Chan Sai Kwong, Tony v. The Incorporated Owners of Great George Building (Paterson Street)

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Building Management Application No. LDBM 38 of 2000

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J U D G M E N T

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Introduction

1. The Applicant Mr. CHAN Sai-kwong, Tony, is a co-registered owner of Flat A3, 10th Floor, Great George Building, 27 Paterson Street, Causeway Bay, Hong Kong. The Respondent is the Incorporated Owners of the same building. Over the years, a significant number of domestic flat owners had either used or permitted their flats to be used for commercial purposes. Such acts constituted breaches of the deeds of mutual covenants of the building and to the conditions set out in the occupation permit issued to the building. In 1998, the Applicant had successfully applied for an order from the Lands Tribunal in case no. LDBM 194 of 1998 to dissolve the then management committee of the incorporated owners on the ground that the then management committee was no longer fit to hold office because the then incorporated owners had allowed or caused to allow such breaches to take place thus causing damage to him as well as other owners and occupiers. The tribunal's order also appointed the Applicant as the administrator of the building for the period between 31stDecember, 1998 and 1stMarch, 1999. On 1stMarch, 1999, the Applicant's appointment lapsed when a new management committee was elected and assumed office. The Applicant commenced the present proceedings on 28thJanuary, 2000 alleging that the new management committee is equally unfit for the office for the same reasons. He seeks an order that the existing management committee be dissolved and that he or one Mr. FUNG Chung-ping be appointed as the administrator for the building for a term of one year so that either one of them will have sufficient time to stamp out the problems created by the commercial activities in the domestic units. The Respondent opposed saying that it had taken positive and reasonable steps to eradicate the breaches. Furthermore, the Respondent also disputed the fitness of the Applicant and Mr. FUNG for the appointment of administrator.

Evidence in the Case

2. Altogether, four witnesses testified in the Applicant's case. The first such witness was Madam CHEUNG Siu-ping (AW1). She was the occupier of Flat A5 7th Floor of the building. She moved into her unit in 1996. Her evidence was that in a meeting held on 28thMarch, 2001, she found most of the participants were those using their units for commercial purposes. The meeting was unfairly chaired by the chairman who stopped her from raising queries on the ground that those queries related to items not on the agenda. She also queried the stance adopted by the chairman and the advising lawyer in that the public fund gather by means of management fee payments were used to fight against the Applicant and not used to fight against the owners who had committed breaches on the DMC. Other complaints she made against the management committee were that the management staff members employed by the Respondent were receiving very small salaries while very large amount of money was used to fund law suits against the Applicant. She was also unhappy with the hawker problems and the commercial activities in the building. She accused the management committee for not passing relevant documents to the other owners of the building. For reasons spelt out in the foregoing, she supported the Applicant's motion for dissolving the existing management committee. However, she had reservation in appointing the Applicant as the administrator for the building because she said she would need time to think about it even the Applicant was the only candidate for the appointment.

3. The second witness for the Applicant was Madam LAM Shui-ying (AW2). She was employed by the Respondent as an estate supervisor in August, 1995 and her term of office lasted until May, 1999 when she was dismissed. The reason given by the Respondent for her dismissal was that her salary at $10,000 per month was too expensive and that the Respondent could only afford to hire a part time staff instead. However, she suspected that the real reason for her dismissal was because she had helped the Applicant to take action to eradicate commercial activities while the Applicant was holding his office as the administrator. She grounded her suspicion on the fact that she was named as the third accused in a defamatory action commenced by some business operators in the building against the Applicant and that one LIN Chi-ming, who was one of the business operators but not a management committee member, was given the job of drawing up her dismissal letter. Any way, she said Mr. LIN could be a consultant of the then management committee. Under cross-examination, she admitted that she did not know English and she had no idea of the level of salary of the estate supervisor currently employed by the Respondent.

4. The third Applicant's witness was Mr. FUNG Chung-ping. He was one of the owners of the building and was the treasurer in the management committee for the years 1995/1996. He testified saying that over 70 % of the existing management committee members were business operators. Those non-defaulting owners had little influence in the meetings. When he was asked why other non-defaulting owners did not take part in the owners meeting and get elected, he said the commercial operators always pressurized the non-defaulting owners by "rubbing their fist and palms" (磨拳擦掌) in the meetings. Furthermore, the business operators would always sent people to pay visits to the residents and sought their proxies to vote in the meetings. He supported the dissolution of the current management committee and the appointment of the Applicant as the administrator. He would also accept the appointment as the administrator himself if the tribunal is minded to appoint him.

5. The Applicant gave evidence as the 4th witness in his case. His evidence was that the current management committee, which was formed on 12th April, 2000, was still under the control of the business operators. It was because 7 out of the 14 committee members were amongst those members forming the management committee which was dissolved by the Lands Tribunal in 1998. According to the Applicant, the Respondent's intention in trying to delay taking action against the business operator could be inferred from the following facts: (1) soon after he stepped down from his post as administrator, the newly elected management committee discontinued the 16 actions he started in the High Court against the business operators and (2) despite his repeated complaint and request, the management committee still refused to take any concrete action against the business operators. The Applicant also queried the usefulness of the ad hoc committee formed by the Respondent allegedly to combat the problem created by the business operators. This ad hoc committee, according to the Applicant, had no record of meetings or of any activities ever since it was formed. Also doubted by the Applicant was the existence of certain visits carried out by the committee members to those business operators. It was the Respondent's case that these visit were carried out with a view to persuade the business operators to quit their business operations. When he was asked why the business operator owners could exert their influence and control over the other owners, the Applicant said it was because the business operators could send a lot of men up the stairs to 'pressurize' those domestic premises owners to give their proxies to the business operator owners.

6. On whether or not the Applicant is a fit person to be appointed as an administrator for 1 year, the Applicant had given explanation to queries on his character. They included explanation on why he had removed the illegal structure in his unit late and why he had not paid the recent renovation expenses on schedule. In my judgment, all these areas is only of marginal relevance, if any, to the issues in the case. More important consideration should be given to how the Applicant had conducted the business of the building during his last term acting as an administrator. Regarding this area, the Applicant disagreed that instituting 16 actions in the High Court against the business operators was something not contemplated by the Lands Tribunal which appointed him as the administrator. He said from the understanding he gathered from his reading of the judgment and from advice from his lawyer, he had the power to do so. In fact, he maintained that he did this to fulfill his duty charged by the Lands Tribunal and that the succeeding management committee should have taken up the lawsuit in his place against the business operators because the said committee also had a duty under the law to enforce the DMC. Anyway, the Applicant conceded that, with the benefit of hindsight, he would consider suing one third of the business operators first. He agreed that this would be a more prudent plan for the cost gathered from the first batch could fund the litigation against the next batch. He also noted that this plan had already been proposed by the current management committee of the Respondent.

7. The Respondent had called only one witness and he was Mr. YUEN Kam-yiu the chairman of the current management committee of the Respondent. Mr. YUEN's evidence was that by 20th June, 2000, there were 17 business operators running business in 20 units in the building. Up to this moment 5 more units had ceased in business operation leaving only 15 units under the business operator's list. Mr. YUEN denied the Applicant's accusation that the Respondent did not want to eradicate commercial activities in the building. He said he knew that the Respondent had an obligation to enforce the DMC. However, he and the management committee had devoted much of their energy to the more imminent task of planning for and carrying out the renovation work during the last one year or so. Documentary evidence showed that the Respondent had signed a contract with a contractor in November, 2000. The renovation works concerned worth a total of HK$3,565,400. The works were expected to complete by 28th May, 2001.

8. On the Applicant's allegation that the management committee was controlled by the business operators, Mr. YUEN pointed out that the current committee was elected on 12th April, 2000. At that time, business activities only existed in 20 units. He could not remember if owners of those 20 units had all turned up to vote in the election but he remembered that the number of non-business unit owners was greater than the number of owners of units in which business were in operation. Furthermore, the votes for the management committee elected on that occasion had been unanimous. The representative of the Home Department was also present to monitor the propriety of the meeting and the election.

9. On action taken so far against the business operators, Mr. YUEN said that he found sometimes persuasion worked better than legal action. Although he admitted that the ad hoc committee formed on 12th April, 2000 to combat business activities had only held 2 meetings on 23rd May, 2000 and 20th April, 2001 respectively, the committee members had engaged themselves in paying informal visits to business operators to persuade them to stop running business in their domestic units. Particulars of those visits which eventually led to the cessation of business in the units in the building were given in a letter dated 12th February, 2001 to the Applicant's solicitor (see Bundle of Hearing page 299 and 300). Under cross-examination, Mr. YUEN admitted that the content of the letter may not be very accurate and that persuasion put forward by committee members who themselves being business operators may not be very persuasive but he denied that the content of the letter was a fabrication.

10. On AW2's allegation of revenge, Mr. YUEN said she was dismissed not because she had assisted the Applicant but because her salary was too expensive. The estate supervisor now employed by the Respondent could read and use English and could perform all that AW2 could do but only earn a salary of $8,500 even after having received 2 upward adjustments.

11. When Mr. YUEN was asked if solicitor's letters had been sent to the business operators pursuant to the resolution reached by the ad hoc committee on 23rd May, 2000, he said there were no follow up on this resolution until the ad hoc committee met for the second time on 20th April, 2001. Solicitor's letters were then sent after this meeting. The reason for the delay as given by Mr. YUEN was that the committee members had to focus their attention on the renovation works of the building.

Assessment on evidence of witnesses

12. Firstly, I find AW1 to be a witness with confused perception over the meeting held on 28th March, 2001. Her allegation on the impropriety of the meeting and of the Mr. YUEN were vague and imprecise. For example, her impression that the business operator owners out numbered the domestic unit owners and could dominate the meet by a majority of three-fourth could never be true. It was because by then, the units where commercial activities were still in progress were about 20 in number while the effective votes for that evening were 81. The representation of the domestic unit owners must be in the majority. Furthermore, I do not believe that Mr. YUEN could act in the manner as she described in the presence of the representative of the Home Affairs Department, the advising solicitor and electronic recording devices. I attributed no weight to her evidence.

13. As for AW2, I do not find her dismissal can be linked up with her prior assistance to the Applicant. It could not be disputed that the Respondent had paid less for the same quality of service which she had rendered before and it is quite understandable that the Respondent would experience some cash flow problems given its previous litigation commitments. Hence, I do not find AW2's evidence to be helpful.

14. AW3's evidence on how the business operators dominated the owners' meetings and how they obtain proxies were very exaggerated. I do not believe that business operators could behave in such violent manner in an owners' meeting where management committee members got elected when officials from the Home Affair Department was present. I also found the "threatening manner" exhibited by the election campaign lobbyist as described by Mr. FUNG to be of common occurrence in other different kinds of election in Hong Kong. For this reason, I do not find Mr. FUNG's evidence to be of assistance.

15. I am then left with the evidence of the Applicant and that of Mr. YUEN the chairman of the Respondent. Their evidence was in detail and related directly to the issues in the case. However, in approaching their evidence, I must be aware that they were effectively the parties themselves and each of them has a real interest in the out come of the case.

Issues to be decided

16. In his Notice of Application, the Applicant seeks the dissolution of the current management committee of the Respondent and his appointment or Mr. FUNG's appointment as the administrator for the building for 1 year. In my judgment, the questions for me to answer are (1) whether the current management committee had purposefully failed in carrying out its duty in enforcing the provisions in the DMC; namely, to stamp out commercial activities in domestic premises and (2) is Mr. CHAN or alternatively Mr. FUNG a suitable person to be appointed as the administrator of the building.

Whether the current management committee had purposefully failed in carrying out its duty?

17. There can be no dispute that the Respondent is under a duty to enforce the DMC by stamping out commercial activities in the domestic units. The Respondent admitted to have such duties and fully realized that one of its previous management committee was dissolved because that committee was found to have failed in carrying out such duty. Two management committees had been elected so far since the Applicant stepped down from his post as administrator for the building on 1st March, 1999 but a majority of the members served in both committees. More than two years had lapsed and what has the Respondent done to eradicate the problem? The expectation of the Lands Tribunal over the newly elected management committee has been clearly spelt out in the last judgment:

"The Respondents are guilty of not addressing themselves to the problem. What is needed is the careful and sensible appraisal of pros and cons of taking legal actions, availability of other methods, the necessary funding for litigation and all other relevant matters, financial and otherwise. If a decision to take legal action is made, it must be made by the management committee or at a meeting of the owners corporation, or, as a last resort, by an independent administrator appointed by this Tribunal."(see page 11 at paragraph 18 of the judgment)(underline added)

18. It follows that the question to be asked is what the Respondent had done to appraise this problem. Firstly, there was a survey collecting views of the owners over the problem but the result of this survey published on 3rd March, 2000 was in doubt (see agenda 2 in minutes of management committee meeting at page 21 in the Bundle of Minutes). Then, another survey was carried out by students of Shue Yan College near the end of March, 2000. The result shown in pages 288 to 290 in the Buddle of Hearing suggested 41.38% of the sampled owners/occupiers voted for immediate legal action to be taken against the business operators while 47.11% voted against the same. By this time, the Applicant had already filed the present application for 2 months. The next thing that happened was that the Respondent had formed an ad hoc committee on this problem on 12th April, 2000. That was on the same occasion when the second management committee was elected. The first formal record of meeting of this ad hoc committee could be seen on page 27 of the Bundle of minutes. It shows that 3 resolutions were passed in this meeting held on 23rd May, 2000. In brief, the 3 resolutions were (1) warning letters to be issued by solicitor to the business operators and in the absence of improvement in 6 months, the committee would consider taking legal action; (2) written complaints would be lodged with the relevant government departments on breaches committed against the DMC and (3) the committee shall review the former two courses of action in every 3 months time.

19. In reality, no solicitor's warning letters were issued pursuant to resolution (1). No complaint letter against the business operators was ever sent to the relevant governments by the ah hoc committee or the management committee. Not only that no review had been carried out pursuant to resolution (3) but the ad hoc committee had also failed to meet again until 20th April, 2001. By that time, the trial dates for this case was only 20 days away. During the 11 months between the two meetings of the ad hoc committee, I could find no record of discussion in the various management committee meetings on how the problems created by the business operators could be tackled.

20. I am aware of Mr. YUEN's explanation in that the delay was due to the committee member's engagement in the renovation work but does that mean the ad hoc committee should do nothing at all for 11 months. I am also aware of his evidence that he had learned from the previous chairperson Madam YEUNG that she had consulted lawyers and got their opinion on whether the 16 actions started by the Applicant should be discontinued against the business operators. However, no written opinion as such could be produced nor is there any trace of such opinion being mentioned in any of the management committee's meetings. Similarly, the adoption of the persuasion approach by the management committee members to cure the business operator's problem was also absent from the records of the management committee as well as those of the ad hoc committee. In fact, so far as record can tell, with the exception of a solicitor's letter dated 10th January, 2001 (see page 297 and 298 of the Bundle of Hearing), warning follow up by legal action had always been the ad hoc committee's resolved approach to the problem.

21. I also notice Mr. YUEN's evidence on the alleged friendly visits shown in the Respondent's solicitor's letter dated 12th February, 2001 (see page 299 and 300 of the Bundle of Hearing). According to the document, a total of 13 units ceased commercial operation because of these friendly visits made between March, 1999 and December, 2000. However, when Mr. YUEN was cross-examined on this part of his evidence, he admitted that the persuasion should be less effective in some of the cases for the representatives of the committee carrying out those visits were themselves business operators. When he was asked why he made certain visits at a time when according to page 52 of the Bundle of Hearing the relevant business operator had already ceased business, he put up excuses like "the operator showed signs of resuming operation" or "could be the sign board of the business had not yet been cleared away completely". Other problems with Mr. YUEN's evidence in this area also included the fact that one of the business operators allegedly being visited was a member of the management committee. Mr. YUEN also said in his statement that 1/3 of the business operators would be sued first with the reminder split into two groups and all would be sued in different stages. Yet, his evidence given in court was that 1 business operator would be sued first. When Mr. YUEN was about to conclude his evidence, he remarked that he would not be the one who make the decision of whether to sue or not. He would be stepping down from his post as the chairman after he completed the renovation for the building. He expected that the matter would have to be resolved in an owners meeting eventually.

22. I do not believe that this problem which has lasted for 20 to 30 years can be resolved by friendly visits and persuasion. Nor do I believe in Mr. YUEN's evidence that such visit has achieved the closing down of business activities in 13 units. If these units had actually ceased business, I believe the reason should be attributable to the poor Hong Kong economy rather than the friendly visits, if any did exist, effected by the management committee. Although I am prepared to find that there had been no impropriety of the sort as suggested by the Applicant's side in the two elections by with the two latest management committees were elected, I also find at the same time that the two said management committees had purposefully neglected their duties in the DMC as spelt out in the Lands Tribunal in the last case. The Respondent has prepared to meet the Applicant's case but has failed to take positive and concrete steps to appraise and act on the problem created by the business operators. It was for the former purpose that the Respondent formed the ad hoc committee and issued the 19 warning letters on 4th May, 2001. For the reasons given, I rule in favour of the Applicant on the first issue.

Is the Applicant or Mr. FUNG a fit and suitable person to be appointed as the administrator of the building for 1 year

23. To consider if the Applicant is a suitable candidate for the appointment as the administrator of the building, I think the most important factor I should have in mind is how he had performed during the 2-month-term of his last appointment. He had dutifully caused an election to be held on 1st March, 1999 and a new management committee was elected for the Respondent. On the other hand, he had also commenced 16 High Court actions against business operators in the building when his term was about to expire and this has drawn much criticism from the Respondent. The Applicant alleged that he was just doing what the Lands Tribunal had charged him to do ---- to stamp out the business activities in the domestic units. However, was that the Lands Tribunal's charter awarded to the Applicant?

24. In the Applicant's last application in the Lands Tribunal in case No. 194 of 1998, he initially asked for a mandatory injunction to direct the Respondent to take legal action against the business operators. It was approaching the late stage of that action, the Applicant then asked the tribunal to appoint him as the administrator. The tribunal, in refusing the granting a mandatory injunction even though it found the then management committee had an attitude problem in enforcing the DMC against the business owners, had this to say:

"It is impossible for us to forge out logistics of these intended proceedings against those 40 flat owners who are allegedly in breach of the DMC. Whom to sue first and when, and, ways to gather evidence etc. are questions for the legal adviser. Even if we can fore see the answers to all these, and we do not, we should not make the terms of the injunction so complex as to embody all steps the Respondents must take to ensue successful litigation on the merits. ....."

Hence, the tribunal then continued with the passage quoted in paragraph 17 above and found the then management committee guilty of not appraising the problem and that if a decision to take legal action is to be made, it should be made by the management committee or the meeting of the owners corporation or, as a last resort, by an independent administrator appointed by the tribunal.

25. While the tribunal in the last case opined that the Applicant was "sincere about this (meaning offering himself as a candidate as the administrator), and that he certainly has the seal in stopping the existing breaches", the tribunal also realized that "the Respondent did not have much time to consider the appropriate candidate for appointment". The tribunal was concerned with the view of the majority of the owners on the candidate. Finally, the then tribunal worked out an order which represented a compromise of all these considerations. Thus the tribunal said:

"We do not think we could make the appointment (for the administrator) for a term of substantial length, as it has to be if actions are to be taken to stamp out the exiting breaches, without considering the view of majority."(page 12 of the Judgment)

26. The tribunal then went on to appoint the Applicant as administrator for roughly two months with effect from 31st December, 1998 or until a new management committee was elected. In my judgment, the message conveyed by the judgment is clear. The tribunal considered that a new management committee should be elected to appraise the problem created by the business operators. If that could not be done on or before 1st March, 1999, the Applicant could recommend new candidate to the tribunal for appointment for a further term. However, the recommendation so made, if any, must take into account of the view of the majority of the owners. In the end, my reading of the judgment clearly suggest that the previous tribunal had never contemplated that the Applicant would commence the 16 actions in the High Court during his rather short-lived appointment. It is because the majority views of the owners cannot be sufficiently represented if actions were to be taken in that manner. Let alone a full appraisal of the problem before a decision is made to institute legal action.

27. In my judgment, the Applicant's decision to commence the 16 High Court actions against the business operators is, to say the very least, a very imprudent one. It failed to take into account of the majority view of the owner and was made before an all rounded appraisal was made on the problem. This decision of the Applicant had reflected badly on his ability as an administrator. It had also affected him adversely on his popularity amongst owners in the building. He had been defected repeatedly in various elections held in owner's meetings by a very large margin. His own witness AW1 had reservation for supporting him even if he was the only candidate for the appointment as the administrator. He himself also realized this and agreed his lack of popularity may give him extra difficulties in carrying out his job as an administrator if he is to be so appointed. In the circumstances, I cannot ignore the views of the majority owners and I find that the Applicant is not an appropriate candidate for the appointment as an administrator.

28. As for AW3 Mr. FUNG, all I know about him is that he had been a treasurer on the management committee for the year 95/96. I also know that he is a person who would mistaken a normal election lobbying exercise for threats imposed. In the circumstances, I find Mr. FUNG to be an over sensitive person and is therefore not suitable for the appointment as an administrator.

Conclusion

29. The instant case before me is about a rather old building troubled by some domestic unit owners who ran business themselves or permitted their occupiers to run business in those units in contravention of the DMC. While I find the two management committees elected ever since the last order made by the Lands Tribunal to be still evasive in tackling this problem, I also find these two committees to have been properly elected and as such represented the views of the majority of the owners concerned. Their performance in other areas in the management of the building, such as organizing and implementing the renovation project, were satisfactory and were so recognized by most of the owners. There is no question that much more is yet to be done by the Respondent in order to stamp out the problem of business operation in the domestic units. However, in the absence of a suitable candidate for the appointment of an administrator who can be shown to be willing to take heed of the voices of the majority of the owners, I am not inclined to order the dissolution of the existing management committee of the Respondent.

Costs

30. Although the Applicant failed in his application in the sense that the order he sought is refused by me, the Respondent, as I have found, has certainly committed a breach of its statutory duty in enforcing the DMC. Such breach has, to a very large extent, led to the present litigation. Taking all these factors into account, I believe the proper costs order to make would be that each party shall bear his own costs.

Orders

31. Base on the aforesaid analysis, I make the following orders:

1. The application of the Applicant is dismissed.

2. Each party is to bear his own costs.