‘Owner’ for the purposes of section 17(1)(b) of the Building Management Ordinance.

Section 17(1)(b) of the Building Management Ordinance empowers the Lands Tribunal to give leave for the execution against any owner of a judgment given or order made against a corporation. In this context, ‘owner’ means any owner for the time being. Very large and unanticipated liabilities of the corporation that have not been disclosed in the contract are encumbrances. They amount to a defect in title and this title cannot be forced on a purchaser in the absence of a clear contractual provision to the contrary.

In Chi Kit Co Ltd v Lucky Health International Enterprise Ltd ([2002] 2 HKLRD 503, CFA) a workman was rendered quadriplegic when he fell from scaffolding on the common parts of a building when acting under the directions of an employee of the incorporated owners. The litigation was pending at the time when R agreed to buy an 11.5% share in the building from A. Judgment was given between the date of the contract and the contractual completion date.  The matter only came to R’s attention after contract and R refused to complete.

The first question was whether R, had it completed, would have faced a real risk of an order being made against it personally under section 17(1)(b) of the Building Management Ordinance in respect of the workman’s claim. A argued that there was no such risk and that ‘owner’ in that section meant an owner at the time that the liability was incurred. This failed. ‘Owner’ means an owner for the time being.

Since this liability ran with the ownership of the relevant shares it was an encumbrance. It amounted to a defect in title since the potential liability was much larger than would be anticipated by a purchaser (as proof of this potential lenders and sub-purchasers had lost interest when they learned of the workman’s claim). In the absence of a clear contractual provision to the contrary, the title, thus encumbered, could not be forced on a purchaser.

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