嘉居樂物業管理有限公司 v. 家安花園業主立案法團

LDBM 188 OF 2004

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Building Management Application No. 188 of 2004

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J U D G M E N T

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1.  The Applicant used to be the manager of the Respondent’s housing estate.  The Respondent says that it had convened an owners’ general meeting on 16^th April 2004, wherein 51.25% of the owners voted for the termination of the Applicant’s appointment.

2.  The notice of termination was served on the Applicant on 27^th April 2004 together with a copy of the resolution notifying the Applicant that the termination would take effect from 1^st August 2004, thus giving the Applicant a little bit more than 3 months’ notice.  The Applicant then lodged this Application and says that the said resolution of the owners was invalid. 

3.  The Applicant has raised 2 grounds.  The first ground is under paragraph 7(5A) of the Seventh Schedule of the Building Management Ordinance.  The Applicant argues that only the owners of shares who pay or who are liable to pay the management expenses relating to those shares of ownership and have indeed paid such expenses are entitled to vote at the meeting.  The Applicant further says that there were a number of owners who voted for the termination were in arrears with management expenses and they were not entitled to vote.  These defaulting owners amounted to 31% out of the said 51.25% of owners.  The Applicant says that they should be excluded from the computation of the percentage of owners who had voted for the termination. 

4.  This argument is a matter of law and I can decide it right away.  The wording of paragraph 7(5A) of the Seventh Schedule is clear and straightforward.  It says: -

“(5A) For the purposes of subparagraph (1)-

(a)    only the owners of shares who pay or who are liable to pay the management expenses relating to those shares shall be entitled to vote;

(b)    the reference in subparagraph (1) to “the owners of not less than 50% of the shares” shall be construed as a reference to the owners of not less than 50% of the shares who are entitled to vote. (Added 69 of 2000 s. 25)”

5.    Under paragraph 7(5A), those who are liable to pay are entitled to vote, regardless of whether they have paid up or in arrears with management expenses.  Even if they are in arrears, they are still entitled to vote.  Paragraph 7(5A) does not bar those who are in arrears from voting.  There is another machinery to make them pay and there is no need to bar them from voting so as to make them pay.

6.  The second ground is that an instrument given by an owner, Billion China Investment Limited (“Billion China”), appointing a proxy to represent it at the said meeting, did not bear the impression of its common seal.  The Applicant therefore says that this instrument was invalid, as it did not comply with the requirement of paragraph 4(2) of the Third Schedule of the Ordinance.  That paragraph says that the instrument appointing a proxy shall be in writing, signed by the owner or, if the owner is a body corporate, under the seal of that body.

7.  If this challenge should be successful, the percentage of owners voting for the termination would be reduced to 47%, and hence below the 50% of owners as stipulated in paragraph 7 of the Seventh Schedule.  The resolution to terminate the service of the Applicant would be invalid. 

8.  The Respondent called the chairman, Mr. Wong Chang-sang, to give evidence.  He said he was the one who convened and chaired the said owners’ meeting.  He said that before the start of the meeting, he had opened the box containing the instruments appointing proxies and found two instruments there.  The first one given by Billion China contained a rubber chop mark stating that the signatory of the document was authorised by Billion China to sign the document.  In addition, he said he also saw the impression of the common seal of Billion China on it.  The second instrument was given by one Hongo Properties Limited and that did not bear the common seal. 

9.  Mr. Wong also referred to an inspection of documents by a representative of the solicitors of the Applicant, one Mr. Wong Shun-him (“S. H. Wong”), which took place on 4^th October 2004.  Mr. Wong, the chairman, said that Mr. S. H. Wong had conducted the inspection in a very cursory manner.  He had not examined carefully the original instrument in question as given by Billion China.  He said Mr. S. H. Wong only spent one second in inspecting that instrument.

10.  I have examined the instrument myself and I must say that, if the examination is not conducted with care, one may simply overlook the impression created by the common seal.  However, if one looks carefully at the space around the Chinese characters reading “common seal”, one can see an impression made by a common seal, though the embossment is not deeply sunken and the wording is not clear as the rubber chop is affixed on top of it.  When I first examined it in court, I had to be told where to look for it before I could discover it.  If one just examined this document in a cursory manner, it is not surprising that one may fail to note its existence. 

11.  However, I have also heard the evidence of Mr. S. H. Wong.  He said he was given the specific task by his principal to go to the office of the Respondent’s solicitors to examine the instrument appointing proxy and to see whether there was the embossment by the common seal of Billion China.  He said, since that was his main task, he therefore examined the document carefully and felt the same with his hand, and he did not discover any embossment by a common seal.  He therefore made an attendance-note on 4^th October 2004, after the inspection, recording that there was no common-seal mark on the original proxy instrument of Billion China.

12.  Coming back to the evidence of Mr. Wong, the chairman, he said he knew that there were common seals made of metal for limited companies, but he thought that they were only used for the purposes of stamp duty and creation of wax seals.  He did not know that they had to be affixed on instruments appointing proxies.  He said that several times in his evidence.  He also said that when he was examining the proxy forms, he saw the common seal embossment on the form of Billion China but did not appreciate its significance.

13.  In giving evidence, he was quite argumentative and at times rash in giving answers.  There were several occasions that he had to admit that he was not a very careful person.  As to his evidence on the meeting and his inspection of the proxy instruments at the meeting, he said he opened the box before the commencement of the meeting; the meeting was quite confused because there were many people; the room was small and the lighting was dim.  He also had two members of the management committee who were responsible for the proxy forms and the forms were not unattended to.

14.  In these circumstances, given the fact that he did not appreciate the need to use the common seal, I do not think he would have made any special effort to check the proxy forms to see whether the embossments of common seals were there.  If one does not really make an effort, it is extremely difficult to identify where the embossment of the common seal can be found on the Billion China proxy form.

15.  I also note that on 12^th August 2004, when the Applicant’s Application was still based on the first ground which I have dealt with, but not on this common-seal ground, the Applicant’s solicitors had made a request for inspection of the proxy forms, but that request was not acceded to.  Mr. Wong’s explanation for the refusal is that he did not know what the Applicant’s solicitors were up to, and hence the management committee declined the request.  I find such explanation not very convincing.  If they wanted to inspect the proxy forms on the basis that they were invalid, why refuse them if the Respondent should hold the view that the forms were all valid and proper?  

16.  So, in the light of the confusion prevailing at the commencement of the meeting, the poor lighting condition, the fact that there were other people responsible for the proxy forms, and there was no particular purpose for Mr. Wong to find out whether the proxy form had the embossment of the common seal, I do not think that he would have discovered the common-seal mark in the proxy form in question in that evening.  I do not accept his evidence on this point.

17.  However, even if I do not accept Mr. Wong’s evidence, I still need evidence to show that the embossment by the common seal was not there in that evening.  On this, I think the evidence of Mr. S. H. Wong can assist because he was given the specific task to look for the common-seal embossment, and he is a trainee solicitor.  With that specific instruction, I do not think he would have failed to pay full attention and tried to identify the embossment if it was there.  He has made an unequivocal attendance-note saying that it was not there.  I would accept his evidence.

18.  Mr. Tang has submitted that if Mr. S. H. Wong did not find the embossment there, he should have asked for assistance from those who were next to him to help him in the inspection.  However, Mr. S. H. Wong was not cross-examined on this at all and, if he was cross-examined on this, I do not know whether he would have been able to give an answer.  Hence, I do not think I can criticise Mr. S. H. Wong for not asking when he did not find the embossment there.

19.  Therefore, on this second point, I hold in favour of the Applicant and find that there was no embossment by the common seal even on 4^th October 2004 when the inspection of document was conducted by Mr. S. H. Wong.

20.  In coming to this finding, I do not overlook the fact that on 13^th September 2004 - which was a call-over hearing, a Mr. Leung of the Respondent’s solicitors told me that the proxy instrument of Billion China had both the common seal as well as the rubber chop affixed on it.  However, I do not know whether Mr. Leung gave me this information from his personal experience or from his instructions and cannot rely on it.

21.  There is one other matter which supports my finding and I should also mention it.  Billion China had provided not just one proxy instrument.  It has previously on 20^th August 2003 provided another proxy instrument for use in another owners’ meeting.  That proxy appointment instrument bears the same signature and rubber chop mark.  However, Mr. Tang, for the Respondent, accepts that the earlier instrument does not contain any embossment by the common seal. 

22.  So, if Billion China did not know that it was necessary to affix the common seal as on 20^th August 2003, I do not know why suddenly on 14^th April 2004, they knew that they had to affix the common seal.  Nobody from Billion China has come and given evidence to explain this.  Therefore, the lack of a common-seal embossment on the August 2003 instrument supports my finding that there was also no common seal on the second instrument dated 14^th April 2004.

23.  There is another argument relied on by the Respondent in case I should be with the Applicant on this second ground.  Mr. Tang argues that it is not necessary to affix the common seal on an instrument appointing a proxy.  He says that the act of sealing is no more than a solemn expression of consent to the instrument, and thus attesting a rubber stamp to it, with an authorised signature, was sufficient sealing.  In making this point, he relies on the case of U Wai Investment Company Limited and Anor v. Au Kok-tai & Ors [1997] 4 HKC 200.  He also relies on the unreported case of Triumphal Fountain Limited and Anor v. Chan Chi-lun, LDBM309/2001 which also blessed instruments appointing proxies but not under the common seal.  Mr. Tang also submitted to me that the purpose of using any common seal is to for it to serve as evidence of authenticity.

24.  Mr. Lam, on the other hand, relies on paragraph 4(2) of the Third Schedule of the Ordinance which reads: -

“The instrument appointing a proxy shall be in writing signed by the owner, or if the owner is a body corporate, under the seal of that body.”

25.  Mr. Lam says that the use of the word “shall” imposes a mandatory requirement and it is preemptory.  For that purpose, he relies on the Court of Appeal decision of Wong Tak-keung, Stanley v. The Management Committee of the Incorporated Owners of Grenville House, CACV244/2003.

26.  I cannot accept a rubber chop mark and a signature in lieu of a statutory requirement of an embossment by the common seal.  The articles of limited companies normally provide that the common seal should be kept in safe custody as provided by the directors, and shall only be used by the authority of the directors or a committee of the directors authorised by the board in that behalf (see Table A of the Companies Ordinance, Cap. 32). 

27.  If a proxy can be appointed by an instrument under the rubber chop of a body corporate, it is possible that the instrument as presented to the meeting might not have been blessed by the board.  It is possible that the proxy in question was not appointed by a resolution of the board and it would not be surprising to find different instruments of the same body corporate under the same or different rubber chops appointing different proxies for the same meeting.  Therefore, to require the appointing instrument to be under the common seal of the body corporate is to ensure that the proxy has been properly appointed by a resolution of the board.  It is not just for the purpose of authentication or to indicate the solemnity of the appointment.  

28.  I also point out that a proxy is not a messenger of the company.  He not only attends and votes in a meeting in the place of the appointing corporation, but also to speak for the corporation at the meeting (see section 114C(1) of the Companies Ordinance).  So the proxy has a very important role to play and represents the stance of the appointing corporation. 

29.  If one takes these matters into consideration, one can understand why paragraph 4(2) of the Third Schedule of the ordinance requires the instrument to be under the seal of a body corporate.  I therefore do not accept the submissions of the Respondent on the use of rubber chop on appointing instruments and I allow the Applicant’s Application. 

30.  I declare that the resolution of the owners’ general meeting of the Respondent held on 16 April 2004 is invalid as it was not agreed to by at least 50% of the owners.  I also hold that the Applicant’s appointment as the manager of the housing estate called Ka On Garden has not been terminated. 

31.  I also order costs of the Application to be paid by the Respondent to the Applicant with certificate for counsel and this costs order would also cover any previously reserved costs but would not affect any order of costs already made.