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The case of Wonderland DMC inquiry

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The case of Wonderland DMC inquiry Powered By Docstoc
					      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).
 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.
 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.
     The Deed of Mutual covenant in
             Wonderland
•   7.           (a)                The                 Estate        Management            Expenses and     the                 Manager's
•   Remuneration                    shall               be            contributed           by               the                 Owners      of
                 the
•   Following in the                following           percentages   :
•   (i)          The Car Parks                                                                                                               9.93%
•   (i)          The Commercial Development                                                                                                  6.57%
•   (ii)         The Domestic Development                                                                                                    83.50%
•   (b)          The                Owners              of            the                   Car Parks         shall contribute   towards     the
•   aforesaid 9 .93% of the Estate Management Expenses and
•   the Manager's                   Remuneration in     such          manner and            in                such
•   proportion as                   provided            in            the                   Sub- Deed governing                  the         Car
•   Parks.
•   (c)          The                Owners              of            the                   Commercial       Development shall contribute
•   towards      the                aforesaid           6.57%         of the                Estate           Management
•   Expenses and· the Manager's Remuneration in such manner
•   and          in                 such                proportion    as                    provided         in                  the         Sub-Deed
•   governing the Commercial Development.
•   d. The       Owners             of                  Domestic      Units                 shall            contribute          towards     the
•   aforesaid 83.50%                of                  the           Estate                Management       Expenses            and
•   the          Manager's          Remuneration        in            such                  manner           and                 in          such
•   proportion as                   provided            in            the                   Su b- Deed       governing           the
•   Block in     which              these               Domestic      Units are situated.
•   e.           The                Owner               of            a                     Domestic         Unit                shall,      in
                 addition,
•   contribute towards              the Management Expenses           of                    the              Block
•   in           which              his                 particular    Residential           Unit             forms               part        in
•   accordance with the terms and conditions laid down in the
•   Sub-Deed governing that Block.
•   The          Owner              of                  a             Commercial            Unit shall,      in                  addition,
•   contribute towards              the                 Management    Expenses              of               the
•   Commercial Development          in                  accordance    with                  the              terms               and
•   conditions laid                 down                in            such                  Sub-Deed         governing           the
•   Commercial Development.
•   (c)          The                Owner               of a          Car              Park                  shall, in           addition,   contribute
•   towards      the                Car                 Parks         Management. Expenses                   (if any)            in
•   accordance with the terms and conditions laid down in such
•   Sub-Deed governing the same (if any).
    DMC wordings: the draftsman’s
             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.
   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, HY’s
  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.
 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:
    A Decided case: DMC and BMO
           must be followed
•   14. Wong Pun -man一案的案情與本案很相似。在該案中,管理費亦是不
    依公契計算,各業主每年都有收到增加管理費的通知及支付管理費,但由
    1995年4月1日起,該案的申請人拒絕再支付不符公契的管理費。高義敦法官
    在該案中有以下的裁決:-
•   "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."
•   15. 可是申請人忽略了高義敦法官以上的裁決是針對在該條例未實行之前的管
    理費而作出的,對於該條例實行之後的管理費,高義敦法官有以下的裁決:-
•   "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."
                            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 344 - BUILDING MANAGEMENT ORDINANCE 16
•   contributed under this section by an owner and when it is payable shall be
  Implied term is not valid in a DMC with
   expressed term that contradicts the
           alleged implied term
• Implied term here is excluded for:
• 1. express 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.
      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 Owner’s committee.
• The resolution made, with an obvious deviation from the
  capacity granted to the owner’s 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.
     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.
       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.
               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
Club house: exclusive possession
        cannot be done.
• Lai Wing Ho and Another v Chan Siu Fong
  [1993] 1 HKLR 319 ... 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
  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.
               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.
                      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.
              appendix
• Copies of Meeting minutes
• Club house: exclusive use of common
  area authority: not possible
                                  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
    319 ... 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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