Sincere Luck Investment Ltd v Mui Pik Ha And Another

CourtDistrict Court (Hong Kong)
Judgment Date18 March 2011
Judgement NumberDCCJ4966/2007
Subject MatterCivil Action
DCCJ4965/2007 SINCERE LUCK INVESTMENT LTD v. TANG MING YUI AND ANOTHER

DCCJ 4965/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4965 OF 2007

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BETWEEN

SINCERE LUCK INVESTMENT LIMITED Plaintiff

and

TANG MING YUI and MUI PIK HA Defendants
----------

DCCJ 4966/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4966 OF 2007

----------

BETWEEN

SINCERE LUCK INVESTMENT LIMITED Plaintiff

and

MUI PIK HA and TANG WING MAN MICHAEL Defendants
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(Consolidated pursuant to the Order of
Deputy District Judge R. Yu dated 20th October 2010)

Coram : Deputy District Judge R. Yu in Court

Dates of hearing : 20 – 22October 2010 and 2 November 2011

Date of handing down of judgment : 18 March 2011

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J U D G M E N T

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Background

1. This action is taken out by the Plaintiff to recover against the Defendants deficiency in management expenses in Kamease Garden. Kamease Garden situate at Lot 476 in D.D. No. 104, Yuen Long, New Territories, consisting of 5 detached 3-storey houses, named Block A, B, C, D & E respectively. Each Block has 2 carports.

2. Kamease Garden has been completed in about 1998 and the first owner and developer is one Kamease Investments Limited, which is a company owned and controlled by Mr. Ngai Man (“Mr. Ngai”) and his wife Madam Choi Yin Chu (“Madam Choi”). The Plaintiff is also a company owned and controlled by Mr. Ngai and Madam Choi.

3. Block E was assigned by Kamease Investments Limited to Madam Choi on 30 November 1998 together with carports nos. 9 & 10. Madam Choi executed a Deed of Mutual Covenant and Management Agreement dated 30 November 1998 (“the DMC”) as the first purchaser with Kamease Investments Limited. By the DMC, which was also signed by the Plaintiff, the Plaintiff was appointed as the Manager of Kamease Garden (I shall refer to the Plaintiff as “the Plaintiff or the Manager”). The DMC is binding on all the owners of Kamease Garden, including the Defendants.

4. Subsequently, Madam Choi was assigned Block B and carports nos. 3 & 4 on 2 December 1998.

5. Block D of Kamease Garden was assigned by Kamease Investments Limited to one Ng Hung Yuen on 17 December 1998. There were further assignments of Block D to new purchasers, and on 8 June 2001, Block D was assigned to the Defendants in DCCJ 4965/2007, Mr. Tang Ming Yiu (“Mr. Tang”) and Madam Mui Pik Ha (“Madam Mui”).

6. It is the case of the Plaintiff that when they are managing Kamease Garden, management deficit has been incurred. As at 31 December 2005, the deficit to be contributed by owners of Block D, namely Mr. Tang and Madam Mui is $140,243.05.

7. Subsequently, Madam Mui and her son Mr. Tang Wing Man, Michael (“Mr. Michael Tang”) acquired and became the registered owners of Block E and carports nos. 9 &10 on 3 April 2007. The Plaintiff said the management deficit payable for Block E as at 26 April 2007 was $75,392.48, and instituted DCCJ 4966/2007 to recover the deficit from Madam Mui and Mr. Michael Tang.

8. While it is not disputed that the Plaintiff is and was at the material time the Manager of Kamease Garden, all the Defendants in both actions disputed the claims on the ground that the Plaintiff has provided no management service to Kamease Garden apart from collection of garbage. It is also contended by the Defendants that the Plaintiff has never convinced annual meetings of owners, and hence no resolution could be passed to approve the expenditure or annual budgets.

9. The Defendants also claims that the Plaintiff has failed to keep any true and proper account of the management expenditures, or to display the monthly and quarterly accounts in a prominent place in the management office of Kamease Garden. The accounts and audited accounts now produced by the Plaintiff are not contemporaneous documents.

10. The 2 actions are listed for hearing before me at the same time. No direction for consolidated has been applied for. It is obvious that there are common issues in the 2 actions. By consent, I have the 2 actions consolidated, but retained the 2 sets of separate pleading as the pleading in the consolidated action. (I shall hereinafter call all the Defendants in both actions “the Defendants” and I shall refer to individual Defendant when necessary by their names.)

11. I shall now proceed to consider the Plaintiff’s case. It is helpful to start with the terms of the DMC.

12. Section VI of the DMC sets out the power and duties of the Plaintiff as the Manager of Kamease Garden. In particular, Clause B 1 (ff) of Section VI provides that the Plaintiff has the power “to recruit and employ such staff as may from time to time be required to perform and discharge its duties hereunder on such terms as the Manager shall in its absolute discretion decide… ”

13. Clauses D 1 and D 2 of Section VI further provides that each owner shall, in such proportion as provided in the DMC, pay all costs expenses and outgoings incurred in relation to the management of the Kamease Garden as set out therein, which includes the costs of carrying out the duties of the Manager, the costs of employing staff directly involved with the management of the Kamease Garden, reasonable professional fees and costs incurred by the Manager in connection with the management of the Kamease Garden, water gas electricity telephone and other service charges except where the same is separately metered to individual Blocks, and others. It also includes all items of expenditures relating to the management and maintenance of Kamease Garden which are in the discretion of the Manager necessary for good estate management of Kamease Garden.

14. And according to the 2nd Schedule of the DMC, the management shares for Block A, B & C are 174 each; and the management shares for Block D and E are 132 each.

15. It is also provided by Clause E 3 of Section VI that “all amounts which become payable by any Owner in accordance with the provision of [the DMC] together with interest thereon …..shall be recoverable by civil action at the suit of the Manager. In any such action the Manager shall conclusively be deemed to be acting as agent or agents for and on behalf of the Owners as a whole…”

16. Pausing here, I note that Section VI empowers the Plaintiff to carry out the management duties therein mentioned. Clauses D 1 and D 2 set out the liability of the individual owners to contribute to the management expenses and Clause E 3 empowers the Plaintiff to collect costs incurred in the management of Kamease Garden from the owners by action if necessary. I call Clauses D1, D2 and E3 “the contribution provisions”. But there is additional provision for payment of management expenses in advance.

17. Clause D 3 of Section VI of the DMC provides that each Owner shall pay to the Manager monthly in advance 1/12 of the total budgeted management expenses and manger’s remuneration payable for the unit he owns. I call this “the monthly management fees provision”.

18. The Plaintiff now claims against the Defendants for the deficits in respect of Block D and E as aforesaid. Pausing here, it is the evidence of Mr. Ngai that $1,000 per month was collected from each Block as monthly management fees until October 2005. With effect from 1st October 2005, the monthly management fees were increased to $2,700 per month. These are the monthly management fees collected by the Plaintiff in advance for the relevant period.

19. I note firstly that the monthly management fees has not been determined according to the monthly management fees provision. And secondly, the “deficits” now claimed is the difference between the actual management expenditure and the monthly management fees collected. The deficit is recoverable under the contribution provisions. It would be necessary for the Plaintiff to prove that the items of expenditure had been used for the management of Kamease Garden and the cost is higher than the monthly management fees collected. In support, the Plaintiff produced all the monthly, quarterly and annual statement with receipts or vouchers of the claimed management expenses. The Plaintiff also produced 7 sets of notice, agenda and minutes of annual meetings of owners from 2001 to 2007 together with the annual budget for these years. The Plaintiff claims that all the annual budgets have been approved in the meeting.

20. It is further provided by Clause D 3 of Section VI of the DMC that “in the event of a deficiency occurring or seeming to the Manager likely to occur ……the Manager may, in consultation with the Owners’ Committee, at any time and from time to time prepare a revised budget or budget, whereupon each Owner shall at the request of the Manager pay a due proportion of the deficiency by making further contribution to the Manager in accordance with the number of the management shares allocated [in the DMC] Provided that such amount shall become due and payable by each Owner immediately on the first day of the month immediately following the date of notification…” Hence when a revised budget is prepared, the monthly management fees would be revised. This clause only provides for increasing the monthly management fees payable in advance. For some reason, this clause has been quoted in the Amended Statement of Claim in both actions.

21. At the closing, Mr. Koo, counsel for the Defendants, submitted that there is no revised budget. But in his written submission, he also confirms that the Defendants are willing to pay the management expenses which are proven to be reasonable and truly incurred.

22. Mr. Yip, counsel for the Plaintiff submitted that under Clause D 3, the manager may issue revised budget. It does not mean that the manager must...

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