勞資審裁處Deputy Judge Tracy Chan, Presiding Officer of the Lands Tribunal27/1/2014
LDBM191/2011
A A
B LDBM 191/2011 B
C C
IN THE LANDS TRIBUNAL OF THE
D D
HONG KONG SPECIAL ADMINISTRATIVE REGION
E BUILDING MANAGEMENT APPLICATION NO. 191 OF 2011 E
__________________________
F F
G BETWEEN G
H NOMINSHARE LIMITED Applicant H
I
and I
THE INCORPORATED OWNERS OF
J Respondent J
KWONG FUNG TERRACE
K K
L Coram: Deputy Judge Tracy Chan, Presiding Officer of the Lands Tribunal L
M Date of Hearing: 8 October 2013 M
N Date of Further Written Submissions:23 October 2013 N
O Date of Judgment: 28 January 2014 O
P P
Q ________________ Q
R R
J U D G M E N T
S ________________ S
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2
A A
B 1. The Applicant, incorporated in Hong Kong pursuant to the B
Companies Ordinance, Cap 32, is the registered owner of those properties
C C
known as Flat B and Flat C, 33 Floor, Tower 2, Kwong Fung Terrace (“the
rd
D suit properties” and “the Building” respectively as appropriate). The D
Respondent is the owners of the Building incorporated in June 2004 (“the
E E
IO”) under the Building Management Ordinance, Cap344 (“the BMO”).
F F
G G
2. The Applicant filed a Notice of Application on 12 April 2013
H H
and claimed for a declaration that the IO was not legally entitled to demand
I for contributions from the owners and in particular the Applicant for cost of I
renovation and repair works carried out in the common parts of the Building
J J
(“the Work”); it also claimed for refund of paid contribution in the amount
K of $180,964.00. The IO opposed to the claim and in its Counterclaim it K
asked for a sum of $20,106.00 being unpaid balance of contribution due and
L L
owing together with collection charge, interest thereon and legal costs.
M M
N N
3. It is confirmed at trial that the Applicant would no longer
O pursue the claim against the increase of management fees as pleaded in the O
Amended Notice of Application.
P P
Q Q
Background
R R
4. There is little dispute on the facts leading to the Application and
S S
the Counterclaim.
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3
A A
B B
C 5. At an extraordinary general meeting of owners’ held on 18 July C
2009 (“the Owners’ Meeting”) it was resolved that:
D D
E
(i) The Work be carried out forthwith; E
(ii) Sun Cheong Company Limited was to be appointed as
F F
contractor to carry out the Work;
G (iii) Core items as proposed in Plan 3 (方案三) were to be G
carried out at the contractual price of $37,711,475.00; and
H H
(iv) 2 optional items out of 3 were to be carried out.
I I
J J
6. At the subsequent Management Committee meeting held on 5
K August 2009 (“the Management Committee Meeting”) to follow up the K
matter, members passed resolutions on the followings:
L L
M
(i) A separate bank account be opened to deal with all M
financial matters concerning the Work;
N N
(ii) Owners shall make contribution to the cost of the Work in
O
the proportion set out by the Deed of Mutual Covenant O
(“the DMC”);
P P
(iii) The owners were to pay their share of contribution by 5
Q
installments; Q
(iv) The dates of such contributions become payable; and
R R
(v) Notice of contribution to be sent to the owners.
S S
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4
A A
B B
C 7. It is not disputed that contributions of individual owners were C
eventually apportioned according to the Allocation of Management Shares
D D
set out in Schedule 2 to the DMC (“the Management Shares”) and that the
E Applicant, pursuant to a notice of contribution dated 4 September 2009 E
(“Notice of Contribution”) had already paid 4 installments but refused to pay
F F
the 5th, leaving an unpaid balance of $20,106. This is the subject matter of
G G
the Counterclaim.
H H
I I
The Applicant’s Case
J J
8. It is the case of the Applicant that the cost and expenditure of
K the Work was not expected to be incurred annually, and therefore the K
operation should be governed by a special fund pursuant to paragraph 4(2)
L L
of schedule 7 of the BMO (“Paragraph 4(2)”). The Applicant complained
M that in contravention of Paragraph 4(2), the IO had failed to obtain a M
resolution from the owners on the total amount to be contributed and the
N N
time for such contribution to be made. Ms So, counsel for the Applicant,
O submitted that the Management Committee was not conferred the power to O
determine how much and the times the contributions were to be made under
P P
Paragraph 4(2). Further, as a reply to the IO’s case the Applicant contended
Q that since the Work was not of an unexpected or urgent nature, provision for Q
a contingency fund set out in section 20(2) of the BMO is not applicable as
R R
the IO had contended. It was submitted on behalf of the Applicant that
S contribution already paid by the Applicant should be refunded and it should S
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5
A A
B not be demanded to pay the balance as pleaded in the Counterclaim. B
C C
D D
The IO’s Case
E E
9. The IO’s stance is that with those resolutions passed at the
F Owners’ Meeting (see paragraph 5 above) the Management Committee had F
the power under section 22(1) of the BMO to apportion the contribution and
G G
to determine the times when such contributions are payable.
H H
I I
10. The IO further contends that the Paragraph 4(2) relating to
J “special fund” has no relevance to the cost of Work in the present cases. It is J
submitted that decisions in the cases of IO of Kenbo Comm. Bldg. v. Lau
K K
Wing Cheung & anr. (LDBM 153/1998) and Mok Ping Cheong Adolf & anr.
L v. IO of Ma’s Mansion (LDBM 331/2004) are relevant. L
M M
Issue for Trial
N N
O
11. The agreed issue for trial is whether the Management O
Committee has the power to apportion the contribution and to determine the
P P
time for payment pursuant to the BMO and DMC in the circumstance of the
Q present case. Q
R R
S S
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6
A A
B Discussion B
C 12. It was not contended by the Applicant that the calculation for C
the contribution was incorrect nor was it contended that wrong principle had
D D
been adopted in making allocation of contribution. The complaint was
E merely on procedures. As mentioned, the contribution was calculated in E
accordance with the Management Shares set out in Schedule 2 of the DMC.
F F
In fact, the DMC sets out 2 kinds of shares, one is Undivided Shares under
G G
Schedule 1, the other is Management Shares set out in Schedule 2. Sections
H
22(2) and 39 of the BMO together provide that if there is no deed of mutual H
covenant, or if the deed of mutual covenant does not provide for the fixing
I I
of contributions, the amount to be contributed by the owner towards the
J
amount determined under sections 21 of BMO shall be fixed by the J
management committee according to undivided share of the owners.
K K
L L
13. It is my observation that in the present case if the Applicant was
M M
to contribute by its Undivided Shares, its contribution would be
N (200+228)/81533 or 0.525% and if it was to contribute according to N
Management Shares as it had been required by the IO, it should be paying
O O
(70+82)/29860 or 0.509%. So in real terms, the Applicant would pay about
P $3,000 less in the present scenario. P
Q Q
R The DMC R
S S
14. Having said the above, the relevant provisions in the DMC have
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7
A A
B to be examined because where there is a provision in the DMC which B
specifies the method of apportionment, that provision prevails.
C C
Notwithstanding the mentioning of the Management Shares above, under the
D DMC there are 2 different allocations of contribution depending on the D
nature of expenses or fund, namely the Management Facility Fund and
E E
Management Expenses.
F F
G G
Management Facility Fund
H H
15. “Management Facility Fund” is defined under Clause 1.01 of
I I
Section 1 of the DMC, it says:
J J
“Management Facility Fund” means the fund established
by the Manager for the purpose of meeting major works of a
K capital nature for the Common Areas and Common Facilities K
under this Deed.”
L L
M M
16. The creation and operation of the Management Facility Fund is
N provided in Clause 6.41 and sub-clauses (a), (d) and (e) are most relevant: N
O (a) The Manager shall set up the Management Facility Fund, O
into which every owner shall initially contribute a sum
equal to the contribution of one month’s Management
P Expenses, for the purpose of meeting major works of a P
capital nature in respect of the Common Areas and the
Q Common Facilities. Q
(b) The Management Facility Fund shall be deposited in an
interest hearing account of a licensed bank. The
R Management Facility Fund shall be a trust fund managed R
by the Manager and shall be the property of the Owners.
(c) The Management Facility Fund shall be kept separate and
S S
apart from the Management Funds in the books of
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8
A A
B accounts but reference shall be made in the annual B
accounts.
(d) The Owners, at annual general meeting, shall resolve the
C C
amounts to be contributed by the respective Owners to the
Management Facility Fund for the ensuing year.
D (e) The Manager shall give to the Owners at least 7 days D
notice of intended use of the relevant Management
Facility Fund together with information on the amount
E and the purpose for which such fund shall be used. E
F F
G 17. Reading from the above provisions, one might suggest that the G
money collected or to be collected for the Work may come within this
H H
Management Facility Fund. It is however obvious upon a closer look that it
I is not the case. In the first place, there was no evidence that a Management I
Facility Fund has been set up by the Manager, or in the present case, the IO
J J
who has been vested with the duties and power of the Manager by operation
K of Clause 7.15 of the DMC. Further the purpose of the Owners’ Meeting K
was not to determine the contribution to be made to the Management
L L
Facility Fund, if there was one, for “the ensuing financial year” but to decide
M on the need of the Work. After all, the Owners’ Meeting was not an annual M
general meeting as required by Clause 6.41(d) but an extraordinary general
N N
meeting convened for proposals relating to the Work to be determined. I am
O of the view that Clause 6.41 does not apply to the present situation. In fact O
neither of the parties has sought to rely on Clause 6.41 to say that
P P
establishment or operation of Management Facility Fund is relevant.
Q Q
R R
S S
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A A
B Management Expenses B
C 18. Would it be the case then that the cost of the Work was covered C
by Management Expenses as the IO has contended. According to a letter
D D
from the lawyer of the contractor dated 2 September 2009, the contribution
E should be allocated to the owners pursuant to Clauses 6.04, 6.14 to 6.20 and E
Schedule 2 of the DMC. Again, definition of Management Expenses is set
F F
out in Clause 1.01 of Section 1 of the DMC. It says:
G G
“Management Expenses” means the costs, charges and
H expenses for the Management and Maintenance of the Lot H
including the Building as provided in this Deed.”
I I
J 19. To see what the phrase “costs, charges and expenses for the J
Management and Maintenance” really means, it would be helpful to read the
K K
provisions regarding annual budgets for the Management Expenses. Clauses
L L
6.14 and 6.15 of the DMC require that the Manager shall prepare an annual
M
budget showing the estimated Management Expenses for the ensuing M
financial year and that the budget shall include the following costs charges
N N
and items (only relevant provisions are set out below):
O O
Clause 6.15
(b) The costs and expenses of carrying out the duties of the
P Manager under this Deed. P
(c) The costs and expenses of purchasing or hiring all
necessary plant, equipment and machinery including
Q sewage treatment plant. Q
(d) The costs and expenses of employing contractor and staff
R
solely concerned with the administration, management, R
maintenance and servicing of the building.
(j) The provision of a reserve fund for the depreciation of
S capital equipment and painting of the exterior of Building S
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A A
B and the interior of the Common Areas and anticipated B
repairs of a major nature.
(k) The provision of the contingency fund for contingencies.
C C
D D
20. Pursuant to Clause 6.15(b), the budget should include costs and
E E
expenses of carrying out the duties of the Manager and such duties are set
F out under Clause 6.04: F
G (a) To maintain the Building the Common Areas and the G
Common facilities in a good, clean and safe condition at
all times and for purpose to employ reputable and
H H
competent contractors and workmen.
(b) To paint white-wash tile or otherwise treat as may be
I appropriate the exterior walls of the Building and the I
Common areas at such intervals as the same may be
reasonably require to be done.
J (h) To keep the Common Areas and the Common Facilities in J
good condition and working order in particulars the
common sewers, drains, watercourses and pipes free and
K K
clear from obstructions.
L L
M 21. In the present case, the core items of the Work included 大廈外 M
N 牆石屎結構及泥水批盪維修工程、外牆新造防水批盪、瓷磚飾面及油 N
漆(窗台) 飾面、更換排水管工程，更換平台及停車場公眾渠筒工程和
O O
新裝冷氣機集水喉工程、with 2 optional items for 第一、二座入口大堂
P P
更新 and 地下大堂側噴水池更新工程 etc. In my judgment these items are
Q within the scope of the duties of the Manager under Clause 6.04 (a), (b), (h) Q
of the DMC and should therefore fall within the definition of Management
R R
Expenses. If for some reasons such cost had not been included in the budget
S for 2009, owners would have to be asked to make further contributions once S
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A A
B the Work had been approved by them. Such further contributions should B
still be made under the scope of Management Expenses.
C C
D D
E
22. Payment and apportionment of Management Expenses is E
provided in Clauses 6.19 and 6.20 of the DMC, it is said that:
F F
“6.19 For the purpose of determining the contributions to be
G made by each Owner of a Unit to the Management Expenses and G
to the Manager Remuneration, there are allocated to each Unit
the number of Management Units as set out in the Schedule 2
H below. H
6.20 Each owner shall be liable to pay a due proportion of the
I I
Management Expenses and Manger Remuneration according to
the number of the Management Units allocated to his Unit.”
J J
K K
23. Similar situation could be seen in The Incorporated Owners of
L L
Yee On Court v. Lee Zee Zing Hai (CACV 181/2000) where the IO
M
contended that the renovation project was outside clause 4 of the DMC and M
the IO could therefore determine the contribution under paragraph 4(2). It
N N
was held by Deputy Judge Lee sitting as Presiding Officer of the Tribunal
O
that clause 4 of the DMC was to deal with “general day to day expenses” O
only and as a result, she found that expenses for the renovation project
P P
should be dealt with by a special fund and thus the contribution had to be
Q
determined by the owners. Q
R R
S 24. Mayo JA when hearing an appeal brought by the applicant S
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12
A A
B owner said he did not agree with such finding. He found that the money B
collected was a “sinking fund” under the general fund. Keith JA agreed to
C C
the view of Mayo JA on this point and found that the project was covered by
D “the costs, charges and expenses” listed in clause 4 (d) of the DMC: D
E 4. Each owner shall be bound by and shall observe and E
perform the following covenants provisions and
F
restrictions:- F
(d) The following costs charges and expenses shall be borne
and paid by the owners of the said building in proportion
G to the number of unit or units in the said premises for the G
time being owned by them, namely:-
…
H (iv) The cost of repairing, renewing, maintaining H
cleansing, painting, or decorating the building or
I any part or parts thereof and all water pumps, tanks, I
pipes, sewers, drains, watercourses, cable, wires or
services therein and all the apparatus equipment
J and conveniences thereof. J
…
(vi) The cost of operating maintaining repairing
K K
servicing replacing and renewing all the lifts in the
building save and except that no contribution shall
L be payable by those parties whose shops or spaces L
are not served by the lifts.
M M
N N
25. As a conclusion, it was held that contribution should have been
O made according to the DMC and the case was remitted back to the Tribunal O
for determination on contribution under clause 4(f) of the DMC.
P P
Q Q
26. It was held in Yee On Court that the DMC was not inconsistent
R R
with the BMO and I found same situation here in our present case. I now
S deal with the BMO below. S
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13
A A
B B
The BMO
C C
27. Section 20(1)(a) of the BMO also provides that:
D D
(1) A corporation shall establish and maintain a general fund-
E E
(a) to defray the cost of the exercise of its powers and
the performance of its duties under the deed of
F mutual covenant (if any) and this Ordinance; F
G G
H
28. The provision requires the IO to establish and maintain a fund H
to defray the cost of exercise of its power and the performance of its own
I I
duties under both the DMC and the BMO. I have dealt with the duties under
J
DMC above. As far as the BMO is concerned, section 18(1) also sets out J
duties of the corporation and that include:
K K
(a) maintain the common parts and the property of the
L corporation in a state of good and serviceable repair and L
clean condition;
(b) –
M (c) do all things reasonably necessary for the control, M
management and administration of the building.
(fa) carry out any renovation, improvement or decoration
N N
work, as the case may be, to the common parts;
O O
P 29. In my judgment I find that the Work did fall within the duties of P
the IO and was therefore within the purpose of a general fund under section
Q Q
20(1)(a) of the BMO (see paragraph 27 above).
R R
S S
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14
A A
B 30. It is not disputed that a management committee is empowered B
by section 21(1) to determine the amount to be contributed by the owners to
C C
the funds if they are established and maintained under section 20. Section
D 21(1) provides this: D
E (1) Subject to subsection (4), a management committee shall E
determine the amount to be contributed by the owners to
F
the funds established and maintained under section 20 F
during such period-
(a) in the case of the first such period after the date of
G registration of the corporation, not exceeding 15 G
months; and
(b) in any other case, not exceeding 12 months, as the
H management committee may determine. H
I I
J 31. Further Section 22(1) provides that: J
K (1) The amount to be contributed by an owner towards the K
amount determined under section 21 shall be-
(a) Fixed by the management committee in accordance
L L
with the deed of mutual covenant (if any);
(b) Payable at such times and in such manner as the
M management committee may determine. M
N N
O
32. So far as the present case is concerned, as I have already found O
that the cost of the Work was within the scope of the general fund under
P P
section 20(1)(a), the Management Committee was therefore entitled to
Q
determine the amount of contribution to be made by the owners by operation Q
of section 21(1)(a).
R R
S S
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A A
B 33. It may be worth mentioning for clarity that section 21(1A) deals B
with situation where the amount to be determined by a management
C C
committee has exceeded the preceding amount by 150%, in such case, it has
D to be approved by the corporation by a resolution passed at a general D
meeting. In the circumstances of the present case, the cost of the Work was
E E
close to $40,000,000 and assuming that such amount of contribution had
F exceeded 150% of the preceding amount determined by the Management F
Committee, which was more than probable in my view, such amount had to
G G
be approved by the owners by a resolution passed at a general meeting.
H H
I I
34. At the Owners’ Meeting, it was approved that the Work together
J J
with 2 optional items were to be carried out. Minutes of the Owners’
K Meeting had this record: K
L “(3.2) 關於核心工程維修方案的議決結果 L
議決: 大會通過核心工程維修方案 “方案三” 議案。
M M
「方案三」為外牆新造防水批盪、瓷磚飾面及油漆(窗台)飾
N 面、更換排水喉管工程、更換平台及停車場公眾渠筒工程和 N
新裝冷氣機集水喉工程。
O O
(4) 關於議決大維修承辦商的結果
P P
投標承建商 方案三投標價 獲得業權份數 百分比
1
Q 新昌建築 $ 37,711,475 31,664 98.68% Q
R 議決: 大會通過大維修承辦商為 “新昌建築” 議案。” R
S S
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A A
B “(5) 關於議決大維修選擇性項目的結果： B
C
贊成 反對 C
獲得業權份數 25,900 6,950
D D
百分比 78.80% 21.20%
E 廢票零張 E
議決：大會通過 “贊成大維修選擇性項目” 議案。
F F
選擇性工程項目為：第一座、第二座地下大堂翻新工程及第
一座、第二座地下大堂側噴水池更新工程”
G G
H H
35. By these resolutions, I find that section 21(1A) had been
I I
satisfied.
J J
K K
36. The Applicant also complained that the amount determined by
L L
the Management Committee was not the same approved by the owners at the
M Owners’ Meeting, if there was approval at all. Truly, the contract price as M
stated in the minutes of the Owners’ Meeting seemed to be $37,711,475
N N
where the total amount determined by the Management Committee was
O $39,500,000 (see p114 and 119 of bundle). One however must not forget O
that the sum of $37,711,475 was for the core items of the Work under Plan 3
P P
(方案三) only. There were optional items and at the end the owners at the
Q Owners’ Meeting passed a resolution to proceed with 2 out of 3. The total Q
sum for these two items was $1,661,000 and $403,000 respectively. Again, I
R R
would say that such cost, which must have been stated in the tender
S document and had also been set out in part 6 of the feasible report on repair S
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A A
B works (p219 of bundle) compiled on 1 July 2009, 17 days prior to the B
Owners’ Meeting, must have been considered and approved by the owners at
C C
the Owners’ Meeting although for some unknown reasons, the total amount
D of the two optional items were not put down in the minutes of the Owners’ D
Meeting when recording the resolution of the optional items.
E E
F F
G 37. In short, I am of the view that in the process of decision the G
owners must have considered the contract price for both the core items and
H H
the optional items of the Work and when a decision was made they must
I have approved the total amount. I
J J
K 38. Further, I am of the view that even if such omission in the K
minutes of the Owners’ Meeting amounted to a defect, it was technical and
L L
could be rectified by amending the minutes to reflect the contract price of
M the optional items for avoidance of doubt. M
N N
O 39. The IO says that a contingency fund was set up by the O
Management Committee to operate on the contributions for the Work. Mr
P P
Hui said in his witness statement that members of the Management
Q Committee had passed a resolution at the Management Committee Meeting Q
to set up a fund for the Work. According to paragraph 2.1 of the minutes
R R
(p114), members passed a resolution that a separate bank account was to be
S S
set up for operation on money matters relating to the Work. Moreover, it
T T
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18
A A
B appeared as “維修基金”in the Income and Expenditure Account for the B
C
month of May 2010 (p349) and it was booked under Contingency Fund in C
the Balance Sheet as at 31 May 2010(p351). So I accept that although there
D D
was no exact wording for setting up a contingency fund in the minutes of the
E
Committee Meeting, the resolution to have a separate bank account E
amounted to the same effect although it can be criticized for lacking clarity.
F F
G G
40. Ms So submitted that contingency fund should not be the
H H
appropriate fund for the Work. I could not agree. Establishment of
I contingency fund is provided in Section 20(2) of the BMO: I
J (1) A corporation shall establish and maintain a general fund- J
(a) to defray the cost of the exercise of its powers and
the performance of its duties under the deed of
K mutual covenant (if any) and this Ordinance; and K
(b) to pay Government rent, premiums, taxes or other
L outgoings (including any outgoings in relation to L
any maintenance or repair work) which are payable
in respect of the building as a whole. (Amended 27
M of 1993 s. 19; 29 of 1998 s. 105) M
(2) A corporation may establish and maintain a contingency
N N
fund-
(a) to provide for any expenditure of an unexpected or
O urgent nature; and O
(b) to meet any payments of the kind specified in sub-
section (1) if the fund established thereby is
P insufficient to meet them. P
Q Q
R 41. Since I have already found that the nature of the Work falls R
within the general fund under section 20(1)(a), section 20(2)(b) is satisfied.
S S
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A A
B Ms So submitted that the Work was not of unexpected or urgent nature so it B
could not be dealt with by contingency fund. I am however of the view that
C C
the Work was urgent in the sense that it was carried out before the cost could
D be included in the budget for the coming year. So when the budgeted D
general fund for 2009 could not meet the expenses, a contingency fund may
E E
be set up to raise fund for the purpose of the Work.
F F
G G
42. I further find that the Management Committee was delegated
H H
the power to establish funds for and on behalf of the IO as far as section 20
I is concerned. There was no specific procedure set out under section 20(2) I
governing establishment of a contingency fund. It is not said in the
J J
provision that “a contingency fund may be set up by the owners at a general
K meeting by passing a resolution”. I find the setting up of a fund could be K
handled by the Management Committee as an executive arm of the IO under
L L
section (29) of the BMO. Section (29) provides this:
M M
“Subject to this Ordinance, the powers and duties
conferred or imposed by this Ordinance on a corporation shall be
N exercised and performed on behalf of the corporation by the N
management committee.”
O O
P P
43. Further as could be seen in paragraph 19 above, Clause 6.15 of
Q the DMC has catered for provision of the contingency fund for contingencies. Q
R R
S 44. As I accept that a contingency fund under section 20(2) has S
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20
A A
B been set up and therefore I am of the view that the Management Committee, B
under section 22(1)(a), was entitled to fix the amount of contribution to be
C C
made by an owner in accordance with the DMC for the total amount so
D determined by the IO under section 21(1A). Yet further, by section 22(1)(b), D
the Management Committee was empowered to determine the times and
E E
manner for the contribution to be made.
F F
G G
Whether Paragraph 4(2) of the Seventh Schedule Applies
H H
45. Finally, it is the contention of the Applicant that the IO in the
I present scenario should abide by Paragraph 4(2), I now turn to this I
contention and start with reading the text of the provision.
J J
4. Special Fund
K (1) The manager shall establish and maintain a special K
fund to provide for expenditure of a kind not
expected by him to be incurred annually.
L L
(2) If there is a corporation, the corporation shall
determine, by a resolution of the owners, the
M amount to be contributed to the special fund by the M
owners in any financial year, and the time when
those contributions shall be payable.
N (3) The manager shall maintain at a bank within the N
meaning of section 2 of the Banking Ordinance
O (Cap 155) an interest-bearing account, the title of O
which shall refer to the special fund for the
building, and shall use that account exclusively for
P the purpose referred to in subparagraph (1). P
(Amended 49 of 1995 s. 53)
(4) The manager shall without delay pay all money
Q Q
received by him in respect of the special fund into
the account maintained under subparagraph (3).
R (5) Except in a situation considered by the manager to R
be an emergency, no money shall be paid out of
the special fund unless it is for a purpose approved
S by a resolution of the owners’ committee (if any).” S
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21
A A
B B
C 46. Deputy Judge Lee, as she then was, and Member Poon had C
dealt with the construction of Paragraph 4(2) in IO of Kenbo Comm. Bldg. v.
D D
Lau Wing Cheung & anr. (LDBM 153/1998). The Tribunal after hearing the
E application held that the nature of the special fund was not for collecting E
funds to meet expenses of specified items of works:
F F
“14. Looking at paragraph 4 (2) of the Seventh Schedule to
G G
BMO, the special fund is a permanent fund to be established and
maintained by the manager, to meet expenditure not expected to
H recur every year, with the owners incorporation by resolution, H
deciding on the contribution in any financial year. The manager
is to maintain an account under this item, paying all money so
I received into it, and making payment out only in an emergency, I
or for a purpose approved by the management committee.
J J
15. This present contribution is not for the setting up or
contribution to the special fund under paragraph 4 (2) of the
K Seventh Schedule to the BMO. It is a contribution towards the K
costs of special items of works ordered by the Building
Authority, and other works approved by the A, on [an] one-off
L L
basis. Paragraph 4 (2) of the Seventh Schedule to the BMO does
not apply. A’s approach using the undivided shares as the basis
M for the calculation of the contribution required from each owner M
is not correct.
N 16. The contribution must be apportioned in accordance with N
the ratio under clause (d) and (e) of the Third Schedule to the
O DMC.” O
P P
47. Mr Malcolm Merry also casts doubt on whether the operation
Q Q
of special fund should come into play when contribution is called for to meet
R expenses of special items although he does not entirely agree with the view R
of the Tribunal. He says in his work Building Management in Hong Kong
S S
T T
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22
A A
B (2nd ed)1 that: B
C “In this case (Kenbo), as in Yee On Court above, the C
owners were entitled to pay at the rate specified for management
expenses in the DMC. However, the phrase ‘one-off’ is not easy
D D
to understand. It suggests that to qualify for the special fund
contributions cannot be to meet a special item of expenditure.
E Whilst there is no reason in principle that the fund cannot be fed E
by both a portion of regular, monthly fees and one-off lump-sum
levies, if paragraph 4 of schedule 7 is read together with
F paragraph 2 on accounts (see below), it may be doubted whether F
it is legally permissible to call for one-off contributions to the
G special fund during the course of a financial year. Paragraph 2 G
requires the manager to include an estimate in the yearly
accounts of the time at which there will be a need to draw on the
H special fund, and the amount of money that will be needed. A H
person cannot give such an estimate unless the matter has been
considered before the end of the previous financial year. The
I I
reference to ‘any financial year’ in paragraph 1 also suggests that
decisions on funds should be taken before the start of each
J financial year. This would also accord with sound management J
practice.”
K K
L L
48. Moreover, HHJ Wong had expressed his view on the true
M meaning of “the amount to be contributed by owners” in Paragraph 4(2) in M
Young Kwok Sui and another v. The Incorporated Owners of Fontana
N N
Gardens (LDBM 76/2011 and LDBM 77/2011 (Consolidated)). It was his
O finding that Paragraph 4(2) did not confer power on the corporation to O
determine the contribution of individual owners. Paragraphs 26-28 are
P P
relevant.
Q Q
“26. Furthermore, paragraph 4(2) of Schedule 7 to the
R 1
R
Malcolm Merry and Kent Paul, Building Management in Hong Kong (2nd ed) 114
S S
T T
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23
A A
B Ordinance does not expressly state that a corporation can, by B
passing a resolution, require each owner to pay any amount of
money. The English version of paragraph 4(2) says that a
C C
corporation shall determine, by a resolution, “the amount to be
contributed to the special fund by the owners”. In this provision,
D “amount” is singular and “owners” is plural. My view is that D
this provision only provides that a corporation can determine, by
a resolution, the total amount to be contributed by all the owners,
E but not the separate amounts payable by each owner. E
F 27. The phrase 釐定各業主 (determine … the owners) in the F
Chinese version of section 4(2) may refer to individual owners,
but as far as 款額(amount) is concerned, it is not stated to be 個
G 別款額 (separate amounts). I think that the Chinese version of G
section 4(2) should be construed in the same way as the English
H version. 各業主 (the owners) should be construed as 所有業主 H
(all the owners); that is to say, a corporation can determine, by a
resolution, the total amount to be contributed to the special fund
I by all the owners, but not the separate amounts payable by each I
owner.
J J
28. I therefore find that paragraph 4(2) of Schedule 7 to the
Ordinance does not empower a corporation to determine, by a
K resolution, the ratio according to which each owner is to pay his K
share of the contribution, and that the respondent could not rely
on paragraph 4(2) to resolve that the expenses of the 2006 repair
L L
and maintenance works should be shared equally among the
owners of Block B, while the owners of Block G did not need to
M pay anything. The respondent should have required each M
individual owner, including the owners of Block G, to share the
expenses of the 2006 repair and maintenance works according to
N the ratio set out in paragraph 20 of Schedule 1 to the SDMC.” N
O O
P 49. In fact, similar view has been expressed by Mr Malcolm P
Merry 2. In his commentary to Yee On Court, he says:
Q Q
“the tribunal appears to have assumed that the power in
R paragraph 4(2) of the general meeting to determine the amount R
2
S ditto S
T T
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24
A A
B contributed to the special fund was a power to fix individual B
contributions. However, the more natural interpretation is that it
is a power to set the total amount to be contributed by the owners
C C
collectively, the apportionment of the amount between individual
owners being a matter for the DMC.”
D D
E E
50. In my judgment, taking into consideration of the above analysis,
F the purpose of establishment of a special fund, which is mandatory under the F
BMO, is to provide for expenditure of a kind not expected to be incurred
G G
annually. With a special fund established, the amount to be contributed by
H the owners collectively in any financial year is to determine by a resolution H
of owners if there is a corporation. As for the present case, I am of the view
I I
that the operation of the money collected or to be collected for the Work was
J for a specific project to be carried out and thus did not fall within the ambit J
of a special fund under Paragraph 4(2).
K K
L L
M 51. From the above analysis, I do not accept Ms So’s argument that M
the contribution by owners to the Work should be governed by the Paragraph
N N
4(2) under the title of “Special Fund”.
O O
P P
Conclusion
Q Q
52. I have examined the relevant facts before me and come to the
R R
conclusion that the cost of the Work is within the ambit of Management
S Expenses under the DMC. I also find that, as I say, such expenses are well S
T T
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25
A A
B within the ambit of the general fund under sections 20(1)(a) and 20(2) of the B
BMO and therefore the IO is entitled to rely on section 22(1)(a) and (b) to
C C
say that the Management Committee has the power to determine the
D contribution of an owner in accordance with the DMC and to determine the D
times to pay such contribution. I have also found that having chosen the
E E
contractor, the IO must have also approved the contract price on the core and
F optional items, section 21(1A) of BMO has been satisfied. Lastly, there was F
no evidence or assertion before me to say that the Applicant was prejudiced
G G
for being asked to pay a contribution under Schedule 2 of the DMC by 5
H installments as opposed to having to pay it in accordance with its undivided H
shares by other number of installments.
I I
J J
K 53. For the above reasons, the claim for the Applicant is dismissed. K
I also enter judgment for the IO for the balance of payment in the amount of
L L
$20,106.00.
M M
N N
54. The Applicant did not put up any real defence to the
O Counterclaim for collection charge and interest pursuant to Clauses 6.22 of O
the DMC. I have read the relevant clauses and I enter judgment for the IO
P P
for those heads of Counterclaim.
Q Q
R Order R
S 55. My order is as follows: S
T T
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26
A A
B (1) The Applicant do pay the Respondent a sum of B
$20,106.00.
C C
(2) The Applicant do pay the Respondent collection charge at
D the amount of $500; and D
(3) The Applicant do pay the Respondent interest at 1.5% per
E E
month for the sum stated in sub-paragraph (1) herein from
F date of Counterclaim until judgment and at judgment rate F
thereafter until full payment; and at judgment rate for the
G G
sum stated in sub-paragraph (2) herein from date of
H Counterclaim until judgment and at same rate thereafter H
until full payment.
I I
J J
K Costs K
L 56. I see no reason why costs should not follow the event. I order L
the applicant to pay the costs of the respondent to be taxed at District Court
M M
scale if not agreed. This is an order nisi to become absolute within 14 days
N if no application is taken out to vary the same. N
O O
P Deputy Judge Tracy Chan P
Presiding Officer
Lands Tribunal
Q Q
R Ms Yvonne So, instructed by Messrs. S. H. Chan & Co., for the Applicant R
S Mr C. W. Chan, of Messrs. Chung & Kwan, for the Respondent S
T T
U U
NOMINSHARE LTD v.THE INCORPORATED OWNERS OF KWONG FUNG TERRACE
A A
B LDBM 191/2011 B
C C
IN THE LANDS TRIBUNAL OF THE
D D
HONG KONG SPECIAL ADMINISTRATIVE REGION
E BUILDING MANAGEMENT APPLICATION NO. 191 OF 2011 E
__________________________
F F
G BETWEEN G
H NOMINSHARE LIMITED Applicant H
I
and I
THE INCORPORATED OWNERS OF
J Respondent J
KWONG FUNG TERRACE
K K
L Coram: Deputy Judge Tracy Chan, Presiding Officer of the Lands Tribunal L
M Date of Hearing: 8 October 2013 M
N Date of Further Written Submissions:23 October 2013 N
O Date of Judgment: 28 January 2014 O
P P
Q ________________ Q
R R
J U D G M E N T
S ________________ S
T T
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2
A A
B 1. The Applicant, incorporated in Hong Kong pursuant to the B
Companies Ordinance, Cap 32, is the registered owner of those properties
C C
known as Flat B and Flat C, 33 Floor, Tower 2, Kwong Fung Terrace (“the
rd
D suit properties” and “the Building” respectively as appropriate). The D
Respondent is the owners of the Building incorporated in June 2004 (“the
E E
IO”) under the Building Management Ordinance, Cap344 (“the BMO”).
F F
G G
2. The Applicant filed a Notice of Application on 12 April 2013
H H
and claimed for a declaration that the IO was not legally entitled to demand
I for contributions from the owners and in particular the Applicant for cost of I
renovation and repair works carried out in the common parts of the Building
J J
(“the Work”); it also claimed for refund of paid contribution in the amount
K of $180,964.00. The IO opposed to the claim and in its Counterclaim it K
asked for a sum of $20,106.00 being unpaid balance of contribution due and
L L
owing together with collection charge, interest thereon and legal costs.
M M
N N
3. It is confirmed at trial that the Applicant would no longer
O pursue the claim against the increase of management fees as pleaded in the O
Amended Notice of Application.
P P
Q Q
Background
R R
4. There is little dispute on the facts leading to the Application and
S S
the Counterclaim.
T T
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3
A A
B B
C 5. At an extraordinary general meeting of owners’ held on 18 July C
2009 (“the Owners’ Meeting”) it was resolved that:
D D
E
(i) The Work be carried out forthwith; E
(ii) Sun Cheong Company Limited was to be appointed as
F F
contractor to carry out the Work;
G (iii) Core items as proposed in Plan 3 (方案三) were to be G
carried out at the contractual price of $37,711,475.00; and
H H
(iv) 2 optional items out of 3 were to be carried out.
I I
J J
6. At the subsequent Management Committee meeting held on 5
K August 2009 (“the Management Committee Meeting”) to follow up the K
matter, members passed resolutions on the followings:
L L
M
(i) A separate bank account be opened to deal with all M
financial matters concerning the Work;
N N
(ii) Owners shall make contribution to the cost of the Work in
O
the proportion set out by the Deed of Mutual Covenant O
(“the DMC”);
P P
(iii) The owners were to pay their share of contribution by 5
Q
installments; Q
(iv) The dates of such contributions become payable; and
R R
(v) Notice of contribution to be sent to the owners.
S S
T T
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4
A A
B B
C 7. It is not disputed that contributions of individual owners were C
eventually apportioned according to the Allocation of Management Shares
D D
set out in Schedule 2 to the DMC (“the Management Shares”) and that the
E Applicant, pursuant to a notice of contribution dated 4 September 2009 E
(“Notice of Contribution”) had already paid 4 installments but refused to pay
F F
the 5th, leaving an unpaid balance of $20,106. This is the subject matter of
G G
the Counterclaim.
H H
I I
The Applicant’s Case
J J
8. It is the case of the Applicant that the cost and expenditure of
K the Work was not expected to be incurred annually, and therefore the K
operation should be governed by a special fund pursuant to paragraph 4(2)
L L
of schedule 7 of the BMO (“Paragraph 4(2)”). The Applicant complained
M that in contravention of Paragraph 4(2), the IO had failed to obtain a M
resolution from the owners on the total amount to be contributed and the
N N
time for such contribution to be made. Ms So, counsel for the Applicant,
O submitted that the Management Committee was not conferred the power to O
determine how much and the times the contributions were to be made under
P P
Paragraph 4(2). Further, as a reply to the IO’s case the Applicant contended
Q that since the Work was not of an unexpected or urgent nature, provision for Q
a contingency fund set out in section 20(2) of the BMO is not applicable as
R R
the IO had contended. It was submitted on behalf of the Applicant that
S contribution already paid by the Applicant should be refunded and it should S
T T
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5
A A
B not be demanded to pay the balance as pleaded in the Counterclaim. B
C C
D D
The IO’s Case
E E
9. The IO’s stance is that with those resolutions passed at the
F Owners’ Meeting (see paragraph 5 above) the Management Committee had F
the power under section 22(1) of the BMO to apportion the contribution and
G G
to determine the times when such contributions are payable.
H H
I I
10. The IO further contends that the Paragraph 4(2) relating to
J “special fund” has no relevance to the cost of Work in the present cases. It is J
submitted that decisions in the cases of IO of Kenbo Comm. Bldg. v. Lau
K K
Wing Cheung & anr. (LDBM 153/1998) and Mok Ping Cheong Adolf & anr.
L v. IO of Ma’s Mansion (LDBM 331/2004) are relevant. L
M M
Issue for Trial
N N
O
11. The agreed issue for trial is whether the Management O
Committee has the power to apportion the contribution and to determine the
P P
time for payment pursuant to the BMO and DMC in the circumstance of the
Q present case. Q
R R
S S
T T
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6
A A
B Discussion B
C 12. It was not contended by the Applicant that the calculation for C
the contribution was incorrect nor was it contended that wrong principle had
D D
been adopted in making allocation of contribution. The complaint was
E merely on procedures. As mentioned, the contribution was calculated in E
accordance with the Management Shares set out in Schedule 2 of the DMC.
F F
In fact, the DMC sets out 2 kinds of shares, one is Undivided Shares under
G G
Schedule 1, the other is Management Shares set out in Schedule 2. Sections
H
22(2) and 39 of the BMO together provide that if there is no deed of mutual H
covenant, or if the deed of mutual covenant does not provide for the fixing
I I
of contributions, the amount to be contributed by the owner towards the
J
amount determined under sections 21 of BMO shall be fixed by the J
management committee according to undivided share of the owners.
K K
L L
13. It is my observation that in the present case if the Applicant was
M M
to contribute by its Undivided Shares, its contribution would be
N (200+228)/81533 or 0.525% and if it was to contribute according to N
Management Shares as it had been required by the IO, it should be paying
O O
(70+82)/29860 or 0.509%. So in real terms, the Applicant would pay about
P $3,000 less in the present scenario. P
Q Q
R The DMC R
S S
14. Having said the above, the relevant provisions in the DMC have
T T
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7
A A
B to be examined because where there is a provision in the DMC which B
specifies the method of apportionment, that provision prevails.
C C
Notwithstanding the mentioning of the Management Shares above, under the
D DMC there are 2 different allocations of contribution depending on the D
nature of expenses or fund, namely the Management Facility Fund and
E E
Management Expenses.
F F
G G
Management Facility Fund
H H
15. “Management Facility Fund” is defined under Clause 1.01 of
I I
Section 1 of the DMC, it says:
J J
“Management Facility Fund” means the fund established
by the Manager for the purpose of meeting major works of a
K capital nature for the Common Areas and Common Facilities K
under this Deed.”
L L
M M
16. The creation and operation of the Management Facility Fund is
N provided in Clause 6.41 and sub-clauses (a), (d) and (e) are most relevant: N
O (a) The Manager shall set up the Management Facility Fund, O
into which every owner shall initially contribute a sum
equal to the contribution of one month’s Management
P Expenses, for the purpose of meeting major works of a P
capital nature in respect of the Common Areas and the
Q Common Facilities. Q
(b) The Management Facility Fund shall be deposited in an
interest hearing account of a licensed bank. The
R Management Facility Fund shall be a trust fund managed R
by the Manager and shall be the property of the Owners.
(c) The Management Facility Fund shall be kept separate and
S S
apart from the Management Funds in the books of
T T
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8
A A
B accounts but reference shall be made in the annual B
accounts.
(d) The Owners, at annual general meeting, shall resolve the
C C
amounts to be contributed by the respective Owners to the
Management Facility Fund for the ensuing year.
D (e) The Manager shall give to the Owners at least 7 days D
notice of intended use of the relevant Management
Facility Fund together with information on the amount
E and the purpose for which such fund shall be used. E
F F
G 17. Reading from the above provisions, one might suggest that the G
money collected or to be collected for the Work may come within this
H H
Management Facility Fund. It is however obvious upon a closer look that it
I is not the case. In the first place, there was no evidence that a Management I
Facility Fund has been set up by the Manager, or in the present case, the IO
J J
who has been vested with the duties and power of the Manager by operation
K of Clause 7.15 of the DMC. Further the purpose of the Owners’ Meeting K
was not to determine the contribution to be made to the Management
L L
Facility Fund, if there was one, for “the ensuing financial year” but to decide
M on the need of the Work. After all, the Owners’ Meeting was not an annual M
general meeting as required by Clause 6.41(d) but an extraordinary general
N N
meeting convened for proposals relating to the Work to be determined. I am
O of the view that Clause 6.41 does not apply to the present situation. In fact O
neither of the parties has sought to rely on Clause 6.41 to say that
P P
establishment or operation of Management Facility Fund is relevant.
Q Q
R R
S S
T T
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9
A A
B Management Expenses B
C 18. Would it be the case then that the cost of the Work was covered C
by Management Expenses as the IO has contended. According to a letter
D D
from the lawyer of the contractor dated 2 September 2009, the contribution
E should be allocated to the owners pursuant to Clauses 6.04, 6.14 to 6.20 and E
Schedule 2 of the DMC. Again, definition of Management Expenses is set
F F
out in Clause 1.01 of Section 1 of the DMC. It says:
G G
“Management Expenses” means the costs, charges and
H expenses for the Management and Maintenance of the Lot H
including the Building as provided in this Deed.”
I I
J 19. To see what the phrase “costs, charges and expenses for the J
Management and Maintenance” really means, it would be helpful to read the
K K
provisions regarding annual budgets for the Management Expenses. Clauses
L L
6.14 and 6.15 of the DMC require that the Manager shall prepare an annual
M
budget showing the estimated Management Expenses for the ensuing M
financial year and that the budget shall include the following costs charges
N N
and items (only relevant provisions are set out below):
O O
Clause 6.15
(b) The costs and expenses of carrying out the duties of the
P Manager under this Deed. P
(c) The costs and expenses of purchasing or hiring all
necessary plant, equipment and machinery including
Q sewage treatment plant. Q
(d) The costs and expenses of employing contractor and staff
R
solely concerned with the administration, management, R
maintenance and servicing of the building.
(j) The provision of a reserve fund for the depreciation of
S capital equipment and painting of the exterior of Building S
T T
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10
A A
B and the interior of the Common Areas and anticipated B
repairs of a major nature.
(k) The provision of the contingency fund for contingencies.
C C
D D
20. Pursuant to Clause 6.15(b), the budget should include costs and
E E
expenses of carrying out the duties of the Manager and such duties are set
F out under Clause 6.04: F
G (a) To maintain the Building the Common Areas and the G
Common facilities in a good, clean and safe condition at
all times and for purpose to employ reputable and
H H
competent contractors and workmen.
(b) To paint white-wash tile or otherwise treat as may be
I appropriate the exterior walls of the Building and the I
Common areas at such intervals as the same may be
reasonably require to be done.
J (h) To keep the Common Areas and the Common Facilities in J
good condition and working order in particulars the
common sewers, drains, watercourses and pipes free and
K K
clear from obstructions.
L L
M 21. In the present case, the core items of the Work included 大廈外 M
N 牆石屎結構及泥水批盪維修工程、外牆新造防水批盪、瓷磚飾面及油 N
漆(窗台) 飾面、更換排水管工程，更換平台及停車場公眾渠筒工程和
O O
新裝冷氣機集水喉工程、with 2 optional items for 第一、二座入口大堂
P P
更新 and 地下大堂側噴水池更新工程 etc. In my judgment these items are
Q within the scope of the duties of the Manager under Clause 6.04 (a), (b), (h) Q
of the DMC and should therefore fall within the definition of Management
R R
Expenses. If for some reasons such cost had not been included in the budget
S for 2009, owners would have to be asked to make further contributions once S
T T
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11
A A
B the Work had been approved by them. Such further contributions should B
still be made under the scope of Management Expenses.
C C
D D
E
22. Payment and apportionment of Management Expenses is E
provided in Clauses 6.19 and 6.20 of the DMC, it is said that:
F F
“6.19 For the purpose of determining the contributions to be
G made by each Owner of a Unit to the Management Expenses and G
to the Manager Remuneration, there are allocated to each Unit
the number of Management Units as set out in the Schedule 2
H below. H
6.20 Each owner shall be liable to pay a due proportion of the
I I
Management Expenses and Manger Remuneration according to
the number of the Management Units allocated to his Unit.”
J J
K K
23. Similar situation could be seen in The Incorporated Owners of
L L
Yee On Court v. Lee Zee Zing Hai (CACV 181/2000) where the IO
M
contended that the renovation project was outside clause 4 of the DMC and M
the IO could therefore determine the contribution under paragraph 4(2). It
N N
was held by Deputy Judge Lee sitting as Presiding Officer of the Tribunal
O
that clause 4 of the DMC was to deal with “general day to day expenses” O
only and as a result, she found that expenses for the renovation project
P P
should be dealt with by a special fund and thus the contribution had to be
Q
determined by the owners. Q
R R
S 24. Mayo JA when hearing an appeal brought by the applicant S
T T
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12
A A
B owner said he did not agree with such finding. He found that the money B
collected was a “sinking fund” under the general fund. Keith JA agreed to
C C
the view of Mayo JA on this point and found that the project was covered by
D “the costs, charges and expenses” listed in clause 4 (d) of the DMC: D
E 4. Each owner shall be bound by and shall observe and E
perform the following covenants provisions and
F
restrictions:- F
(d) The following costs charges and expenses shall be borne
and paid by the owners of the said building in proportion
G to the number of unit or units in the said premises for the G
time being owned by them, namely:-
…
H (iv) The cost of repairing, renewing, maintaining H
cleansing, painting, or decorating the building or
I any part or parts thereof and all water pumps, tanks, I
pipes, sewers, drains, watercourses, cable, wires or
services therein and all the apparatus equipment
J and conveniences thereof. J
…
(vi) The cost of operating maintaining repairing
K K
servicing replacing and renewing all the lifts in the
building save and except that no contribution shall
L be payable by those parties whose shops or spaces L
are not served by the lifts.
M M
N N
25. As a conclusion, it was held that contribution should have been
O made according to the DMC and the case was remitted back to the Tribunal O
for determination on contribution under clause 4(f) of the DMC.
P P
Q Q
26. It was held in Yee On Court that the DMC was not inconsistent
R R
with the BMO and I found same situation here in our present case. I now
S deal with the BMO below. S
T T
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13
A A
B B
The BMO
C C
27. Section 20(1)(a) of the BMO also provides that:
D D
(1) A corporation shall establish and maintain a general fund-
E E
(a) to defray the cost of the exercise of its powers and
the performance of its duties under the deed of
F mutual covenant (if any) and this Ordinance; F
G G
H
28. The provision requires the IO to establish and maintain a fund H
to defray the cost of exercise of its power and the performance of its own
I I
duties under both the DMC and the BMO. I have dealt with the duties under
J
DMC above. As far as the BMO is concerned, section 18(1) also sets out J
duties of the corporation and that include:
K K
(a) maintain the common parts and the property of the
L corporation in a state of good and serviceable repair and L
clean condition;
(b) –
M (c) do all things reasonably necessary for the control, M
management and administration of the building.
(fa) carry out any renovation, improvement or decoration
N N
work, as the case may be, to the common parts;
O O
P 29. In my judgment I find that the Work did fall within the duties of P
the IO and was therefore within the purpose of a general fund under section
Q Q
20(1)(a) of the BMO (see paragraph 27 above).
R R
S S
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14
A A
B 30. It is not disputed that a management committee is empowered B
by section 21(1) to determine the amount to be contributed by the owners to
C C
the funds if they are established and maintained under section 20. Section
D 21(1) provides this: D
E (1) Subject to subsection (4), a management committee shall E
determine the amount to be contributed by the owners to
F
the funds established and maintained under section 20 F
during such period-
(a) in the case of the first such period after the date of
G registration of the corporation, not exceeding 15 G
months; and
(b) in any other case, not exceeding 12 months, as the
H management committee may determine. H
I I
J 31. Further Section 22(1) provides that: J
K (1) The amount to be contributed by an owner towards the K
amount determined under section 21 shall be-
(a) Fixed by the management committee in accordance
L L
with the deed of mutual covenant (if any);
(b) Payable at such times and in such manner as the
M management committee may determine. M
N N
O
32. So far as the present case is concerned, as I have already found O
that the cost of the Work was within the scope of the general fund under
P P
section 20(1)(a), the Management Committee was therefore entitled to
Q
determine the amount of contribution to be made by the owners by operation Q
of section 21(1)(a).
R R
S S
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15
A A
B 33. It may be worth mentioning for clarity that section 21(1A) deals B
with situation where the amount to be determined by a management
C C
committee has exceeded the preceding amount by 150%, in such case, it has
D to be approved by the corporation by a resolution passed at a general D
meeting. In the circumstances of the present case, the cost of the Work was
E E
close to $40,000,000 and assuming that such amount of contribution had
F exceeded 150% of the preceding amount determined by the Management F
Committee, which was more than probable in my view, such amount had to
G G
be approved by the owners by a resolution passed at a general meeting.
H H
I I
34. At the Owners’ Meeting, it was approved that the Work together
J J
with 2 optional items were to be carried out. Minutes of the Owners’
K Meeting had this record: K
L “(3.2) 關於核心工程維修方案的議決結果 L
議決: 大會通過核心工程維修方案 “方案三” 議案。
M M
「方案三」為外牆新造防水批盪、瓷磚飾面及油漆(窗台)飾
N 面、更換排水喉管工程、更換平台及停車場公眾渠筒工程和 N
新裝冷氣機集水喉工程。
O O
(4) 關於議決大維修承辦商的結果
P P
投標承建商 方案三投標價 獲得業權份數 百分比
1
Q 新昌建築 $ 37,711,475 31,664 98.68% Q
R 議決: 大會通過大維修承辦商為 “新昌建築” 議案。” R
S S
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16
A A
B “(5) 關於議決大維修選擇性項目的結果： B
C
贊成 反對 C
獲得業權份數 25,900 6,950
D D
百分比 78.80% 21.20%
E 廢票零張 E
議決：大會通過 “贊成大維修選擇性項目” 議案。
F F
選擇性工程項目為：第一座、第二座地下大堂翻新工程及第
一座、第二座地下大堂側噴水池更新工程”
G G
H H
35. By these resolutions, I find that section 21(1A) had been
I I
satisfied.
J J
K K
36. The Applicant also complained that the amount determined by
L L
the Management Committee was not the same approved by the owners at the
M Owners’ Meeting, if there was approval at all. Truly, the contract price as M
stated in the minutes of the Owners’ Meeting seemed to be $37,711,475
N N
where the total amount determined by the Management Committee was
O $39,500,000 (see p114 and 119 of bundle). One however must not forget O
that the sum of $37,711,475 was for the core items of the Work under Plan 3
P P
(方案三) only. There were optional items and at the end the owners at the
Q Owners’ Meeting passed a resolution to proceed with 2 out of 3. The total Q
sum for these two items was $1,661,000 and $403,000 respectively. Again, I
R R
would say that such cost, which must have been stated in the tender
S document and had also been set out in part 6 of the feasible report on repair S
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17
A A
B works (p219 of bundle) compiled on 1 July 2009, 17 days prior to the B
Owners’ Meeting, must have been considered and approved by the owners at
C C
the Owners’ Meeting although for some unknown reasons, the total amount
D of the two optional items were not put down in the minutes of the Owners’ D
Meeting when recording the resolution of the optional items.
E E
F F
G 37. In short, I am of the view that in the process of decision the G
owners must have considered the contract price for both the core items and
H H
the optional items of the Work and when a decision was made they must
I have approved the total amount. I
J J
K 38. Further, I am of the view that even if such omission in the K
minutes of the Owners’ Meeting amounted to a defect, it was technical and
L L
could be rectified by amending the minutes to reflect the contract price of
M the optional items for avoidance of doubt. M
N N
O 39. The IO says that a contingency fund was set up by the O
Management Committee to operate on the contributions for the Work. Mr
P P
Hui said in his witness statement that members of the Management
Q Committee had passed a resolution at the Management Committee Meeting Q
to set up a fund for the Work. According to paragraph 2.1 of the minutes
R R
(p114), members passed a resolution that a separate bank account was to be
S S
set up for operation on money matters relating to the Work. Moreover, it
T T
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18
A A
B appeared as “維修基金”in the Income and Expenditure Account for the B
C
month of May 2010 (p349) and it was booked under Contingency Fund in C
the Balance Sheet as at 31 May 2010(p351). So I accept that although there
D D
was no exact wording for setting up a contingency fund in the minutes of the
E
Committee Meeting, the resolution to have a separate bank account E
amounted to the same effect although it can be criticized for lacking clarity.
F F
G G
40. Ms So submitted that contingency fund should not be the
H H
appropriate fund for the Work. I could not agree. Establishment of
I contingency fund is provided in Section 20(2) of the BMO: I
J (1) A corporation shall establish and maintain a general fund- J
(a) to defray the cost of the exercise of its powers and
the performance of its duties under the deed of
K mutual covenant (if any) and this Ordinance; and K
(b) to pay Government rent, premiums, taxes or other
L outgoings (including any outgoings in relation to L
any maintenance or repair work) which are payable
in respect of the building as a whole. (Amended 27
M of 1993 s. 19; 29 of 1998 s. 105) M
(2) A corporation may establish and maintain a contingency
N N
fund-
(a) to provide for any expenditure of an unexpected or
O urgent nature; and O
(b) to meet any payments of the kind specified in sub-
section (1) if the fund established thereby is
P insufficient to meet them. P
Q Q
R 41. Since I have already found that the nature of the Work falls R
within the general fund under section 20(1)(a), section 20(2)(b) is satisfied.
S S
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19
A A
B Ms So submitted that the Work was not of unexpected or urgent nature so it B
could not be dealt with by contingency fund. I am however of the view that
C C
the Work was urgent in the sense that it was carried out before the cost could
D be included in the budget for the coming year. So when the budgeted D
general fund for 2009 could not meet the expenses, a contingency fund may
E E
be set up to raise fund for the purpose of the Work.
F F
G G
42. I further find that the Management Committee was delegated
H H
the power to establish funds for and on behalf of the IO as far as section 20
I is concerned. There was no specific procedure set out under section 20(2) I
governing establishment of a contingency fund. It is not said in the
J J
provision that “a contingency fund may be set up by the owners at a general
K meeting by passing a resolution”. I find the setting up of a fund could be K
handled by the Management Committee as an executive arm of the IO under
L L
section (29) of the BMO. Section (29) provides this:
M M
“Subject to this Ordinance, the powers and duties
conferred or imposed by this Ordinance on a corporation shall be
N exercised and performed on behalf of the corporation by the N
management committee.”
O O
P P
43. Further as could be seen in paragraph 19 above, Clause 6.15 of
Q the DMC has catered for provision of the contingency fund for contingencies. Q
R R
S 44. As I accept that a contingency fund under section 20(2) has S
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20
A A
B been set up and therefore I am of the view that the Management Committee, B
under section 22(1)(a), was entitled to fix the amount of contribution to be
C C
made by an owner in accordance with the DMC for the total amount so
D determined by the IO under section 21(1A). Yet further, by section 22(1)(b), D
the Management Committee was empowered to determine the times and
E E
manner for the contribution to be made.
F F
G G
Whether Paragraph 4(2) of the Seventh Schedule Applies
H H
45. Finally, it is the contention of the Applicant that the IO in the
I present scenario should abide by Paragraph 4(2), I now turn to this I
contention and start with reading the text of the provision.
J J
4. Special Fund
K (1) The manager shall establish and maintain a special K
fund to provide for expenditure of a kind not
expected by him to be incurred annually.
L L
(2) If there is a corporation, the corporation shall
determine, by a resolution of the owners, the
M amount to be contributed to the special fund by the M
owners in any financial year, and the time when
those contributions shall be payable.
N (3) The manager shall maintain at a bank within the N
meaning of section 2 of the Banking Ordinance
O (Cap 155) an interest-bearing account, the title of O
which shall refer to the special fund for the
building, and shall use that account exclusively for
P the purpose referred to in subparagraph (1). P
(Amended 49 of 1995 s. 53)
(4) The manager shall without delay pay all money
Q Q
received by him in respect of the special fund into
the account maintained under subparagraph (3).
R (5) Except in a situation considered by the manager to R
be an emergency, no money shall be paid out of
the special fund unless it is for a purpose approved
S by a resolution of the owners’ committee (if any).” S
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21
A A
B B
C 46. Deputy Judge Lee, as she then was, and Member Poon had C
dealt with the construction of Paragraph 4(2) in IO of Kenbo Comm. Bldg. v.
D D
Lau Wing Cheung & anr. (LDBM 153/1998). The Tribunal after hearing the
E application held that the nature of the special fund was not for collecting E
funds to meet expenses of specified items of works:
F F
“14. Looking at paragraph 4 (2) of the Seventh Schedule to
G G
BMO, the special fund is a permanent fund to be established and
maintained by the manager, to meet expenditure not expected to
H recur every year, with the owners incorporation by resolution, H
deciding on the contribution in any financial year. The manager
is to maintain an account under this item, paying all money so
I received into it, and making payment out only in an emergency, I
or for a purpose approved by the management committee.
J J
15. This present contribution is not for the setting up or
contribution to the special fund under paragraph 4 (2) of the
K Seventh Schedule to the BMO. It is a contribution towards the K
costs of special items of works ordered by the Building
Authority, and other works approved by the A, on [an] one-off
L L
basis. Paragraph 4 (2) of the Seventh Schedule to the BMO does
not apply. A’s approach using the undivided shares as the basis
M for the calculation of the contribution required from each owner M
is not correct.
N 16. The contribution must be apportioned in accordance with N
the ratio under clause (d) and (e) of the Third Schedule to the
O DMC.” O
P P
47. Mr Malcolm Merry also casts doubt on whether the operation
Q Q
of special fund should come into play when contribution is called for to meet
R expenses of special items although he does not entirely agree with the view R
of the Tribunal. He says in his work Building Management in Hong Kong
S S
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22
A A
B (2nd ed)1 that: B
C “In this case (Kenbo), as in Yee On Court above, the C
owners were entitled to pay at the rate specified for management
expenses in the DMC. However, the phrase ‘one-off’ is not easy
D D
to understand. It suggests that to qualify for the special fund
contributions cannot be to meet a special item of expenditure.
E Whilst there is no reason in principle that the fund cannot be fed E
by both a portion of regular, monthly fees and one-off lump-sum
levies, if paragraph 4 of schedule 7 is read together with
F paragraph 2 on accounts (see below), it may be doubted whether F
it is legally permissible to call for one-off contributions to the
G special fund during the course of a financial year. Paragraph 2 G
requires the manager to include an estimate in the yearly
accounts of the time at which there will be a need to draw on the
H special fund, and the amount of money that will be needed. A H
person cannot give such an estimate unless the matter has been
considered before the end of the previous financial year. The
I I
reference to ‘any financial year’ in paragraph 1 also suggests that
decisions on funds should be taken before the start of each
J financial year. This would also accord with sound management J
practice.”
K K
L L
48. Moreover, HHJ Wong had expressed his view on the true
M meaning of “the amount to be contributed by owners” in Paragraph 4(2) in M
Young Kwok Sui and another v. The Incorporated Owners of Fontana
N N
Gardens (LDBM 76/2011 and LDBM 77/2011 (Consolidated)). It was his
O finding that Paragraph 4(2) did not confer power on the corporation to O
determine the contribution of individual owners. Paragraphs 26-28 are
P P
relevant.
Q Q
“26. Furthermore, paragraph 4(2) of Schedule 7 to the
R 1
R
Malcolm Merry and Kent Paul, Building Management in Hong Kong (2nd ed) 114
S S
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23
A A
B Ordinance does not expressly state that a corporation can, by B
passing a resolution, require each owner to pay any amount of
money. The English version of paragraph 4(2) says that a
C C
corporation shall determine, by a resolution, “the amount to be
contributed to the special fund by the owners”. In this provision,
D “amount” is singular and “owners” is plural. My view is that D
this provision only provides that a corporation can determine, by
a resolution, the total amount to be contributed by all the owners,
E but not the separate amounts payable by each owner. E
F 27. The phrase 釐定各業主 (determine … the owners) in the F
Chinese version of section 4(2) may refer to individual owners,
but as far as 款額(amount) is concerned, it is not stated to be 個
G 別款額 (separate amounts). I think that the Chinese version of G
section 4(2) should be construed in the same way as the English
H version. 各業主 (the owners) should be construed as 所有業主 H
(all the owners); that is to say, a corporation can determine, by a
resolution, the total amount to be contributed to the special fund
I by all the owners, but not the separate amounts payable by each I
owner.
J J
28. I therefore find that paragraph 4(2) of Schedule 7 to the
Ordinance does not empower a corporation to determine, by a
K resolution, the ratio according to which each owner is to pay his K
share of the contribution, and that the respondent could not rely
on paragraph 4(2) to resolve that the expenses of the 2006 repair
L L
and maintenance works should be shared equally among the
owners of Block B, while the owners of Block G did not need to
M pay anything. The respondent should have required each M
individual owner, including the owners of Block G, to share the
expenses of the 2006 repair and maintenance works according to
N the ratio set out in paragraph 20 of Schedule 1 to the SDMC.” N
O O
P 49. In fact, similar view has been expressed by Mr Malcolm P
Merry 2. In his commentary to Yee On Court, he says:
Q Q
“the tribunal appears to have assumed that the power in
R paragraph 4(2) of the general meeting to determine the amount R
2
S ditto S
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24
A A
B contributed to the special fund was a power to fix individual B
contributions. However, the more natural interpretation is that it
is a power to set the total amount to be contributed by the owners
C C
collectively, the apportionment of the amount between individual
owners being a matter for the DMC.”
D D
E E
50. In my judgment, taking into consideration of the above analysis,
F the purpose of establishment of a special fund, which is mandatory under the F
BMO, is to provide for expenditure of a kind not expected to be incurred
G G
annually. With a special fund established, the amount to be contributed by
H the owners collectively in any financial year is to determine by a resolution H
of owners if there is a corporation. As for the present case, I am of the view
I I
that the operation of the money collected or to be collected for the Work was
J for a specific project to be carried out and thus did not fall within the ambit J
of a special fund under Paragraph 4(2).
K K
L L
M 51. From the above analysis, I do not accept Ms So’s argument that M
the contribution by owners to the Work should be governed by the Paragraph
N N
4(2) under the title of “Special Fund”.
O O
P P
Conclusion
Q Q
52. I have examined the relevant facts before me and come to the
R R
conclusion that the cost of the Work is within the ambit of Management
S Expenses under the DMC. I also find that, as I say, such expenses are well S
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25
A A
B within the ambit of the general fund under sections 20(1)(a) and 20(2) of the B
BMO and therefore the IO is entitled to rely on section 22(1)(a) and (b) to
C C
say that the Management Committee has the power to determine the
D contribution of an owner in accordance with the DMC and to determine the D
times to pay such contribution. I have also found that having chosen the
E E
contractor, the IO must have also approved the contract price on the core and
F optional items, section 21(1A) of BMO has been satisfied. Lastly, there was F
no evidence or assertion before me to say that the Applicant was prejudiced
G G
for being asked to pay a contribution under Schedule 2 of the DMC by 5
H installments as opposed to having to pay it in accordance with its undivided H
shares by other number of installments.
I I
J J
K 53. For the above reasons, the claim for the Applicant is dismissed. K
I also enter judgment for the IO for the balance of payment in the amount of
L L
$20,106.00.
M M
N N
54. The Applicant did not put up any real defence to the
O Counterclaim for collection charge and interest pursuant to Clauses 6.22 of O
the DMC. I have read the relevant clauses and I enter judgment for the IO
P P
for those heads of Counterclaim.
Q Q
R Order R
S 55. My order is as follows: S
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26
A A
B (1) The Applicant do pay the Respondent a sum of B
$20,106.00.
C C
(2) The Applicant do pay the Respondent collection charge at
D the amount of $500; and D
(3) The Applicant do pay the Respondent interest at 1.5% per
E E
month for the sum stated in sub-paragraph (1) herein from
F date of Counterclaim until judgment and at judgment rate F
thereafter until full payment; and at judgment rate for the
G G
sum stated in sub-paragraph (2) herein from date of
H Counterclaim until judgment and at same rate thereafter H
until full payment.
I I
J J
K Costs K
L 56. I see no reason why costs should not follow the event. I order L
the applicant to pay the costs of the respondent to be taxed at District Court
M M
scale if not agreed. This is an order nisi to become absolute within 14 days
N if no application is taken out to vary the same. N
O O
P Deputy Judge Tracy Chan P
Presiding Officer
Lands Tribunal
Q Q
R Ms Yvonne So, instructed by Messrs. S. H. Chan & Co., for the Applicant R
S Mr C. W. Chan, of Messrs. Chung & Kwan, for the Respondent S
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