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Gallium Development Ltd And Others v Winning Properties Management Ltd And Another

Judgment Cited authorities 1 Cited in Precedent Map Related
Vincent
Judgment Date17 September 2004
CourtCourt of Appeal (Hong Kong)
Judgement NumberCACV186/2003
Subject MatterCivil Appeal
CACV000186A/2003 GALLIUM DEVELOPMENT LTD AND OTHERS v. WINNING PROPERTIES MANAGEMENT LTD AND ANOTHER

CACV 186/2003

CACV 400/2003


IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 186 OF 2003 AND

CIVIL APPEAL NO. 400 OF 2003

(ON APPEAL FROM BUILDING MANAGEMENT

APPLICATION NO. LDBM 121 OF 2000)

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BETWEEN

GALLIUM DEVELOPMENT LIMITED and 1st Applicant
LEN TONG HOLDINGS LIMITED
WONG SAIO LING CONNIE 2nd Applicant
CHUNG YEE INDUSTRIES LIMITED 3rd Applicant
WONG ALICE and JOO RIKA YOLANDA 4th Applicant
HUNG HING DEVELOPMENT LIMITED 5th Applicant
HAU KWAN HAP 6th Applicant
RAINBOW WEALTH LIMITED 7th Applicant
FULLEREX COMPANY LIMITED 8th Applicant
LIM CHING LANG and HENRY LESMANA 9th Applicant
SO YIK 10th Applicant
SMARTJET LIMITED 11th Applicant
SANKO SETSUBI COMPANY LIMITED 12th Applicant
SUN ON TAT INVESTMENT COMPANY LIMITED 13th Applicant
IP WOON CHI 14th Applicant
NGAI PETER 15th Applicant
GLORY HOPE COMPANY LIMITED 16th Applicant
SWEEPER COMPANY LIMITED 17th Applicant
NG TZE CHUEN 18th Applicant
ZHAO FENG 19th Applicant
HUA RONG COMPANY LIMITED 20th Applicant
CHINA EUROPUS LIMITED 21st Applicant
SOURCE CHANNEL INVESTMENT LIMITED 22nd Applicant
WU YI CONSTRUCTION COMPANY LIMITED 23rd Applicant
and
WINNING PROPERTIES MANAGEMENT LIMITED 1st Respondent
WINNING PROPERTIES HOLDINGS LIMITED 2nd Respondent

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Before : Hon Woo VP, Le Pichon and Yuen JJA in Court

Dates of Hearing : 8 and 9 June 2004

Date of Judgment : 17 September 2004

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J U D G M E N T

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Hon Woo VP:

Background

1. This is a matter that mainly relates to the construction and decoration works (“the works”) done in the common parts or otherwise of a building known as Island Beverly formerly known as Island Centre (“the Building”) in the heart of Causeway Bay. The Building comprises a shopping arcade on the two basement floors, ground floor and the 1st, 2nd and 3rd floors (“the shopping arcade”), the 4th to 8th floors used for various restaurants and offices on the 9th to 26th floors. The applicants were owners of some but not all of the office units. The 2nd respondent (“R2”) was the owner of the shopping arcade, ie the basement to the 3rd floor. The 1st respondent (“R1”) was the building manager of the Building.

2. The dispute between the parties arose out of the works done in the shopping arcade. The applicants alleged that the works were done for the benefit of R2 alone and had nothing to do with the office premises or the Building as a whole. As a result, they made the following allegations and claims and sought damages against both of the respondents in the Lands Tribunal:

(a) R2 had converted portions of the common parts of the shopping arcade for its own occupation, enjoyment and use;

(b) R1 had no authority or justification in allowing the works to be done;

(c) R1 had no authority or justification in applying the contributions to the Management Fund and the Sinking Fund made by the applicants for the management of the common parts of the Building towards paying the expenses for the works;

(d) R1 should not have charged the applicants additional remuneration consequent upon the works;

(e) Some expense items that had been paid out of the funds were wrongfully paid out or wrongly booked by R1.

3. After about 30 days of hearing, the Presiding Officer of the Lands Tribunal, District Judge Yung (“the Judge”), held that R1 was not liable to pay any damages to the applicants. He dismissed all the claims against R1. He ordered that R2 do pay damages to the applicants in the proportion of their respective contributions towards the Sinking Fund which had been set up for “major overhauls of replacement of facilities of a capital nature” that had been used to pay for the works for the shopping arcade. The Judge handed down his judgment on 24 June 2003 and after a further hearing of the parties on the question of damages to be paid by R2, he assessed the damages so ordered to be payable by R2. However, he did not make an award of damages against R2 for its occupation and use of the common parts in the shopping arcade that had been converted to its own use.

4. Against the judgment and the assessment of damages, both the applicants and R2 have appealed and cross-appealed. The appeal by R2 is against the judgment on liability and the applicants’ cross-appeal is mainly against the dismissal of their claims against R1, and they are the subject matter of CACV 186/2003. R2 also appeals the order of damages and the assessment, and that is the subject matter of CACV 400/2003.

Matters not in dispute

5. Despite the various grounds raised by the parties before us, there are a few matters over which they have no dispute and do not challenge the Judge’s findings, namely, that R2 did convert portions of the common parts of the shopping arcade for its own use, that the expenses for the works for the shopping arcade were taken out of the Sinking Fund established for the Building, and that R1 did apply a portion of that fund towards paying those expenses.

Authority or justification for the conversion

6. The applicants had identified the following two items that were included in the works carried out in the shopping arcade to illustrate that their lawful rights of access to and use and enjoyment of the related common areas had been limited or restricted, namely, the conversion of the air handling unit room on the 2nd floor of the Building into a shop, and the installation of a large vending machine on the corridor of the common area of the 3rd floor of the Building.

7. The defence raised by the respondents or their legal representatives on their behalf was that the works had been authorised and approved by four written resolutions signed by or on behalf of R2 who was the registered owner of 77.09% of the equal and undivided shares of the Building, and such resolutions were valid and effective in authorising the works and the drawings from the Sinking Fund to pay for the expenses, in accordance with the Deed of Mutual Covenant made in respect of the Building (“the DMC”).

8. The relevant terms of the resolutions are set out below:

(a) The resolution dated 9 March 1996 resolved that “the Building Manager … should be urged to carry out the works for the Common Areas major re-decoration of the Shopping Arcade…”.

(b) The resolution dated 15 April 1996 noted that “in order to improve the flow of pedestrians, the layout of the Common Areas of the Shopping Arcade … will be changed in accordance with the plans to be forthcoming”, and resolved “that the Conversion of the layout of the Common Areas of the Shopping Arcade … be approved and that the Manager … should be authorised to make changes to the wall(s), partitions(s), pedestrian concourse, pathways and other erections in the Common Areas of the Shopping Arcade … in accordance with the plans to be forthcoming.”

(c) The resolution dated 16 December 1996 noted that “the Renovation Works relating to Stage I covering the Common Areas of the whole of the 3rd floor, whole of 2nd floor and Southside of 1st floor of the Shopping Arcade … have been completed in accordance with the Plans as attached”, and resolved that such conversion of the Stage I Common Areas Renovation be approved and “that the Works for Stage I Common Areas Renovation be paid out of the Sinking Fund” of the Building.

(d) The resolution dated 20 December 1997 noted that “the Renovation Works relating to Stage II covering the Common Areas of the whole of Upper-ground floor, Northside of 1st floor of the Shopping Arcade … have been completed in accordance with the Plans as attached”, and resolved that such Conversion of the Stage II Common Areas Renovation be approved, and that “the Works for Stage II Common Areas Renovation be paid out of the Sinking Fund” be approved.

9. S 34I of the Building Management Ordinance, Cap 344 (“the BMO”) provides that:

“(1) No person may-

(a) convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners' committee (if any);

(b) use or permit to be used the common parts of a building in such a manner as-

(i)unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or

(ii) to cause a nuisance or hazard to any person lawfully in the building.

(2) Any person who contravenes subsection (1) shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building.”

10. It is common ground that no owners’ committee was ever formed in respect of the Building, nor for that matter, had the owners of the Building formed an incorporation of the owners or appointed a management committee. However, it was contended before the Judge and it is raised before us by the respondents that the four resolutions approving the works in the shopping arcade and the payment of the expenses for the works out of the Sinking Fund were valid and effective for those purposes, since the four resolutions were made pursuant to clause 27(j) of the DMC.

11. Clause 27 is under the heading of “MEETING OF THE OWNERS OF THE COMMERCIAL DEVELOPMENT”. For the purposes of these proceedings, the term “the Commercial Development” means the Building, because it is used in the DMC to distinguish all the other parts of the Building from the portion under the basement level of the Building housing an MTR station. Clause 27 provides as...

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