Archive for the ‘Incorporated owners’ Category

Incorporated owners can be liable in public nuisance

September 21, 2011

Incorporated owners can be liable in public nuisance where they know (or can be presumed to know) that the common parts (or an element of the common parts) are in such a state as to endanger the lives, safety, health, property or comfort of the public or as to obstruct the exercise or enjoyment of rights common to members of the public. They are liable for any foreseeable loss or damage arising from a failure to take such steps to neutralise any such hazard as are within their power. Individual owners and tenants (but not the owners as a collective body) can also be liable in respect of the same hazard if they had sufficient knowledge, control and resources.

In Leung Tsang Hung v Incorporated Owners of Kwok Wing House ([2007] 4 HKLRD 654, CFA) an unauthorised canopy above a balcony protruted from the external wall of a building. The canopy had been poorly constructed and had deteriorated over time. A corner of it fell off and killed a hawker in the street below. The owner accepted liability and the tenant was found to be liable. The question was whether the incorporated owners were also liable. The Court of Final Appeal held that they were. It reviewed the law of public nuisance in general and as it applied to incorporated owners. It held that Incorporated owners can be liable in public nuisance where they know (or can be presumed to know) that the common parts (or an element of the common parts) are in such a state as to endanger the lives, safety, health, property or comfort of the public or as to obstruct the exercise or enjoyment of rights common to members of the public. They are liable for any foreseeable loss arising from a failure to take such steps to neutralise any such hazard as are within their power. Individual owners and tenants (but not the owners as a collective body) can also be liable in respect of the same hazard if they had sufficient knowledge, control and resources.

The external walls were common parts. The owners had duties under the DMC not to convert common parts to private use, not to place things on common parts and to keep the structure and exterior in repair. The incorporated owners had the control needed for public nuisance since they had the power to monitor and enforce these duties. They could be presumed to know of the hazard and the danger it posed to the public. They had access to the resources needed to neutralise the hazard. They were therefore liable.

Section 16 of the Building Management ordinance does not preclude incorporated owners from being liable alongside individual owners and tenants. It only prevents a simultaneous action against the incorporated owners and the owners as a collective body.

Management Committee’s failure to step down does not leave a power vacuum

September 7, 2011

Even though a Management Committee has not stood down as required by the Building Management Ordinance, it does not cease to be the Management Committee of the Incorporated Owners with the rights and duties that that entails.

In Incorporated Owners of Finance Building v Bright Hill Management Consultants Ltd ([2001] HKEC 1431, CA) the plaintiffs were the incorporated owners of Finance Building in Des Voeux Road Central. Bright Hill was one of the owners. In 1997, a dispute arose concerning the management charge and Bright Hill refused to pay. The DMC allowed unpaid management charges to be secured by a charge over the property of the defaulting owner. Two charges were registered at the Land Registry. The Incorporated Owners applied to the court seeking the sale of the property. Bright Hill counterclaimed seeking among other things, a declaration that the registered charges were invalid and their removal from the register. The Lands Tribunal stopped the proceedings and dismissed both the application and the counterclaim. It did so because the original Management Committee had not stepped down to be re-elected or replaced as required by the terms of the Second Schedule to the Building Management Ordinance. As a result, the Land Tribunal decided, it was not empowered to bring or defend proceedings on behalf of the company.

By a majority, the Court of Appeal overturned this decision and returned both the application and the counterclaim to the Land Tribunal. A management committee’s failure to step down did not mean that it ceased to be the lawful management committee of the corporation.

Canopy as a common part

September 7, 2011

Hollywood Shopping Centre Owners’ Committee Ltd v Incorporated Owners of Wing Wah Building  ([2011] HKEC 1063, CA) concerned a mixed commercial / residential development. There was an owners corporation for the development as a whole. There was a sub-DMC for the shops at ground, mezzanine and first floor levels (Hollywood Shopping Centre). There was a separate owners’ corporation for the shopping centre. The dispute between the two corporations centred on a canopy attached to the outside wall of the building between the ground and mezzanine floors. The plaintiff (the Hollywood Shopping Centre Owners) had allowed the canopy to be used for advertisements. The defendants claimed that this was a breach of section 34I since it meant that the shopping centre owners had converted a common part to their private use. The Court of Appeal agreed and Hollywood Shopping Centre was ordered to account for the sums received for advertising in respect of the advertising agreement entered into after the Incorporated Owners of the building had voiced their opposition to the use of the canopy for the exclusive benefit of the shopping centre.

Can incorporated owners bring proceedings where the duty was owed only to some owners?

September 6, 2011

Incorporated Owners of One Beacon Hill v Match Power Investment Ltd ([2011] HKEC 1156) (reversed by the Court of Appeal) concerned proceedings brought by incorporated owners against the developer of the building. The proceedings alleged that sub-standard materials had been used and poor workmanship allowed in the construction process. The developer, Match Power, sought to strike out the action on the basis that the incorporated owners had no locus standi. The relevant duty concerned the common parts but it was a contractual duty owed to only some of the original purchasers: different forms of sale contract were used at different stages of development and only some incorporated the relevant duty. Match Power argued that incorporated owners could only bring proceedings where the relevant duty was owed to all of the owners. The court rejected this; it was enough that the duty was owed to one or more owners and concerned the common parts. The incorporated owners could bring proceedings even though the duty was contractual.

Incorporated owners took over right to require managers to account for fees from common parts

September 5, 2011

Where money is owed to the owners of a property for the time being and an owners’ corporation is then formed, the right to enforce the obligation passes to the owners corporation under section 16 of the Building Management Ordinance.

In Jikan Development Ltd v Incorporated Owners of Million Fortune Industrial Centre ([2004] 1 HKLRD 181, CFA) the managers of an industrial building wrongly paid the fees derived from car parks that were common parts to be paid to one of the owners. After these sums had been collected by the managers, an owners’ corporation was formed and the corporation brought proceedings to recover the sums (which should have been held on behalf of all of the owners for the time being). The managers contested the corporation’s right to bring these proceedings since the corporation had not been formed when the sums were collected. This failed. Section 16 passed the right to enforce the reimbursement obligation to the corporation). Section 18(2) did not have this same effect since it merely conferred management powers and did not give any rights to the corporation.

Incorporated owners’ right to sue

August 15, 2011

Section 16 of the Building Management Ordinance vests the right to bring proceedings in relation to the common parts in the incorporated owners where the loss or damage is suffered in common by the owners. The individual owners retain the right to bring proceedings (even in respect of the common parts) in relation to loss or damage to their person or property.

In Grenville House v The Incorporated Owners of Grenville House ([1978] HKLR 235, CA) the incorporated owners brought proceedings in negligence against (among other parties) the developers, architects and building contractors responsible for the design and construction of a residential development. Soon after the building was completed and days after the incorporation of the incorporated owners, the common parts of the development were affected by a series of landslips. It cost several million dollars to carry out the necessary remedial works and the incorporated owners sought to recover these damages. They relied on their rights under the predecessor of section 16 of the Building Management Ordinance. This vests rights, powers, privileges and duties in relation to the common parts in the incorporated owners. Where the loss or damage in question is suffered in common by all of the owners, the corporation has the exclusive right to bring proceedings. Individual owners retain the right to bring proceedings for other (‘private’) loss or damage even if it is caused by some matter connected to (eg a defect in) the common parts.

Another case on partition walls

July 25, 2011

Whether a wall between, for example, two apartments is owned by either of the owners (or by both) is to be determined by searching for the intention of the parties to the DMC and the first assignment. An express provision in the deed is obviously the best way of spelling out that intention. The colouring on a plan or a legend to a plan are unlikely to have been intended as an explanation of their intention in this regard.

In Tam Sze Man v Shan Tsui Court (IO) ([2011] HKEC 111) the owners of two adjoining apartments wanted to remove the partition wall between them so as to create a single apartment. They argued that they owned the wall.  They relied on the fact that the wall was coloured on the plan showing the area of their exclusive occupation. This failed. Colouring on a plan was not a valid basis from which to infer the parties’ intention in this regard. The DMC and first transfer did not deal with ownership. Thus, the neighbours owned the floor and ceiling surfaces and the air space in between. They did not share the ownership of the wall and could not remove it.

Trivial actions and adverse possession

May 18, 2011

Actions which are trivial in the context of the disputed land do not amount to possession nor are they evidence of an intention to possess.

In Incorporated Owners of San Po Kong Mansion v Shine Empire Ltd ([2007] HKEC 977, CFA) Shine Empire owned undivided shares in a building and had the right to exclusive possession of its roof. The residents of the building used the roof for drying clothes and for installing TV antennae. They had occasional parties on the roof. The Incorporated Owners licensed telecommunications companies to install equipment on the roof and kept the substantial licence fees. They built a management office on the roof. They installed a gate to control access to the roof and kept it locked at night. The Court of Final Appeal rejected the Incorporated Owners’ claim to have acquired title by adverse possession. The acts that had lasted for long enough were too trivial to amount to a dispossession. There was a further question as to whether the actions of individual owners and those of the Incorporated Owners could be aggregated so as to be considered to be the actions of the Incorporated Owners but this was not the decisive issue.