Members of the outgoing Neptune Court Owners' Association (NCOA) management committee will have to pay more than $420,000 to the condo's estate fund by this week, following a High Court decision last week.
The court ruled that the committee did not follow proper procedures when it decided, without permission from its residents, to use $427,700 from the fund to pay for legal fees for a failed defamation suit against 26 residents.
The decision had not been approved at an annual general meeting (AGM) or put to ballot, said Justice George Wei, in ruling in favour of two residents who were seeking to recover the "misspent" money.
Instead, expenditures related to the defamation proceedings were "inconspicuously parked" under privatisation expenses or privatisation expenses/legal fees, he noted.
"It is clear that members of NCOA were never given the chance to vote on the legal expense for the law suits in question," said Justice Wei in his oral judgment on March 22.
Built in 1975, Neptune Court has 752 units.
The NCOA has been trying to get the estate privatised by buying land and common areas from the Ministry of Finance.
The case arose in 2012 when residents put up resolutions for consideration ahead of that year's AGM.
The management committee took offence to certain phrases in two proposed resolutions.
The first asked it to explain who should be responsible for paying the costs involved in the privatisation exercise.
The second asked residents to give their considered decisions on the income and expenditures for 2011 and the budget for the following year.
A court ruled last year that the phrases carried no defamatory meaning.
Yesterday, about 200 residents attended this year's AGM. Last week's judgment was discussed by residents, who also endorsed a new committee headed by Mr Ho Kok Keong.
Outgoing president Tommy Wong, who held the post from 2008, told the AGM that his committee accepts the court ruling although the members felt aggrieved.
"The legal suits are not for personal reason but to protect the committee's integrity," Mr Wong said.
The management committee had tried to appeal against the defamation ruling twice but failed.
Mr Wong also appealed to residents to be given a 12-month grace period for his committee to pay back the money, which drew mixed responses from them.
An 80-year-old retired teacher, who declined to be named and was among the 26 residents sued, said she was glad about the ruling.