 of Bundle B).

34.  The Manager then issued the demand letters to the owners of Level 5, Level 6 and Kindergarten for their respective share in the costs of the Repair Work.  I found what the Manager had done is in line with the requirement under Clause 12(i)(ii) of the DMC to cover further maintenance to be incurred which may not have been included in the annual budget.  I found the Manager is entitled to issue written debit notes to demand for the costs of the Repair Work.

Liability of Respective Owners

35.  Before one can answer the ultimate question as to whether owners of the Car Parking Spaces should be liable for the costs of the Repair Work, the liability of respective owners under the DMC should be examined. 

36.  I agreed with Mr. Chan for the respondent that to decide who should be responsible for what management expenses, the Manager had to work that out in accordance with the terms of the DMC instead of by way of wild guess by the Manager, no matter how honest the Manager had been in making the decision.  The opinion formed by the Manager has to be in line with the provisions of the DMC and as long as this is followed, the decision is conclusive for all purposes.

37.  The DMC had provided for the liability of respective owners in their payment of the management expenses.  Clause 12(c) of the DMC had differentiated 3 different kinds of management expenses, i.e. :

(a) management expenses of the Commercial Block (“CB expenses”),

(b) management expenses of the Residential Block (“RB expenses”), and

(c) management expenses of the Car Parking Spaces (“CPS expenses”). 

On top of this, each owner shall also bear a proportion of the general expenses.

38.  Clause 12(e) of the DMC stipulated the obligation of different owners to pay for their share of the management expenses, i.e.:

(a) owners of the commercial units shall pay and contribute towards the CB expenses,

(b) owners of the domestic units shall pay and contribute towards the RB expenses, and

(c) owners of the Car Parking Spaces shall pay and contribute towards the CPS expenses. 

39.  One should note that the term “owners of the commercial units” is being used in Clause 12(e) instead of “owners of the Commercial Block”.  This is apparently due to the fact that though included in the definition of Commercial Block, the expenses for Car Parking Spaces and Parking Common Areas are specifically excluded from the CB expenses under Clause 12(c)(A) and another category, i.e. CPS expenses had been created to cater for the Car Parking Spaces and Parking Common Area under Clause 12(c)(C).  From the wordings of Clause 12(e), 12(c)(A) and 12(c)(C), the only conclusion must be that the CB expenses defined under Clause 12(c)(A) is intended to be borne by owners of Level 5, Level 6 and the Kindergarten only with the Car Parking Spaces being excluded, hence they are being referred to as “owners of commercial units” instead of owners of Commercial Block.

40.  So, Clause 12(e) required owners of the Commercial Units, i.e. owners of Level 5, Level 6 and the Kindergarten to be liable only for the CB expenses whilst the owners of the Car Parking Spaces are only liable to bear the CPS expenses. Whilst the general expenses are common and to be shared by the 3 different categories of owners, I found those specifically referred to as expenses under their respective head is distinct to each group and in effect, mutually exclusive.  

41.  Adopting the requirement under Clause 12(e), in order for the owners of the Car Parking Spaces to be required to contribute to the costs of the Repair Work, it must fall within general expenses.  If the costs of the Repair Work are CB expenses but not general expenses, it should be borne by owners of the Commercial Units only.

Is the costs of the Repair Work fall within general expenses?

42.  Clause 12 (c)(D) of the DMC provided that general expenses shall cover “expenditure to be expended for the benefit of all owners as essential or required for the proper management cleansing security and maintenance of the Estate as a whole (and not for any particular residential blocks or car parking spaces or the commercial block)” (my emphasis).

43.  Is the Repair Work for the benefit of all owners?  I found the answer to this question must be no.  The owners of the Residential Blocks and the Kindergarten may well go to the Shop Building from time to time but the intention of having the Membrane is definitely not for their benefit.  The Membrane cannot be said to be for the benefit of all owners.  As to who actually takes the benefit, this will be dealt with below.

44.  I found the costs of the Repair Work cannot be classified as general expenses since it is not an expenses common to all owners and cannot be shared by all owners as required under Clause 12(c)(D). 

45.  Clause 12(c)(D)(ii) and (v) provided that the management expenses of the Estate includes the costs of maintaining the Common Areas. 

46.  Common Areas, as defined in Clause 1 of the DMC had specifically included the main roofs of the residential blocks but not the roof of the Shop Building (“the Roof”). This is apparently not an inadvertence with the Roof not being included.  And to become a Common Area, it must be “areas in the Estate intended for common use and enjoyment of all owners of the Estate” (my emphasis).  I found the Membrane is not intended for the common use and enjoyment of owners of the Residential Block and the Kindergarten, hence it cannot be classified as for the common use and enjoyment of all owners of the Estate. 

47.  The respondent also tries to argue that all owners are entitled to use the Roof as a place of escape in case of emergency.  But as can be seen from the wordings of Clause 21(k)(i), owners are allowed to use the roofs for escape only and not otherwise.  This is just a conditional usage and cannot be said to be common use and enjoyment as such.

48.  Judging from the definition of Common Areas in Clause 1, unless the Roof falls within Estate Common Areas, Commercial Common Area or Parking Common Areas, it cannot be considered as Common Areas.

49.  Estate Common Areas covered “those parts … intended for the common use and benefit of all the owners and/or persons using or visiting the Estate”.  Adopting the rationale stated in paragraph 43, the Membrane cannot be said to be intended for the common use and benefit of all owners and/or persons using or visiting the Estate.  I found the Membrane does not fall within Estate Common Areas.

50.  Commercial Common Areas, as defined in Clause 1 of the DMC, include “any other parts of the commercial block for the exclusive use and benefit of the commercial block” (page 18 of Bundle B) (my emphasis).  Since the Kindergarten being part of the Commercial Block does not enjoy the benefit of the Membrane, I found the Membrane does not fall within the Commercial Common Areas.

51.  And judging from the definition of Parking Common Areas, the Membrane cannot be considered as part of it.  Neither can the Membrane be said to be intended to be used by owners of the Car Parking Spaces only.

52.  I found the Membrane does not fall within the definition of Common Areas as stipulated under Clause 12(c)(D)(ii) and (v) and so cannot be considered as general expenses.

53.  It is never the respondent’s case that the costs of the Repair Work should be borne by the owners of the Residential Block.  This is inconsistent with its contention that the costs of the Repair Work falls within general expenses which according to Clause 12(c) should be borne by all owners in proportion.  Nor is the respondent suggesting that the owners of the Car Parking Spaces should be the only one to bear the same. 

54.  So the only remaining question is whether the costs of the Repair Work is being caught by Clause 12(c)(A), i.e. being expenses specifically referred to the Commercial Block other than the Car Parking Spaces, or Clause 12(f)(ii), i.e. owners who enjoyed the benefit shall bear the costs.

The Membrane – for whose benefit?

55.  It is not in dispute that the Membrane lies above Level 6 and is part of the Roof.  There is the dispute as to whether the Car Parking Spaces also took the benefit of the protection of the Membrane.  Both parties had adduced expert evidence in this regard. 

56.  Mr. Cheung, the applicant’s expert opined that the Membrane can always be said to have a role in serving as part of the waterproofing protection for the Car Parking Spaces.  However, given the many layers of surfaces below the roof with other waterproofing membranes, the Car Parking Spaces will still be fully protected even if the Membrane does not exist (report at page 177-182 of Bundle A).  And the lift shaft and the staircase are separate structures and water coming from the Roof via the Membrane will go straight down to the ground with Level 1 to 4 unaffected. 

57.  Mr. Chan, expert of the respondent opined that the Membrane is designed for the waterproofing and weather protection of the Car Parking Spaces.  Level 1 to 4 will not be fully protected from weather if the Membrane does not exist or defective since there is no other waterproofing membrane on the floor slab of Level 6 and below and rainwater will run down from the Roof, via the lift shaft and the escape staircase, to the lower floors. 

58.  Having considered the expert evidence, I accept Mr. Chan’s opinion and found that the Membrane is for the protection of the shops as well as the Car Parking Spaces. As rightly pointed out by the respondent in its final submission, Mr. Cheung’s opinion is founded on the assumption that there are other waterproofing membranes below the Roof but the Finishing Schedule (page 409 of Bundle B) of the Estate proved this not to be the case.  And Mr. Chan’s description of the lift shaft and the staircase as separated from the Car Parking Spaces is also unfounded in view of Mr. Cheung’s description of the layout of the building (at paragraph 3.3 of his report) which is confirmed to be correct by Mr. Mui, an employee of the Manager.  I found Mr. Chan’s evidence unacceptable.

59.  I found that the Membrane provides protection to Level 5, Level 6 as well as to the Car Parking Spaces.

Clause 12(f)(ii)of the DMC

60.  The respondent is relying on Clause 12(f)(ii) of the DMC to argue that should the court find the Membrane is for the protection of the shops and the Car Parking Spaces, Clause 12(f)(ii) should be applicable.  I disagreed.  From the wordings of Clause 12(f), it is apparently catered for those portions of the buildings in separate occupation and for exclusive use of particular owners.  The Membrane or even the Roof cannot be said to be in separate occupation of any owner nor can it be said to be owned by particular owner or owners. 

61.  The respondent also tries to argue that all owners are entitled to use the Roof as a place of escape in case of emergency but this does not involve separate occupation or ownership by the owners.  I found Clause 12(f)(ii) is not applicable in this case.

Clause 12(c)(A) of the DMC

62.  The CB expenses under Clause 12(c)(A) of the DMC are expenses specifically referable to the Commercial Block except those expenses referable to the Car Parking Spaces and the Parking Common Areas which are classified as the CPS expenses. With such differentiation, the only inference to be drawn must be that the expenses of the Commercial Block which are only referable to the Car Parking Spaces and named as CPS expenses is taken out from the CB expenses and were to be borne by owners of the Car Parking Spaces solely under Clause 12(e)(C). 

63.  The liability of the owners of the Car Parking Spaces is confined to the costs specifically referable to the Car Parking Spaces whereas other expenses specifically referable to the Commercial Block are not within their responsibility.  It is the responsibility of the owners of the Commercial Units instead.  So the Roof and the Membrane not being specifically referable to the Car Parking Spaces but to the Commercial Block, should be the responsibility of the owners of the Commercial Units only.

64.  It is also stated in Clause 12(c)(A) that “the maintenance, repair, cleansing … of the common areas within the commercial block excluding the car parking spaces and Parking Common Areas” are included as CB expenses and were to be borne by owners of the Commercial Units.  I found the “common areas within the commercial block” is different from Commercial Common Areas or Estate Common Areas.  This ‘common area within the Commercial Block’ should not be mixed up with the above two defined Common Areas.  

65.  The “common areas within the commercial block” should be given its ordinary meaning and there is no dispute that the Roof and the Membrane are common area of the commercial block.  According to Clause 12(c)(A), the expenses for the maintenance and repair of the Membrane should be solely borne by the owners of the Commercial Units, i.e. the shops and the Kindergarten.

66.  I conclude that the owners of the Car Parking Spaces are not required under the DMC to bear the costs of the Repair Work.

The Management Units of Shop 1A and 6B

67.  The next issue to determine is how much the respondent should be responsible as far as the costs of the Repair Work is concerned.  This turns on what should be the management units apportioned to Shop 1A and 6B. 

68.  Even though the respondent had, in its pleadings, raised the argument that the share of Level 5 should be equally divided amongst the 18 shops, there is no evidence adduced in support of such a contention.  I found the respondent had failed to substantiate its case in this regard. 

69.  The applicant had provided the respondent with an Allotment Schedule (page 401 of Bundle B) which shows the respective management units assigned to each shop on Level 5.  The respondent challenged the basis for such tabulation. 

70.  There is no evidence as to the basis of the tabulation but from the calculation provided by the applicant in paragraph 22 and 25 above, the management units assigned to each shop of Level 5 by the Manager is more or less in line with their respective shares.  There is no dispute that Section 22(2) of BMO should be applicable when the DMC had been silent as to the contribution.  Since the DMC had not provided for the respective management units assigned to each shop on Level 5, I found Section 22(2) should be applicable and the undivided shares of respective shop owners should be adopted in the calculation of the assignment of management units.

71.  I accept the applicant’s calculation by way of undivided shares.  I found the respondent’s share in the costs of Repair Work should be $1,200,820.53.

Interests

72.  The applicant is asking for interests to be charged for the sum to be paid by the respondent. Counsel for the respondent argued in his final submission that since no repair work had been done, no interests should be levied.  I found such a contention cannot stand.  Clause 13(b)(ii) of the DMC did empowered the Manager to charge interests on non-payment and there is nothing in the provision to require that actual work should have been done before interests can be levied.

73.  I found the IO is entitled to charge interests in accordance with Clause 13(b)(ii).

The Declaratory Relief

74.  The applicant is asking for a declaration that only owners of those units of Level 5 and Level 6 of the Shop Building as well as the Kindergarten and not owners of the Car Parking Spaces would be obliged to pay towards the expenses incurred or to be incurred for the Repair Work.  The respondent contended that this serves no useful purpose since the respondent is no longer an owner and other owners of the Commercial Block are not involved in this case, hence the relief sought should be declined.

75.  Judging from my ruling above, it is clear that the owners of the shops and the Kindergarten should be the only one to bear the costs of the Repair Work. Given the respondent is the only one within the Commercial Block to raise objection to the liability to pay for the repair costs, I agree with the respondent that the declaration sought by the applicant serves no useful purpose and should be declined.

The Order

76.  It is ordered that :-

(a) The respondent do pay the applicant the sum of $1,200,820.53 with interests according to Clause 13(b)(1) of the DMC till full payment;

(b) The declaratory relief sought by the applicant is dismissed;

(c) Cost order nisi that the respondent do pay the applicant costs of this case, with certificate for counsel, to be taxed if not agreed at District Court scale; 

(d) Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.