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The background of the case It is agreed that Hong Yip is not charging the cost share of the management fee for different owners ( Commercial, Car Park,

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Presentation on theme: "The background of the case It is agreed that Hong Yip is not charging the cost share of the management fee for different owners ( Commercial, Car Park,"— Presentation transcript:

1 The background of the case It is agreed that Hong Yip is not charging the cost share of the management fee for different owners ( Commercial, Car Park, Domestic ) at their rate set by the Deed Of Mutual Covenant. It further adds, again admitted by Hong Yip, that the club house, professional charges 3%, excessive reserve which benefit HY in remuneration, is disputed by other domestic owners. The whole case started from about 1990 and base on a estimation of total amount so over charged, if it is proven that Hong Yip does not have the legality in charging the rates they are proceeding now, is about 20 years of 10% total management fee with interest, a claim over HK$50 to 100 million. This inquiry is to find out whether Hong Yip has the right to charge the domestic owners as they are charging now, considering all the possibilities of the Counsel opinion submitted by Hong Yip as to the legality and cases decided, the contractual obligations of all parties in the DMC, the relevant law enacted in Hong Kong for the management of buildings ( Building Management Ordinance Cap 344).

2 The dispute against Hong Yip: the counsel opinion Hong Yip claimed there is an implied term in the DMC that they could charge the proportion not following the ratio set out in the DMC. The difference is 4% involves significant amount. Hong Yip in a meeting of the owners committee claimed after the register owner does not need to pay the club house charges shares. Hong Yip claimed they have the right to charge 3% professional charges even it is not stated in the DMC. Hong Yip charged excessively and benefited from a over budget made every year, resulting in excessive benefit of Manager Remuneration. Hong Yip claimed the owners committee gave consent to the above charges and it is an established acceptance by conduct and / or silent acquiescence of all owners. The cost different and possible over charge is 9 to 10% of the total management fee in the starting from 1990.

3 The relevant sections of the Deed of Mutual Covenant DMC clearly set out the ratio of common area cost share among the owners of Domestic, car park, Register owners. Domestic shares only 83.5% common area and club house expense. The DMC does not provide the authority for HY to charge 3% professional fee of HK$1,020,000 p.a. The Statue: Building Management Ordinance Cap 344 provides Owners pay according to the shares set out in the DMC. BMO is the authority.

4 The Deed of Mutual covenant in Wonderland 7.(a)TheEstateManagementExpenses andtheManager's RemunerationshallbecontributedbytheOwnersof the Following in thefollowing percentages: (i) The Car Parks 9.93% (i)The Commercial Development6.57% (ii)The Domestic Development83.50% (b)TheOwnersoftheCar Parks shall contributetowardsthe aforesaid 9.93% of the Estate Management Expenses and the Manager'sRemuneration insuchmanner andinsuch proportion asprovidedintheSub- Deed governingtheCar Parks. (c)TheOwnersoftheCommercialDevelopment shallcontribute towardstheaforesaid6.57%of theEstateManagement Expenses and· the Manager's Remuneration in such manner andinsuchproportionasprovidedintheSub-Deed governing the Commercial Development. d. TheOwnersofDomesticUnitsshallcontributetowardsthe aforesaid83.50%oftheEstateManagementExpensesand theManager'sRemunerationinsuchmannerandinsuch proportionasprovidedintheSu b- Deedgoverningthe Block inwhichtheseDomesticUnits are situated. e.TheOwnerofaDomesticUnitshall in addition contributetowardsthe ManagementExpensesoftheBlock inwhichhisparticularResidentialUnitformspartin accordance with the terms and conditions laid down in the Sub-Deed governing that Block. TheOwnerofaCommercialUnit shall inaddition contributetowardstheManagementExpensesofthe CommercialDevelopmentinaccordancewiththetermsand conditionslaiddowninsuchSub-Deedgoverningthe Commercial Development. (c)TheOwnerof aCarParkshall inaddition contribute towardstheCarParksManagement. Expenses(if any)in accordance with the terms and conditions laid down in such Sub-Deed governing the same (if any).

5 DMC wordings: the draftsmans intention? The DMC is a well established document so prepared by the register owner and the first buyer. The register owner, as many other large developers do, planned in advance what will be the possible changes in their master plan. The lawyers are well experienced in giving the best benefits for the Register, such as appointing their subsidiary company as the manager. There leaves no ground for the HY or the register owner to plead not enough information or no knowledge about the change of the area during their drafting of the DMC in Wonderland. Indeed they have set out a very reasonable and accurate prediction. Even in the case that there could be some larger commercial area developed, this will in return the domestic owners will bear a higher proportion. This is all about DMC: it is a commercial contract and once signed, all parties will have to follow it fully. The DMC once sign off by all parties, shall be executed as it is. The hypothetical suggestion that if the commercial area is increased to 50%, then according to the DMC, all parties will also have to observe it and pay their respective share. But this is not likely as the legal representative of the conveyance lawyer for the first buyer will be find it out and necessary actions will be taken to protect the first buyer and subsequently benefit other buyers.

6 The counsel opinion from HY The Sr. counsel opinion from Mr Lam provided by HY deals with ratio of the DMC. Despite the admission of the DMC has expressly set out the fix rate that all owners will be charged according to Section IV 7, HYs lawyer argued even this is expressed provided, there is an implied term could be established in the DMC. This complicated legal argument is made technically and referred to a number of case law and history. It is not intended here to argue legally with such opinion but from the information and decided cases, HY could not satisfied the requirement of an implied term for the reasons set out in the coming page.

7 Why HY legal opinion is not valid The Section IV share of cost % is an expressed term. If there is any express term so set out then it is a condition incorporated and agree with all owners and binding to all owners. It could not be changed without the consent of all owners. Apparently there is no such consent made by all owners. Cases:

8 A Decided case: DMC and BMO must be followed 14. Wong Pun -man "This evidence clearly establishes detriment. It is equally clear that it would be quite unconscionable for the accounts for those years to be reopened and the shop owners allowed merely to pay fees in accordance with the original DMC proportions. The owners acquiescence to fees being levied in proportions different to the provisions of the DMC, amounts in equity to a waiver of their right only to pay fees levied in accordance with the DMC. I hold that those levied fees were properly payable. In the event of non- payment they may lawfully be recovered by the respondent." "As the relevant provisions of the BMO came into force on 1st June 1994, these fees were also the first that required to be fixed in accordance with both the DMC and the BMO."

9 BMO Cap 344 Section: 22 Recovery of contributions from owners 30/06/1997 (1) The amount to be contributed by an owner towards the amount determined under section 21 shall be- (a) fixed by the management committee in accordance with the deed of mutual covenant (if any); (b) payable at such times and in such manner as the management committee may determine. (Amended 27 of 1993 s. 22) (2) If there is no deed of mutual covenant, or if the deed of mutual covenant does not provide for the fixing of contributions, the amount to be contributed by an owner towards the amount determined under section 21 shall be fixed by the management committee in accordance with the respective shares of the owners. (3) The amount payable by an owner under this section shall be a debt due from him to the corporation at the time when it is payable. (4) A certificate in writing signed by the chairman of the management committee stating the amount to be Cap BUILDING MANAGEMENT ORDINANCE 16 contributed under this section by an owner and when it is payable shall be

10 Implied term is not valid in a DMC with expressed term that contradicts the alleged implied term Implied term here is excluded for: term of the DMC, Section IV, 7. 2.statutory authority of BMO S.22. If the contract parties intended an implied term be validly uphold and served as a guideline for the charges, the DMC section will be well drafted to accommodate such variation. It will be much like this the cost of sharing shall be calculated base on their respective share of the building.

11 Meeting minutes of Owners committee resolution in 1990 There is a resolution made about the acceptance of change of the management fee contribution ratio and Club house in 1990 between the management company and the Owners committee. The resolution made, with an obvious deviation from the capacity granted to the owners committee in the DMC, and further in contradiction of the BMO Cap 344, must be voided. Silent Acquiescence of owners will not stop their right once the acceptance of over paying management charges is withdrawn and BMO 344 provides the grounds of claim of those over paid.

12 Case reviews of implied term Implied term: Classic definition: The MoorCock case: Presumed intention of the parties and upon Reasons. Giving the transaction such efficiency as both parites must have intended that at all events it shall have, preventing such a failure of consideration as cannot have been within the contemplation of the either side. Implied term valid if it satisfied the conditions. Shirlaw V Southern Foundries: Officious Bystander. Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying. It seemed that the bystander would say: you guys share the charges by ratio of your shares, oh, Course. But in our case, the draftsman put it, here is the deal, the figure will be follow by your, I put it clear in the deed and you two will follow it, agree? Then it is signed. The express term so set out overrule any implied term. And indeed the draftsman could simply put a clause that allow the variation of the charges by NOT FIXING IT. But nevertheless, after considered all the conditions, master plans, possible amendment to by made, the draftsman fix the rates in DMC. Luxor V Cooper: Estate agent commission not a valid implied term. Reigate V Union Manufacturing no term implied. In order the term to be implied, it must be necessary to give business efficacy and not just reasonable. Coutaulds Northern Spinning V Sibson The court will consider what the parites would have agreed if acting reasonably at the time of the contract was made. Eyre V Measday Decided no implied term. It is the case of Moorcock case that will attract an implied term and it is certainly not compared in our case as even the DMC is set put the expressed term: Where there are printed and written words, greater significance should be placed on the written words as more likely to exhibit a true intention The DMC should also be read in the light of BMO 344 S. 22 and the decided cases I set out earlier. Conclusion: the implied term is not a valid ground for modifying Section IV. 7 of DMC and or case.

13 3% professional charges It is not valid and must be return to owners for: It is not a valid charge in DMC. It must be failed in BMO 344: not following DMC Section 22. We have no obligations to pay it. HY has 1350 buildings managing in Hong Kong with totally 110 million square feet ( per HY website). Wonderland amounts to 1/1350 in building share of their Headquarter cost or 1.8/ 110 ( where Wonderland has 1.8 million Sq feet ). HY has no right at all to charges and even they have mistakenly think they could charge, 3% could not be consistent. It must be noted that estates like Ho King Wan ( TsingYi ) and other estates they could not charge this ratio other than those they could do in accordance with BMO.

14 Club house charges Management company does not charged the register owners and charge only the domestic owners by the reason the management company does not want commercial owners to use the club house. The statement made is not a valid one and must be rejected as: The intention of the management is to benefit the register owner, their holding company and in return they are benefited further. Management company failed to collect the management fee in accordance with the DMC Section I, which defined the common area and club house area and Section IV 7 that the register owners must provide the same contribution ratio. The club house served any one from guests to renovation works. The suggestion by management company to benefit only the domestic owners is merely an excuse to benefit their holding company. Our commercial complex of Wonderland is a complex of energy ( air con and lighting ) wasting given the empty rooms inside is more than the occupied. The management company in deciding fees allocation is clearly in conflict of interest. Domestic owners interest is taken away for the benefits of them

15 Club house: exclusive possession cannot be done. Lai Wing Ho and Another v Chan Siu Fong [1993] 1 HKLR It was pointed out that a co-owner could not create or carve out a right of exclusive possession so as to bind the other co-owners and assign it separately. The reason for that is quite simply that the right of exclusive possession of any part of the premises could only arise out of the deed of mutual covenant.[22] (Our emphasis

16 Excessive management fees There is positive feed back mechanism in the DMC that in case there is a surplus of the previous year, the manager should reduce the budget and reduce the management fees. The emergency fund is not raised for the benefit of extra benefit of the management company. Given the large surplus of Wonderland Villas, over HK$30million, a 8% remuneration amounts to a more than HK$2.4 million charged on us. Again this is in breach of the relevant sections of BMO 344.

17 Our limitations The owners could not get proper legal advice while the management company has strong resources in litigations. The owners could not take any action or sanctions against the Management company. The owners could not take legal actions, other than individuals who will bear their the cost themselves. The power is strongly imbalanced even we are paying all the cost. We are paying the cost and remuneration for the management company and more sadly, encouraged by some owners to take the advantage of the majority of the owners.

18 Conclusion Hong Yip failed to consider the interest of the domestic owners as one of their main duty as a manager. Hong Yip is negligent in executing their duty as a manager. Hong Yip is in breach of the statutory provision of BMO Cap 344, Section 22. Hong Yip is in breach of the DMC, inter alia, Section IV,7 and other relevant sub sections. Hong Yip is further in breach conduct and business ethics by not acting fairly in executing their capacity as the management company. Damages should be obtained from HY. Declarative relieve should be obtained from court that HY is in breach of DMC. Injunctive relieve should be obtained stopping HY from further charge owners not complying with DMC.

19 appendix Copies of Meeting minutes Club house: exclusive use of common area authority: not possible

20 FINAL APPEAL NO. 1 OF 2008 (CIVIL) (ON APPEAL FROM CACV NO. 227 OF 2005) _______________________ Between: KUNG MING TAK TONG CO LTD Plaintiff (Appellant) - and - PARK SOLID ENTERPRISES LIMITED 1st Defendant (1st Respondent) INFO KING LIMITED2nd Defendant (2nd Respondent) _______________________ 31. It is unlikely that his Lordship was intending to depart from the view he had earlier expressed, especially since in the same case, Rogers JA also cited Lai Wing-ho v Chan Siu-fong and forcefully reiterated the view (without dissent on the part of Godfrey JA) that exclusive possession was a matter of mutual covenant and did not involve the grant of an interest in land: Without a deed of mutual covenant, each co-owner of the property, that is those who hold undivided shares, would be entitled to the full use and enjoyment of the whole property. The deed of mutual covenant governs the rights of the co-owners amongst themselves and regulates, amongst other things, the portions of the property in respect of which each owner would have the exclusive right of enjoyment. That exclusive right of enjoyment cannot be assigned on its own, but it has to be assigned together with a part interest in the legal estate. This point was discussed in Lai Wing Ho and Another v Chan Siu Fong [1993] 1 HKLR It was pointed out that a co-owner could not create or carve out a right of exclusive possession so as to bind the other co-owners and assign it separately. The reason for that is quite simply that the right of exclusive possession of any part of the premises could only arise out of the deed of mutual covenant.[22] (Our emphasis)

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