Renovation works: which charging clause?

郭錦燊v 澤安閣業主立案法團 ([2012] HKEC 1140) concerned the apportionment of the cost of renovation works amongst the owners of Chester Court. The works had been approved by the owners both at an AGM and an EGM. The DMC contained two separate and potentially applicable charging clauses. The problem was that each clause had its own mechanism for apportioning the costs between the owners. The methods of apportionment were different: one used ‘management shares’ (based on a method set out in the relevant charging provision) and the other apportioned costs by reference to the ownership of undivided shares. Using one method rather than the other would result in very different outcomes for the owners. The applicant (the owner of shop premises in the building) contended that the cost of the renovation work fell within the charging clause that used management shares as the basis for apportionment. The respondent (the incorporated owners) contended that the management shares clause was merely intended to cover payments in advance and not the ultimate liability. The court had to decide which approach represented the true intention of the parties to the DMC.

It decided that the applicant was right and that the management shares clause covered the works. It was not merely a mechanism for collecting advance payments. Commercial sense could be given to the other charging clause by considering it as being the clause that would cover repair and maintenance costs (but not renovation costs). The judge reached this conclusion by reference to other decided cases where similar provisions had been considered and the internal coherence of the DMC.

A draft apportionment of the renovation costs showing the liability of each owner and using the management shares method had been appended to the EGM minutes approving the works. The applicant had contended that this amounted to the exercise of a discretion conferred by the DMC on the management as to the method of apportioning expenditure. The judge remarked that this would only be true if the apportionment was placed before the meeting and there had been a clear exercise of the discretion.

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One Response to “Renovation works: which charging clause?”

  1. More Info Says:

    good article, great read, very informative. thank you

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