Don’t pay first and object later!

Where owners of a unit covered by a DMC make a greater payment than was due of them they will be unable to recover the overpayment (because it amounts to an acquiescence) where it would be unconscionable for them to demand it of the recipient. Para. 4 of Schedule 7 to the Building Management Ordinance empowers the manager to set up a sinking fund and the incorporated owners are to decide on the amount required. This paragraph, however, does not deal with how the liability to contribute to the fund is to be divided between the individual owners.

Young Kwok Siu v Fontana Gardens (IO) ([2012] 2 HKLRD 203) concerned the costs of repair works carried out at a residential estate in Causeway Bay. Repair works were carried out in 2006. The applicants were owners of units in the estate. The incorporated owners agreed in a meeting that the works would be carried out and the cost divided equally among the owners. The applicants paid the amount due from them pursuant to this resolution. Four years later they discovered that the DMC and sub-DMC required them to make payments calculated according to a ratio specified in the sub-DMC. They had each contributed around $58,000 too much and they now sought to recover the overpayment from the incorporated owners. They failed because they had made the payments with constructive notice of the terms of the DMC and sub-DMC. It would be unconscionable for them now to be able to recover the overpayment ([32]).

Had it not been for this, they would have been entitled to recover. The incorporated owners claimed that the contributions had passed through a sinking fund established to meet the requirements of para. 4 of Schedule 7 to the Building Management Ordinance. The incorporated owners claimed that this entitled them not only to set the level of the fund but also to specify the contributions to be made by individual owners. The Lands Tribunal disagreed. The paragraph empowers the manager to set up a sinking fund and the incorporated owners are to decide on the amount required. This paragraph, however, does not deal with how the liability to contribute to the fund is to be divided between the individual owners. The terms of the sub-DMC dealt with the liability of individual owners.

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2 Responses to “Don’t pay first and object later!”

  1. Cleo Says:

    That seems to be so obvious that the decision to allow the overpayment as nonrefundable as to be intentionally damaging to the overpayers. I can’t see the logic in this at all. Where is the moral behind this decision? To avoid more paperwork??? Why can’t you prepay and have the excess credited to future charges? It makes no sense. There is something wrong with Hongkong law.

    • Michael Lower Says:

      The problem is that the management had spent the money on the repairs and there was a concern that they would not be able to recover the money from anyone else. That is the unconscionability.

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