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Legal Update

At the Mercy of Creditors: Liability of Co-owners in Hong Kong’s Multi-storey Buildings

14 November 2017
Mayer Brown JSM Legal Update

On 24 October 2017, Hong Kong’s Court of First Instance handed down its judgment in Wong Tak Man Stephen and Osman Mohammed Arab, The Joint and Several Liquidators of the Incorporated Owners of Nos. 6, 6A, 6B, 8, 10, 12, 14 and 16 Wing Kwong Street (in compulsory liquidation) v. Chang Ching Wai & Chang Din Wah (the "Judgment").

In this case, the Plaintiffs were the liquidators of the Incorporated Owners (IO) of the subject building. The Defendants were two of the owners of the building. Expensive refurbishment work was performed on the building before 2009, and the IO found itself unable to pay the fees of the construction company. The IO was wound up with unpaid debts of some HK$3.6 million.

In order to settle the said debts and liabilities, the Plaintiffs had previously taken steps to recoup contributions from the owners of the Building according to their respective shares in the Building. A substantial number of owners of the Building (including the 1st and 2nd Defendants) had failed to make their contributions to the refurbishment work. The Plaintiffs then obtained leave from Harris J to commence proceedings against each and every owner of the Building, including the present proceedings against the 1st and 2nd Defendants, seeking a declaration that the 1st and 2nd Defendants shall be jointly and severally liable for all the debts and liabilities of the IO and an order for payment of some HK$3.6 million. The 2nd Defendant is the father of the 1st Defendant, and was of advanced age and could not appear in court. The 1st Defendant, acting in person, appeared and argued that they should not be liable and questioned the sum payable for the refurbishment work and the apportionment of such sum amongst the owners of the Building.

The Court order is in favour of the Plaintiffs. Hence, the liability for the entire sum owed by the IO fell on the 1st and 2nd Defendants.

The consequences of the Judgment are troubling and significant. It affects everyone who owns undivided shares in a building with an IO.

Authors

  • Nancy S. M. Leung
    T +852 2843 4510
  • Simon M. S. Au
    T +852 2843 2564
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