THE INCORPORATED OWNERS OF GRENVILLE HOUSE v. WONG TAK KEUNG STANLEY AND ANOTHER

DCCJ 2868/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2868 OF 2008

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JUDGMENT

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Background

1.  Plaintiff, the incorporated owners of Grenville House at No. 3 Magazine Gap Road, Hong Kong (“the Building”) incorporated under the Building Management Ordinance, Cap. 344 of Laws of Hong Kong (“BMO”) claims against the Defendant, the registered owners of Apartment No. C on 12^th Floor and roof of Block CD of Grenville House, Nos. 1 & 3 Magazine Gap Road, Hong Kong (“the Flat”) the sum of $50,885.02.  The action was initially instituted in the Small Claims Tribunal on 21 January 2008.  Later, due to filing of the counterclaim of $178,199.00 by the Defendants, the case was transferred to the District Court.

2.  The present action arose as a result of a dispute between the Plaintiff and the Defendants in relation to replacement works carried out to the air grilles installed on the external wall outside the Flat.

3.  The said sum of $50,855.02 was incurred by the Plaintiff in order to effect the said replacement works. Plaintiff now seeks recovery of the same from the Defendants.

4.  It is not in dispute that on or about 19 April 2003, a piece of air grille on the external wall of an apartment fell and a person was seriously injured.  Legal proceedings, i.e. HCPI 368/2005 were instituted against, inter alia, the Plaintiff, the former management company of the Building and the registered owner of the apartment concerned.  Temporary protective measure was taken after the accident.  Eventually in 2006, with the advice from professionals, the Plaintiff decided that a large scale repair works should be undertaken for the Building including repair works to the external walls and air grilles.

5.  It is also not in dispute that:-

a.   On 31^st March 1971, a Deed of Mutual Covenant (“the DMC”) affecting the rights and interests of the Building was executed and registered in the Land Registry by Memorial No. UB803367.

b.   The DMC is binding on all owners of the Building including the 1^st and 2^nd Defendants, their assigns or successors in title and shall ensure for the benefit of the Building.

6.  The provisions of the DMC include, inter alia, the following:-

“9(b) Without in any way limiting the generality of the foregoing, the Managers shall have the following powers and duties, namely:-

(10) To repair and keep in good repair and condition the main structure, roof and fabric of the said building its equipment, apparatus, services, facilities and common areas and when necessary to replace any part or parts thereof which require replacement.

   (23) To enter into contracts and to engage, employ,     remunerate and dismiss solicitors, architects, and other   professional advisers and consultants, contractors,    workmen, servants, agents, watchmen, caretakers and    other building staff and attendants and to commence,    conduct carry on and defend legal and other     proceedings touching or concerning the said premises and building or the management thereof on behalf of all     the owners for the time being.”

   (27) To do all such other things as are reasonably  incidental to the management of the said premises and   building.”

“9(c) All acts and decisions of the Managers in accordance with the provisions of this Deed in respect of any of the matters aforesaid shall be binding in all respects on all the owners for the time being of undivided shares in the said premises and building.”

“10(h) The Managers shall further have power to commence proceedings for the purpose of enforcing the observance and performance by any owner of any one or more undivided shares in the said premises or building and any person occupying any Apartment through under or with the consent of any such owner of the covenants, conditions and provisions of this Deed and of recovering damages for the breach non-observance or non-performance thereof. The provisions of paragraphs (e), (f) and (g) of this Clause shall apply to all such proceedings and to the recovery of any costs, damages or other moneys awarded therein.”

and

Clause 1 of Section B of the 1^st Schedule of the same reads:-

“Full right and privilege for the Managers with or without agents surveyors workmen and others at all reasonable times on notice (except in case of emergency) to enter into and upon each apartment, portion of roof and car-parking space for the purposes of rebuilding, repairing, renewing, maintaining, cleansing, painting or decorating the said building or any part or parts thereof or any sewers, drains, watercourses, cables, pipes, pumps, tanks, wires or services therein or any other apparatus and equipment used or installed for the benefit of the said premises and building or any part thereof as part of the amenities thereof and not by any individual owner for his own purpose or enjoyment.”

Plaintiff’s case

7.  According to Tsang Hing Kong (“Tsang”), Area Manager of Hong Yip Service Company Limited (“Hong Yip”), the management company of the Building since July 2006, there are 120 flats in the Building.  Tsang said according to Schedule 2 of BMO, a minimum requirement of 9 members is required to form the management committee (“the Management Committee”).

8.  Tsang admitted that at some time the number of members of the Management Committee dropped below 9 as some members resigned but at all material times there were at least 5 members.

9.  He said the Management Committee was functioning properly at all material times and all past resolutions passed at the Management Committee’s meetings were valid.

10.  Tsang said due to the urgency in respect of the repair of the air grilles, at an extraordinary general meeting of owners of the Building convened by the Plaintiff on 5 July 2006, it was resolved that the air grilles on the external walls should be urgently replaced in their entirety adopting a new design as discussed in the said meeting, prior to any other renovation works and re-tiling.

11.  The Plaintiff says this majority resolution is binding on all owners.

12.  Tung Kee Construction Company Limited, he said, was the appointed contractor for replacement of the air grilles.  In order to effect the replacement works, entries to the flats of the Building were required.

13.  The Plaintiff said despite repeated demands, including, inter alia, the letter from Hong Yip to the Defendants dated 22 November 2006, the Defendants, via, inter alia, letter from their solicitors to Hong Yip disallowed the Plaintiff and/or its authorized contractor to enter the Flat to effect such works. 

14.  Plaintiff referred this Court to a letter by Mr Michael Chiang, authorised person, dated 5 January 2007 which stated that the condition of the existing air grille at apartment C12 is :

“We would remind you that the condition of existing concrete air grille at 12/F is bad condition, there are evidences of crack and spalling. If the replacement works… are not carried out, the remaining spalled concrete air grille will be hazardous to the residents and the visitors of Grenville House. In other words, it creates a danger to the lifes and properties of Grenville House."

15.  Tsang said the Defendants did, without consent of the Plaintiff, effect inappropriate temporary repair on air grille of the Flat on 11 February 2007 by applying cement mortar on the broken part of the air grille, rendering them even more dangerous. 

16.  Upon advice, the Plaintiff believed that the said repair works was unprofessional and actually would accelerate the deterioration of the concrete of the already dangerous air grille and the air-grille had to be completely replaced to remove the threat to safety. 

17.  Tsang said, as advised by Richard KH Cheung, Authorized Person of Knight Frank Petty Limited (“Knight Frank”), the air grille at the Flat were in dangerous condition and posed inherent and immediate threat to public safety and full replacement was urgent and necessary.  He exhibited Report from Knight Frank dated April 2007 (“Knight Frank Report”) in support of his contention.

18.  Tsang complained that the Defendants had even instructed their contractor to enter the scaffolding of the Plaintiff’s appointed contractor and inspected the air grille without safety equipment.

19.  Tsang said due to the un-cooperative attitude of the Defendants and the urgency to remove the immediate threat to safety, the Management Committee of the Plaintiff, pursuant to the powers given by the DMC, passed an unanimous resolution on 14 February 2007 that application be made to Magistracy for a warrant of entry against the Defendants in order to effect the replacement work abovementioned. 

20.  The replacement works for all other 119 flats of the Building had already been completed at the time.

21.  The Plaintiff relied on Section 40(1) of BMO which states that:-

“(1) A member of a management committee and any other person authorized in that behalf by the management committee may, on reasonable notice to the owner or occupier thereof, enter a flat at any reasonable time for the purpose of- (Amended 27 of 1993 s. 33)

(a) inspecting, repairing, maintaining or renewing-

(i) any common parts in the flat; or

(ii) any other property in the flat the condition of which does or may affect adversely the common parts or other owners;

(b) abating any hazard or nuisance which does or may adversely affect the common parts or other owners.

22.  Subsequently the Plaintiff did, instruct solicitors to apply to the Eastern Magistracy on 4 June 2007, ESMP 982/2007 for a warrant of entry to the Flat.  The same was granted on the same date.

23.  Tsang said, the Plaintiff, in making its application for the warrant to enter the Flat, has submitted all relevant documents including letters from Messrs Wong, Hui & Co., Solicitors for the Defendants dated 4 December 2006, 17 January 2007, 22 January 2007 and 5 February 2007 for the consideration of the Magistrate.  He disagreed to Defendant’s contention that relevant information was withheld from the Magistrate.

24.  On 21 June 2007, the Plaintiff successfully executed the warrant and the repair work of the air grille at the Flat was completed on the same day.

25.  A total of $50,885.02 was incurred being extra costs and expenses actually incurred by the Plaintiff in order to effect the replacement works to the air grille of the Flat including also the legal costs in application of the warrant to enter.

26.  Despite demands by the Plaintiff, the Defendants failed and/or refused to pay these costs or any part thereof.

27.  Tsang said therefore the Plaintiff now seeks to recover the said sum as a civil debt due jointly and/or severally from the Defendants to the Plaintiff.

28.  Plaintiff relied on Section 40(3) of BMO, the same reads:-

“…any costs incurred by the management committee in connection with the exercise by it of the powers conferred by subsection (1)(a)(ii) or (b) shall be recoverable by the corporation as a civil debt from the owner of the flat in respect of which such costs were incurred.”

29.  The Plaintiff also relied on Clause (10)(h) of the DMC which provides that:-

“The Managers shall further have power to commence proceedings for the purpose of enforcing the observance and performance by any owner of any one or more undivided shares in the said premises or building and any person occupying any Apartment through under or with the consent of any such owner of the covenants, conditions and provisions of this Deed and of recovering damages for the breach non-observance or non-performance thereof. The provisions of paragraphs (e), (f) and (g) of this Clause shall apply to all such proceedings and to the recovery of any costs, damages or other moneys awarded therein.”

30.  Clause (11) of the 2^nd Schedule of the DMC provides that all owners are:-

“to be responsible to the Management Committee and the other owners for the time being for the acts and omissions of all persons occupying any apartment of which he is the owner or using the same with his consent, express or implied and to pay all costs charges and expenses incurred in repairing or making good any loss or damage caused by the act, neglect or default of all such persons. In the case of loss or damage which the Managers are responsible to make good or repair such costs charges and expenses shall be recoverable by the Managers are hereinbefore provided and in the case of loss or damage suffered by other owners or occupiers of the said premises and building which the Managers are not responsible to repair or make good, such costs charges and expenses together with all other damages recoverable by law shall be recoverable by the person or persons sustaining the loss or damage.”

31.  The breakdown of the said sum $50,885.02 stated by Tsang are as follows:-

Organizations/ Company	Date	Invoice No.	Description of Services	Amount (HK$)
Messrs. Chung & Kwan	8 August 2007	T-22182	Legal Fee in relation to the application of the warrant to enter	$23,800
Knight Frank Petty Ltd.	13 April 2007	BC 116264	Surveyor Report on air grille at the Flat	$10,000
Tung Kee Construction Co. Limited	8 October 2007		Additional costs charged by and paid to Tung Kee due to the deferral of the air grille work including extended insurance cover, extension of supervision of scaffolding and additional hoisting service	$16,685.02
Leung Pui Kee Limited	21 June 2007	46259	Locksmith fee for opening door of the Flat	$400
Total:				$50,885.02

32.  Tsang produced copies of the receipts and evidence in respect of the above expenses.

Conclusion

33.  As the Defendants have both failed to turn up for trial to prosecute their counterclaim, the counterclaim has been dismissed on date of hearing.

34.  The Defendants were both absent from trial and therefore the evidence from Tsang was unchallenged.

35.  The Knight Frank Report was also not challenged and therefore this Court finds the air grille of the Flat did pose a threat to the other owners of the Building and the public and the same was therefore in need of urgent repair/ replacement.

36.  The Defence in their pleadings denies the air grille did form part of the external wall or indeed form any part of the common parts of the Building. 

37.  In fact, “external wall” of which the air grille from part is one of the parts specified in Schedule 1 of BMO.

38.  Further, it is submitted by the Plaintiff, which this Court agrees that in the first assignment dated 9 November 1971 of the Flat and the assignment dated 20 July 1988 under which Defendants took title, the external walls were not designated for the exclusive use occupation or enjoyment of the owner.

39.  In any event, if the air grille is indeed in need of repair, it matters not whether the same form any common parts of the Flat or it is any other property in the Flat, as member of Management Committee and person authorized in that behalf by the Management Committee, may, on reasonable notice to the owner or occupier enter the Flat.

40.  The air grille of the Flat at the time surely posed as a hazard to other owners. In entering the Flat and replacing the air grille as in the present case, Plaintiff was merely exercising its powers under Section 40(1)(a) or (b) of BMO.

41.  It follows therefore that pursuant to Section 40(3) of BMO, the costs and expenses incurred as a result shall be borne by the Defendants here as a civil debt, as they are owners of the Flat of which such costs were incurred.

42.  It is noted that the Defendants did say that they were willing to maintain and effect repair on the air grille of the Flat but the same was refused by the Plaintiff, the latter even refused to let them access the scaffolding erected to inspect the air grille.

43.  Upon perusing the correspondence between the parties and/or their solicitors between late 2006 to June 2007, it is apparent that the Defendants refused to effect replacement of the air grille to conform to the design as approved in the EGM of owners of the Building on 5 July 2006 and more importantly, the temporary repair work done to the air grille was found to be unprofessional and therefore the replacement work was pressing.

44.  In the circumstances, it is reasonable for the Plaintiff to apply for the warrant to enter the Flat in discharge of its duty.

45.  Although Defendants did also allege that Plaintiff did make fraudulent representation/fail to make full disclosure to the Magistrate in their application for the warrant, they failed to apply to set aside or quash the warrant. This Court does not find any evidence of irregularity in the application.  The warrant was properly executed and the power was validly exercised by Plaintiff.

46.  It was also said by the Defendants that the number of members on the Management Committee of the Building was less than the prescribed minimum number of 9 and therefore any resolution of the Management Committee was invalid.

47.  This Court accepts, as argued by the Plaintiff, that it has been established by the Court of Appeal that the minimum number of members of a management committee specified in BMO Schedule 2 (1) does not impose a requirement that, in order to be validly constituted, the management committee must at all times have that minimum number of members. In the case of The Incorporated owners of Blocks F1 to F7 of Pearl Island Holiday Flats v Wong Chun Yee and others CACV 1911/2001 (unrep., 13 December 2001, para 5-7), it is held that decisions by a management committee are not invalid because the number of members drops below the statutory minimum during its term.

48.  Here, as said by Tsang, the decisions of the Management Committee were at all times passed by a quorum of at least 5 members, i.e. 50% or more of the statutory minimum.

49.  Defendants did also allege that the meeting was invalid as the meeting was only held through telephone and there was no physical meeting.

50.  Plaintiff referred this Court to Building Management in Hong Kong 2^nd Edition, 2008 by Merry & Kent, P. 346 – P. 347:-

“Meeting

In practice, decisions by committees, especially smaller ones, are often taken without a physical meeting of the whole committee. Matters are dealt with in circulation, either by personal visits to, or casual encounters with, members individually by the chairman or by telephonic or electronic communication between the chairman and members. If there is unanimity and the matters are mundane, there is no reason not to do this. Indeed, the era of e-mail and the pace of modern life have rendered the idea of formally summoned, face-to-face meetings outdated and cumbersome. In The Incorporated Owners of Four Winds Apartment v Koa Hsung Land Investment Co Ltd LDBM 218/2005 (unrep. 6 November 2006) by HH Judge Yung, the management committee of a single block of apartments, the members of whom were sophisticated and busy professional and business people, was accustomed to taking decisions by e-mail. The Lands Tribunal accepted this as legitimate.”

“It may, therefore, be that a meeting can take place by telephone conference call, electronic messages or video conference.”

“This is a pragmatic principle whereby the courts have treated the unanimous consent of members of a body who are entitled to vote on a matter as binding upon that body without the need for a properly convened, or any meeting. The principle has been applied to company meetings of all kinds, including board meetings (analogous to meetings of management and owners’ committee) and there seems no reason to restrict it to companies. The underlying rationale is that, if all members are in agreement on a matter, there is no necessity to hold a meeting to discuss and decide it. Their assent must be actual, honest, informed, unanimous, within their powers (intra vires) and for the benefit of the corporation. It does not matter that the assent is given at different times and places.”

51.  It is submitted also by the Plaintiff that in light of the advance in modern technology, the courts are now prepared to take a broad view of the term “meeting” and it is submitted that a meeting conducted over telephone is capable of constituting a meeting.  He referred this Court toCompany Meetings – Law, Practice & Procedure (2008) byKosmin & Roberts, para 1.10; Mulcon v MYT Engineering (1996) 14 ACLC 1054 (Supreme Court of News South Wales), at 1057 (Bryson J); MYT Engineering Pty Ltd v Mulcon Pty Ltd (1997) 15 ACLC 1057 (NSW Court of Appeal), at 1059 (Handley JA), 1073-4 (Powell JA); 1078 (Dunford A-JA).

52.  Plaintiff did rely also on the case of Bell v Burton (1994) 12 ACLC 1037-1038 where Tadgell J said:-

“No doubt there is no necessity nowadays – if there was – that directors should gather physically together at a directors’ meeting. In appropriate circumstances they may meet by assenting to a document, or by telephone, video link, or other electronic means which caters for a meeting of their minds.”

53.  In the present case, the “meeting” over the telephone was followed by the members’ assent to the written document representing the record of their decision at the “meeting”.  This Court accepts that there was a valid “meeting” and therefore the resolution was valid.

54.  Further, as said by the Plaintiff, BMO Schedule 2 para 10(5) provides that:-

“Subject to this Ordinance, the procedure at meetings of a management committee shall be as is determined by the management committee.”

55.  Thus, the Management Committee plainly had the power to regulate its own procedure, including manner of holding a meeting through telephone.

56.  Secondly, even if there was no meeting, the resolution dated 14 February 2007 was passed “unanimously…by all members of the Management Committee” entitled to vote and it does not matter that it was passed informally without a meeting.

57.  It is said that this is in fact the well-known common law “Duomatic principle” and that it also applies to board of directors: Base Metal Trading Ltd v Shamurin [2005] 1 WLR 1157, para 83-84 (Arden LJ). Accordingly, there is no reason why it would not also apply to meetings of the management committee: see Merry & Kent: Building Management in Hong Kong (2^nd ed., 2008), P. 347.

58.  It is also said by the Defendants that before incurring the subject costs in the application and execution of the warrant to enter the Flat, they were not informed of the amount of such costs. There is clearly no such requirement in the DMC, the BMO or indeed any legislation and it is also impractical that there need be such notification in advance.  In my view, it is sufficient that the Plaintiff has, as in this case, informed the Defendants in advance of their intention to take legal action to gain entry.

59.  Considering the breakdown of the $50,885.02 as aforesaid and the supporting documents for these expenses, this Court accepts the sum of $50,885.02 is reasonably incurred.

60.  The costs are plainly incurred in connection with the exercise of the power under Section 40(1) aforesaid and Plaintiff is entitled to recover the costs incurred as a civil debt under Section 40(3) of BMO.

61.  Further or in the alternative, the Defendants were in breach of their obligations under DMC, as a result, Plaintiff had to incur extra costs in completing the replacement works:-

  Plainly,

(a)  Plaintiff is entitled to enter the Flat for the purpose of replacing the air grille by its power of entry under DMC 9(b)(10), 1^st Schedule Section B (1). Defendants’ refusal to allow Plaintiff to do so constituted a breach.

(b)Defendants were also clearly in breach of the Owners’ Resolution which was binding on them.

62.  Plaintiff is therefore entitled under DMC 10(h) or 2^nd Schedule (11) to enforce the obligations under the DMC against any owner and claim damages for any loss.[1]

63.  Similar to Section 40 of BMO, Plaintiff’s power under 2^nd Schedule (11) extends to the “repairing of the said building or any part or parts thereof” and is not limited to the common areas.

64.  Plaintiff is therefore also entitled to recover the subject sum from the Defendants under this limb.

65.  In the circumstances, I find the claim of the Plaintiff proved.  The Defendants shall jointly and severally pay the Plaintiff:

(a) the sum of $50,885.02;

(b) interests thereon at 8% per annum from 21 January 2008 to date of judgment and thereafter at judgment rate till date of payment.

Costs

66.  As costs normally follow the event, I make an order nisi that the Defendants shall jointly and severally pay the Plaintiff costs of these proceedings with certificate for counsel, the same to be taxed if not agreed.