The Incorporated Owners of Luen Fat Mansion v. Tse Yuk Lun, Danny

(Consolidated by Order of Deputy Judge LEE dated the 14th day of December, 1998)

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J U D G M E N T

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1. The Applicant (A) is the Incorporated owners of Luen Fat Mansion, 36-42 Johnston Road, Wanchai Hong Kong (the building).

2. The Respondent of LDBM 297 of 1998, Mr. Tse Yuk Lun, Danny (R1), is the owner of a unit on 21st Floor, Flat C, of the building.

3. The Respondent of LDBM 298 of 1998, Mr. Cheung Po Wing (R2), is the owner of 2 units, at 6th Floor, Flat B and 10th Floor Flat C of the same building.

4. A Deed of Mutual Covenant (DMC) under Memorial No. 3501851 (Exhibit A3), was registered at the Land Office in respect of the building.

5. The Kwong Sum Union Property Management Company Ltd. is the present manager of the building.

6. The DMC provided in Clause 3 for the management of the building. The manager's powers and duties were listed under Clause 3 (d). Under Clause 3 (d) (v) to (xi), there is power to repair and maintain the building. Under Clause 3 (d) (xvii) there is a duty to keep proper accounts of expenditure and payments and to permit owners to inspect such accounts during office hours upon prior written notice. Clause 3 (d) (xx) provides for power to enforce the observance and performance of the DMC. The owners liability to pay management charges, and the proportion under which management expenses are to be shared are set out in Clause 4. The Schedule to the DMC sets out that there are 100 shares in the building, and also state the number of shares in respect of the various units.

7. In accordance with the DMC, R1's share is one, and R2's shares are two, one in relation to each of the units of which he is an owner.

8. It was not in dispute that repair and maintenance works were required to be carried out on the building under a works order from the Building Department.

9. In 1996, while R2 was the Chairman, and R1 was the Secretary of the A management committee, A resolved to award the contract for repair and maintenance to Tung Cheong Construction Company in the sum of $3,646,116. Each share should bear the sum of $ 36,462. The amount was to be paid by 3 installments, of $15,000, $11,000 and $10,462 for each share. The evidence was that all owners made payment of the first installment. R1 and R2 did not make further payments.

10. A's present secretary, AW1 gave evidence on A's behalf, and produced the relevant documents. (Exhibits A1, A2, A3, A4) On 18th November 1996, A held its Annual General Meeting (AGM). A new management committee was elected.(Exhibit A4 :48th & 49th pages re: attendance record; 58th to 60th pages re: notice, agenda and minutes of meeting; 42nd page re: notice of change of particulars of chairman, vice-chairman, secretary and treasurer.) The Kobunet Trading Co. Ltd. represented by AW2, was elected as the chairman, AW1 was elected as the secretary, while the Ho's Clansmen Association Ltd. was elected as the treasurer. R2 was elected as a committee member.

11. On 28th November 1996, the management committee held its first meeting and resolved to call for new tender, appoint an architect to be in charge of the repair and maintenance project and to call an Extraordinary General Meeting (EGM) of the A to resolve on the project. It was also resolved that an auditor be appointed. (Exhibit A4 31st page : re notice, agenda and minutes of meeting) R2 did not attend this or any other committee meetings, as he did not feel that it would serve any useful purpose.

12. On 13th December 1996, an EGM was held. (Exhibit A4 : 65th page re: notice and agenda, 29th to 30th pages re: agenda and resolution) In the resolution, the details as to the contractor to be appointed, the total contract sum and contribution from each share were left blank. An architect was appointed to oversee the works. It was also resolved to set up a fund to meet debts incurred under the previous management committee, in addition to the fund for repair and maintenance. The amounts to be contributed were left blank.

13. On 17th January 1997, a second EGM was held. (Exhibit A4 : 24th to 28th pages re: notice, agenda, attendance record and minutes.) The short list of contractors and the handing over from the previous management committee was reported. It was decided to call another EGM on the choice of contractor for the repair and maintenance works.

14. On 24th January 1997, another EGM was called to select and appoint the contractor and to appoint a new management company.

15. Throughout 1997, various meetings were called to report on the progress of the repair and maintenance works.

16. On 23rd October 1997, an EGM was called in which the budget for repair and maintenance, the contribution towards and expected expenditure were revised and passed by the meeting. (Exhibit A4 : 1st to 6th pages re: minutes, proposed budget, revised and approved budget, attendance record and R2's proxy to R1.)

17. Based on the revised and approved budget, to cater for expenses already incurred and for future estimated expenditure, including contribution towards a management reserve fund, a total sum of $20,000 was required from each share in the building. Owners who had made payments of the original first and second installments, in the sum of $26,000, were eligible for a refund of $6,000. Those who had only make the first installment payment of $15,000 for each share were to pay a further $5,000. Except for the 3 shares owned by R1 and R2, all contribution for 93 shares out of the total of 100 shares in the building had been paid.

18. A's applications are for the sum of $5,000 as against R1,and $10,000 as against R2, for this contribution.

19. R1 and R2 contended that they were not aware of what the reserve fund was for, that they did not receive notices, agenda and minutes of meetings, and that these were not posted up in the building hall for notification. A's evidence was that such documents were posted up in the hall of the building, and a copy placed into the letter box of each unit. AW1 referred to the various attendance records and the proxies to show that Rs either attended those general meetings personally, or authorized each other to attend. I accept the A's evidence on these points, and find that all relevant documents and notices had been duly served. Though R2 was elected as a member of the management committee, he admitted that he did not attend any of the committee meetings. He considered that he would not be able to carry out any of his proposals, since there was a majority of 6 against 1.

20. Even when provided with all the relevant notices, agenda, minutes of meetings, and the audited accounts, (Exhibit A5), Rs still insisted that they did not understand the revised budget and the amount they should pay. Rs did not dispute their liability to pay. They were just seeking clarification as to the amount payable.

21. There was another EGM on 5th March 1998, in which the contribution of $1,000 per share, towards the management fund, as stated in item C of the revised budget was explained, rectified and adopted. There was a report on the legal proceedings between A and the previous management company, giving a brief background of the litigation and the existing position. It reiterated the reason for appointing an auditor and the need of litigation. (Exhibit A2 Annex 10 & 11) From the evidence, there could be no room for misunderstanding the revised budget.

22. There is no evidence that the amount of $5,000 to be contributed for each share in the building was in any way improper, ultra vires or in contravention of the DMC or the Building Management Ordinance.

23. The Respondents have shown no valid ground of opposition.

LDBM 297/98

24. Judgment for the Applicant in the sum of $5,000 and costs to be taxed if not agreed.

LDBM 298/98

25. Judgment for the Applicant in the sum of $10,000 and costs to be taxed if not agreed.