宏德居業主立案法團 v. 人人汽車有限公司 AND ANOTHER

LDBM 167/2019

[2023] HKLdT 61

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 167 OF 2019

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BETWEEN

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DECISION ON REVIEW

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Background

1.  The Judgment of this case was handed down on 31 March 2023. In paragraph 58(2) of the Judgment, I mentioned that expenses for the maintenance and repair of the lifts should be attributed to Category 6(a), ie all owners of the Estate.

2.  On 27 April 2023, the 2^nd respondent wrote a letter to the Tribunal suggesting that paragraph 58(2) was inserted accidentally and it is a clerical error. However, I did not think that paragraph 58(2) can be regarded as accidental slip or clerical error, and the 2^nd respondent should make an application for review or leave to appeal.

3.  Thus, the 2^nd respondent filed an application for review on 2 May 2023. I decided to review on the same day and the parties agreed to have the review application disposed of on paper.

4.  The only point that the 2^nd respondent invites the tribunal to review is whether under the budgets for the years 2018/2019 and 2019/2020 the head of expenses for the maintenance and repair of the residential lifts should be attributed to Category 6(a), ie all owners of the Estate as stated in paragraph 58 of the Judgement, or rather all such expenses should be attributed to Category 6(c), ie the owners of the Residential Units.

5.  The 2^nd respondent accepts all the other parts of the Judgment. In other words, the review application will not disturb the orders I made in the Judgment. It only affects how the applicant should categorise expenses for the maintenance and repair of the residential lifts when it revises the budgets for the years 2018/2019 and 2019/2020.

The 2^nd respondent’s case

6.  Paragraph 58 of the Judgement states as follows:-

“I agree and adopt the above reasoning in the present case. Thus, the following heads of expenses under the two budgets should be attributed to Category 6(a), ie all owners of the Estate, having regard to the particular nature and utility of them:

(1) Expenses for security guard services ...

(2) Expenses for the maintenance and repair of the lifts which are defined as part of the “Residential Common Areas” under the DMC and are, inter alia, deemed to be for the benefit of the residential unit owners.

(3) Cleaning service expenses.

(4) Water charges under the 2019/2020 budget.

(5) Electricity charges.

(6) Expenses for pump plumbing and drainage under the 2019/2020 budget

(7) The expenses for the repair of materials under the 2019/2020 budget ...”

(emphasis added)

7.  The 2^nd respondent submits that the above cited paragraph 58 of the Judgment should be revised in such a way that the head of expenses for the maintenance and repair of the lifts referred to in sub-paragraph (2) therein should be attributed to Category 6(c).

8.  Category 6(c) is referring to “expenses which are attributable solely to or solely for the benefit of the Owners of the Residential Development and shall be apportioned to the Owners of the Residential Shares proportionally according to the number of Residential Shares held by each of them”.

9.  The reasons advanced by the 2^nd respondent are as follows:-

(a) For expenses relating to lifts, in paragraphs 63 to 69 of the Judgment, the Tribunal rejected the applicant's method of arbitrarily apportioning the expense, and observed that this “reflects the Manager’s misconception in fixing the management expenses, namely it had to follow the so-called user-to-pay principle to split the expenses rather than attributing the management expenses according to the express requirements set out in the DMC.” (emphasis added)

(b) The Tribunal rightly observed in paragraph 58(2) of the Judgment that the lifts are defined as part of the “Residential Common Areas” under the DMC, and the expenses for the maintenance and repair of them are, inter alia, deemed to be for the benefit of the residential unit owners.

(c) Therefore, according to the express requirements set out in the DMC, all the expenses relating to the lifts, which are “attributable solely to or solely for the benefit of the Owners of the Residential Development”, should be attributed to Category 6(c).

(d) The Tribunal also rightly pointed out in paragraph 59 of the Judgment that, according to the DMC, the Owners of Residential Units shall have full right and liberty to have access to and to use and enjoy the Residential Common Areas, while neither the Car Port Owners nor the Owners of the Commercial Units have the right to enter upon the Residential Common Areas. This means that neither the Car Port Owners nor the Owners of the Commercial Units have the right to use the lifts unless they are at the same time also Owners of the Residential Units.

(e) It would therefore be contradictory to the express requirements set out in the DMC if the expenses relating to the lifts are attributed to Category 6(a), ie all Owners of the Estate. This is for the reason that the expenses incurred for the lifts, which are defined as part of the “Residential Common Areas” under the DMC, are not attributable solely to all the Owners of the Estate because at least they are deemed not for the benefit of the Car Port Owners or the Owners of the Commercial Units.

10.  The 2^nd respondent also submits that the proposed revision of paragraph 58(2) of the Judgment as set out in the above would serve to eliminate any dispute that may arise when the applicant proceeds to revise the two budgets as ordered by the Tribunal and to prepare the future budgets, thus achieving the practical objective of the DMC, ie in facilitating the management of the Estate by reducing the conflicts among co-owners on the one hand and preventing abuse by the Manager and the majority owner on the other.

11.  The 2^nd respondent therefore asks this Tribunal to adopt the proposed revision of paragraph 58(2) of the Judgment, and to order that the costs of this review to be paid by the applicant to the 2^nd respondent to be taxed if not agreed.

The 1^st respondent’s case

12.  The 1^st respondent did not take out the present review application but was served with the review application by the 2^nd respondent.

13.  However, the 1^st respondent did file a written submission in support of the 2^nd respondent’s review application. Not only that the 1^st respondent concurs with the 2^nd respondent’s submissions, it makes further submissions as stipulated below.

14.  The 1^st respondent observed that in making the decision in paragraph 58(2) of the Judgment, the Tribunal has adopted the reasoning of the case in Century Globe Ltd and Others v Incorporated Owners of Fu Loy Garden, LDBM 24/2015 (“Century Globe”).

15.  HH Judge KW Wong at paragraph 54 of Century Globe stated that the DMC therein “makes no distinction for different category of co-owners in using any part of the common areas of the Estate. Accordingly, common facilities installed in the car park cannot be said being relating solely or for the sole benefit of the CPSs. Taking the example of fluorescent tubes and other lighting installed in the car park and along the driveway. Apart from providing basic lighting for CPS users, other co-owners will be benefited from such lightings. It is not in dispute that all co-owners can access the car park podium via the drive way. Flat owners or occupiers can enter the residential blocks via the podium entries. Every other co-owner of the Estate is entitled to remain and stay at the car park podium as the CPS owners.”

16.  HH Judge KW Wong at paragraph 57 of Century Globe further stated that “it has already been defined that the CCTV in the car parks (if any) connecting directly to the Estate Office is part of the “Estate's Common Facilities”. It can be inferred that the author has envisaged CCTV at the car park entrance is for the benefit of the entire Estate. According to Clause D5(b) these expenses are to be contributed by all co-owners. It makes perfect sense as the car park security is part and parcel of the security system of the entire Estate. Access to the residential flats can be through the car park which forms an integral part of the Estate. It will provide an alternative access point for trespassers if all these security/communication facilities are removed.”

17.  HH Judge KW Wong therefore based upon the said express provision under the DMC in that case held that the facilities such as the fluorescent tubes and other lighting installed at the car park, the CCTV, which was defined as the Estate’s Common Facilities, the cleaning of the car park common areas as well as other miscellaneous expenses are for the benefit of the whole estate.

18.  The 1^st respondent submits that Century Globe, however, is distinguishable from the present case as follows:-

(a) Firstly, it is correctly pointed out in paragraph 58(2) of the Judgment that “Expenses for the maintenance and repair of the lifts are defined as part of the “Residential Common Areas” [and not as “Estate Common Areas” as well] and are, inter alia, deemed to be for the benefit of the residential unit owners [and not for the benefit of the Carport Owners or the Owners for Commercial Units].

(b) Secondly, “Residential Common Areas” are defined in the Definitions clause in Part I of the DMC as “… the Lifts in the Residential Towers and the Entrances and their lobbies of all the Residential Towers and any other parts of the Residential Development for the use and benefit of the Residential Development.”

(c) Thirdly, the DMC herein makes distinction for different category of co-owners in using different parts of the common areas of the Estate. It is a finding of fact in paragraphs 59(2) to (4) of the Judgment that: -

“I agree and adopt the above reasoning in the present case. Thus, the following heads of expenses under the two budgets should be attributed to Category 6(a), ie all owners of the Estate, having regard to the particular nature and utility of them:

“59(2) There are provisions stating that the Owners of Residential Units shall have full right and liberty to have access to and to use and enjoy the Estate Common Areas in addition to the Residential Common Areas (see clauses 1 and 2 in Section A of Part III of the DMC). Similarly, for Owners of Commercial Units, they shall have full right and liberty to have access to and use and enjoy the Commercial Common Areas as well as the Estate Common Areas [but not for the Residential Common Areas] (see clauses 1 and 2 in Section B of Part III of the DMC).

(3) On the other hand, for the Car Port Owners, there are no similar provisions in the DMC which allow them to have access to and to use and enjoy the Residential or Commercial Common Areas.

(4) In fact, clause C of Part III of the DMC stipulates that “the Owner shall have no right to enter upon any part of the Land or the Estate save as expressly herein provided.””

19.  The 1^st respondent submits that in the light of the above express provisions under the DMC, and as a matter of fact, neither the Car Port Owners nor the Owners of the Commercial Units have the right to have access to and to use and enjoy the Residential Common Areas including the right to use the lifts for residential blocks unless they are at the same time also the Owners of the Residential Units. It follows that the head of expenses for the maintenance and repair of the residential lifts defined as part of the Residential Common Areas should be attributed to Category 6(c), ie the Owners of the Residential Units as they are for the benefit of the Residential Unit Owners but not otherwise.

20.  Thus, the 1^st respondent also asks this Tribunal to allow the review application lodged by the 2^nd respondent with costs of the review to be paid by the applicant to the 1^st and 2^nd respondents, to be taxed if not agreed.

The applicant’s case

21.  The applicant submits that the Tribunal was correct in attributing the expenses for maintenance and repair of the residential lifts to Category 6(a), ie all owners of the Estate as per paragraph 58(2) of the Judgment. The attribution is consistent with the principles of construction of DMC enunciated by the Tribunal and nature and utility of the expenses.

22.  In the Judgment, the Tribunal first held at paragraph 24 that Clause 6(e) should be read subject to Clause 6(a) to (d). In other words, Clause 6(a) to (d) governs the exercise of the Manager's power of attribution of expenses to the four parts of the annual budget.

23.  The Tribunal further held at paragraph 44 that it would be irrational and unreasonable to "apportion" the expenses first before “attribution”. In response to the applicant’s argument that “it is not preferable to divide the services such as cleaning works of the Estate into four parts to be conducted by four contractors” and thus “it is necessary to apportion the expenses under one single contract (eg ... maintenance of passenger lifts) for the whole Estate into different components before they are attributed” (emphasis added), the Tribunal correctly held at paragraph 53 that “the DMC specifies that they must be attributed to Category 6(a), because they are not solely attributable or solely for the benefit of the Owners in Categories 6(b) to (d)” (emphasis added).

24.  The Tribunal also acknowledged at paragraph 54 that the benefits of grouping a particular type of service for the Estate to be conducted by one single contractor. The Tribunal held that this practical aspect justifies the DMC's requirement for attributing the whole expenses under that one single service contract to Category 6(a) without prior apportionment.

25.  With respect to the expenses for Maintenance and Repair of the residential lifts, the Tribunal observed that:-

(1) The Manager set the management fees for lift maintenance based on the serving floor of the lifts, and it deems that the Car Port owners would use a particular number of floors (paragraph 63).

(2) Regarding the inconsistencies in calculating the number of serving floors for the Car Port, Mr Choi, the applicant’s witness, explained that the Manager took into account that the Car Port Owners would use the lifts in Block A and Block B (paragraph 65).

(3) Even assuming it represented the Manager’s actual calculation method, it reflects the Manager’s misconception in fixing the management expenses by the “user-to-pay principle” and “split the expenses” rather than attributing the management expenses according to the express requirements set out in the DMC (paragraph 67).

26.  In other words, the Tribunal did not reject the applicant’s evidence that the Car Port owners would use the lifts in Block A and Block B. What the Tribunal disapproved of was the misconception of “apportionment before attribution”, contrary to the Tribunal's interpretation of Clause 6(a)-(e) of the DMC.

27.  The applicant submits that whilst the residential lifts are defined as Residential Common Areas in the Definition of the DMC, it is not determinative of how the management expenses should be attributed according to Clause 6(a)-(e) of the DMC. The overarching question remains whether the type of expenses is “attributable solely or solely for the benefit of the Owners” of the Commercial Development, the Residential Development and/or Car Port of the Estate (per Clause 6(a)-(d)).

28.  The applicant further submits that as a matter of practice and reality, they are not used exclusively by the Owners of Residential Development of the Estate.

29.  The evidence of the parties in relation to the use of the residential lifts which was neither challenged by the respondents nor rejected by the Tribunal are as follows:-

(1) Mr Choi gave evidence that non-residents of the Estate including users of the Car Port may gain access to the lift lobbies of the ground floor by asking for the assistance from the security guard.

(2) Mr Pong (the 2^nd respondent’s witness) gave evidence that he also gained access to the lift lobbies to the Ground Floor of Block B with the assistance from the security guards after pressing the bell at the entrance gate.

(3) Mr Pong accepted that users of the Car Port may gain access to the lift lobbies through the unlocked doors and may use the residential lifts to enter and/or exit the Car Port. If they do not use the lifts for entrance and/or exit to the Car Port, they would need to walk along the U-shape driveways for up to 3 floors and/or flights of stairs.

30.  Thus, the applicant submits that the expenses for maintenance and repair of the residential lifts were not “attributable solely or solely for the benefit of the Owners of the Residential Development.”

31.  There was only one single contract for the maintenance of the Residential Lifts. Applying the Tribunal’s ruling at paragraphs 53-54 of the Judgment, the applicant should not apportion the expenses for maintenance of the residential lifts prior to attribution. In the circumstances, such expenses should be attributed to the Estate instead of the Residential Development.

32.  The applicant therefore submits that the Tribunal did not err at paragraph 58(2) in attributing the expenses for maintenance of the residential lifts to Category 6(a), and asks for the dismissal of the review application.

Discussion

33.  First of all, paragraph 58(2) was not inserted accidentally nor was it a clerical mistake. It was my decision that expenses for the maintenance and repair of the lifts should be attributed to Category 6(a), ie all owners of the Estate.

34.  Paragraph 58(2) should be read and understood in this manner: Even though expenses for the maintenance and repair of the lifts which are defined as part of the “Residential Common Areas” under the DMC and are, inter alia, deemed to be for the benefit of the residential unit owners, such expenses should be attributed to Category 6(a), ie all owners of the Estate, having regard to the particular nature and utility of them.

35.  As submitted by the applicant, the evidence is clear that non-residents of the Estate including users of the Car Port could use the residential lifts to gain access to the lift lobbies of the ground floor and/or access to the Car Port. The respondents never challenged this fact. In fact, the 2^nd respondent’s witness, Mr Pong, gave evidence that he, as well as other users of the Car Port, also gained access to the lift lobbies of the ground floor and/or the Car Port in this way, and if they do not use the residential lifts, they would need to walk along the U-shape driveways or flights of stairs for up to 3 floors.

36.  Thus, it was clear to me that the residential lifts were in actual fact not for the sole benefit of the Owners of the Residential Development, but for anyone using the Car Port as well. If I have not made such an express finding in the Judgment, I will make it now.

37.  Although the lifts in the Residential Towers are defined to be part of the “Residential Common Areas” under the DMC, I agree with the applicant that the determination of how the management expenses should be attributed is another matter, and such determination should be in accordance with Clauses 6(a) to (e) of the DMC. Clause 6(c) is for those expenses “attributable solely to or solely for the benefit of” the residential owners, but as the residential lifts are not just for the benefit of the residential owners, the related expenses should not be attributed under Clause 6(c), but under Clause 6(a).

38.  Just like the example of fluorescent tubes and other lighting installed in the car park as mentioned by HH Judge KW Wong in Century Globe, as long as they are for the benefit of all the owners, all the owners should share the expenses even though they are situated in the car park only. I do not think that the ruling depends on whether the DMC has divided the Estate into different parts of common areas, and hence I do not see how Century Globe can be distinguished from the present case.

39.  The key factor in Clauses 6(a) to (e) is how these expenses are attributed to or for the benefit of which owners, not how the common areas are defined. The deeming effect of the provisions can be overridden by the actual nature and utility of such expenses.

40.  By the same token, even though the DMC may not have given express rights to non-residential owners to use the residential lifts, it is clear that non-residential owners were actually given access to use the residential lifts. It is the actual nature and utility of such expenses that matters.

41.  This attribution according to Clauses 6(a) to (e) is different from the so-called “user-to-pay” principle, which the Tribunal has already held to be a dangerous label and can be totally misleading. What matters here is how the expenses should be attributed according to Clauses 6(a) to (e).

42.  Although the fact that a single service contract is adopted does not mean that the service is not “attributable solely to or solely for the benefit of” a particular category of owners, the deciding factor is still the nature and utility of the expenses.

43.  In the Judgment, I mentioned that in practice, grouping a particular type of service for the Estate to be conducted by one single contractor will have certain benefits, and this practical aspect justifies the DMC’s requirement for attributing the whole expenses under that one single contract to Category 6(a), but it was never meant to be a factor to be considered in how the expenses should be attributed in the first place. In other words, whether the attribution is correct or not does not depend on whether there is one single contract. Thus, the arguments in relation to one single contract is not helpful.

Conclusion

44.  By reasons aforesaid, the 2^nd respondent’s review application must fail. Paragraph 58(2) of the Judgment still stands. In other words, the lift expenses should be attributed to all owners of the Estate.

45.  I therefore order as follows:-

(1) The 2^nd respondent’s application for review filed on 2 May 2023 be dismissed.

(2) Costs order nisi: The 1^st and 2^nd respondents do pay the applicant costs of the said application for review with certificate for counsel to be taxed on District Court Scale if not agreed; and

(3) The aforesaid costs order nisi shall become absolute if there is no application for costs within the next 14 days.