THE INCORPORATED OWNERS OF FLORA GARDEN v. YEUNG CHUEN LING SAMUEL AND ANOTHER

LDBM 283/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 283 OF 2014

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LDBM 285/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 285 OF 2014

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LDBM 286/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 286 OF 2014

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LDBM 287/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 287 OF 2014

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LDBM 288/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 288 OF 2014

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LDBM 289/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 289 OF 2014

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_________________

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D E C I S I O N

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1.  This is the application by all the respondents for variation of the costs order nisi made on 2 occasions.  The first one being the judgment handed down on 25 August 2016 (“the Judgment”) for the main application and the second one being the decision handed down on 31 October 2016 (“the Decision”) for the leave to appeal application.  The background and findings of this case had been set out in the Judgment and the Decision, I shall not repeat here.  For convenience, I shall adopt the abbreviations used in the same.

2.  Upon hearing from the respondents, the basis for their application for variation of the costs order nisi in the Judgment (“ Judgment Order Nisi”) to one of no order as to costs is that :

a.  The IO refused to go for another round of mediation when the respondents were always eager to settle and prepared to pay whatever they should;

b.  The IO had chosen to litigate in a wrong venue, given the amount claimed, the IO should take out these proceedings at the Small Claims Tribunal, so there should be no order as to costs to condone such abuse or alternatively, the costs should be taxed at a scale applied in the Small Claims Tribunal;

c.  The respondents had succeeded in their defence over the claim of 10% Additional Costs;

d.  Conduct of the solicitors for the IO in repeated failure to comply with rules and practice in the service of documents as well as unsuccessful objection to representation by Mr Ronald for respondents of other cases;

e.  The unnecessary adjournment of the trial on 15 May 2015 since the IO had not adduced any new evidence thereafter;

f.  Unnecessary abuse of calling 2 witnesses giving unreliable and not concrete evidence resulted in the proceedings being prolonged.

3.  For the variation of the costs order nisi in the Decision (“Decision Order Nisi”), the respondents solely relied on ground (b) above.

Legal Principles

4.  Section 12(1) and (7) of the Lands Tribunal Ordinance (“LTO”) provides that :

“(1) The costs of and incidental to all proceedings in the Tribunal are in the discretion of the Tribunal, and the Tribunal has full power to determine by whom and to what extent the costs are to be paid.

(7) Notwithstanding subsection (1) and section 12C but subject to subsection (5) and any rules made by the Chief Justice under section 10(3), Order 62 of the Rules of High Court applies, with the necessary modifications, to the award, taxation and recovery of costs in the Tribunal.”

5.  Order 62, rule 3(2) states the general proposition that costs should follow the event, unless in the circumstances of the case some other order should be made as to the whole or any part of the costs.

6.  Order 62, rule 5 reads :

“5(1) The court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account -

(aa) the underlying objectives set out in Order 1A rule 1;

(a) any such offer of contribution as is mentioned in Order 16 rule 10, which is brought to its attention in pursuance of a reserved right to do so;

(b) any payment of money into court and the amount of such payment;

(c) any written offer made under Order 33 rule 4A(2);

(d) any written offer which is expressed to be ‘without prejudice save as to costs’ and which relates to any issue in the proceedings, but the court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22;

(e) the conduct of all the parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful;

(g) any admissible offer to settle made by a party, which is drawn to the court’s attention.

(2) For the purpose of paragraph (1)(e), the conduct of the parties includes -

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

Conduct of the IO at mediation

7.  It is the respondents’ case that the IO had refused to mediate by withdrawing unilaterally after the first session of mediation at which Mr Ip for the IO insisted that the respondents should pay all the amount claimed.  Since the IO had not been able to obtain a judgment for all money claimed, there should be no order as to costs.

8.  Ms Lee submitted that both parties had attempted mediation and the IO had also indicated its willingness to attempt further mediation session in the Reports on Mediation dated 6 February 2015 (B/697-705).  But ultimately, for whatever reason, no more mediation session was arranged.  Under such circumstances, there should not be any adverse costs order against any party for unreasonable failure to engage in mediation.  

9.  From the court record, solicitors for the IO filed a letter with this Tribunal on 6 February 2015 stating that parties failed to reach any settlement after mediation and sought for court’s direction.  This Tribunal had, on 9 February 2015, gave directions for case to be set down for a call over hearing.  On 10 February 2015, the respondents filed their respective Reports on Mediation dated 6 February 2015 indicated that the IO refused to go for a second attempt even though the respondents were prepared to do so.  Solicitors for the IO filed a letter on 17 February 2015 with the respondents’ Reports on Mediation attached to it but on each of the reports, indicated that the IO was prepared to go for further mediation.  There is no evidence before the court as to what happened thereafter and why no further mediation was arranged.  It is quite likely that since a date had been fixed by this Tribunal, parties had not taken further action for mediation.  There is no basis to conclude that the IO had acted unreasonably in the course of mediation.

Should commence proceedings in the Small Claims Tribunal

10.  The respondents argued that the claimed amount in each case is only a little bit more than $50,000.  Had the IO taken into account the $10,000 paid by the respondents of each case, the claimed amount falls below $50,000 which is within the jurisdiction of the Small Claims Tribunal (“SCT”).  So the IO should have commenced these proceedings in the SCT in the first place hence there should be no order as to costs.  Alternatively, the Judgment Order Nisi should be varied to costs of the IO be taxed at a scale adopted by the SCT instead.  The respondents are relying on this ground in support of the application for variation of the Decision Order Nisi.

11.  The IO contends that since the claim for share of contribution of the Works falls within the jurisdiction of the Lands Tribunal, and given the numerous complicated legal arguments raised by the respondents which are clearly outside the ability and knowledge of a reasonable layman, it is justified for the IO to engage legal representation and to commence these proceedings at this Tribunal. As for the application for variation of the Decision Order Nisi, Ms Lee submitted that since the respondents had failed in the application for leave to appeal, costs should follow the event.  And since it is an appeal against the Judgment of this Tribunal, it must be dealt with at this Tribunal so costs should be taxed at District Court scale.

12.  I agree with the IO’s contention.  The arguments raised by the respondents at trial may not be complicated enough to justify a counsel’s involvement, but the issues raised are numerous and convoluted and cannot easily be handled by any layman. The decision of the IO to engage lawyers and to commence these proceedings at this Tribunal is not unreasonable so as to deprive the IO of its costs or to be taxed at a scale other than the District Court scale.

13.  Since the respondents had failed in their application for leave to appeal, there is no justification for depriving the IO of the costs in regard to such application. Given my ruling at §12 above, the application by the respondents for variation of the Decision Order Nisi to be taxed not at District Court scale must also fail.

Costs should follow the event

14.  The respondents contend that since the respondents had succeeded in their defence in the claim of 10% Additional Costs, the “event” should therefore include such successful defence and if costs were to follow the event, there ought to be an order for no order as to costs with each party bearing their own costs. 

15.  Ms Lee for the IO submitted that even though the respondents had succeeded in the claim for 10% Additional Costs, they failed in all remaining issues and the issue of 10% Additional Costs constitutes just a little portion of the whole case.  When the usual practice is costs to follow the event, it is absolutely reasonable to order the respondents to be fully liable for the IO’s costs.

16.  The issue about the 10% Additional Costs is being dealt with at §§33-36 of the Judgment. As can be seen from the findings therein, the facts of this issue is not in dispute and there is no cross-examination of Mr Ip or Ms Choy on this issue.  The IO has been successful in all its claim except this issue which had not occupied a significant amount of hearing time or led to the incurring of significant expenses.  This issue is not so distinct or separate in itself that the decision of it constitutes an event.  This Tribunal finds it not reasonable to deprive the IO of all its costs nor its costs of this issue.

Conduct of the solicitors for the IO

17.  It is the contention of the respondents that solicitors acting for the IO had, before trial, out of their own neglect or incompetence, repeatedly failed to comply with the rules and practice in the service of documents on the respondents.  This includes:

a.  30 March 2015 for leave to file and serve Reply out of time;

b.  13 July 2015 for leave to file and serve witness statement of an additional witness;

c.  7 January 2016 for leave to serve witness statement; and

d.  Serving of 6 sets of documents on the respondents in ignorance of court’s direction.

18.  It is also the argument by counsel acting for the IO about the representation by Mr Ronald for all other respondents except LDBM 286/2014.  The argument failed and costs had not been dealt with then and the time wasted for this argument should be reflected in the Judgment Order Nisi as well.

19.  For the allegedly non-compliance of the rules and practice in the service of documents, costs orders had already been made in all the above hearings and I can’t see how the respondents can rely on these as a ground to vary the Judgment Order Nisi at the end of the trial.

20.  For the sending of 6 sets of documents on the respondents in disregard of the court’s direction, this should be an issue to be dealt with at taxation and not at the stage where liability of costs is being considered.

21.  At the hearing on 15 May 2015, counsel of the IO did raise the observation as to the representation by Mr Ronald for respondents of other cases and citing Rule 26 of the Lands Tribunal Rules about leave is required for such representation.  The representation by Mr Ronald for other respondents is made by way of a written application signed by the other respondents and filed with the Tribunal on 10 December 2014.  Since this may be unknown to the IO, the query raised by counsel is not unreasonable.  In any event, this issue had only taken up 4 minutes of the hearing time which is nominal.  This Tribunal failed to see how would this be a valid ground to vary the Judgment Order Nisi.

Wasted Costs for the adjournment of the trial

22.  At the hearing on 15 May 2015, during cross-examination of Mr Ip, the respondents raised a new issue about the 10% Additional Costs.  Upon objection from the IO that the respondents should not raise new issues not included in their pleadings, the respondents applied for an adjournment of the trial.  Hence, trial was adjourned for the respondents to amend their Notice of Opposition to include the following new issues, namely:

a.  the IO failed to give a proper account of the respective costs of the items of Works;

b.  the 10% Collection Charge never on agenda or approved at the 215 EGM and without any tender being called for;

c.  tiling of 3 external walls, renovation of main lobby on Cloud View Road and renovation of the car park entrance on Cloud View Road were not on the agenda of the 215 EGM;

d.  failure of the IO to provide the documents requested by the respondents;

e.  5% Surcharge and Collection Fee are for repair works and not improvement works and such clauses in the DMC are penalty clause; and

f.  insurance premium of the Building increased upon completion of the Works.

23.  At this hearing, the respondents sought to argue that the adjournment was for the purpose of allowing the IO to adduce further evidence to support the case that it was repair works that was intended all along.  But it turned out that such adjournment served no purpose since the IO had failed to adduce any evidence in support of this.  

24.  From the background leading to the adjournment stated at §22 above, the respondents had apparently mis-stated the reason leading to the adjournment.  Since it was the respondents’ application for the adjournment to include new defences in their pleadings, the adjournment is through no fault of the IO so it is ordered there and then that the respondents should bear the costs of the IO occasioned by the adjournment. This Tribunal failed to see how can the respondents raise this as a ground in support of the variation of the Judgment Order Nisi.

Calling of additional witness by the IO

25.  The respondents contend that the IO had sought leave to file and serve the statement of Ms Choy to substitute Mr Ip, the first witness, who would soon leave the employment and could not attend court to complete his evidence.  Yet, both Mr Ip and Ms Choy showed up at the adjourned hearing to give evidence.  The respondents said that this is an abuse of process wasting time and costs.

26.  Ms Lee gave the explanation that since Mr Ip refused to sign any supplemental witness statement after submitting his resignation, it is a must for the IO to arrange for Ms Choy to take up as a witness.  But Ms Choy had also resigned after filing of the witness statement.  It turned out that both Mr Ip and Ms Choy were kind enough to show up at the hearing on 13 June 2016.  Yet, the respondents decided not to cross-examine them so not much time and costs had been wasted.

27.  The issue as to allow Ms Choy to be called as an additional witness had been dealt with on 17 July 2015 with costs to the respondents.  This Tribunal had, by then, accepted the explanation of the IO and allowed the filing of the witness statement and the calling of Ms Choy.  The respondents cannot seek to re-visit the reasonableness of so doing at this hearing.  This Tribunal agree with Ms Lee that since the respondents had not conducted any cross-examination of both Mr Ip and Ms Choy at the resumed hearing, not much time and costs had been wasted or sufficient to convince this Tribunal not to go along the principles of costs should follow the event in the Judgment Order Nisi.

Conclusion

28.  Having considered all the argument and submissions, it is ordered that:

a.  the application for variation of the costs order nisi by the respondents in the summons dated 7 September 2016 and 14 November 2016 be dismissed;

b.  costs of the 2 summonses for variation of the costs order nisi be to the applicant, to be taxed if not agreed at District Court scale.

LDBM 283/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 283 OF 2014

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LDBM 285/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 285 OF 2014

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LDBM 286/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 286 OF 2014

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LDBM 287/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 287 OF 2014

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LDBM 288/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 288 OF 2014

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LDBM 289/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 289 OF 2014

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_________________

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D E C I S I O N

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1.  This is the application by all the respondents for leave to appeal against the judgment handed down on 25 August 2016 (“the Judgment”).  The background and findings of this case had been set out in the Judgment and I shall not repeat here.  For convenience, I shall adopt the same abbreviations used in the Judgment.

Leave to Appeal

2.  Section 11 (2) of the Lands Tribunal Ordinance (“LTO”) provides that :

“Subject to section 11AA and the provisions of any Ordinance relating to appeals from the Tribunal, any party to proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law.”

3.  Section 11AA(6) of the LTO provides that :

“(6) Leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that –

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

4.  The respondents had filed a draft Notice of Appeal together with the summons for leave to appeal filed on 22 September 2016. 

5.  There are 7 grounds raised in support of this leave to appeal application.  I shall deal with the same in seriatim.

Ground 1

6.  The respondents contend that this Tribunal has erred in law in holding or finding that the DMC of the Building did provide the power and/or authority to the IO to install a new (additional) lift and carry out improvement works of the Ground Floor lobby.  This turns on the findings by this Tribunal as to whether the Works are renovation works in nature or improvement works.  This issue is being dealt with at §§14-20 of the Judgment. 

7.  In support of this leave application, the respondents contend that this Tribunal was wrong to interpret the words “renew” and “renovate” in the DMC to cover “to improve or to build a new lift” (§18 of the Judgment).  And also erred in finding the amendment of the BMO in 1998 overrides the common law position stated in the case of Bayview Mansion (§19 of the Judgment) without basis.

8.  In the Judgment, it is the findings of this Tribunal that Clause 4(f) of the DMC did allow for improvement work to be performed by the IO including “renewing the lifts”.  In fact the opening words of Clause 4(f) stated that “(A)ll costs charges and expenses incurred in managing and providing services to the said building and the common parts services and facilities shall be borne and paid by the owners … such costs charges and expenses to include but not limited to the following, namely …”.  So what stated in Clause 4(f) (1) to (9) are not exhaustive and from the framing of the opening words in Clause 4(f), an additional lift must be providing services to the Building and such costs and expenses shall be borne by the owners of the Building (§12 of Judgment).

9.  The addition of a lift is an improvement work is not arguable.  The gist of the Judgment on this issue is s.18(2)(fa) of the BMO did allow the IO to carry out any improvement work to the common parts of the Building.  With such a provision in the BMO, the IO is entitled to carry out any improvement work including the addition of a new lift.

10.  It is the findings of this Tribunal that the differentiation between renovation work and improvement work as found in the case of Bayview Mansion had become otiose given the amendment of the BMO by adding s.18(2)(fa) in 1998 (§19 of the Judgment) and it is never the findings of this Tribunal that the case of Bayview Mansion had become null and void.  Since s.18(2)(fa) was not in existence hence not considered by the court in Bayview Mansion, this Tribunal failed to see how the findings in it can be of any relevance or assistance to the respondents in this case and this is what “otiose” means.  Given the fact that there is a new provision resulted from the amendment of the BMO which turns on the same issue, Bayview Mansion, which is a judgment before the time of the enactment of the amendment, can no longer be applicable.

11.  This ground of appeal must fail.

Ground 2

12.  It is the contention of the respondents that this Tribunal erred in holding that the IO was empowered or authorised to carry out the renovation of the Ground Floor lobby or the retiling of the external wall of the car park since these were never approved at the 215 EGM or at all. 

13.  This issue had been dealt with at §§26-31 of the Judgment and this Tribunal had relied on the List attached to the minutes of the 215 EGM to find that the renovation work of the Ground Floor lobby and the retiling of the external wall of the car park were approved at the meeting.  The respondents contend that this Tribunal had been misled by the IO and the List was only shown to those present at the meeting.

14.  It is the findings of this Tribunal at §29 of the Judgment that the works alleged were included in item (A) under agenda 1 of the 215 EGM.  The List which was shown to those present at the meeting is apparently for the purpose of discussion for Agenda 1.  Under such circumstances, I failed to see how the respondents can argue that renovation work of the Ground Floor lobby and the retiling of the external wall of the car park were not on the agenda or not approved at the meeting.

15.  This ground of appeal must fail.

Ground 3

16.  It is the respondents’ case that this Tribunal erred in law in failing to give credit or deduct the HK$10,000 each being paid by the respondents prior to the commencement of this Application when it was not in dispute that such payment had been paid and still remained in the IO’s bank account.

17.  It is not in dispute that the HK$10,000 was paid by the respondents into the IO’s bank account purportedly to settle their contributions towards the Works but such had been rejected by the IO and refunded to the respondents by way of cheque (§10 of Judgment) which was not cash by the respondents.  Even though Mr Yeung (1^st respondent in LDBM 286/2014) told this court during this leave application hearing that he had in fact not received the cheque, such piece of evidence was not before this Tribunal at trial.  

18.  This Tribunal must admit that there was an oversight not to give credit or deduct this $10,000 from the judgment sum when the respondents had only raised this in their opening submissions that “the respective amounts being claimed against the respective respondents in each case which being disputed, will have to be reduced by at least $10,000 or even more in any event on grounds or for reasons given below” (§3 of the Submission of the Respondents filed on 13 May 2015). But this point had never been raised in the pleadings or in the witness statements or at trial, nor had the IO indicated its stance towards such a request.

19.  At this leave application hearing, Ms Lee confirmed on behalf of the IO that the IO is prepared to set off this $10,000 from the judgment sum and the actual arrangement of such set off could be dealt with by the parties upon payment made by the respondents.

20.  With such an indication, even though such sum had not been reflected in the judgment sum, the interests of the respondents will not be prejudiced.  I see no reason granting leave to appeal on this ground.

Ground 4

21.  The respondents contend that this Tribunal erred in failing to consider or determine whether and/or how the IO could seek to enforce the respective demand made to the respondents when the demands were wrong and such amounts were not those authorised by the owners at the owners’ meeting.     

22.  This ground turns on the findings as to whether the Works were authorised in Ground 2.  Given my findings on Ground 2 above, ie the Works were properly authorised at the 215 EGM, this ground of appeal must fail.

Ground 5

23.  The respondents contend that this Tribunal erred in holding that the IO was entitled to claim surcharge and collection charges under the DMC which provided for a levying of these items for repair works only and not for renovation works.  And the sum of $150 for collection fee was fixed by the DMC some 30 years ago, it must be extravagant and a penalty.

24.  This ground of appeal hinges on the findings of renovation or improvement work in Ground 1.  In view of my findings on Ground 1 above, this ground of appeal must also fail.  As to whether the collection fee is a penalty clause, I stand by my findings at §§47-48 in the Judgment and found that the amount stipulated for is not extravagant compared with the greatest loss that could conceivably be proved to flow from the breach of the terms of the DMC in failing to make payment.  Since the DMC will be binding on all subsequent owners for many years and the consequences of a breach cannot be foreseen with precision, some allowance must be given to allow the parties to stipulate a sum which will provide adequate compensation in the event of breach.

25.  This ground of appeal must fail.

Ground 6

26.  The respondents contend that this Tribunal erred in finding that there was no evidence from the respondents on the increased premium as a result of the addition of 1 lift.  Judicial notice should have taken for such a conclusion and the IO had failed to produce any evidence otherwise to rebut.

27.  I shall repeat and adopt my findings at §§41-42 of the Judgment and I shall stand by my findings of fact therein.  Whether the insurance premium will be increased may turn on the facts of each case and I do not agree with the respondents that this is something judicial notice has any part to play.  And based on the principle that he who asserts must prove, it is wrong for the respondents to suggest a shifting of the burden of proof to the IO when the respondents failed to adduce any evidence to support their contention.

28.  This ground of appeal must fail.

Ground 7

29.  The respondents contend that this Tribunal erred in law in holding that the judgment of Bayview Mansion was rendered otiose or otherwise null or void by reason of the 1998 amendment to the BMO.  Such amendment should have no retrospective effect on the DMC of the Building in this case which was made almost two decades before the amendment.

30.  I shall repeat my findings for Ground 1 above on the validity of the judgment of Bayview Mansion on the amendment of the BMO in 1998. And it is never the findings of this Tribunal in the Judgment that the amendment of the BMO would have any effect on the DMC.

31.  This ground of appeal must fail.

Conclusion

32.  Having considered all the argument and submissions, I find the grounds raised by the respondents in this application for leave to appeal cannot stand.  The respondents had failed to demonstrate that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.  Application for leave to appeal be dismissed.

33.  Costs should follow the event.   Costs order nisi that costs of this leave to appeal application be to the applicant, to be taxed if not agreed on party and party basis at District Court scale.  Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.

LDBM 283/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 283 OF 2014

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  LDBM 285/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 285 OF 2014

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LDBM 286/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 286 OF 2014

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LDBM 287/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 287 OF 2014

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_________________

LDBM 288/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 288 OF 2014

_________________

_________________

LDBM 289/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 289 OF 2014

_________________

_________________

_________________

J U D G M E N T

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Undisputed or Indisputable Background

1. This is a claim by the applicant (“IO”) against the respective respondents, being owners of Flora Garden (“the Building”) for their respective share for some repair and renovation works done at the Building.

2. The Building was built in or about 1980 consisting of 3 blocks of residential building namely Block A, B and C and 5 car park floors namely Level A, B, C, D and G.  Car park Level G is also the building lobby floor. 

3. For Block A, access from car park Levels B, C, D and G are served by lifts whilst car park Level A is only served by common staircase.  Owners of Block A are required to take the staircase from car park Level A to Level B and then take lift on car park Level B to enter the Building.  For Block B and C, access from car park Levels C, D and G are served by lifts whilst car park Levels A and B are served by common staircase only.  Owners of Block B and C are required to take the staircase from car park Levels A and B to Level C and then take the lift to enter the Building.

4. At the extraordinary owners’ meeting on 14 August 2010 (“814 EGM”), it was resolved that planning for the installation of the new lift system for the car park levels from Cloud View Road to podium floor of the car park be commenced (「通過籌劃於車場樓層位置安裝由雲景道至平台之升降機系統之安排」) (B/395-398).

5. At the owners’ meeting on 6 October 2012 (“1006 AGM”), it was resolved that planning for the renovation of the external wall of the car park and the 2 entrances on Cloud View Road be commenced (「籌劃翻新停車場外牆及雲景道兩個入口」) (B/465-468).

6. At the management committee meeting on 11 November 2013 (“1111 MC”) and 9 December 2013 (“1209 MC”), the consultant engaged by the IO reported on the progress and timetable of the works which included renovation work of the external wall, renovation of the lobbies and lift door and corridor and the installation of the new car park lift (「外牆翻新工程」，「新造升降機及大堂翻新工程」「各樓層電梯走廊工程」) (B/509-518).

7. Approval for the installation of the car park Lift was obtained from the Buildings Department (“BD”) on 13 December 2013 (B/536-541) and from the Lands Department (“LD”) on 16 December 2013 (B/542) respectively.

8. By a resolution duly passed at an owners’ meeting on 15 February 2014 (“215 EGM”), it was resolved that (B/522-525) :

a. Installation of a new car park lift and the renovation of the G/F lobbies (“Work 1”), the retiling of the external wall of the car park (“Work 2”) and retiling of the lift lobbies for all floors of the 3 blocks (“Work 3”) (total 3 projects) (「加建停車場升降機及改善各座平台大堂、重鋪雲景道停車場外牆，及重鋪三座各層電梯走廊 (共三項工程)」)(collectively called “the Works”);

b. Wecon Limited be appointed as the contractor of the Works (「選聘工程承辦商為偉工有限公司」);

c. for the surplus from 2012-2013 External Wall Renovation projects (ie $3,773,388.80) (「有關2012－2013外牆大維修集資餘款」):

i) to transfer $800,000 to the sinking fund (「將餘款之 $800,000保留於維修基金備用」); and

ii) to transfer the balance of $2,973,388.80 for use in the Works (「餘款$2,973,388.80撥往即將進行之屋苑維修工程」);

d.   contributions from the owners for the Works be collected within a month from 15 March 2014 by 1 installment (「有關...工程集資日期為三月十五日，以一期為準，以一個月為限」).

9. The IO issued a notice dated 18 March 2014 to inform all owners of the particulars and costs of the Works as well as the share of each unit (B/543-547).  The IO also issued a letter dated 17 April 2014 to the respondents to inform them the share of contributions to be made by them for the Works (B/549-554).  Since the respondents failed to make any payment, the IO instructed its solicitors to issue demand letter dated 13 May 2014 to the respondents and demanded for the payment again (B/555-560).

10. On or about early July 2014, without prior notice or permission of the IO, the respondents deposited a sum of $10,000 into the bank account of the IO.  By a letter issued by its solicitors dated 7 July 2014, the IO informed the respondents that since the sum paid was not sufficient to fully settle their contributions to the Works, the payment was rejected and refunded to the respondents by way of cheque.  However, the respondents had not cash the said cheques.

11. A final notice dated 25 August 2014 was sent to the respondents asking for the payment of the contributions to the Works.  Since the respondents still failed to pay for the contributions, the IO issued these proceedings on 13 October 2014, claiming against the respective respondents for their respective share towards the Works, a surcharge of 5% on the unpaid amount as well as the collection charge of $150 pursuant to the terms of the Deed of Mutual Covenant (“DMC”).

12. The respective amount claimed against the respondents in this case are as follows:

Case	Contribution to the works	5% Surcharge	Collection fee
LDBM 283/2014	$54,960	$2,748	$150
LDBM 285/2014	$50,380	$2,519	$150
LDBM 286/2014	$52,670	$2,633.50	$150
LDBM 287/2014	$38,930	$1,946.50	$150
LDBM 288/2014	$48,090	$2,404.50	$150
LDBM 289/2014	$38,930	$1,946.50	$150

13. The respondents, in their respective Notice of Opposition, had raised a number of defences.  I shall deal with each of the points raised in seriatim.  The IO had called Mr Ip (“Ip”), the property officer of IO and Ms Choy (“Choy”), the property manager of the management company to testify and Mr Ronald (2^nd respondent in LDBM 283/2014) testified for all the respondents.

Renovation vs Improvement Work

14. It is the contention of the respondents that the Works are not renovation works in nature but rather improvement works instead involving additional lift works, building entrance beautifying works and the excelling works to entrance on Level G of all 3 blocks.  Since only renovation work is allowed in the DMC but not for improvement works, the respondents are not liable to pay for the contributions towards the Works.  It is also the contention of the respondents that s.14 of the Building Management Ordinance (“BMO”) does not empower any resolution inconsistent with or in breach of the DMC and s.18 of BMO is not applicable in this case since there is no provision for improvement works in the DMC to be enforced under s.18(1)(c).

15. Ms Gwilt for the applicant submitted that whether the Works amounted to improvement works or repair works is neither here nor there since both s.14(1) and s.18(2)(fa) empowered the IO to carry out renovation, improvement or decoration work, so the respondents are liable to make contributions towards the Works.  Relying on the case of Grande Properties Management Ltd v Sun Wah Ornament Manufactory Ltd [2006] 3 HKLRD 473, Ms Gwilt submitted that since the resolutions for the Works are not contrary to any provisions of the DMC, it shall be binding on all owners.

16. Section 14(1) of BMO provided that :

“Subject to this Ordinance, at a meeting of a corporation any resolution may be passed with respect to the control, management and administration of the common parts or the renovation, improvement or decoration of those parts and any such resolution shall be binding on the management committee and all the owners.”

17. Section 18(2)(fa) reads :

“(2) A corporation may, in its discretion -

...

(fa)  carry out any renovation, improvement or decoration work, as the case may be, to the common parts.”

18. I do not agree with the respondents that the DMC had provided for no improvement work to be performed by the IO.  Clause 4(f) do require all owners to bear the costs and expenses incurred, apart from repairing or maintaining the Building, also for “decorating the said building and the common parts” as well as costs for “renewing the lifts”.  Decoration work on the Building and renewal of the lifts must be improvement works.  I found the Works resolved to be carried out in the 215 EGM are works anticipated under Clause 4(f) of the DMC.

19. In any event, I agree with Ms Gwilt that the argument on the differentiation between renovation work and improvement work as found in the case of Incorporated Owners of Bayview Mansion v Chan Cheung Kit Mui Margaret (Small Claims Appeal No. 32/94, unreported, 23 June 1995) is otiose given the amendment of the BMO in 1998 by adding a new subsection (fa) to section 18(2) of it.  With such amendment of the BMO in 1998, the case of Bayview Mansion which is a judgment on the old law before the amendment is no longer relevant or of any assistance.

20. The wordings of s.18(2)(fa) of BMO clearly allows the IO to carry out “any renovation, improvement or decoration work … to the common parts”.  The argument by the respondents in this case to distinguish improvement work from renovation work must fail.

The IO failed to give a proper account of the respective costs of the items of the Works

21. It is the respondents’ case that they had sent letters dated 20 May 2014 and 28 January 2015 to the IO asking for the breakdown of the Works to particularise which are renovation works and which are improvement works and their costs (B/561-566 and 596).  But the IO failed to respond.  The IO also failed, despite repeated requests from owners, to explain to all owners the significance and legal impact of the improvement works, but went so far to mislead the owners by deliberately or gross-negligently holding out or representing that the law requires the owners to contribute towards the improvement works.

22. There is no evidence from the respondents as to how the IO misled the owners in paying the contributions.  Given my findings on the unnecessary differentiation between renovation work and improvement works above, the failure by the IO to specify what are renovation works and what are improvement works is neither here nor there.  This contention of the respondents must fail.

23. As for the allegations of the IO’s failure to give a proper account of the particulars of the Works, it is the evidence of the IO that details of the Works had been explained at all the owners’ meetings and since the respondents were present at the meetings, they should be fully aware of the works and costs involved.  In any event, the details of the Works had been displayed for months at the Building for the owners’ to read.  As for the written requests, the IO said that the respondents had been invited to go to the management office for perusal of documents and for discussions, but the respondents never show up.  The respondents had never denied such evidence of the IO, I accept the evidence.

24. In any event, even if the IO failed to respond to the owners’ request for further information, I cannot see how this can be a ground for the respondents not to pay for the contributions towards the Works when such was approved and duly resolved at an owners’ meeting and shall be binding on all owners including the respondents (s.14 BMO refers).  Should the respondents wish to have details as to the costs of each item of work, they should have raised the same at the owners’ meeting before the resolution for the Works was being approved.

25. This ground of defence must fail.

Tiling of 3 external walls, renovation of main lobby on Cloud View Road and renovation of the car park entrance on Cloud View Road were not on the agenda of the 215 EGM

26. In the Amended Notice of Opposition, it is stated that “the alleged ‘renovation’ works now being claimed in fact including also, inter alia, (new or additional) tiling of three other external walls which had originally been painted (ie facing the West, Hop Yat Church, the estate of Beverly Heights on the East and Shue Yan University at the back) and the ‘renovation’ of Car Park Entrance on Cloud View Road and ‘renovation’ of main lobby (entrance) on Cloud View Road which were never put to any agenda of owners’ meeting and never approved by any owners’ meeting” (B/146.8). 

27. Choy, the property manager of the Building testified that the resolution at the 215 EGM did include the 3 items named by the respondents whilst Ip’s evidence is that the 3 items were resolved at 814 EGM (B/398) and 1006 AGM (B/468).

28. I found the allegation by the respondents that the 3 items of work named had never been approved at any owners’ meeting is misplaced. 

29. According to the notice of meeting for the 215 EGM (B/533), agenda 1 concerned the improvement works to be conducted and item (A) therein is the item of works eventually passed by way of a resolution, ie “install the car park lift and the renovation of the G/F lobbies and Canopies, the retiling of the external wall of car park, and the retiling of typical lift lobbies floor (total 3 projects)”.  It is apparent from the record quoted above that the tiling of the 3 external walls and the renovation of the canopy at the main lobby/entrance was approved at the 215 EGM.

30. There is also a document attached to the minutes of the 215 EGM which is a list showing the works involved and the costs of the works (「工程項目價錢總覽表」)(B/535) (“the List”) in which details of the Works and the tender price of each contractor are listed at Part 1A therein.  Item (ii) of Part 1A on the List concerned the retiling of the external walls of the car park whilst item (i) of Part 1A on the List touched upon the canopy work at the main lobby on Cloud View Road (「大堂入口新造簷篷」).  I cannot see how the respondents can argue that these items of work were not included in the 215 EGM.

31. As for the work at the car park entrance on Cloud View Road, the respondents had not provided details as to what sort of work are involved.  According to the Interim Certificate of Payment prepared by the project director (B/576-581), no work touches upon the car park entrance except for the lobbies for different levels of the car park and the retiling of the external walls of the car park.  If this is the entrance mentioned by the respondents, this is also included in Part 1A of the List (B/535).

32. I found this defence must also fail.

10% Additional Costs Charged never on agenda and no tender

33. It is not in dispute that the IO had charged a sum of 10% of the total costs of the Works for the expenses of consultancy fee, contract administrative fee, clerk of works, extra insurance coverage and security staff and other relating expenses (“10% Additional Costs”).  It is also not in dispute that this 10% Additional Costs was never on the agenda or approved at the 215 EGM. 

34. It is the contention of the IO that it is the practice of the IO to set a contingency sum prior to the commencement of the renovation works ever since September 2010 and the respondents had settled all previous renovation works including such contingency sum.  Ms Gwilt submitted that the respondents had by conduct acceded to such practice.

35. I found the levying of this 10% Additional Costs by the IO based on the common practice before cannot stand.  There is no evidence that the practice of levying this 10% Additional Costs had been approved at any owners’ meeting, I cannot see how the IO can rely on the practice before as a basis to charge the same when such had not been included in the resolution passed at the 215 EGM.

36. I found the IO is not entitled to go after the respondents for this 10% Additional Costs.

Failure of the IO to provide the respondents with the letters of the BD/LD till 30 April 2015

37. It is not in dispute that Mr Ronald had requested for a copy of the letters issued by the BD/LD in connection with the approval of the car park lift and such was only provided in April 2015.

38. Be that as it may, I cannot see how this failure by the IO can be a ground to justify the respondents’ contention that they are not liable to pay the contributions towards the Works which is based on a resolution passed at the 215 EGM and should be binding on all of them (s.14 BMO refers).

39. This ground of defence must fail.

Clause 9(b) of DMC on insurance premium

40. Clause 9(b) of the DMC provides that :

“9. Each owner shall observe and perform the following covenants:

...

(b) Not to do anything whereby any insurance of the said building ...against fire may be rendered void ...or whereby the premium for any such insurance may be liable to be increased”.

41. Mr Ronald, who had been a registered insurance agent since about 1993, said in his witness statement that “by reason of the increase of the incurable interest and the fire risks thereof because of the added improvement works particularly the additional lift, the premium of the insurance of the Building is bound to increase” (B/287.2).  But under cross-examination, Mr Ronald agreed that he had no evidence to show that this is in fact the case.

42. I agree with Ms Gwilt that there is no evidence to show that the insurance premium of the Building had been increased or the insurance policy had been rendered void upon completion of the Works.  Furthermore, Clause 9(b) is a covenant to restrict the conduct of the individual owners and not the IO.  I cannot see how the respondents can rely on such a clause to restrict the acts of the IO.

43. This ground of defence must fail.

5 % Surcharge and Collection fee

44. It is the contention of the respondents that the 5% surcharge and the collection fee levied under the DMC are only for repair works and not for improvement works, so the IO is not entitled to charge the same.  And in any event, such clauses in the DMC are penalty clauses, thus not enforceable.

45. Clause 4(m)(3) of the DMC provides that :

“4(m) The Manager shall have power and authority to do all or any of the following acts and things namely :-

(1) To demand and receive from each owner the contributions payable by each owner as hereinbefore specified ...;

...

(3) If any of the owners shall fail to make such contribution or further contribution as above provided within seven days after written notification from the Manager calling upon him so to do, he shall further pay to the Manager :

(i) A surcharge of 5% of the amount unpaid without prejudice to any other remedy exercisable hereunder; and

(ii) A collection charge of $150.00 or such lesser sum as the Manager may agree to cover the costs (other than legal costs of proceedings as hereafter mentioned) of the extra work occasioned by the default;” (B/295).

46. Since it is the findings above that the respondents are liable to pay the contributions to the Works and they had failed to pay on demand, the IO is entitled to levy a surcharge of 5% of the amount unpaid and the collection charge in accordance with Clause 4(m)(3) of the DMC.

47. The question whether a sum stipulated for in a contract is penalty or liquidated damages is a question of law.  A clause will not be a penalty merely because it is not a precise pre-estimate of the loss (Chitty on Contracts, 32ed, Paras. 26-182 to 26-184) and the onus of showing that a contractual provision is a penalty clause lies on the respondents.

48. I found the sum stipulated in the levying of the surcharge and the collection fee in this case is neither extravagant nor unconscionable in amount.  The sum levied is to ensure that owners would pay the sum they are required to pay to make sure that the IO have the fund for the management of the Building.  Such a clause is necessary to protect the legitimate interests of the IO.  The clause may be said to be a deterrent provision but cannot be considered a penalty.

49. This ground of defence must fail.

Conclusion

50. The respondents are liable to pay their respective share to the contribution of the Works except for the 10% Additional Costs which is not approved at the owners’ meeting.  And since the respondents failed to pay the contribution on demand, the IO is entitled to charge them the 5% surcharge and the collection fee.

51. Without the 10% Additional Costs, the repair costs to be apportioned for each undivided share of the building should be $2024.30 [($10,756,130 - $1,248,000) ÷ 4697 shares].  The respective contributions to be borne by the respondents should be as follows :

Case	Contribution to the Works	5% Surcharge	Collection fee
LDBM 283/2014	$48,583.20	$2,429.20	$150
LDBM 285/2014	$44,534.60	$2,226.70	$150
LDBM 286/2014	$46,558.90	$2,327.90	$150
LDBM 287/2014	$34,413.10	$1,720.70	$150
LDBM 288/2014	$42,510.30	$2,125.50	$150
LDBM 289/2014	$34,413.10	$1,720.70	$150

Order

52. It is ordered that :

a.   The respondents in LDBM 283/2014 do pay the IO their share of contributions to the Works in the sum of $48,583.20, a 5% surcharge at $2,429.20 and collection fee at $150;

b.   The respondents in LDBM 285/2014 do pay the IO their share of contributions to the Works in the sum of $44,534.60, a 5% surcharge at $2,226.70 and collection fee at $150;

c.    The respondents in LDBM 286/2014 do pay the IO their share of contributions to the Works in the sum of $46,558.90, a 5% surcharge at $2,327.90 and collection fee at $150;

d.   The respondents in LDBM 287/2014 do pay the IO their share of contributions to the Works in the sum of $34,413.10, a 5% surcharge at $1,720.70 and collection fee at $150;

e.    The respondents in LDBM 288/2014 do pay the IO their share of contributions to the Works in the sum of $42,510.30, a 5% surcharge at $2,125.50 and collection fee at $150;

f.   The respondents in LDBM 289/2014 do pay the IO their share of contributions to the Works in the sum of $34,413.10, a 5% surcharge at $1,720.70 and collection fee at $150;

g.   Costs order nisi that the respondents do pay costs of this application to the applicant without counsel’s certificate, to be taxed if not agreed on District Court scale.  Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.