In Flora Garden (IO) v Li Do Wai ([2016] HKEC 1830, LT) the owners’ meeting approved the carrying out of renovation and improvement works at the estate. The incorporated owners added a 10% fee on top of the cost of the works to cover consultancy, contract and administrative fees and other ancillary costs (‘ancillary costs’). The owners’ meeting had approved the cost of the works but not the ancillary costs. When the works were complete, each owner was asked to pay the due share of the cost of the works including the ancillary costs. Deputy Judge Kot held that the ancillary costs could not be charged to the owners. They had not been approved by the owners nor had this aspect of the works been put out to tender. The incorporated owners’ submission that owners had paid such costs before without express approval and that this practice provided the necessary authorisation failed ([33] – [36]).
The DMC authorised the owners’ corporation to levy a 5% surcharge on late payers as well as a collection charge of HK$150. A demand for these sums was made of the owners who had paid late. They argued that these sums were a penalty and so irrecoverable. This argument failed. It did not matter that the sums were not a genuine pre-estimate of loss. The surcharge clause protected a legitimate commercial purpose of the incorporated owners and was not extravagant or unconscionable in amount ([47] – [48]).
Michael Lower
